Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Hallaway. Tracy, have you
Speaker 1: seen Tesla's chart lately? I have, actually, I think because
Speaker 1: you tweeted it. Um it's it's a pretty crazy chart.
Speaker 1: Do you know that, at this moment that we're recording this,
Speaker 1: just this right precise moment, that if Tesla opens up
Speaker 1: today where it's trading in the pre market, it could
Speaker 1: be a one billion dollar company for the first time.
Speaker 1: That's amazing considering, you know, just a few months ago
Speaker 1: people were talking about Tesla actually going bankrupt, and of
Speaker 1: course there are a lot of people out there who
Speaker 1: still think that the company might go bankrupt. Did you
Speaker 1: know that Tesla bonds are trading above par for the
Speaker 1: first time since they were issued. I wasn't aware of that,
Speaker 1: but I'm not surprised that you were on top of
Speaker 1: the bond angle and following that, and that stocks are
Speaker 1: I like stocks, they're just simple, they go open down,
Speaker 1: you know. Well, together, we provide a holistic cross asset
Speaker 1: overview of Tesla. So job. So that's obviously big news
Speaker 1: in the world of electric vehicles. There was other also
Speaker 1: another big thing in the world of sort of climate
Speaker 1: and energy and renewables this week? Did you did you
Speaker 1: happen to catch it? Would that be the launch of
Speaker 1: something called green? Yeah, so exactly right. So are our
Speaker 1: colleagues in within Bloomberg News have launched a new green vertical.
Speaker 1: It's called Green. It's on Twitter at the handle at climate,
Speaker 1: and it's a major endeavor to cover climate in a
Speaker 1: whole new way all kinds of unique fresh data should
Speaker 1: be a pretty interesting endeavor. Our colleague got Aaron rut Cough,
Speaker 1: is launching that and it looks pretty cool. Yeah, there's
Speaker 1: been a lot of great coverage already, and I'm particularly
Speaker 1: interested to see us try to break down some of
Speaker 1: the numbers and stats behind a lot of the I'm
Speaker 1: going to say corporate pr guff behind environmentalism. I think
Speaker 1: that's important. Yeah, I think it's important to exactly, as
Speaker 1: you put it, break down the corporate pr guff. We
Speaker 1: also happened to be uh this week. It's Davos week,
Speaker 1: so it is certainly a very big week for corporate
Speaker 1: pr around and say, yeah, it's a ball market in
Speaker 1: guff this week, so it's kind of the perfect week
Speaker 1: for us to do an episode, uh talking about climate,
Speaker 1: renewable energy, electric vehicles, all of these things that are
Speaker 1: suddenly the sort of confluence of things happening right now. Great,
Speaker 1: I'm into it. So here's Uh, there's one one piece
Speaker 1: of good news before we get into the the actual discussion,
Speaker 1: which is that although there is a lot of corporate
Speaker 1: pr guff, as you so eloquently put it, related to climate,
Speaker 1: there are real things happening. And it's easy to be
Speaker 1: cynical and say politicians aren't doing anything and business leaders
Speaker 1: it's all just lip service and greenwashing and press releases
Speaker 1: that sound good. But there is some good happening in
Speaker 1: the world, and there's actually a lot of progress being
Speaker 1: made on the transition to renewable fuels and renewable energy sources.
Speaker 1: And that is what we're going to be talking about today. Great,
Speaker 1: And this is why I think it's so important, by
Speaker 1: the way, to identify the bad actors in this space,
Speaker 1: because then you can actually find the things that are happening,
Speaker 1: the companies that are changing their practices, the policies that
Speaker 1: actually work around this and funnel more capital to them.
Speaker 1: So this should be interesting. Yeah, absolutely, So, without further ado,
Speaker 1: I want to bring in our guest for the week
Speaker 1: or for the episode. He's Gregor McDonald. He is a journalist,
Speaker 1: he is an analyst. He is the editor of the
Speaker 1: Gregor Letter, which is a newsletter that everyone should subscribe to.
Speaker 1: It's about the world of energy, both the sort of
Speaker 1: conventional energy and the shift to renewables, published in many places.
Speaker 1: And he has been tracking for as long as anyone
Speaker 1: I can remember, the evolution of the world's energy balances
Speaker 1: and the trends happening and what's driving the trends. And
Speaker 1: we're going to be talking about to him about what
Speaker 1: he sees. So Gregor McDonald, thank you very much for
Speaker 1: joining us. Oh thanks Joe. It's great to be great
Speaker 1: to be with you and Tracy today. Really look forward
Speaker 1: to our chat. How long have you been following energy?
