Listen: Energy transition discussions shift to pragmatism amid policy uncertainty

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Lindsey Hall: I'm Lindsey Hall.

Esther Whieldon: And I'm Esther Whieldon.

Lindsey Hall: Welcome to All Things Sustainable, a podcast from S&P Global. As your host, we'll dive into all the sustainability topics that are reshaping the business world.

Esther Whieldon: Join us every Friday for in-depth analysis and interviews with leaders from around the globe. Together, we'll breakdown big sustainability headlines and cut through and cut through the jargon. On this podcast, we take the pulse of the sustainability landscape across a range of topics, including the energy transition. We wanted to understand how companies at the heart of the energy industry are approaching this topic, so we took the show on the road to Houston, Texas to cover CERAWeek. This is the annual S&P Global Conference and formally known as the industry's Super Bowl. This event convenes stakeholders from across the energy ecosystem. We're talking to the world's largest fossil fuel companies, electric utilities, renewable energy companies, policymakers, scientists, academics.

It's a massive event and a good place to take the temperature of the energy transition. This is our third year covering CERAWeek on this podcast. And as we'll hear from today's guests, this year, the tone around sustainability topics like climate strategy and the low-carbon energy transition shifted. Right out of the gate, we heard that new U.S. Energy Secretary, Chris Wright, declared himself a "Climate realist." He said the Trump Administration will "Treat climate change for what it is, a global physical phenomenon that is a side effect of building the modern world." And he pledged that the new administration would end what he dubbed irrational, quasi-religious climate policies enacted by the previous administration.

Lindsey Hall: We heard some of this messaging reinforced in other main-stage speeches. For example, Amin Nasser, CEO of the world's largest oil and gas company, Saudi Aramco, said in his speech that the current transition strategy is "Visibly failing on most fronts." He also said that, "The future of energy is not only about sustainability, security and affordability must share the stage." In many panels, meetings and interviews, I would say the tone we heard about sustainability and climate was more measured than this. Attendees from across the energy spectrum said they remain focused on climate goals and the low-carbon energy transition while also acknowledging the path to get there might be slower than previously expected.

I talked about this idea of balancing priorities between energy, sustainability, security and affordability in my interview with today's first guest, Paul Gruenwald. Paul is the Chief Economist at S&P Global Ratings, and he attended CERAWeek and moderated a number of panels there. We'll kick off today's episode with Paul's high-level overview of themes from the conference, and then we'll dig in further when we sit down with guests who are working with energy companies, utilities and in the low-carbon technology sector. Okay. Here's Paul.

Paul Gruenwald: Well, I think the tone was set pretty early when we had a couple of secretaries from the new U.S. administration. Obviously, this administration is viewed a bit more favorably by the industry than the previous one. It's seen as more pro-business and maybe a lighter regulatory touch. But I think this theme of realism permeated the discussions. And what folks mean by that is I think everyone wants the energy transition and wants to decarbonize the way we live our lives in some ways. But there's really a bunch of key trade-offs there. We call this the energy trilemma Trilemma obviously means 3 things. We're trying to achieve 3 things at the same time, and we can't put too much focus on 1 of the 3. So those are energy sustainability, energy security and energy affordability. And if you think about those in a perfect world, we could pursue those evenly all the time.

But over the last few years, obviously, energy security has come into higher focus with Russia's invasion of Ukraine. The U.S. has become very quickly a net energy exporter, supplying lots of natural gas to our allies in Europe. So that trade-off really came to the fore. Sustainability is obviously still there, but this is an industry that's, I think, still dominated by fossil fuel producers. And they repeatedly pointed out that this is a century old industry. It's very sophisticated supply chains, and it's very good at supplying cheap, reliable energy to the world economy.

Question and Answer

Lindsey Hall: So I definitely heard this theme come through this idea of being a climate realist, like you said, the new Department of Energy Secretary for the U.S., Chris Wright, right out of the gate, said he's not a climate skeptic. He's not a climate denier. He's a climate realist. And he had some pretty strong words about how he's going to unwind some of the climate policies from the Biden administration. Did that tone hold up for you in the other conversations that you were hearing throughout CERAWeek?

Paul Gruenwald: No, I think the tone was less strident if that's the right way to put it. Every administration obviously wants to talk their own books. So the 2 secretaries, one from energy and one from interior where they're part of the new U.S. administration. But I think there was a sort of broad agreement that realism is what's needed. What I did hear a lot, and this has become -- increasingly becoming an issue in the markets was concerns about policy uncertainty. So even if there was broad agreement on the direction of policy, the back and forths with tariffs in particular, was on a lot of attendees' minds. I lost count of how many times people came up to me and said, "Hey, Paul, you're the Chief Economist for S&P Global. What do you think is going to happen to the economy on the back of all of this back and forth on the tariffs and all this uncertainty." And I think we all have the same conclusion.

When there's a lot of uncertainty, people, whether you're a firm or an individual or a family, you kind of pause, right? You want to see how it's going to play out. If you're a firm, maybe you're going to put your investments on hold. If you're a family, maybe there's a big purchase coming out, maybe you want to dial back on your discretionary spending. But I think that was the undercurrent for a lot of the conversations I have. People want to know about the transition. People want to know about energy security and energy dominance. But that idea that we're in a very uncertain world in terms of U.S. policy kind of permeated all of the discussions that I had.

