This is an edited transcript of an episode of “The Ezra Klein Show.” You can listen to the conversation by following or subscribing to the show on the NYT Audio App, Apple, Spotify, Amazon Music, YouTube, iHeartRadio or wherever you get your podcasts.
Ezra Klein: Hey, it is Ezra. So I’m taking a bit of time off this month, and we’re going to have a few friends of the show on to host guest episodes. Today’s host is Robinson Meyer. Rob is a contributing writer for New York Times Opinion and the founding executive editor of Heatmap News, which is the go-to source for reporting on the decarbonization rollout.
I’ll let him take it from here.
Robinson Meyer: Two years ago, President Joe Biden signed the Inflation Reduction Act, the biggest climate law in U.S. history. Its goal was to revitalize manufacturing jobs and make U.S. industry competitive with China. And by one measure, there’s been nearly half a trillion dollars in investment in green energy and manufacturing since the law was passed.
But then Democrats lost the election, and the future of decarbonization is far more uncertain. So where does the clean energy industry go from here?
Jigar Shah is one of the best people positioned to answer that question. He spent years working in the private sector leading companies that invented new ways of financing green infrastructure.
And he’s now the director of the Loan Programs Office at the Department of Energy. You’re going to be hearing a lot about the Loan Programs Office, or L.P.O., in this episode. The L.P.O. is supposed to help fund renewable energy projects that private-sector lenders find too risky or meager to invest in. Its experts are supposed to identify promising new clean tech and turn it into something that can scale up — something you can actually buy and use every day. And because of the Inflation Reduction Act, its lending authority grew from 40 billion a few years ago to over 400 billion today.
Ezra has talked a lot on this show about what it takes for the government to help America build abundance — to build new power plants, new power lines, new housing. And I think the Biden administration got closest to that aspiration through the team Jigar Shah leads.
So I wanted to talk to Jigar about what lessons he’s learned from the Biden administration’s economic experiment. What worked? What are the trade-offs the L.P.O. made? How does Jigar think about turning policy into products? And, since this experiment is not over, where does clean energy go in a second Trump era?
Meyer: Jigar Shah, welcome to the show.
Jigar Shah: Oh, my goodness, it’s so great to be here.
Meyer: So I want to start here. Before we get into policy, Donald Trump has won the election. How screwed is the clean energy industry?
Shah: Well, when you look at Trump’s first term, the clean energy industry really found its own during Trump 1. Right?
And so my sense is that the deployment of clean technology is going to keep going. I think the real question is what our leadership looks like around the world. And even there, I would say that people are continuing to clamor for American technology in geothermal, in nuclear, in some of these other areas.
And so I think that the pace may change a little bit. And there’s always ups and downs, but clean technology companies are crushing it right now. I
Meyer: I think that gets at one of these core tensions in Biden administration policy. So when people hear about what the Biden administration has tried to do around clean energy deployment, clean technology deployment — there’s an assumption that it’s part of their climate and environmental goals. Which it is.
You often, as you just did, frame things differently. So what do you see as the main drivers of decarbonization or of clean energy deployment?
Shah: Yeah, look, I think that when you think about what we’ve done to produce a modern lifestyle: We have burned things. For hundreds of years. Whether it was wood and then coal and then oil and natural gas, we have burned our way to a modern lifestyle.
And I think then you had the Environmental Protection Agency, and folks said: We don’t want to live in smog anymore. And we developed a whole new set of technologies coming out of the 1970s. And today, these technologies are truly superior — in many ways. So when you think about what is driving people, it is superior solutions that help solve other problems.
It’s not climate.
Meyer: How large a role do you think climate and the global effort to bring down greenhouse gas emissions plays into the ongoing global deployment of these clean technologies? Are the clean technologies going to deploy anyway because they’re superior, as you were saying. Or is this something where people want to solve climate change and they want to develop and so they’re going to uptake these green technologies?
Shah: Well, I think, of course, it’s all of it. If you talk to entrepreneurs like me and others, we are driven by solving problems for people. We were not driven by regulatory arbitrage or by figuring out how to mine tax credits within the Inflation Reduction Act. We’re driven by the fact that we believe that these solutions are superior to what they’re replacing.