Speaker 1: I mean I've been following your stuff on Twitter and
Speaker 1: newsletters for years and years. What got you first looking
Speaker 1: into this space and how and why? I lived in
Speaker 1: London about twenty years ago, and that was written around
Speaker 1: the time that the price of oil fell to about
Speaker 1: ten dollars apparel. You may recall the the famous economy
Speaker 1: this cover drowning in Oil. Yeah, I was living in London,
Speaker 1: and um I was a writer and a teacher. I
Speaker 1: was teaching poetry writing too children through a Royal Parks
Speaker 1: education program. But you know, my educational background and my
Speaker 1: family background had all been in finance, and I just
Speaker 1: I couldn't I couldn't resist getting interested in why oil
Speaker 1: was so cheap? Um and Um I began to research
Speaker 1: that and started started writing about that, and that's how
Speaker 1: I took my unexpected journey into energy. When did that
Speaker 1: journey into I mean, I'm guessing that was traditional types
Speaker 1: of energy twenty years ago. When did your interest in
Speaker 1: energy sort of flip into alternative sources such as solar
Speaker 1: or environmentally friendly energy generation methods. Right, So, around two
Speaker 1: thousand six two thousand seven, the world felt like it
Speaker 1: was in energy crisis, Part two because of the price
Speaker 1: of oil. And I had a couple of people who
Speaker 1: wanted to help me design portfolios to capture what was
Speaker 1: about to happen in clean energy. And that was quite
Speaker 1: a challenge because, as you may recall, clean tech or
Speaker 1: or clean energy sort of had a had a little
Speaker 1: mini bubble and bust in two thousand six through two
Speaker 1: thousand nine as a result of the Great recession, but
Speaker 1: I could see them doing a lot of research then
Speaker 1: talking with experts in the field. I could see that
Speaker 1: if the price of solar and if the price of
Speaker 1: wind power were to ever get down to certain levels,
Speaker 1: that it could be very transformative. And yeah, that's where
Speaker 1: that's where we are today. So, as Tracy mentioned in
Speaker 1: the beginning, this anything to do with renewables or clean
Speaker 1: fuels is associated with a lot of corporate pr guff
Speaker 1: And I'm sure you'd agree, And I based on knowing you,
Speaker 1: I don't think you have tons of patients for sort
Speaker 1: of lip service or sort of corporate green messages. But
Speaker 1: you wrote a piece it was actually published in BuzzFeed
Speaker 1: last year, and you've written on your newsletter that in
Speaker 1: the real world there is a major transformation going on.
Speaker 1: As you put it, there is kind of a green
Speaker 1: new deal happening, even before we're seeing anything policy wise
Speaker 1: really being put into plays. What what excites you? What
Speaker 1: is this positive transformation that you're seeing look like on
Speaker 1: a big sort of big picture level. Yeah, So, I
Speaker 1: mean you're absolutely right, so that the energy transition really
Speaker 1: kicks off in earnest at the start of the last decade,
Speaker 1: around two thousand ten, it gets it, it gets a
Speaker 1: a push from from policy, but then traditional learning curves
Speaker 1: or the learning rate kicks in and as more as manufactured,
Speaker 1: the cost of every of every unit of solar and
Speaker 1: every new unit of wind drops. Unfortunately, we're still in
Speaker 1: a period where a lot of people have they're sort
Speaker 1: of anchored to that memory of the policy support, and
Speaker 1: they're just gonna ware that we're departing the domain of
Speaker 1: policy support. We have. We have utilities in the United
Speaker 1: States that are running sophisticated software modeling programs. They're doing
Speaker 1: Monte Carlo stimulations, if you will, and they're they're just
Speaker 1: reviewing their entire portfolio, and they're they're discovering that they
Speaker 1: can shut coal and build new wind, build new solar
Speaker 1: and storage and actually save rate payers money. So, yeah,
Speaker 1: my op ed last year in BuzzFeed was just trying
Speaker 1: to explain to a sort of a broader audience that
Speaker 1: there are really good things happening already, and you know,
Speaker 1: with something like the Green New Deal, which I hope
Speaker 1: we get to talk about a little bit more, I
Speaker 1: was sort of, I was politely suggesting that the New
Speaker 1: Green Deal doesn't need to get out a big sledge
Speaker 1: hammer and hit something hard. The New Green Deal can
Speaker 1: just really take advantage of the cost alignment and the
Speaker 1: favorable cost curves that really give everything that's happening, you know,
Speaker 1: sort of its own wind at its own back. At
Speaker 1: this point, can you give some examples of those cost curves,
Speaker 1: because I think when a lot of people think about
Speaker 1: the transition to clean energy, they start thinking that it's
Speaker 1: very expensive and we're going to have to replace all
Speaker 1: our old power generators with something new, and we just
Speaker 1: don't have enough money for that. So if you could
Speaker 1: explain exactly how costs are changing, that would be interesting.
