Welcome to Nasdaq Trade Talks, where we meet with the top thought leaders and strategists in emerging technologies, digital assets, the regulatory landscape and capital markets. I'm your host, Jill Malandrino, and joining me on the desk at the Nasdaq market site. We have Ethan Paterno. He is a partner at PA Consulting. Josh Joseph, senior vice president of sustainability and governance advisory at Edelman Smithfield. Natalie Silva, strategic marketing leader of critical power industries at ABB, US. And Dr Sasan Mokhtari, founder and CEO of OATI.
We are here to discuss a number of issues and why a mixed array of energy sources such as wind, solar, geothermal, and other new forms of renewable energy are key to resource diversification. It is great to have all of you with us. Welcome to Trade Talks. Ethan, let's go around the table here. There is a lot to unpack as we think about next gen power generation in the US.
Yeah, I've been doing this 25 years. And this is also the most interesting and complex time of my entire career. We're facing load growth that we haven’t seen in the US since before the oil embargo in the mid 1970s. So, 50 plus years of tremendous electricity demand growth, about 3% per year.
And what it's really calling for is solutions really broken into two parts, a near-term solution of how are we going to keep the lights on? We already see some actions being taken by electricity system operators, namely PJM in the Mid-Atlantic states, to try and solve that. But also too, there's a need for long-term solutions as well, bringing in new infrastructure, both for transmission as well as power generation. And if we're going to get through this and towards a sustainable future, we're going to need of address both of those simultaneously.
Yeah. I mean, the demand certainly outpaces the supply at this point.
So, there's a lot of incentives that are coming in from governments on this. Certainly, there's a lot of challenges associated with demand. And what you're seeing is, you know states are actively incentivizing a lot of different companies to invest in these AI data centers. I think a real challenge is power, water consumption, and noise pollution. And so, you know, as we deal with some of these incentives and power generation needs, you're going to start to find a lot of challenges in getting these data centers online.
Especially when you think about, Natalie, infrastructure and the bottlenecks created as companies are trying to forecast what they are going to need.
That's right. I mean, historically, you would look at fiber connectivity and land as the constraints for data center build. And now it’s power. Power is the absolute number one constraint in the industry. And so you're seeing a lot of the bring your own power on site power generation. And that's really leading to data centers building at these emerging markets. You know, Northern Virginia is completely saturated. Now you see Dallas, you see Midwest, a lot of southeast builds happening because that's where power is abundant.
Yeah. And when you think about it, Sasan, from the utility perspective, they are in fact eager to innovate. And really the question is, do you, you know, with aging infrastructure, the near term and then longer term, how are you building out this new infrastructure?
It's a good point. The utilities are very motivated to participate and deal with the issues. The grid as we know it today was build, one way it was generation building transmission level and go through transmission through distribution and to the load. Ultimately, the new grid will be very different. It will be built such that the flow will be bidirectional. They will be distributed generations such as solar and battery and so forth, which there could be anywhere in a household level.
It could be in distribution or transmission level. So the flow would be both directional. This will create significant challenges for the operators. The other big challenge for them is unknown and uncertainty. If utilities must rely on reliable resources they can forecast, schedule load, and generation has to balance at all times in the power grid. So they have to rely on that generation. How to do the forecast and how do you deal with the uncertainty is where AI come into play. It’s a big tool to do that kind of analysis and forecasts. So I think there is a lot of hope. I think there is a lot to be unpacked and be able to extract the existing architecture infrastructure without having to resort to major build out. I think there's a lot of capacity in the existing transmission that can be extracted through dynamic loading and other methodologies and there is a lot of power that can be generated by individuals, by people, by other companies. So I think there is big hope here.
Yeah, there is a big hope by Ethan at the same time because of policy and roadblocks, right? It takes time. It takes massive investments to get a longer term solution online in the next six, seven, ten years.
Absolutely. And I think that's why we really see a need for coordinated policy as well as tax credit discussions at the federal and state level, working together with local communities towards getting behind these large infrastructure projects, whether it's a data center, whether it's a power plant, because that is the long term solution, is we need more of everything if we’re going to meet this forecast of electricity demand, but also recognize that a lot of the existing transmission and power fleet is aging.
If you look at the average age of transmission lines are 50 plus years old. We have a large portion of our power fleet that's similarly 30 plus years old. These are assets that are reaching the end of our useful life, which is where the AI comes into play in a short term solution to keep them operating until we can bring these longer fuse projects on board.
Yeah. So it sounds to me, Josh, like this is a bridge strategy in the near term.
Absolutely. Yeah. I mean, it's only going short term. To your point earlier you were talking about these projects can take seven, eight, nine years to go. That's multiple different policy cycles, different administrations that are in place. You know, community challenges are real as we think about the investment in some of these projects. And so being able to find a way to kind of craft that story about why we should be investing in these so we can get the investment from local policymakers is going to be really important.
Yeah, I mean, it certainly does impact forecasting as well.
Yeah. No, absolutely. I mean, as an equipment supplier, I mean we're very much reliant on our customers and working directly with our customers to tell us what capacity is needed, and also working with the utility directly to understand what's available, what’s needed, because we know these are longer life cycles. And so that's really important if we want to get online quickly as in terms of a data center build.