And yes, those climate objectives helped pass the laws necessary to make the first of a kind projects happen. So look, it’s all part of a whole. But I want to make sure that we’re crystal clear about where we’re headed. And I think the president has been quite clear about this having to relate to jobs and everyday lives, and the secretary has been very clear about the fact that this has to make people’s lives better.
And I do think it makes people’s lives better. And that’s what entrepreneurs thrive on. It’s like Elon Musk wants a car that goes zero to 60 in 1.9 seconds. And he created that car, and people want that car, and that’s awesome.
Meyer: I want to follow like three different threads there, but I think at this point, let’s introduce people to what your job is.
So you run the Loan Programs Office at the Department of Energy. What does that office do?
Shah: So in 2005, Senator Pete Domenici and others said: Hey, why do we invent everything here in the United States, but then send our awesome technology overseas? And people realized: Well, when you look at the industrial strategy of Germany or Canada or China or other places, they actually support the commercialization of those technologies.
And so the Loan Programs Office was born. We’re basically a bank within the U.S. Department of Energy, and it is supposed to take that risk of building that first project when commercial banks are not comfortable with putting the loan out the door for that first project.
Because remember, these projects don’t have venture-capital-like returns. You can’t put in a billion dollars of venture capital into something and get a 10 times return on that. These are infrastructure projects that generate 10 percent returns.
And so you need to have low-cost, affordable debt, but you also need to recognize that most of these banks do not have the expertise to evaluate the technology that people are bringing to them. Whereas Department of Energy has 10,000-plus scientists, experts and engineers on the platform, many of whom invented the technologies and probably provided some of the money for demonstrations, etc.
And so the Loan Programs Office operates like a commercial bank, but has this mandate to lose money to make sure that we are commercializing technologies here in the United States. And oh, along the way, we haven’t actually lost money. We’ve made money for the federal government.
Meyer: The I.R.A. expanded L.P.O.’s authority by 10 times from, I think, 40 billion before the I.R.A. passed to now more than 400 billion.
How has that changed the way you do your job? And also how does L.P.O. fit into the Biden administration’s decarbonization policy writ large?
Shah: Well, remember, I think starting in around 2018, there were huge funds that were created to support the next generation of climate companies. And then that number continued to expand exponentially in 2019, 2020, 2021.
And there were thousands of companies that got funded investment from the private sector. And so part of, I think, what the Biden administration realized was that we had this moment again where those companies could either build things here in the United States or they could go overseas. And a lot of those companies were starting to become ready to commercialize here.
And I think that, at the core of this, there was a recognition that these projects were going to be big.
So when you think about, for instance, the three biggest automakers and the battery manufacturing plants that they’re building — each one of those plants were multibillion dollar endeavors. And so I think it was very clear by the time we got into 2022 and the legislative session, that the Loan Programs Office needed to be beefed up. And so we were seeing so much interest in using the Loan Programs Office. And there were tons of libertarian folks who were like: Wait a second — I don’t think I’m going to be able to get this company to scale and exit unless we figure out a beefed-up Loan Programs Office.
Meyer: What kind of companies are applying for loans from L.P.O.? You mentioned that car companies have these giant factories that will eventually be profitable, but it takes a very long time for them to turn a profit. I think lots of manufacturing companies find themselves in that position.
But what other companies, what other kinds of startups or long-lasting industrial companies, are applying to you for loans?
Shah: So the identities of the actual loan applicants are confidential, but I can maybe talk about it from a sector perspective.
Meyer: You can talk about who’s been approved for loans.
Shah: Well, I can certainly —
Meyer: Or who’s gotten a conditional —
Shah: Yeah, I can certainly do that. So there’s some broad categories. Clearly, battery manufacturing has been a huge highlight of our four years in office. And so, you’ve got 400 gigawatt-hours’ worth of battery manufacturing. But then you’ve got critical minerals, production facilities here in the United States that are going to feed those battery manufacturing facilities.