Speaker 1: So at one point in time, you might have thought
Speaker 1: the main determinant of what it costs to run a
Speaker 1: coal fired power plant would be the price of coal,
Speaker 1: and that was true at one time. That's why China
Speaker 1: built a lot of coal starting in the late nineties.
Speaker 1: That's how we sort of got a coal two point
Speaker 1: oh globally because the price of coal is cheap and
Speaker 1: China could build a lot of coal fired power plants.
Speaker 1: As it turns out, the main cost of coal is
Speaker 1: the infrastructure and the supply chain and the maintenance and
Speaker 1: the operational cost. Right now, coal is very cheap right now,
Speaker 1: but that doesn't make coal power cheap now alone. Comes
Speaker 1: clean energy. Wind and solar, and the sort of the
Speaker 1: very nature or the very soul of wind and solar
Speaker 1: are very different investment propositions then coal. When you build
Speaker 1: a coal plant, you've got to feed that coal plant
Speaker 1: twenty four hours a day, seven days a week, twelve
Speaker 1: months a year, and you've got to have an elaborate
Speaker 1: supply chain that feeds that coal plant, and you've got
Speaker 1: to operate and maintain that coal plant. When you build
Speaker 1: a solar plant, all you're in investment comes in sort
Speaker 1: of a lump sum up front. It's such an enormous
Speaker 1: steep hill that you climb rate at the outset, and
Speaker 1: then once the solar plant is built, it starts running
Speaker 1: at extraordinarily low operational costs. I sometimes think of a
Speaker 1: large utility solar plant is sort of like a long bond,
Speaker 1: where we sort of push a pile of money towards
Speaker 1: an investment, and then you wait for the interest payments
Speaker 1: to start giving you a return on your capital. So
Speaker 1: that's sort of what's happening right now in like the
Speaker 1: American utility business. The crossover point has now been reached,
Speaker 1: and and it's happening so fast. I mean even for
Speaker 1: those of us who followed this only three or four
Speaker 1: years ago, the main question was, well, sure, utilities can
Speaker 1: build new wind and solar at a competitive cost, but
Speaker 1: their existing coal plants are still running very economically. How
Speaker 1: are you going to push those out? And now just
Speaker 1: three late three, two to three years later, we've reached
Speaker 1: a point where utilities are, as I said, running uh
Speaker 1: stimulations and calculations, and they're discovering that just having to
Speaker 1: run the existing coal plants for another year or two
Speaker 1: is now become uneconomic. So I mean, I could get
Speaker 1: into some of the utilities that have started to do this,
Speaker 1: but I think Uh. Having set in on a presentation,
Speaker 1: for example, recently from Pacific Corp here in Portland, you
Speaker 1: almost had the sense that Pacific Corp itself was surprised
Speaker 1: when they got the answer about what to do with
Speaker 1: their power portfolio, which, as I said, was accelerate the
Speaker 1: closure of coal and accelerate the build out of wind swords.
Speaker 1: What happened to something that I heard about a lot
Speaker 1: a few years ago, like, yeah, the cost curve is
Speaker 1: plunging rapidly with solar and wind, but sometimes the wind
Speaker 1: isn't blowing, and at night there's no solar power and so,
Speaker 1: and battery tech is still really expensive. So even if
Speaker 1: all these things are getting cheaper, that doesn't provide a
Speaker 1: sustainable seven electricity grid. How does that How is that
Speaker 1: problem getting solved? The way it's getting solved is like
Speaker 1: more like an evolutionary process rather than a revolutionary process.
Speaker 1: In other words, the world just presses forward now at
Speaker 1: a pretty good rate building out new wind and solar,
Speaker 1: and the cost of wind and solar continue to drop
Speaker 1: very fast. But you're right, show that the cost of
Speaker 1: storage has not dropped is fast. But I'll tell you
Speaker 1: one thing that's kind of curious that's happened is that
Speaker 1: even though the price drop of storage has been slower,
Speaker 1: because the price drop of wind and solar so fast,
Speaker 1: it's made an all wind system more affordable and so.
Speaker 1: But to get to the other part of your question
Speaker 1: about how do we make use of wind power that
Speaker 1: tends to blow at night and and solar power which
Speaker 1: tends to come up and peak during the daytime, the
Speaker 1: system is already finding ways to sort of route that traffic,
Speaker 1: if you will, almost like air traffic control, routing those
Speaker 1: surpluses and gaps into various markets. So I'll give you
Speaker 1: one example right now, California tends to produce surplus solar
Speaker 1: power midday around lunchtime, when when when the grid isn't
Speaker 1: demanding as much electricity, And so you get a utility
Speaker 1: like Arizona Public Services, who two years ago thought they'd
Speaker 1: build new get natural gas plants to give Metro Phoenix power.
