00:00 Josh
You look at these higher electricity prices, Dave. Do you look at it and say, okay, this is 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, that’s a great question. Um, so I think these higher prices are here to stay, at least in the short term.
00:21 dave
We’re seeing rising electricity prices across the U.S., driven in part by artificial intelligence and data centers, but there are many other factors, and the capital costs of new power plants are increasing. We are already seeing the decommissioning of some aging infrastructure. Well, we have additional transmission and distribution lines that need to be upgraded. That being said, in any given year, weather can be a very important factor in overall electricity prices. But overall, I think we’re in an era of rising prices.
00:54 Josh
So if these electricity prices stay the same, Dave, and they continue to go up across the United States, how much do you think these prices will go up, Dave?
01:08 dave
This is another great question. So, there are several factors at play. Well, some markets have price caps that limit price increases. Having said that, the political appetite for high-level pricing does seem to be challenged at best. So we’re seeing a lot of different system operators, policymakers, regulators across the country starting to try to change the rules, which always happens in these competitive markets, to help really focus and hone in on affordability. Well, I think we’re going to see some evolution of market rules. Um, but generally speaking, at any given time, the price within each market can reach a price cap.
01:52 Josh
Dave, are you someone who has thought a lot about this issue? I mean, is there a solution or solutions that could help mitigate the cost hit for consumers?
02:05 dave
So there are a lot of different potential solutions. There’s no magic bullet, right? If it were easy, we would have done it. I think one of the most interesting things that we’ve seen in the last 12 months is PJM, which is the grid operator from the University of Chicago to New Jersey. Covers 13 different states. Well, parts of at least 13 different states. It is the largest wholesale energy market in the world. Well, for electricity.
02:22 dave
They’ve implemented what they call the key issue, um, fast track, which is really a stakeholder process to try to accelerate the innovation of new ideas to alleviate costs for consumers, two, bring new generation into the system faster, and three, ensure a more reliable grid.
02:40 dave
Typically in these processes, um, in some kind of standard process, it takes 12 to 18 months to start going through the regulatory pathway. Sometimes it can take years to see changes. So the quick way they try to solve this critical problem is to come up with a bunch of ideas, debate them, figure out what works and what might not work, and actually move forward with some of those solutions. So some of that remains to be seen, but we’re seeing a lot of interest in demand response.
02:59 dave
So essentially, if data centers don’t need to have the capacity to support them, for example, then the power plants that support them are essentially turning on the light switch when needed. Demand response essentially allows system operators to shut them down during periods of really high grid stress.