Yeah. And it certainly is resource diversification as well.
Oh, absolutely. Resource diversification is absolutely critical for a variety of reasons. For one thing, resiliency. You cannot rely on a single resource as we are today in the current infrastructure. If you're relying on coal only oil the price of oil goes down, impacts everything else. So that diversification definitely helps with that. That kind of a price hike in this case, those are resiliency. You know, in case of severe weather outages and so forth, you know, if you rely on a big generator with the big you know, power plant and it goes down, you're going to millions of people are going to lose power. So if you diversified and geographically and in terms of resources that will definitely help with that as well. So there are extreme benefits in there are in this kind of diversification in terms of reducing price hikes, resiliency, reliability and so forth.
Yeah, I mean, especially critical infrastructure, Ethan, there can't be downtime. I mean, at my house, I have a backup generator. Like, you know, multiple resources just seems like an obvious choice. But again, there are some roadblocks there.
Absolutely roadblocks in terms of I think it’s a mindset that we've had as an industry for the past 25 years, really, since the power grid deregulated in the late 90s around this is how we're going to use these assets. And that's the way it’s always been.
We can't afford to do that anymore. And one example of that is every data center is built with backup generation, typically at a 1.2 redundancy to whatever their power consumed is. If you look across the pond to Ireland they're thinking about different ways that they can use that backup generation to actually act as a demand response to serve the needs of that data center. When the grid is tight, when there aren't excess electrons what that means is at the end of the day, two things. One, you're able to bring on data centers faster, but also two, that you can reduce the new infrastructure needed to connect that data center to the grid.
The latter is important because that helps reduce ratepayer costs, which I know from the other panelists here is a big obstacle when new data centers are going to get sited. everybody's very concerned about the cost of milk but they're also concerned about their power bill. So what can we as an industry do really to make sure the costs are one reduced but two isolated from ratepayers?
Yeah, I think but Josh are also up against a brick wall here because it has become a partisan issue, which, um, you know happens quite frequently, It's also the way the media portrays it NIMBY, right, and nobody wants it in my back yard. So the question is, how does the industry communicate this at scale?
Yeah. I mean, look, this isn't a new phenomenon. Certainly there's been challenges with NIMBYism in different types of build outs before, different affordable housing, several others as well. You know, a lot of this is going to start with local engagement with communities to understand what those issues are in certain regions of the country, there's certainly going to be power concerns. Utility bills are going to be rising, you know, ten, 20%. Sometimes it's going to be water concerns.
There's actually a local suburb of Chicago where a data center project failed because of noise pollution concerns. You know, they have HVAC systems that have a loud kind of humming noise and the local community didn’t want that. And so, you know, certainly engaging the community stakeholders to understand what their needs are, what their challenges are, and then effectively communicate what the benefits could be for them. That's going to be really important going forward.
Yeah. Well, certainly the benefits are being able to use these types of technologies that make our life more convenient as well. I mean, there is a balance. Nobody wants to listen to construction when you're updating infrastructure but it needs to be done. Roads need to be fixed. Grids need to be updated.
Yes, exactly. I think that digital technology can really save the day here without any doubts short term. Now, whether it's through demand response or incentivize the consumers through rebates or through programs or it is aggregation of resources into what they call virtual power plants, essentially. And you can aggregate millions and millions of rooftops. And then that gives you, you know, could you know, 100MW of capacity that you can use when you need to.
So you don't have to have that. You don't have to design the power grid for the peak anymore, right? Because you have that leverage that you can reduce your demand. So yeah, this, this kind of digital technology is really going to help short term without a doubt. It can meet the immediate needs for the electrification for the AI data centers and so forth.
Yeah. And Natalie, I mean, you have a couple of ideas here as it relates to community impact and innovation and demystifying the industry.
Yeah, I think that's the one thing that data centers are really looking to do is to engage with communities early on and share those tangible benefits that they're bringing to the community whether that's tax revenue, whether investing in local schools, local communities. The local grid per se. But I think data centers are also getting smart in terms of where they’re building. So if you look at where power is abundant, you think about West Texas, you think about maybe Midwest.
You know, they look at the natural resources that are there, like natural gas plants, wind, and they're building there and they’re able to go into those local communities and say hey, you're exporting this recourse. Let us take care of that for you. And so I think, you know, they're really getting innovative in terms of how they're building and where they’re building.
What about the challenge of, okay one day we're investing in renewable resources and then there's a policy pivot. Wind as an example. I mean, it's, it's start and stop with significant investments.
Yeah. I mean, I think the hybrid strategy is what wins, right? Is, is that interconnection with the grid and working with the utility? But also if renewables works, if there's, um, you know, renewable energy available, they're going to go and they're going to tap into that and be able to source that.
Yeah. And what's so interesting is, Ehtan, that the AI demand conversation really reinvigorated renewable energy. You can also throw climate tech in there as well.