Speaker 1: You know, then they thought they would build some wind
Speaker 1: and solar to get Metro Phoenix power. And then they
Speaker 1: look at all that surplus power coming from California, they
Speaker 1: just decided to build storage. They just decided to build
Speaker 1: utility scale to storage. And then you're in fact your
Speaker 1: arbitraging cheap electricity at lunchtime and selling it back to
Speaker 1: the grid at dinner time. So they'll just pull the
Speaker 1: electricity off the grid when it's cheap, when it's offered midday,
Speaker 1: then they'll sell it into Metro Phoenix during peak time
Speaker 1: around dinner. So the way it's getting solved is we're
Speaker 1: not going to solve that storage problem all in a
Speaker 1: big bang, in a flash. We're gonna sell it. We're
Speaker 1: going to solve it incrementally as we go along through
Speaker 1: examples like that. You mentioned that policy gave the start
Speaker 1: of this process a little bit of a nudge, but
Speaker 1: you're you're obviously emphasizing the market forces here and how
Speaker 1: those cost curves are coming down. What is the role
Speaker 1: of policy in this process? What should it be? That's
Speaker 1: a great question. So a good way to think about
Speaker 1: the world's energy system is that there's basically there's electricity,
Speaker 1: right and and all the things every the world uses
Speaker 1: electricity for. Then there's transportation, and then there's heating and
Speaker 1: industrial processes. And we've got really good clarity and visibility
Speaker 1: now on how we're going to decarbonize the world's electricity system.
Speaker 1: And even in a country like China, which is still
Speaker 1: largely running its power grid on on coal, the wonderful
Speaker 1: thing about having established and built such a huge power
Speaker 1: grid is that you can plug in a new energy
Speaker 1: source to that, and that's exactly what China has been doing.
Speaker 1: It's increasingly plugging into wind and solar, and so policy
Speaker 1: has less to do now in the in the area
Speaker 1: of electricity. And you've you've kind of heard this articulation
Speaker 1: from people at Bloomberg New Energy finance and so forth
Speaker 1: talking about the energy system this way. What policy needs
Speaker 1: to do now is something about transportation, and then unfortunately
Speaker 1: it's going to be the really harder area is heating
Speaker 1: and industrial processes. I would say right now, what policy
Speaker 1: can do most is in the area of transportation, making
Speaker 1: sure that drivers of cars pay a fuller cost for
Speaker 1: the common areas. We'll call it the atmosphere that the
Speaker 1: car drivers are using. And so you know, we don't
Speaker 1: have a carbon text yet, but like in a city
Speaker 1: like London, you have a day charge, you have a
Speaker 1: road charge that came in about twenty years ago. That's
Speaker 1: the form of a carbon text, and it's been enormously
Speaker 1: helpful in pushing London towards better use of transport and
Speaker 1: better use of bicycle back. London has really exploded with
Speaker 1: bicycles and it should just become a much cleaner city
Speaker 1: right now. Policy needs to focus on transportation, and then
Speaker 1: research and science really needs to think about the hard
Speaker 1: problem of austrial processes, steelmaking and so forth. That's that's
Speaker 1: going to be very tough. Let's talk a little bit
Speaker 1: more about electric vehicles and the transportation problem. Mentioned at
Speaker 1: the outset that this week, shares of Tesla hitting an
Speaker 1: extraordinary that hundred billion dollar level sentiment towards them really
Speaker 1: swinging towards the positive. You wrote last year in your
Speaker 1: newsletter that the Chinese EV market, let's start there. We
Speaker 1: also know which is a we know that's a market
Speaker 1: that Tesla wants to expand in. When I'm in Hong
Speaker 1: Kong visiting Tracy, I see a lot of Tesla is
Speaker 1: on the road there, but that that the Chinese EV
Speaker 1: market was at some sort of tipping point that people
Speaker 1: weren't paying attention to it. But that's something very big
Speaker 1: was happening in China, with the number of e vis
Speaker 1: being sold as a percentage of the total automobile mix.
Speaker 1: Let's start there. What what do you see happening in
Speaker 1: the Chinese market that got you excited? Great? Yeah, So
Speaker 1: the Chinese EV market is a classic example of what
Speaker 1: we were talking about, where you you kick off these
Speaker 1: trends with with a policy push and and you theorize
Speaker 1: that once once you get going, the cost curves will
Speaker 1: kick in. And that's exactly what's happened um in China.