Lindsey Hall: One thing I heard quite a bit was people saying that there needs to be durability in the policies and that durability has to come from congressional action, legislative action as opposed to executive orders. So I heard real caution around just how durable are some of these recent developments that we've seen. So I don't know if you heard anything.

Paul Gruenwald: Yes, it was the same thing, right? The administration, especially if we change parties, there's a tendency to see flip-flops, not necessarily a total 180, but a very different view on how energy policy could be implemented. And right, that's all or mostly by executive order, and I think there was a desire to have this legislated and have the Congress kind of step up and do its role. And again, markets hate uncertainty, whether you're in the financial markets or you're in the energy markets and producing the energy that we all need. So again, even if you align with the broad objectives of the new administration, I think all the back and forth and the drama around the tariffs have really put a damper on some of that excitement. And one of the risks we're highlighting is we could actually grind the economy into a necessary slowdown if this uncertainty continues.

Lindsey Hall: Okay. So Paul, I won't ask you to look in your crystal ball and say what's going to happen to the economy. But I would love to know your perspective having spent a week in Houston. Did you come away with any different ideas?

Paul Gruenwald: Yes. Well, I think on the macro front, what we just discussed, Lindsey, which is the uncertainty is putting a damper on spending. By the way, the economy is supposed to slow down this year. Our baseline is for the economy to have a soft landing. So think of the U.S., which for us, has a sustainable growth rate or a speed limit of around 2%. That's been closer to 3%. So we've been running a little bit hot. Inflation has been a little bit too high. The Fed has been having its foot on the brake. That's why rates are a little bit higher than what we would call neutral. So again, the risk is that we might slow down too much because of all of this uncertainty.

But the other thing we did come away with was around the implementation of AI and energy security and energy dominance and all the investment around that particular phenomenon. So even if cyclically, we might be seeing a slowdown, we've got these tailwinds around the data centers and the investment around that and the possibilities of AI. So it's -- my job and my team's job is to kind of tease out all of those conflicting things, but we definitely have some longer-term tailwinds from the economy coming out of the energy sector and the tech sector.

Lindsey Hall: Okay. Yes. Let's dig in a little bit more on the tech sector and on AI because, of course, that came up in just about every panel, every discussion. Talk to me a little bit about your key takeaways as it relates to AI from CERAWeek.

Paul Gruenwald: Yes. Well, I think AI is where a lot of these megatrends come together. At first glance, AI, it's a tech issue, right? So all the big tech companies, they're building out their data centers. They want to run their large language models. They want to leverage all the wonderful -- potentially wonderful benefits around AI. But it's not just a tech issue, it's an energy center because we know all those data centers need power. And what came out very clearly from the discussions in CERAWeek was renewables aren't going to be enough to power this. The cleaner, safer nuclear is maybe 5 or 10 years down the road. So we're going to have to use gas as a transitional fuel, if not even more than a transitional fuel.

So there's a huge amount of electricity that's going to be needed for these data centers, and a lot of that's going to be filled with gas. So there's a huge demand for gas exploration, a huge demand for gas turbines, a huge demand for all the infrastructure around getting electricity out of gas for these data centers. But it's also a CapEx story. So I heard this wonderful narrative that for the first time ever, the tech sector is going to be driving the capital expenditure in the U.S. You usually think of that as an industry or even a heavy industry thing, but now all the tech companies have big capital expenditure programs. And then on top of that, you've got the geopolitics.

We heard in a lot of the geopolitical forums and roundtables at CERAWeek around the AI race kind of like the arms race or the space race between the U.S. and China. So not just at the company level, is there a need to get there first and build out your products and make some money for your shareholders. There's also a geopolitical imperative for the U.S. and China to get there first. And then all this is going to help the macro, right? If you've got a lot of demand and a lot of spending and a lot of investment, you're going to have the macro as well. So all these megatrends we've been talking about, technology, energy, geopolitics, macro, they all come together around AI, which for me as a humble economist attending this energy conference was really kind of a special thing. I've never really thought about tech and AI that way before.

Lindsey Hall: Yes. I would say there was almost what I would call anxiety that I heard about this idea of the U.S. falling behind other nations and China in particular. And that's certainly contributing to this frenzied pace of data center build-out, I would say.

Paul Gruenwald: Yes, right. Failure is not an option, right? I think there was a lot of former defense and military folks there, and they've got their eyes on the possibilities of AI as well. So that flavor, not just the commercial flavor, but the defense and geopolitical flavor was also very much present in the AI discussions at CERAWeek.

Lindsey Hall: And then I think for me, it was interesting with my sustainability hat on to hear these conversations and to think about what are the climate implications of this AI build-out. One panel I sat in on, I thought was really interesting, had a speaker, David Sandalow from Columbia University, and he said, on this question of whether AI will ultimately be good or bad for climate change. He said, I've done a lot of research into that question and no one knows. And anybody who says they know is making it up. What are your thoughts on that?