And remember, auto companies are some of the most sophisticated companies in the world from a supply chain standpoint. They have to buy stuff from many, many countries and assemble it all into one place. And so they’re also very nervous about 90 percent of processed critical minerals coming from China.
And so we’re now on track with the lithium loans that we provide to Thacker Pass, the conditional commitment to Rhyolite Ridge — Ioneer — in Nevada, the graphite processing facility in Vidalia, La. We have a number of grants that the Manufacturing Supply Chain Office provided to folks. We’re now on track to fully meeting our lithium needs by either the end of this decade or the early part of the next decade —
Meyer: And so that’s mines and industrial mineral refining facilities, in other words.
Shah: Totally. And it’s next-generation technology.
So we’re not just taking stuff that’s already being done and deploying it here. This is all-next generation technology that we have proprietary access to — because we invented it here at the U.S. Department of Energy and at the National Labs. And we’re going to make sure that we scale that up here.
I think people just don’t understand that we’re not competing with China. What we’re saying is that there’s a number of technologies that are the next-generation beyond what China is doing now.
And so when you look at the next-generation anode and cathode materials, the next-generation battery separator materials — all of that stuff are things that came out of the Loan Programs Office and/or some of the other offices within the Under Secretary for Infrastructure.
I have no doubt in my mind that the very best long-range batteries in the world will come out of the U.S. by the end of the decade. And that is not something I could confidently say four years ago. And that doesn’t even get to some of the other sectors like modernizing our grid or virtual power plants or other things. And so today we have 212 loan applications across about 13 sectors seeking about 324 billion.
Meyer: Can you just lay out where you see L.P.O. fitting into the bigger scheme of things — in terms of the politics of Biden’s agenda and where that intersects with private industry?
Shah: Yeah, well, I think first we have to recognize that it’s a team effort. When President Biden was on the campaign trail, his promise was that America was going to do big things again.
This industrial strategy was part of his campaign. He went to people on Wall Street, went to entrepreneurs and said to them: I am going to make it possible for you to do things in this country. And frankly, I would say the vast majority of people didn’t believe him because those promises have been made before, and they were not kept.
And he went to the unions and said: Look, you are going to have to play a productive role here. Right? I get the fact that change is hard, but you’re going to have to figure out how to embrace change, and you’re going to have to be fervent supporters of this. And I’ll also be a fervent supporter of you.
But then separately, he went to the environmental groups and said: Look, you’re going to have to understand that in order for us to get solar panels, to be something that we want to deploy at 100 gigawatts a year scale, Americans want them made here. And so you’re going to have to understand what it takes to be able to deploy things at scale.
And then he went to the justice groups and said: Look, I get it. You were promised a whole bunch of stuff, and none of it came true. And so you do not trust he government. You do not trust these large industrial deployments. But let us come up with a process to earn your trust.
And we have done that with all of our loans.
And so while the private sector is essential to this, and then the Loan Programs Office receives a loan application and then actually just provides a loan after a lot of due diligence, etc. — the ingredients for Americans thinking that we could do big things again was a team effort.
And you see that in states around the country who are now competing ferociously to attract these projects to their states. And it’s not an economic development story in terms of: Who’s giving you the biggest package? It’s: How do we get trained workers? How do we make sure that the infrastructure is there? How do we build up new electricity transmission lines and new facilities to be able to accommodate all this load growth?
So that is something that’s more of an art than a science. Which politicians are better at than I am today. I’m getting people calling me saying: Jigar, I would have never in a million years thought that we could do big things in this country, but I think we can.
Meyer: Can we get more specific with this? Like, what can L.P.O. do that others in the industry or others in the private sector cannot?
Shah: So, if we look at Thacker Pass, which is a big lithium production facility in Nevada: They had to go through permitting; they had to go through the National Environmental Policy Act. We made their process as smooth as we could. And frankly, my team did an extraordinary job there.
But the big thing is that, remember, when we came into office, lithium was very high priced because there was a shortage — but there’s no shortage of lithium in the world. It was just the processing facilities were short. Since the market has been flooded with lithium, lithium prices have come down. And so the private sector does not want to fund a lithium production facility because lithium has very volatile pricing.
