Transcript by Kensho.

Lindsey Hall: I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a Senior Writer on the Sustainable1 Thought Leadership team.

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy.

Esther Whieldon: By the time you hear this episode, Climate Week NYC will be over. But for now, I'm still on the sidelines of the Nest Climate Campus, where Lindsay and I have been having so many great conversations. We brought some of the interviews in our daily releases of the podcast last week. We heard from Siemens, 3M and the Sustainable Apparel Coalition. 

And we heard repeatedly about the importance of collaboration. Well, today, we're going to hear about the role government has to play in that. All right. Let's dive in.

 I appreciate you having me on the podcast. Chris Creed, I am the Chief Investment Officer of the Loan Programs Office, which is the office within the Department of Energy that is responsible for administering a variety of different loan programs that in the aggregate, after the passing of the Inflation Reduction Act, gives us approximately $350 billion worth of lending authority, all for senior loans, all to help catalyze energy projects here in the United States. And we are in the process of ramping up to meet that amazing challenge that Congress has given us. And as you have seen, we've announced a number of different loans over the past couple of months. And going into next year, we're super excited about the number of loans that we are hoping to announce next year.

Esther Whieldon: What are some of the technologies that you are most excited about or you think can make the biggest difference for the transition?

Christopher Creed: I'm excited about a lot of different things. I'm probably the proudest of some of the work that we've done in our battery electric vehicle, battery supply chain, battery chemistry markets. So we have announced the first ever active anode assembly facility here in the United States, down in Louisiana. All of our other EV batteries, the anode came from somewhere else. 

We announced 2 transactions to create gigantic battery assembly facilities that will be the battery for all of the EVs coming out of those entities for years. We have been working with battery recyclers to see if once we start to see a large number of batteries, to make sure that we're able to recycle these critical minerals. And so that has been, I think, a strong success, which doesn't mean I'm not equally excited about virtual power plants. We announced our first virtual power plant transaction in April.

Esther Whieldon: So let me stop you there. What is a virtual power plant?

Christopher Creed: Virtual power plants. It's an aggregation term. It is an umbrella term that means distributed generation, rooftop solar, distributed storage, batteries.

Esther Whieldon: And distributed means like not utility scale, like residential?

Christopher Creed: Exactly, residential and commercial. Demand response. A great example of demand response might be if your HVAC system or your heat pump, preferablym talks to the grid and says, "Hey, what's going on with your generation assets right now?" And the grid says, "Oh, I'm flush with solar. It's 2:00 in the afternoon, and we are actually curtailing some solar. Go ahead and set your thermostat to 65 degrees, cool your house down. We have free electricity right now. The price -- the marginal price of electricity in California right now is negative. Please cool your house", such that you don't use that power at 4 pm or 5 pm when everyone's trying to do the dishwasher or charge their electric vehicle or whatever it might be. 

We're going to call that load shifting. If I can move load from one point in time of the day to another, I can increase the percentages of renewable generation that I have at grid scale. So we can have a higher percentage of solar or wind in our markets. The aggregation of all of that with the software to control or to induce behavioral change, that's known as virtual power plants.

Esther Whieldon: All right. So what are some other technologies that you think our listeners should know about or you're really excited about?

Christopher Creed: The other side of virtual power plants is nuclear, and let me explain. Virtual power plants allow us to have higher percentages of renewable energy generation on the grid. Nuclear is that clean, firm electricity that we need to power the constant needs that we have for electricity, whether that's the data centers or the chat GPT or whatever it is. 

The other side of that is all of the supply chains and other important components for all of these energy projects. So other examples of projects that we have in our pipeline are the necessary components that you would need for SAF (sustainable aviation fuel), the necessary components that you would need for offshore wind, the necessary components that you would need for nuclear, the necessary components that you would need for any of these interesting technologies, burgeoning technologies.

Esther Whieldon: What is your thought on the pace of change? And yes, how do you feel about the transition?

Christopher Creed: The IRA was passed about 13 months ago. We are seeing Treasury release more and more information about the utilization of tax credits. We see a substantial increase in our pipeline. We now have something like 150 applications for something like $150 billion of loans. 

It's going to take some time. We are going to do it. This is unbelievably important. We have a tremendous mandate from Congress. We at the Department of Energy's Loan Program Office, but other areas of government, many of your listeners, the states, we all have an important role to play in this transition. 

And the thing that, the phrase that we use at the loan programs office that I really like is this transition is going to be private sector-led and government enabled. We're capitalists.

One of our most famous loans was to a small startup called Tesla, and it totally changed how we think of electric vehicles going forward. And it's my sincere belief that in our portfolio now, we have amazing entrepreneurs that are going to have technologies that are going to provide a similar level of disruption in their part of the economy. 

And the other phrase that sort of goes through my mind sometimes when asked about the aren't you pessimistic or why aren't you depressed, is that things can go from impossible to inevitable without ever reaching probable. Because we'll move to a world where, of course, 50% of electric vehicle sales will be EV. We'll move to a world where, of course, we'll have demand response and load shifting technologies in residences and commercial buildings. Of course, we will have nuclear power. 

And I hope that what we can do in the Loan Programs Office is through debt financing, which is important when you think about the capital intensity of a lot of the projects that we're talking about. This isn't software where you can raise some private venture equity and make a killer app and have a tremendous payday. This requires tons of jobs, a lot of investment, commodities, infrastructure, buildings. But in the end, I think there's a tremendous payoff at the end of that. 

But you need debt financing to get your equity returns. It's my hope that by doing that, by helping provide that leverage, we show the broad financial markets that there's real returns in these investments, that these amazing technologies can be de-risked, i.e. the confidence interval around the costs associated with building the widget factory, or the uncertainty of the possible revenues of selling my widgets, continues to shrink, thus inducing more and more investors into these technologies, whatever they might be. 

Esther Whieldon: Thank you so much for doing this, talking with us. It's great to have you on the podcast.

Christopher Creed: Esther, thank you very much for inviting me. It's been wonderful. And I hope the rest of your climate week goes great.

Esther Whieldon: So as you heard Chris say, government has a real role to play in helping to catalyze many of the technologies companies are going to need for the low carbon transition. And this is a theme will continue to tease out in our coverage of climate week and in the weeks ahead.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider, and a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.

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