Speaker 1: So for example, if you go back to two thousand fifteen,
Speaker 1: e V sales were just about one and a quarter
Speaker 1: percent of the market. By two thousand seventeen, there were
Speaker 1: two and a half percent of the market. And last year,
Speaker 1: although sales of EV were hit in the second half,
Speaker 1: partly because China's economy has struggled last year, but also
Speaker 1: because of a short term policy change, EV sales didn't
Speaker 1: grow quite as much last year, but they did get
Speaker 1: close to what a lot of energy and and sort
Speaker 1: of business researchers identify as sort of this tipping point
Speaker 1: in substitution curve. EV almost got to five of of
Speaker 1: the market for new cars last year in China, And
Speaker 1: when we look at across a lot of this space
Speaker 1: was a build out of wind power in the UK,
Speaker 1: build out of solar power in California, that five tipping
Speaker 1: point tends to point to something. So, you know, Joe
Speaker 1: I declared that China somewhat single handedly killed the internal
Speaker 1: combustion engine. And by that, I don't mean the internal
Speaker 1: combustion engines going away. It's not going away, going to
Speaker 1: be with us for another couple of decades, but if
Speaker 1: we do have it does look like and it's sort
Speaker 1: of stuck a peak into the sales of global internal
Speaker 1: combustion engines around the two thousand, sixteen, two thousand seventeen points,
Speaker 1: and there's just no way we're going to get back
Speaker 1: there because the e V platform is just such a
Speaker 1: superior platform in many ways, especially in China where they
Speaker 1: have what are known as minis and super minis. These
Speaker 1: are like little tiny evs that are highly affordable and
Speaker 1: are very popular in like the second, third, fourth, and
Speaker 1: fifth year fifth tier cities in China where incomes aren't
Speaker 1: as high. So just bringing this back to Tesla, the
Speaker 1: Tesla will Tesla will concentrate on the higher income strata
Speaker 1: in the Chinese market. But but the e V platform
Speaker 1: has really had its greatest success at the lower price
Speaker 1: tag end in in the whole of China. Uh, you know,
Speaker 1: listening to you talk about evs being a superior platform.
Speaker 1: I think it was last year, maybe two years ago,
Speaker 1: I actually drove one for the first time. It wasn't
Speaker 1: a Tesla, it was I think it was an Audie
Speaker 1: maybe hybrid e V i CE type thing, and I
Speaker 1: remember thinking, and I know I'm not the first person
Speaker 1: to make this analogy, but then when I went back
Speaker 1: and drove my car, which is just a regular I see,
Speaker 1: it felt like going from a smartphone to a flip
Speaker 1: back to a flip phone after that, Like, regardless of
Speaker 1: the environment and of the environmental issues aside, the smoothness,
Speaker 1: the quietness of the EVA was just so clearly felt
Speaker 1: like a superior technical experience. Definitely, if I ever buy
Speaker 1: another car environment aside, like there's no way I would
Speaker 1: get another uh engine that has to like sputter in
Speaker 1: the beginning and stuff like that. It's just so clearly superior.
Speaker 1: So when you talk about when I when you were
Speaker 1: talking about an obviously better platform, clearly resonated with me. Okay,
Speaker 1: I'll take your word for a Joe Uh. Just to
Speaker 1: play Devil's advocate for a second, Gregor. I mean you
Speaker 1: mentioned to shift in Chinese policy, which I think was
Speaker 1: the removal or the reduction of subsidies for electric vehicles.
Speaker 1: A lot of people will look at the China example
Speaker 1: and say, well, China is a command economy. They're able
Speaker 1: to put in place these big policy initiatives, and they're
Speaker 1: able to create the infrastructure of electricity distribution for electric
Speaker 1: vehicles to make this happen. So for that particular example,
Speaker 1: could you just break down a little bit more the
Speaker 1: market forces versus policy incentive when it comes to China, right,
Speaker 1: it's a good question. So when policy support sort of
Speaker 1: resolves or transforms into a market that can stand on
Speaker 1: its own two feet, you still have the antecedent influences
Speaker 1: of policy, you know, sort of fliquor ring through the
Speaker 1: market as you transition to a market that can stand
Speaker 1: on its own. The one thing I would say is
Speaker 1: is that when you talk to experts that I do
Speaker 1: to get into the details of the of the Chinese market,
Speaker 1: it does look as though the mini and the super
Speaker 1: Mini sales really are happening simply because those vehicles are cheaper.
Speaker 1: They're just cheaper, and and they're especially cheaper to run.
Speaker 1: And this is something we might want to get into
Speaker 1: about the e V platform versus the ICE platform, and
Speaker 1: and why energy transition may very well represent a cost
Speaker 1: savings rather than a cost outlay. So you have to
Speaker 1: imagine that consumers in China who are able to purchase
Speaker 1: a super Mini for seven thousand U S dollars or
Speaker 1: six six to eight thousand U S dollars, once they
Speaker 1: start running that vehicle, their fuel costs are so significantly lower.