And so they’re saying: Not only do we not trust the technology —because Thacker Pass is using next-generation novel technology that is far more environmentally friendly than what they do in China — but we also don’t like this volatility. So there is no place for them to go to get debt.
But when you talk to the big mining companies, they’re like: Well, we don’t want to buy these guys. We don’t want to use next-generation technology. We want to use technology that’s already been used for 10 years in the field.
And so the Loan Programs Office was the only place where we could actually look at the forward price curve for lithium and look at supply and demand and figure out where is this going to go — we had third-party providers that helped us with this — and how likely is this technology to work? Oh, very likely — because we’ve actually been piloting it for over 10 years. OK, fantastic.
And so the only place for them to get a fair hearing was going to be the Loan Programs Office.
Meyer: And so the moral of that story, it seems to me, is that L.P.O.’s job — the thing that makes it different from the rest of the private sector — is that it can lose money. And it can lose money on worthwhile projects, or it can decide that basically it doesn’t need to make money in a short period of time. It doesn’t need to respond to the conditions of the spot market at any one moment.
You mentioned earlier that L.P.O. has made money, that it’s been making money. There’s like two famous stories about L.P.O.: In 2010, it made a $465 million loan to Tesla. But also, at around the same time, it made a $535 million loan to this company, Solyndra, which went bankrupt relatively quickly and became a big issue in the 2012 campaign.
One question I’ve had about L.P.O. for the past few years is: The Tesla story is great. The Solyndra story obviously haunts the office.
Shah: Not anymore.
Meyers: Did we overlearn the lesson of Solyndra? Is the fact that L.P.O. is making money — that’s great, right? It’s good that it’s making money: We’re running the government like a business.
But L.P.O.’s job is not to run the government like a business. So did we overlearn the lesson of Solyndra?
Should L.P.O., if it is doing exactly what it’s supposed to be doing — should it be losing money?
Shah: Well, look, I think that right now there are so many companies who are deserving of an L.P.O. loan. They have done their homework. They have made sure that they’re meeting our threshold, which is that reasonable prospect of repayment, that we don’t have to lose money. Right? That the companies that come in are just so overprepared and so amazing that we’re able to make smart choices.
I think there were two big challenges with Solyndra — and both things we don’t do anymore. The first is that the Loan Programs Office put our money in first before the private-sector folks put their money in.
And that never happens now. And so we make the private sector money put first their money in first, and then we match it with our debt second. And so that makes sure that the project actually has enough money to be completed.
The second is that Solyndra had real technology risk, and we don’t take real technology risk anymore at the Loan Programs Office. If we think there’s real technology risk, we have our partners at the Department of Energy demonstration programs give them a grant to demonstrate their technology first.
And so those two things we do not do anymore at the Loan Programs Office. So we learned our lesson. We got a bunch of unsolicited advice, and we followed it. Which is great.
In terms of the way that L.P.O. should work and does work today: We estimate what our chances of losing money on every loan is. We reserve that amount of money into an account, which is held by the U.S. Treasury. Every year we estimate whether that loan has gone up in risk or down in risk.
The goal is to be accurate. The goal is not to overallocate money for losses and then not need it. Because that’s sort of just money that could have been used to help other people. And I think we’re really good at that today.
In terms of the lesson learned: Look, I would suggest to you that today, both Republicans and Democrats have never been more bullish on America’s ability to do big things. When you look at just how aggressive Governor Bill Lee is, in Tennessee, around pushing for nuclear supply chain and more nuclear plants, it’s amazing. Or Governor Brian Kemp, in Georgia, and all the wonderful stuff that’s happening there.
Governors around the country recognize that this is something that is essential, to take their best and brightest people that have decided to scale up a company in their state — this is the tool that they need. And it is so prudent because it doesn’t really cost the federal government much compared to amount of loan authority and how much economic development it spurs.