Absolutely. And also opened us up to new forms of what we consider renewable energy. Talking about SMRs, so small modular reactors. So think of a big nuke site, but really a small modular package of about 3 or 400MW. What you see now is the hyperscalers are starting to invest equity behind a lot of these SMR startups. And that personally, for me, is how we can meet our future needs as a society and as a US grid of a decarbonized future because I don't think any of us are willing to shelve that, but also reliable and resilient grid as well.
You know, if you think about a lot of the natural gas power plants that are on the US grid today, we do see supply disruption with natural gas at times, especially during winter storms. SMRs don't have that problem obviously, because they store the technology or the uranium on site. The issue is, is that none of those are advanced technologies yet. So what the hyperscalers are doing is stepping in to provide that see capital. And we think it could be part of the long term solution of the grid.
Right. And Josh, let’s expand on that. What I'm hearing is three R’s resiliency, reliability and redundancy as you’re thinking about longer term projects.
Absolutely. Yeah. And I think using all of those three R’s to craft a narrative or a holistic story about look, this is an investment, this is needed. This is how we're kind of planning. I think it's going to land very well with the stakeholder base. I mean, ultimately this is an investment that needs to happen going forward. I think we all recognize the need for it. It's more just how are we going to do that? And how are we going to bring the whole community along as we invest in that?
Yeah. Well, I mean, Sasan also, you don’t want to be in that position where you have to tirage power, right? If you have a power outage because there is no redundancy, does that go to the hospital or does it go to, you know, what other areas in the community? You don't want to have to be in that position of triaging.
Well, that's exactly the challenge that utilities are facing. They don't want to make that kind of decision. So if they have diversification of resources, if they have, you know, the tools like AI that they can use to more efficiently and more economically and more reliably operate the grid, we can avoid that kind of situation.
How would AI be used in terms of grid efficiency?
You know, it's a good question you are asking, Jill. Um, AI can be used different ways AI can use like as a machine learning tool that we have heard and seen for forecasting which is absolutely critical right now. How you forecast these, um, variable generations that it's, they're at the mercy of the nature and other things. That's a very difficult one.
The other one, as an operator assistant, the power grid operators, if you go to one of these rooms, you see these guys have dozens and dozens displays in front of them. There is so much information and it’s coming from a variety of sources. It used to be 3 or 4 systems. Now they have a dozen systems that they gather a lot of information. Uh, you know, courtesy of new technologies. So they, they have a hard time analyzing the short term to avoid you know, this kind of outages. That's where AI comes into play. AI comes into play as an operator, assistant they use the machine, use the LLM train your AI, uh, you know, your, your energy native, uh, AI tool and then understand the power grid and then analyses different alarms and messages coming in so it can work in the background as an AI agent for you for example, and then, you know, collect and information and then if there is a problem, points to the operators so they can take quick action. So that's way the AI comes into play, as a operator assistant tool more than anything else in my opinion.
Yeah. And Natalie, this is why modernizing AI at scale is critical to our infrastructure and the investments that need to be made.
That's right, that's right. In terms of technologies for data centers, for infrastructure. I mean, if we look at how we're building data centers now, they're much more efficient, whether it's through the cooling systems, whether it’s through the electrical infrastructure, the substations, the technologies that are embedded in the substations. Um, all of those technologies help in terms of predictive maintenance in terms of operating costs and the overall impact of that site. Um, to, to run that site.
So why can't we take some of those technologies and apply them to aging infrastructure? Is that possible to integrate that?
That's exactly what we’re trying to do. So we're trying to partner with utilities, with the end users and saying hey we can make substations smarter by the technologies that you’re embedding into that system. And so whether it's AI, whether it's predictive maintenance whether it's sensor technology all of that has come a long way from when the grid was originally built.
So, Josh, what separates the projects that move forward from the ones that are getting delayed or blocked?
So obviously, from my perspective communications is going to be a big part of that. I mean, I think to the part that you were just talking about in terms of the new technologies that are being used, being transparent with different community stakeholders in terms of how it's what the benefits are, why this will work as opposed to some of the stuff that folks might reading in headlines. Um, obviously local engagement with different stakeholders engaging to understand what their needs and concerns are is going to be paramount. So, you know, I don't want to leave communications out of this, I think that's a big part in ensuring that this can move forward in a way that we need it to.
Yeah. And Ethan, to wrap I’m going to ask you the same question as well. Which ones do you think are going to move forward and what projects just aren't going to get to the finish line?
Yeah, so I'll take that from a capital investment standpoint. You know, we work with a lot of private equity firms and infrastructure funds. And as they think about funding these projects, in particular, on the power generation side of things, they're really looking for as much de-risk projects as they can get. So what does that mean? That does mean, from a developer standpoint having a strong community engagement plan. And it also means having really your federal and state policies aligned from both the tax credit but as well as the regulatory process. I mean, nothing kills a deal like time. So when we're in this current morass now where it’s five, seven, ten years to really move those projects forward, you know, that's a lifetime from a private capital markets perspective. So my clients at least they are looking for where they can mobilize capital quickly. And that's usually towards those projects that are most streamlined from a permitting community engagement and regulatory perspective.
All right. I appreciate everyone’s insight. Thanks for joining us on TradeTalks. And thanks for joining me on Marketsite. I'm Jill Malandrino, global markets reporter at Nasdaq.
