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