Paul Gruenwald: Damian was on my panel as well. I had a green growth panel that I moderated. But yes, that's -- I think that's right because if you think about it, the AI, sustainability argument can go both ways. So as we just discussed, building out all these data centers and building out the capability of AI is going to generate a huge demand for electricity. And at least in the short run, that's going to generate a huge demand for gas. Gas is a fossil fuel. It's a relatively clean fossil fuel, but nonetheless, it is a fossil fuel. So in a sense, this big build-out of AI and data centers is putting sustainability on the back burner of it. That's the trilemma again, right? We've got the security kind of dominating the sustainability there.

But AI is supposed to do all these wonderful things and optimize your operations and optimize your technology and optimize the efficiency of your operations, including, I would say, your environmental efficiency, maybe minimizing the environmental impact of your operations. So in some sense, over time, AI has the possibility of paying for itself in a sustainability point of view. So we know there is a short-term negative impact on sustainability from the gas. But if AI is going to do all these wonderful things, maybe it can make up for that over time with efficiencies or whatever. So I mean, I agree with David's quote, the jury is still out, but there's definitely a negative followed by a positive. We're going to have to see how all that plays out.

Lindsey Hall: Okay. Paul, I'd like to circle back to this idea of the trilemma, the energy trilemma. You and I got to talk about this a little bit in Houston. But what are the different points in this triangle if it is indeed a triangle?

Paul Gruenwald: Yes. Okay. Well, what I'd like to do is just draw a triangle. We all know how to draw a triangle. And at each vertex or each point, we've got a different kind of goal. On one vertex, you can write energy security. On one vertex, you can write energy sustainability. And on the other, you can write energy affordability. And these are always in conflict, but you can see how there might be trade-offs. So let's think about the time before Russia invaded Ukraine, and we had a series of COPs. We had a series of other global convenings, and there was a big push toward sustainability. There were the Paris targets and everything else. So we were probably closer to the sustainability point on the triangle. And what I'd like to do is think about how the point -- let's say, the point is where we are now or where we have been.

How that point kind of moves around the triangle over time. So after Russia invaded Ukraine, all of a sudden energy security was a big deal, particularly for Germany and Central Europe because they were relying on Russian gas. So the point started to move away from energy sustainability to energy security. So you could tell by the market chatter, you could tell by the narrative in the market, you could tell about the number of security folks on panels versus sustainability folks on panels that the weight, if you will, on each of those things was changing and moving towards security. So that's another one. And then what I think is also super interesting is a lot of folks at CERAWeek were talking about the 1 billion versus the 7 billion.

So the 1 billion are people in the industrial advanced countries, U.S., Western Europe and parts of Eastern Asia, maybe Japan and Korea, they've got one view of the triangle, which is security versus sustainability. But the other 7 billion in the global economy, they are low-income countries. They're more worried about just getting electricity, right? This is to power their heating, power their homes and a lot of them don't have roofs over their head or steady food supplies, et cetera. So they might be over toward the sort of affordability part of the triangle. So the triangle is not the same for everyone.

But again, if you think about just a point on that triangle, it's going to move around depending on how important security is versus cost versus sustainability. And we together all have to work that out, right? That's why we get together in these global conferences. That's why we have global organizations like the UN and the IMF and the World Bank. We've got to work all this stuff out because different people want different things, and we've got to find a solution that's sufficiently good for everybody.

Lindsey Hall: Right. And I think for security and affordability, those points on the triangle, they're very immediate. And they're very visible, right? It's people's everyday lives. And I think often sustainability, it's harder to envision what that's going to look like because we are really looking decades into the future. And we're talking often about -- when it comes to climate change, we're talking about impacts that will be felt in the 2050s and the 2090s. So much harder sometimes to make that case compared to these very visceral day-to-day things like can you afford energy? Do you have access?

Paul Gruenwald: No, that's an excellent point, right? And you're absolutely right, Lindsey. The sustainability is a multi-decade thing and people have different discounting of the future, and they may be focused on more immediate things. Security can be a very immediate thing. affordability can be a very immediate thing. But when the waters are relatively calm, I think we can focus more on the longer-term stuff. But again, Russia's invasion of Ukraine is a good example where there was an immediate change in the security situation. And I think a lot of people going back to our little triangle, they moved away from the sustainability point over to the security point.

Lindsey Hall: So how would you compare the conversations that you had or heard this year at CERAWeek in 2025 to years past around sustainability? Would you say that the emphasis has changed?

Paul Gruenwald: I kind of like this realism view because this was my third CERAWeek. And the first one, we were talking about stranded assets. Stranded assets happen when you have a very quick energy transition. And the worry back then is energy is a very capital expenditure-intensive industry. Some of these assets have long lives, 20, 30, 40 years. And one of the worries back then was firms may be reluctant to make 20-, 30-, 40-year investments in these big assets if we're going to move very quickly away from fossil fuels and go to sustainable. And I think one of the things that came out from CERAWeek that we haven't discussed so far is this idea that new energy sources are additive to what we have already.