Meyer: So Biden came into office promising to do big things. This is a theme you keep returning to. And as you were saying, he went to the climate people and he made a set of promises to them. And he went to labor unions and made a set of promises to them. He said we’re going to bring back jobs. He said: We went to the justice people, and said we’re going to get pollution out of your communities.
And the Inflation Reduction Act, which is like the signature partisan bill of his administration, tries to do a lot of these things at the same time. It’s a decarbonization bill, an environmental bill. It’s a justice bill. It’s also a manufacturing bill.
How do you see all of those impulses brushing up against each other in the bill and in the Biden administration’s policy writ large?
Shah: Well, remember, it really is only an industrial strategy bill. It is not the rest of those things.
The rest of those things are things that incentivize the private sector to do things —
Meyer: It has grants for environmental justice organizations. It does a few different — I think if we were talking maybe two years ago, Biden officials would be describing it a little differently.
Shah: Maybe, but I — look, I think that what matters is that these projects succeed.
If we build a manufacturing facility and that manufacturing facility fails, well then all the benefits that it provides to workers or to communities or other things go away.
And so the central tenant to all of this has to be that these projects succeed. That’s how it provides the benefits to all of the other folks. And so that has to be the thing that is the thing that we’re most focused on: Is this company going to succeed? Are the products that it’s making in demand? Is the expertise required to stay ahead of its competitors something that the Department of Energy is working on.
And so I would suggest to you that that has been the central tenant. And when you think about the Loan Programs Office’s approach, our approach and our due diligence has been the golden ticket for all the companies that have gotten conditional commitments.
Every one of them to date has been able to raise the equity necessary to complete their projects. That is because people are like: Wow, you guys are hard on these companies. You guys are tough on these companies. You guys do ask them the right questions. And therefore these are really good companies that are able to succeed.
And what we’ve told people is: You have to make sure that labor is not something that is going to make your project fail. You need to hire people who are experts at their craft. You need to make sure that those people do the job right the first time. And people have done that because it has derisked their project.
And we’ve said: Hey, it’s great for you to talk to the community. We’re not giving them a veto. But we are saying if you don’t have a good relationship with the community, we’re not really sure how you’re going to get the changes to your permit that you’re going to need in five years or the expansion plans you want to do in five years, etc.
So you should talk to them. And when it’s been scary, we’ve facilitated the conversation so people are like: Oh, we were scared for no reason. These people actually do want jobs at this plant. They actually do want to have this plant in our community. This is not as scary as we imagined it would be.
And so we have facilitated better conversations.
But I want to be crystal clear that none of these benefits remain unless these companies succeed.
Meyer: I think looking back on the past three years of L.P.O. and on what’s followed the Inflation Reduction Act, there’s obviously been this boom in clean energy and clean manufacturing that’s happened across the U.S. But when you look at the numbers from L.P.O. specifically, they suggest that there’s a lot of dry powder sitting in L.P.O.
So L.P.O. has $400 billion of loan authority. I think it has issued $54 billion of loans. I think $19 billion of that has come after the election. And — you should correct me if any of this is wrong — I believe there are 200 applications with over $300 billion of loans waiting to get dispersed, waiting at your office.
So what has gone into that holdup? Why haven’t there been as many loans issued from their office as there could be? Why is there so much dry powder at the end of the Biden administration in this very important program?
Shah: Yeah, it’s a good question. I think we all first have to acknowledge where we were as a country when President Biden came into office.
America was really doubting itself and doubting its ability to do these big things. Most investors were saying to their chief executives: I know you want to do things in America, but that’s just too risky. So now we had to go to the C.E.O.s and say: How do we arm you with the information that you need to convince your investors that this is the place that we can do business?
And along the way, people are like: Well, I don’t want to have a great track record on megaprojects here in the United States. A lot of projects are over budget and take longer.
And so we had to say: Well, what are the best practices on megaprojects? Oh, you should be spending 10 percent of your entire budget upfront on planning before you start construction. Oh, you should have higher quality work force. And all these things.
And so a lot of the companies were like; Wait, this isn’t free money? This is not a grant? And I was like: No, it’s not a grant. And even if we were to give you a grant, which the Loan Programs Office doesn’t do, we still want you to succeed.