Speaker 1: And of course this is something that's true not only
Speaker 1: for a n evy driver in a in a smaller,
Speaker 1: less well known Chinese city, it's also true for someone
Speaker 1: in in in San Francisco. And so China announced that
Speaker 1: it wouldn't hit electric vehicles in the way they hit
Speaker 1: them in, which I think was I read as sort
Speaker 1: of a they're sort of a wake up call occurred
Speaker 1: and they realized that they they've got this new EV
Speaker 1: industry going and the last thing they wanted to do
Speaker 1: is puncture. You know, it's growth rate. So I think
Speaker 1: you know, most people, including Bloomberg analysts and so forth,
Speaker 1: they're expecting a fairly significant rebound this year. And yeah,
Speaker 1: I don't think that's going to be something that we
Speaker 1: can point to and say, oh that just because of
Speaker 1: policy or or price. I think still in a policy
Speaker 1: and price driven driven market. Talk to us about evis
Speaker 1: outside of China. So again, Tesla doing very well. But
Speaker 1: I've seen questions about whether the markets say in the
Speaker 1: US there is a big appetite for evs per se,
Speaker 1: or whether it's mostly there's a Tesla phenomenon and then
Speaker 1: people don't really care about it. What do you see happening? Um,
Speaker 1: just in general with evis in the West and in
Speaker 1: the US, and then how does it also connect to
Speaker 1: the grid in terms of as you mentioned, you know,
Speaker 1: the grid is slowly becoming uh more based on renewables.
Speaker 1: But obviously that's an important question because if everyone is
Speaker 1: plugging in their evs at night at home, but that
Speaker 1: power isn't particularly clean, then maybe it'll be a marginal
Speaker 1: improvement on the ice platform, but doesn't necessarily get us
Speaker 1: very far. So what do you see developing here? Let
Speaker 1: me go to that part of the question first, and
Speaker 1: then I'll address the market itself, which is less interesting
Speaker 1: in the US. The US is a little bit of
Speaker 1: a disappointment in terms of the market, But let's let
Speaker 1: me talk about that bigger picture, Joe, because I think
Speaker 1: that would really help tie up a lot of the
Speaker 1: themes that we're talking about. Yeah, so e V have
Speaker 1: come up above five of the California market. They're up
Speaker 1: around uh six to seven. Now I have to check
Speaker 1: the number. But it's important for people to understand how
Speaker 1: much energy savings we can harvest by just transitioning from
Speaker 1: ice vehicles to too e V. And the reason is
Speaker 1: is that you know, fossil fuel combustion, which occurs in
Speaker 1: an individual engine. It's very powerful, but it's also very wasteful.
Speaker 1: So you know, at least half of what you spend
Speaker 1: on petrol on road fuel, gasoline, diesel, it tends to
Speaker 1: just get lost into the atmosphere through waste heat. It's
Speaker 1: probably more like sixty or sixty. So when we think
Speaker 1: about transition, we want to never for loose sight of
Speaker 1: the fact that when we transition eventually, let's say, all
Speaker 1: of California's thirty five million vehicles two electric vehicles, you know,
Speaker 1: we we want to imagine that the fifteen and a
Speaker 1: half or sixteen billion gallons of gasoline that California is
Speaker 1: consuming each day, that that goes away. But it only
Speaker 1: it only takes us about half and maybe even only
Speaker 1: of the energy to run that same fleet. They can
Speaker 1: do all the things they normally do, drive to work
Speaker 1: every day, but you know, on a on a different
Speaker 1: energy platform. And that's because we've we've moved away from combustion,
Speaker 1: and that's that's just a very important sort of concept
Speaker 1: that you can keep applying and reapplying to the decarbonization process.
Speaker 1: But just in terms of the market, the US e
Speaker 1: V market suffers from over concentration by slap. It's sort
Speaker 1: of it's sort of a story where the market has
Speaker 1: become overly dependent on Tesla sales. Without huge booming Tesla
Speaker 1: sales in the US, the U S e V market
Speaker 1: would be way behind other other markets. And so, yeah,
Speaker 1: the US had another disappointing year last year, and I
Speaker 1: would say the simple reason is this lack of consumer choice.
Speaker 1: And you go into a you go into a showroom
Speaker 1: and you've got a couple of Teslas to choose from,
Speaker 1: and you have a Chevy Bolt and a Leaf and
Speaker 1: some hybrids. That's just not enough for people to choose from.
Speaker 1: Why do you think we haven't seen a stronger competitor
Speaker 1: to Tesla emerge in the United States Because certainly in China, again,
Speaker 1: we have so many e V startups that people are
Speaker 1: actually talking about the market being crowded and that's actually
Speaker 1: caused some problems for some of those companies. But it's
Speaker 1: it's a different picture in the US. Yeah, that's a
Speaker 1: good question. So the e V ecosystem in China of
Speaker 1: slee get started through state support. The e V ecosystem
Speaker 1: in Europe is waiting for its existing automobile industry to
Speaker 1: retool which is happening apparently, and in fact, in some
Speaker 1: ways some people feel that that the emissions crisis that
Speaker 1: Volkswagen had wound up working in a positive way. It
Speaker 1: helped Volkswagen get sort of shocked into retooling for a
Speaker 1: world VV. And then you have the US market, which
Speaker 1: is sort of a lazy fair market. And and I
Speaker 1: think what the Tesla example shows is how high the
Speaker 1: hurdles are trying to create a new capital intensive company.