So we started with wood and then we went to coal and then we went to oil and gas, and now we're going to renewables. But that other stuff doesn't disappear. People are still heating homes with wood and unfortunately, heating things with coal. Then we went into fossil fuels. Now we're going toward the clean end, which is gas, and now we've got wind and solar and maybe nuclear. But the new stuff doesn't displace the old stuff. It's kind of complementary to the old stuff. So I think that discussion has matured a lot in the last couple of years. We still need to decarbonize, right? We're going to fossil fuels and have a lot of carbon capture or whatever. But I think just having been to 3 CERAWeeks, that discussion around the speed of the transition has changed. And now, one, there's a security overlay and two, there's just a view it's going to take longer than people initially thought.

Lindsey Hall: Yes. I certainly heard that come through. I also heard quite a bit this all of the above approach idea. I'm doing air quotes here around all of the above because last people talked about this, the fact that it's going to take all different sources of energy to meet the growing demands.

Paul Gruenwald: Yes. And just to add something to that, there -- these guys at the conference, they're always struggling to figure out demand. They can manage supply, and they're the ones doing the supplying, but they're always worried about demand. And they were, I think, very reluctant to put any curbs on energy demand. So there was a lot of discussion about this kind of step change in energy demand from the past decade, which has been relatively flat to the coming decade.

And I think the number was 9% per year, and it was something like 1% or 2% in the previous decade. So there's going to be a step up in the demand for energy, and they just need to meet that. They weren't talking about curbing the demand for energy, which again goes back to that additivity argument that we're going to need everything on the table to supply all this energy we need.

Lindsey Hall: Well, Paul, I've asked you lots of questions, but what have I not asked? Is there anything else you think is important for our sustainability-focused audience to understand from this big energy gathering?

Paul Gruenwald: Well, we haven't talked about the just transition. We kind of touched on it, but it's something I'd like to write about in the future. So we can imagine lots of paths for -- let's keep it simple. There's an economic variable, call it GDP growth, and there's a climate variable called emissions. And our colleagues in our Commodity Insights division have done some scenarios. But if I give you a bunch of scenarios for the next generation or 2, some of them have faster growth, some of them have faster decarbonization. How do we rank those? What does just mean?

If you ask one of the 1 billion that we talked about earlier, they may put a higher weight on decarbonization and getting emissions down. One of the 7 billion would say, well, that's nice for you rich people, but we really want to grow fast and catch up and get better food supply and better jobs and higher income and higher quality of life. So when you look across the 8-plus billion people in the world, and I make you or somebody the benevolent social planner or God or whatever we're going to call this person, how do you decide which path is best? Because there's only one planet, there's only one climate, and we have different types of people with different objectives and they put different weights on those objectives.

So I think this issue is not going to go away on the just transition. And maybe another way to frame it is we learned this during globalization. I'm a big skeptic of win-win, right? I don't think there are a lot of win-win scenarios in the world. So whenever we do one of these big tectonic changes to the global economy, whether it's globalization or AI is coming or the energy transition, some people are going to do better off and some people are going to do worse off. And how do we keep enough people together and get the political and the social backing to make the change? I think that's a huge issue. We need to do more research on that one.

Lindsey Hall: Totally agree with you, and that's something we'll continue to explore on this podcast. I hope you'll come back so we can continue this conversation, Paul.

Paul Gruenwald: Happy to do that.

Lindsey Hall: We just heard Paul talking about the idea of realism that permeated the conference. Another related buzzword this year at CERAWeek was pragmatism. Here's how BlackRock's CEO, Larry Fink, put it when speaking at CERAWeek. He said, "Across the board, we have to think about power and energy in a pragmatic way." BlackRock is the world's largest asset manager with $11.6 trillion in assets under management. And in recent years, Fink's influential CEO letters have highlighted the importance of decarbonization. Now Fink told the audience at Houston that, "I still believe that, but I also caution that any decarbonizing technology is highly inflationary right now." Fink said that wind, solar and other energy sources have a role to play, but he said the world will depend on dispatchable power for a long, long time, especially with the unbelievable need for electricity to power growing AI usage.

Esther Whieldon: As we just heard from Paul, AI was a big focus at CERAWeek. More AI means more data centers, and that's leading to huge increases in electricity demand, which also means electric utilities will need to increase their electric generation supply to meet that demand. Our next guest is Arshad Mansoor. And as President and CEO of the Electric Power Research Institute, or EPRI, he has some unique perspectives on this topic. EPRI is a research organization that focuses on electricity issues related to generation and the delivery of electricity in the U.S. And among other things, they have a number of initiatives underway related to artificial intelligence. I asked Arshad, how are utilities thinking about their low carbon goals as they're also building out these gas plants? Here's our conversation.

Arshad Mansoor: So natural gas will be a key generation source. The challenge with natural gas will be we're going to make sure we order the turbines right now because that is by the supply chain. And ordering a turbine at the end of this year, you may get it in 2030. But let's talk about low carbon. And this is an interesting discussion that's happening in U.S. and other parts of the world. We see that as this energy transition, the way energy is evolving is a dual between good versus good. So one good is energy drives global prosperity. And that's abundant energy, accessible energy, reliable energy, resilient energy and affordable energy. So that's driving the prosperity in U.S. and globally.

The other good is energy has to also protect the planet. But protecting the planet is not just carbon. It's land use, it's water use, it's impacting air quality. And of course, it's greenhouse gas emission, which is beyond carbon that impacts climate. So it's a good versus good. It seems to be a dual and a debate. For us as technologists, we actually see as an opportunity that you bring in SMR, you bring in new nuclear technology, you build the gas plants with the back-end future possibility of carbon capture and storage, then you can do both the goods and you can drive global prosperity and you can protect the planet. I think that's where the world will evolve.