We don’t want to just give you money and then have you fail. And then for Chinese companies to buy all of your intellectual property — and bankruptcy.
Meyer: Let me just voice the other side of that argument, though, which is something I’ve heard from companies that are applying for L.P.O. is that the process is really arduous. It’s much more arduous than the private banks.
Which on the one hand is good. Right? Like that is making use of the Department of Energy’s experts. It’s making use of its ability to kind of put its stamp of approval on certain big projects.
But something I’ve heard that’s related to that is: If you go to a bank and you ask for a loan, you can usually get a sense in a few months of whether you’re going to get that loan.
But when you go to L.P.O., it can take a few years to even get a sense of how far you are in the pipeline or whether you’re going to be approved. And those years represent millions of dollars of planning investment. They represent burned runway. They represent a lot of lost executive salaries.
Was there too much process here to make sure that all of these loans were airtight?
Shah: Which is it? Too much process? Or is Jigar pushing money out the door too fast? [Meyer laughs.]
I think that when you do these billion-dollar projects, there has to be a level of sobriety around how hard it is to do these things. And I think that a lot of the people that came into the Loan Programs Office did not have that level of sobriety.
Now it’s not my job to impose that on them, but it is my job to make them actually go through the checklist. And remember, if they thought that they could get private sector capital, they should. It is not the Loan Programs Office’s job to compete with the private sector. So the only reason that they’re going through the Loan Programs Office is because they can’t get a loan from the private sector.
And so let’s be clear about the risk profile that the Loan Programs Office is expecting to take on. And so we want to make sure these things are successful.
Now what I would suggest to you is that the amount of time it took to get people through the Loan Programs Office in 2021 was a lot longer than today. Today there are some people who come into the Loan Programs Office who are leaving with a conditional commitment within seven months.
And so it is a lot faster. Why? Because they’re amazingly better prepared. They listened to some of the guidance that we’ve given people. They’re like: Oh, we can’t just phone this in? We have to do real homework? Oh, OK. I guess we’ll do that work.
And now things are moving much faster in the Loan Programs Office. I’m not going to apologize for the fact that we’ve taught American entrepreneurs, innovators, and investors how to do big things — and they’re finally listening and figuring out how to do that.
Meyer: The L.P.O. isn’t only just teaching them how to do big things, they’re actually doing something else. Which is that I think the office and the Department of Energy, more broadly, have followed through on a set of promises made by the Biden administration at the beginning of its term.
That this wasn’t only about doing big things in America. This isn’t only about big manufacturing projects. This is also about making good on pledges to labor. This is about making good on pledges to communities that have suffered under pollution for so long. And something that L.P.O. has done a lot of is to make sure that communities benefit from projects.
There’s a critique from Ezra and others that when you add all those other pledges, all those other requirements to these big projects, you require labor standards, you require community input: It’s not that those things are not worthwhile, but they slow the projects down, and it takes time to do the planning for all these different aspects of a project. When what the ultimate end goal is making sure there’s a battery plant.
After running L.P.O. for three years, what is your sense of it? And should we have the same requirement? Should we try to make all the same pledges next time?
Shah: Well, to be clear, there were no requirements. The requirements for the Loan Programs Office is you have to pay Davis-Bacon wages during construction, and you’ve got to meet some of the other statutory requirements around the Cargo Preference Act and some of that stuff.
And so, our projects were not required to use union. What we said to people is: Show us that the people that you’re hiring actually have experience on building what you are building. And it turned out that most of those were union contractors. We also, by the way, if you talk to the unions — they didn’t love me, either.
Because I was like: Where’s your marketing materials? What are you doing to promote the fact that you’re reducing risk?
We had a lot of tough conversations with the unions. And I think the unions are more competitive today than they were four years ago around how they win business because we held them accountable, too.
And so this is not something where this was a requirement. This is something where we said: We have low unemployment rates. This project is going to fail if the people you hire are not people who can actually do the skilled work that you are suggesting that you need in the loan application to Loan Programs Office.