Speaker 1: I mean, America's Forte is creating software companies and non
Speaker 1: capital intensive companies. Muscas created a company that's just admittedly
Speaker 1: very difficult to create. And and we have a regulatory
Speaker 1: environment where the process is slow by which foreign models
Speaker 1: of ev can come in to this market. And so
Speaker 1: I think we've got a pretty big mismatch between demand
Speaker 1: and availability. And I've I've written in my newsletter that
Speaker 1: once the market has what's called a crossover, which is
Speaker 1: sort of this popular short wheelbase sort of mini suv,
Speaker 1: the Mazda makes I think something called the c X five,
Speaker 1: which is sort of seems like the archetype of what
Speaker 1: would be popular. Hyundai and Kia both have a couple
Speaker 1: of crossover models that have started to come into European market,
Speaker 1: and I think once they're here, you'll sort of see
Speaker 1: that uprush of of adoption in the United States that
Speaker 1: you know we're still waiting for the US is the
Speaker 1: US TV market is still trapped down at that two level.
Speaker 1: And unfortunately, you know, just getting back to adoption curves
Speaker 1: and substitution curves, markets can get trapped at that one
Speaker 1: to two to three percent level for years before finally
Speaker 1: you know, breaking out above five. So yeah, it's not
Speaker 1: that encouraging in the in the US how dependent we are.
Speaker 1: So before we wrap it up here, I just want
Speaker 1: to go back to policy, and I think this uh
Speaker 1: sets it up well. What you're talking about about the
Speaker 1: sort of disappointing e V market, And you said in
Speaker 1: the beginning that you given the progress that we're seeing
Speaker 1: towards a renewable energy mix, the policy makers don't need
Speaker 1: to take a sledgehammer to improve the system, that there
Speaker 1: are things that can be done. So let's say, um,
Speaker 1: you know there's a new president at some point and
Speaker 1: they are listening to this podcast. Look all right, I
Speaker 1: one UH to have Gregor be one of my energy advisors.
Speaker 1: What are some of the things say in the US
Speaker 1: that you would recommend in terms of put shoot the
Speaker 1: gas pedal, so to speak, on on this acceleration or
Speaker 1: on this transformation. Okay, Well, the main thing the federal
Speaker 1: government can do is it can smooth the siting and
Speaker 1: permitting process for utility scale solar and offshore wind, and
Speaker 1: that has started to happen to a certain extent. The
Speaker 1: other thing they can do is actually either provide financing
Speaker 1: or create green bond markets, or partly back green bond markets,
Speaker 1: or perhaps the United States might even want to take
Speaker 1: minority stakes in new and new energy infrastructure. Also, I
Speaker 1: think the transportation system is sort of right for a nudge.
Speaker 1: You know, it wouldn't hurt to dip back into some
Speaker 1: traditional twentieth century technology like trains and so forth. You know,
Speaker 1: upgrading our train lines would be enormously helpful. And the
Speaker 1: reason for that is is that urban planners are increasingly
Speaker 1: discovering that you can use existing rail lines in in
Speaker 1: a network effect to sort of layer up or build
Speaker 1: on top of those existing rail lines to build out
Speaker 1: bike lanes and other forms of transportation that gets people
Speaker 1: from houses to the train stop. This is happening in
Speaker 1: Los Angeles by the way, where whereas l A builds
Speaker 1: out its Metro, the planners at Metro, for example, think
Speaker 1: hard and do things to foster pedestrian and bicycle networks
Speaker 1: that get from the neighborhoods to the you know, to
Speaker 1: the train stop. So I think those two things alone
Speaker 1: would be enormously helpful. There are a couple of wonky things.
Speaker 1: It might be helpful if we let utilities own more
Speaker 1: of their assets. Um that could get them building storage
Speaker 1: and wind and solar a little bit faster. It would
Speaker 1: help if the US would help provi i'd financing to
Speaker 1: upgrade our power grid. So, for example, we have a
Speaker 1: new offshore wind industry that's going to start appearing on
Speaker 1: the eastern seaboard between Virginia and Massachusetts. Very exciting job
Speaker 1: opportunity and so forth. As the supply chain forms, but
Speaker 1: that's going to be a lot of new electricity coming
Speaker 1: into the power grid. It would be good if our
Speaker 1: government bostered or encouraged or help us upgrade and modernize
Speaker 1: the power grid so that we can do things more.