And it is not just carbon that protects the planet. How much land that you use to produce energy, to move energy, how much water you use, how does it impact air and how much greenhouse gas emission you impact. So we call it a balanced energy scorecard. And you got to keep it balanced. You can reduce carbon and then if your land use goes up, if your affordability changes, if your reliability changes, you are coming to an unbalanced energy system. So I think the narrative on energy globally will evolve into we need to protect the planet, we need to drive global prosperity. And it is optimizing both of them. And I see gas -- we talk about gas from a U.S. perspective, AI models.

AI models are happening everywhere. Countries are already deciding that our data will remain in this country. You have developing countries where power need is significantly more, even with our increased power need. So if you're using coal in a country and if you can replace it with gas, you just removed half of the greenhouse gas emission that's coming up. So one of the -- if you look at the worldwide use of coal and petroleum for using -- making electricity, if you can buy a magic wand, replace it with natural gas, you will create a glide path where the world is going through a carbon reduction that U.S. did in the last 15 to 20 years because U.S. did it with coal-to-gas conversion and bringing in a lot of wind and a lot of solar.

So give that opportunity to the world as well so that they can go into an accelerated glide path. But do that thinking about the future, which is carbon capture and storage. You're in Houston. This is the capital of carbon capture and storage. Those technologies exists today will be used in the future. So if you're building a gas plant, think of a gas plant that can be retrofitted with carbon capture and storage in the future. So we see it a good versus good. We don't see that as a dual. We actually see that you can do both.

Esther Whieldon: Arshad mentioned SMRs, and those are small modular reactors. A new generation of nuclear reactors intended to be smaller, more flexible and more easily deployed. Nuclear was a big focus of CERAWeek discussions. More than a dozen energy companies and tech leaders, including Amazon, Google and Meta signed a large energy users pledge reporting a goal of at least tripling nuclear capacity by 2050. At CERAWeek, I also heard how AI can help make grid operations more efficient. So this prompted me to ask Arshad where electric utilities are at in their AI integration journey. You'll hear him mention ERCOT. That's the Electric Reliability Council of Texas, which is the electric grid operator for Texas. Okay. Here's a Arshad again.

Arshad Mansoor: So when you have to keep the lights on, 99.99% of the time, the coldest day, the hottest day of the year, you will have to be careful on how quickly you bring in new technology. I used to give this example. If I got an iPhone and somebody rolls out an app, within 2 days, they will send another version and they'll correct the bug. You don't have that opportunity. You cannot send something on the grid and the light goes out. And then ops, we're going to fix the bug. So there is a natural conservatism, which is ingrained in any critical industry. Having said that, cybersecurity is already -- it's not new. You're protecting control rooms, you're protecting all your data. You're doing it with your cloud services, your on-prem storage with all the cybersecurity already built in.

So when you bring this AI, you got to keep the data on your side. You're not going to take operational data and bring it somewhere. So you will use the same level of protection that you have today as you bring AI within the system. And you will do it in steps. The first, AI is your transformer expert. Well, there is some cyber risk, but lower. Now that transformer expert is getting all the data and making decisions.

Esther Whieldon: And the transformer expert is?

Arshad Mansoor: An expert, transformers are things in the power system that are critical. Transformer is a like transmission line, like switchgear, like a nuclear power plant, like a gas turbine. All these are technologies that makes the grid work and AI will create experts. And how does AI create experts? Because AI will be trained by the 50 years of expertise that EPRI has built and the thousands of experts that we work worldwide because you can actually extract the knowledge from an expert just by talking. You can talk with a nuclear power plant expert who has been managing nuclear power plant for 30 years, and you can talk with them for hours and hours and hours.

And that audio is actually training the model. So that's what we are embarking next week at the NVIDIA Developers Forum, GTC, another huge 15,000 people conference that's going to happen in San Jose. By the way, just an anecdote, last year, that same conference, 15,000 people happened in the same week at CERAWeek. And CERAWeek was dubbed as the Super Bowl of energy, but everybody was talking about AI. San Jose, 15,000 people was dubbed as the AI Woodstock, but everybody was talking about energy. But San Jose, AI people didn't know much about energy. And I would say the CERAWeek Energy folks didn't know much about AI.

So one of the things that EPRI has done since then, we have squarely put us in the middle of those 2 industries. And when you talk about how do you power AI, we just launched last November, maybe the only global -- it's not research in the sake of research. It's knowledge that we already have, but some of the knowledge is with power industry, some of the knowledge is with markets like ERCOTs, some of the knowledge with hyperscalers and Google, some of the knowledge is data center developers like QTS, Compass. We brought in all those 4 groups, more than 40 entities on a 3-year project starting from 2025 January, let's take some 100, 200, 500-megawatt data centers globally.

Let's figure out when the grid is stressed, how do I flex? How does the data center back off? So that's called our data center flexible initiative or DC Flex initiative. That's a great example of you have to bring the industries together. These industries work together, but not really together. And this is data center developers, hyperscalers, tech companies like NVIDIA, AMD, Broadcom and of course, power companies, regulators, markets. And that's the amazing thing that happened. And I would say CERAWeek was the trigger because we had -- I was at CERAWeek last year. We had our AI people in San Jose at the NVIDIA Developers Forum.

And when we came back, we say, we're hearing all about this. How do we address this? Step one, bring the industries together. So that has happened. So I'm optimistic we will meet the demand. I'm optimistic we will also protect the planet. And I'm optimistic that the enduring value of AI in operating the grid more reliably, you will continue to see that in coming years. It's not a one-and-done deal.

Esther Whieldon: Arshad said EPRI is working to bring the tech and utility sectors together and this need for collaboration and partnerships to solve big sustainability challenges is something that we hear about often on this podcast. Our next guest works directly with companies across multiple sectors, including energy and utilities and outlined what she heard from them at CERAWeek.

Cate Hight: So my name is Cate Hight. I'm a partner of Bain & Company, which is a global strategic management consultancy. I'm based in Washington, D.C., but we have employees throughout the world. Our company has, I think, about 19,000 employees by now. So it's a big company. We help companies with or new problems, right, ranging from big transformations they need to do to thinking about how to enter into new markets and my specialty, in particular, is energy and sustainability. So I help companies really think about how to participate in energy markets, how to think about trends in sustainability and how they may impact some of their strategic considerations.

Esther Whieldon: Cate noted that even as companies are looking to serve growing energy needs, they're aiming to limit the impact of that growth on total emissions.

Cate Hight: I think something that I've been seeing is an interesting part of the conversation is a number of companies, including some of the big providers of oil and gas in the Middle East, talking about providing molecules with less externalities, less emissions, right, and really positioning themselves to take care of those emissions to be able to provide as clean a fossil product as possible.

Esther Whieldon: On a recent episode of this podcast, I sat down with one of the world's largest oil and gas companies, ExxonMobil. We heard from that interview how the company is trying to lower emissions from its core product, which is fossil fuels as opposed to investing in renewable energy sources like wind and solar. I asked Cate for her perspective on how oil and gas companies are thinking about investing in renewables. Here's what she said.

Cate Hight: So I think, again, that's a geography-dependent question. But in general, I think what we've seen over the past several years is shareholders of these companies really wanting to focus on returns to shareholders and whatever capital is not being returned to shareholders going back into the core business that the companies have experience doing, right? So drilling for oil, drilling for gas, extended competencies, including carbon capture and underground storage used for advanced oil recovery, et cetera. I think that investors and shareholders have less patience for some of the lower returns that those new energies or low-carbon businesses have been providing. So I think that's a little bit of what we're seeing. So it's kind of a message of, can you please just get on with focusing on what you're good at and put that other stuff on the back burner a little bit.

That is a story for many oil and gas companies right now, but that is not a story for utilities or renewables developers at all, right? Those companies are very bullish on the future of deploying renewable energy because that's what they do, right? So I think there's an element of shareholders and investors really encouraging company performance and sort of the fiduciary responsibility of these companies to really focus on their core rather than it's picking and choosing one technology over the other.

Lindsey Hall: We've heard from a couple of today's guests about how policy uncertainty is impacting markets and the energy transition. Our next guest talks about the role of policy and enabling technology innovation. I sat down with Damian Beauchamp, President and Chief Development Officer at 8 Rivers. This is a clean energy and climate technology company that develops and deploys sustainable infrastructure solutions to meet the global goal of net zero by 2050. He starts off by explaining more about what his company does.

Damian Beauchamp: So all of our technologies focus on the interface of emissions and fossil fuels and how you eliminate those emissions. And the majority of attendees to CERAWeek are in the hydrocarbon space. And so it's a very relevant place for us to participate.

Lindsey Hall: Okay. And when you're thinking about the thing that you do at 8 Rivers, if I wanted to explain that to my fourth grader, like how would you explain that in simple terms to her?

Damian Beauchamp: Yes. So we've redesigned large industrial systems such that we eliminate the emissions. So we keep the inputs the same, and we keep the outputs the same. What we're dialing in and changing is the environmental outcome and the environmental impacts. So we're eliminating any of the emissions that come from the plant, not just CO2, but all emissions.

Lindsey Hall: And who are the clients you're working with?

Damian Beauchamp: Yes. So for example, in Wyoming, we've signed an MOU with a utility by the name of PacifiCorp, which is a division of Berkshire Energy Corporation. That's one. In other instances, we're partnered with ammonia producers and consumers around our blue hydrogen technology. We're also looking at major refiners who consume hydrogen for hydrogenation of different long-chain hydrocarbon feedstocks. On the direct air capture side of things, we're focused on various hard-to-abate sectors like shipping and airlines and people who have legacy emissions that they want to remove like large data center companies and AI and the latter part, which is a huge focus of this year's CERAWeek, the data center AI play and the energy demand growth is also relevant to our zero emissions power production platform that we've developed.

Lindsey Hall: Okay. And tell me more about what that is for anyone not familiar.