Speaker 1: What's the word algorithmically if you will. Getting back to
Speaker 1: what we were talking about with storage, buying and selling
Speaker 1: and arbitrage ng of power perhaps on a more automated basis.
Speaker 1: The main idea would say is our government needs to
Speaker 1: accept that we're going to electrify. Electrification is the efficient,
Speaker 1: the most efficient way to de carbonized. So we want
Speaker 1: to electrify as many processes as possible, and that means
Speaker 1: some increase of some good chunk increase in electricity demand,
Speaker 1: and that means a power grid that needs to be
Speaker 1: more eventually. Uh, Gregor, that was a really great conversation.
Speaker 1: Really enjoyed talking to you and hopefully have you on
Speaker 1: again at some point. Really appreciate it. Thank you. Pleasure
Speaker 1: for me as well. Thanks. Yeah, that's great. You know, Tracy,
Speaker 1: as we were saying in the beginning, I think both
Speaker 1: of us are a little bit um cynical about a
Speaker 1: lot of corporate pr guff around uh, clean energy and
Speaker 1: renewables and sustainability and all that. But I think that
Speaker 1: conversation was a good reminder that you can kind of
Speaker 1: be a little bit cynical at the same time, but
Speaker 1: not necessarily pessimistic, if that makes sense. Yeah, I think
Speaker 1: that's right. I mean, I think all of these projects
Speaker 1: wererant close scrutiny and analysis for obvious reasons. There does
Speaker 1: seem to be a sense out there that if we
Speaker 1: just throw a bunch of money at the problem, things
Speaker 1: will improve. But I think when it comes to stuff
Speaker 1: like the Green New Deal or other big climate change initiatives,
Speaker 1: I think it's really really important that we actually sit
Speaker 1: down and think about the problems that we're trying to
Speaker 1: solve and design the program around it. So for the
Speaker 1: Green New Deal, I maybe you know the answer to this,
Speaker 1: but I've missed out on a lot of the conversations
Speaker 1: in the US. But is the point to boost economic
Speaker 1: growth or is the point to tackle climate change? Yeah?
Speaker 1: I mean I think they would the advocates would definitely
Speaker 1: say it's both to tackle climate change, but in a
Speaker 1: manner that doesn't impair the economy, but that actually puts
Speaker 1: people to work. One of the things that I like
Speaker 1: about Gregor's framing is well and I think that, uh,
Speaker 1: for a lot of climate activists it should be positive,
Speaker 1: which is that there's a lot of alarmism about climate
Speaker 1: But there's also the risk that if there's so much
Speaker 1: alarmism that people just become throwing the towel that Okay,
Speaker 1: the earth is burning and the oceans are boiling, So
Speaker 1: what good does it do to sort of always complain
Speaker 1: and show up? And I think that is why it
Speaker 1: is good to highlight some of this transition that we're
Speaker 1: already seeing that A it's not unrealistic that we actually
Speaker 1: do we can economically transition to different energy sources, and
Speaker 1: B that there already is progress being made in some
Speaker 1: respects on reducing carbon emissions and things like that. And
Speaker 1: so even if there is more work to be done,
Speaker 1: and even if there is a lot of tension uh
Speaker 1: in terms of reducing emissions overall, there are sustainable models
Speaker 1: that show how it can be done. So I think
Speaker 1: Gregor's work and some of his insights are very useful
Speaker 1: from that perspective. It is definitely heartening to hear from
Speaker 1: someone who thinks that minor policy pushes or policy sort
Speaker 1: of around the edges can lead to big shifts in
Speaker 1: how the market actually functions, so that eventually market forces
Speaker 1: sort of takeover and these things start happening naturally. I'd
Speaker 1: like that I did too. Okay, this has been another
Speaker 1: episode of the All Thoughts podcast. I'm Tracy Alloway. You
Speaker 1: can follow me on Twitter at Tracy Alloway, and I'm
Speaker 1: Joe Wisenthal. You can follow me on Twitter at the Stalwart,
Speaker 1: and you should definitely follow our guests on Twitter. He's
Speaker 1: Gregor McDonald. His handle is at Gregor McDonald. You should
Speaker 1: also follow sign up for his newsletter. You can find
Speaker 1: it on his Twitter page. Definitely one of my favorites.
Speaker 1: I read it every time I get it in my inbox.
Speaker 1: And check out the new Bloomberg Climate coverage, the New
Speaker 1: Green coverage at the handle at Climate. Very impressive snag
Speaker 1: they got there with that Twitter handle, along with, of course,
Speaker 1: all of the Bloomberg podcasts at Podcasts, and be sure
Speaker 1: to follow our producer on Twitter, Laura Carlson. She's at
Speaker 1: Laura M. Carlson, as well as the Bloomberg head of podcast,
Speaker 1: Francesca Levy at Francesca Today. Thanks for listening.