Damian Beauchamp: Yes. So traditional power generation, majority of all power generation across the world happens with the combustion of some kind of fossil fuel. And the way they're combusting or burning that fossil fuel is with oxygen directly from the air. And it's that air that actually spins the turbine that generates the electricity through a generator. There'll be waste heat in the exhaust of those air breathing turbines. And that extra heat is used to boil water which then creates steam and the steam goes through a steam turbine to generate additional electricity, kind of increase the efficiency. What we did was we said, how would you redesign a power plant such that you inherently capture all of the emissions and they never go to the atmosphere and nothing has to be separated, that your emissions become pure CO2 ready for sequestration.

And so what we looked at was the front end of the system and using pure oxygen instead of oxygen from air to burn a fuel while recirculating CO2 back to the front end and the CO2 instead of air spins the turbine now. So if you think about a plane when you're on a plane if you've ever looked at the big turbines on the wings, what's basically giving you that power is the compression of air going through those blades that are spinning. But those are the same units effectively that are producing power. So instead of air going through that, we have pure CO2 going through that turbine with oxy-combustion for the heat to generate electricity. And so that's the primary difference is that we've designed a power system that utilizes CO2 to generate power through a turbine and thereby inherently captures all of the emissions.

Lindsey Hall: So it makes a lot of sense the way you've just explained it. Why isn't everyone doing this?

Damian Beauchamp: Well, when we started, it was long before there was an IRA. We started this work in 2008, 2010. And a lot of people back then were really focused on pure renewables approaches, just solar or wind. And what we kind of looked at and said, there's a huge opportunity and gaping hole here where we have to figure out how to interface and engage with the hydrocarbon industry if we expect to reduce emissions. And that's when we set out to start looking at different ways to utilize fossil fuels such that we could eliminate the emissions, but still have all the benefits of fossil fuels, the transportability, the affordability, the reliability. And so that's really what set us on at work.

And at that time, there weren't any CO2 incentives from the federal government or from really any governments around the world on reducing CO2 emissions. And so there is a little bit of added cost in our overall system design and to transition to this new kind of power plant. And so I think at the time, it was harder for large corporates or even start-ups to embark on this type of endeavor because it is very capital intensive.

And a lot of VCs typically look for things that will return in 4, 5 years, 5, 10x their capital investment where this is a much longer road and the capital requirements for first unit deployment and larger revenue generation, it takes a longer time and it requires a little more capital. So one, it was a very ambitious endeavor. So I think that's part of the reason people didn't do it. And then two, there really wasn't a significant value placed on CO2. So to design a system or a machine that produced large volumes of pure CO2 didn't at the time, really make sense, I think, for a lot of different groups.

Lindsey Hall: Okay. And now in the environment where we currently are in early 2025, the Inflation Reduction Act has been in place for a couple of years now, and we have this new administration. Talk to me about how the IRA changed the game and also what is ahead for you?

Damian Beauchamp: Yes. For us, the IRA certainly added significant economic upside and attractiveness for the deployment of our technologies. So with the IRA in place, the returns for our first-of-a-kind projects, which are typically going to be the most expensive, start to return like nth of a kind and they even return better than legacy systems that have been deployed hundreds of times already. So it was certainly a huge catalyst and accelerant.

Lindsey Hall: We just heard some of the ways the Inflation Reduction Act has changed the landscape for 8 Rivers. Damian also talked to me more broadly about the domestic impacts of this law.

Damian Beauchamp: I think what we saw with the passage of the IRA in the U.S. is a huge influx and shift in capital. Capital started coming onshore to invest in large industrial facilities. We saw a number of large clean fuel projects pop up, a number of power generation, clean power generation projects come up. We started to see the direct air capture companies receive large investments, not only from domestic companies, but international companies. And ultimately, what all this investment influx created was a huge number of jobs that if we would have kept on the path of the IRA as was intended, I think we would have saw another waves of hundreds of thousands of jobs being created as well.

And not only the white collar jobs, I think it creates a tremendous amount of blue-collar jobs because a ton of steel and cement was going to have to be put down on the ground to construct these facilities. I'll give you an example, like if you look at Oxy, who kind of had the balance sheet as well as the ambition to really drive direct air capture fast and you look at their STRATOS facility, if anybody is listening and you go Google STRATOS and look at some of the images of the size of this complex that they've constructed and just imagine the number of jobs that, that created. Imagine 15 or 20, 30 of those, hundreds of those across the country, building kind of the new clean infrastructure ecosystem that the world then could model and replicate. That's, I think, where we were headed with the IRA initially.

Lindsey Hall: Okay. But no longer?

Damian Beauchamp: To be seen. So I don't think that the whole IRA has been repealed. I think there's some evaluation going on. We heard Chris Wright at the beginning of CERAWeek talk about the fact that he's being pragmatic in his approach. He's not being ideological or dogmatic. He's really thinking about what are the pros and cons, and he sees the benefits of emissions reduction, I think, as well as CO2 utilization. So I think we have a steady hand at the helm of the ship right now in the DOE. And I think he'll be able to navigate the waters and bring the IRA through to the other side. There might be some refinement to it, but I don't think there'll be -- or at least I hope there won't be an outright dismantling of it.

I think you've got too many large corporate entities. If they want more energy faster, you've got the Exxons, the Oxys, the Chevrons, all bought into this in different ways. Exxon bought Denbury, Oxy is building STRATOS as well as a number of other kind of carbon capture-based initiatives, plus they have all the expertise on the infrastructure side for CO2. And then Chevron with the acquisition of Talos that we saw a few years ago, which was a huge acquisition of offshore assets for CO2 sequestration. All of those transactions suffer a bit if you have absolutely no components of the IRA left. And refinement and analyzing things like the IRA, I think, make it stronger, will ultimately make it more robust.

Lindsey Hall: And you mentioned when we were chatting ahead of this interview that you'd been to several previous years of CERAWeek. And I just wonder how has the conversation shifted for you this year?

Damian Beauchamp: If I think back to 7 years ago, we were still trying to explain why we were designing a power plant that inherently captured all the CO2. In 2021, '22, '23, there was more conversation around and excitement around what solutions are out there. And we were really ready for that moment. And so what I saw was all of these large oil and gas companies really thinking hard about, okay, how do I implement this into my portfolio. You saw companies like ExxonMobil in those years stand up and say, yes, climate change is real. We've had the information. We know it's a thing. We're now engaging in a bigger way and a ton of support came through.

But you also saw that at least post-COVID, so call it, '21, '22, you saw all the energy companies kind of questioning what the future was for their business because the previous administration had kind of put an attack on all things fossil. And so there was some hesitancy. Now I think where we're at is an interesting moment where you have the observation and the admission that we want to be cleaner and we want to evolve as an industry, coupled with the enthusiasm of increased production with the shadow of this tariff game that's starting to be played, which kind of threatens all industries and creates quite a bit of turbulence in markets. So we'll see where all that shakes out.

Lindsey Hall: As you're looking ahead, what are the big challenges for you in your industry and the work that you're doing? What are the big outstanding questions that if we have this conversation again next year, you hope would be answered?

Damian Beauchamp: Yes. For us, I think on the regulatory front and the permitting front for these types of projects, it's at least understood. It might not be exactly how we want it to be in terms of time and maybe things will speed up on that front. As far as addressable market, value propositions for various customers, that's becoming clear, and it's easier to have those conversations with counterparties now because they're openly looking for solutions.

The difficulty for us and I think anybody in this field because this is capital-intensive infrastructure is access to capital and access to capital for first-of-a-kind projects and getting creative around the business model innovation that you put together to acquire the capital and gain the confidence of these counterparties to put that capital at risk for what could be a better and cleaner solution that also makes economic sense in the long term. I think that continues to be one of the most challenging points. On the technology front, there are many technologies that have been well developed, demonstrated, tested, and now it really comes to commercial deployment and the capital required to do that.

Lindsey Hall: One of our recent podcast guests was Dr. Vanessa Chan, who was until recently the Chief Commercialization Officer at the Department of Energy, and she talks quite a bit about just this first-of-its-kind, the challenge this -- the getting capital flowing there. Any thoughts on what needs to happen to get that capital flowing?

Damian Beauchamp: Well, for us, government incentive is always helpful and has proven over time to really allow innovative technologies to come down the cost curve when maybe industry wasn't ready to bear the risk. This is certainly true for solar. I think the way we think about it is, okay, administrations are going to change so often that we can't build a business model based on just government financial support. So how do we start talking to various parties across different industries and ask them to do the things that they're already doing naturally, but just take that step. So like if you're a hyperscaler, let's talk about a power offtake.

If you're a utility, let's talk about how you could operate our power plants. If you do compressors and pumps, let's talk about how you could support in that way and ask them for like investment into that entity in exchange for equity to just do the things that they already want to do. And trying to pull those right strategic partners together, I think, is a good strategy. But ultimately, having a large strategic partner who's bought in on the vision and wants to see it through is one of the most critical pieces. And that's something we're continuously focused on.

Lindsey Hall: Well, thanks for sitting down with me today. It's been a pleasure talking to you.

Damian Beauchamp: Yes. Thank you.

Lindsey Hall: So today, we heard a lot of perspectives on the energy transition and about the challenge of balancing near-term energy concerns about affordability, security and reliability alongside longer term but still urgent concerns about energy sustainability. None of these priorities can be looked at in a silo and sustainability and energy transition strategies need to be durable enough to withstand changing political wins.

Esther Whieldon: We covered a lot today, but one topic that we didn't get to was methane emissions. We heard repeatedly that oil and gas companies are prioritizing methane emission reductions in their climate-related efforts. We're going to be covering this and hear the perspective of other companies across energy, utilities and chemical sectors about their approach to the energy transition in upcoming episodes. We'll also be talking more about clean technology investments. I moderated an S&P Global webinar on March 26, and I want to end today's episode by highlighting a figure I heard from one of my panelists, Roman Kramarchuk, Head of Climate Markets & Policy Analytics at S&P Global Commodity Insights. He said that 2025 will be the first year where clean tech investments will outpace investments in oil and gas globally. So that means investments in low-carbon solutions are also continuing to climb. We'll include a link to the replay of that webinar in case you'd like to hear more.

Lindsey Hall: Thanks for tunning into this episode of All Things Sustainable. If you like what you heard, please subscribe, share and leave us a review whenever you get to our podcasts.

Esther Whieldon: And a special thanks to our agency partner, the One Nine Nine. See you next time.

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