So this is a source of risk for us. On the community side, I’d say, a lot of the times our companies were led by extraordinary C.E.O.’s who were not focused on communities, not because they’re bad people, but because they’re focused on their technology succeeding. So they would outsource this work to their head of H.R., but the head of H.R. would be like: Well, let’s put in a playground. And I was like: Seriously, that’s what you think the community needs?
And so we would hold a listening session with the community and say: What do you need? And we would make the C.E.O. and chief financial officer come there. And it was clear that they had never met the community leaders before they had outsourced this to the H.R. people.
And when they met the community leaders, the community leaders are like: We have all these people in this neighborhood that are extremely impoverished that want to work at your factory, but there’s no public transportation to get there. Would you put in a bus service to do that? And the C.E.O. was like: [Expletive], yeah, of course we would do that. Why is this the first time I’m hearing about this? And then we looked at the H.R. person and say: Why didn’t you bring that idea to them?
And so we facilitated the conversation. We didn’t mandate anything. But once the C.E.O.s and C.F.O.s heard the request, they were like: These are eminently reasonable, and this reduces the risk of running my facility.
Look, I get where Ezra is coming from. And I think it was some article he wrote about a homeless shelter in San Francisco or something. But when you think about what we’re doing here: These are infrastructure projects that have to last for decades, decades and decades and decades. I just think that the notion that you would do all this stuff without being thoughtful is ridiculous.
Meyer: Well, I think that this is exactly the question: Where does thoughtfulness end and process begin? Because you’re describing things that are not requirements per se. However, I think if you go to a company and are like: You should really have a community meeting to figure out what that is, what the community wants — that’s going to read to a company much more like a requirement. Maybe they’re going to feel like they’re being voluntold.
Shah: So I don’t know: Do you think that if you’re going to make a multidecade commitment to a community that you should like have the C.E.O. and C.F.O. actually meet the community once before like you sign on the dotted line?
I don’t know that this is a requirement here. I think we’re talking about best practices.
Meyer: How would you get the dollars out the door faster next time then?
Shah: I think today, American entrepreneurs and innovators are more prepared to do big things in our country today, and their investors are more prepared than they ever have been.
This has never been about the Loan Programs Office. And I love the fact that we’re being told on the one hand that we’re rushing money out the door, and on the other hand, we’re being told we’re being too thoughtful.
But this has been about applicants. We have an absolute threshold that Congress reconfirmed in the bipartisan Energy Act of 2020 that they passed, saying you have to make these applicants meet this threshold.
And so we have been working to get everyone to meet that threshold. Now we can do a lot of mentorship, But we can’t drop our standards. We can’t cut corners. We can’t do any of those things.
I think today people are more prepared and people are more sober about what it takes to do big things than they ever have been. And as a result, I’m very proud of every loan that we’ve made. I think that they are going to be pretty successful. But more important, I’m really proud of what they’re catalyzing.
It took about 15 years from our first loans and the utilities signing their first power purchase agreements with these solar farms for there to be full market acceptance of solar within the big money centers from pension funds to others. I think we can cut that in half. I think we can do that in seven and a half years.
And for all of the executive salaries that we’re burning by asking tough questions, I think if we cut their time to trillion-dollar scale in half, that makes their companies more likely to become hugely successful and profitable. But it also means that the climate benefits faster from that scale.
And so I’m proud of the formula that we put in place. And I really think that it’s going to last the test of time, regardless of the president, regardless of administrations. I think this is something that American innovators and entrepreneurs recognize that they have to do if they want to be successful.
Meyer: Let’s talk about some specific industries. I want to go back to this question in the context of the Trump administration. But for now, let’s talk about some specific challenges we’re facing in decarbonization.
So more than half of L.P.O.’s deals since 2021 have gone toward electric vehicle or battery companies. And just last month, you announced a conditional loan to Rivian to build their giant megafactory in Georgia.
What’s the state of the E.V. market in America broadly?
Shah: Look, I think that these are superior cars. Let’s be crystal clear. If you want a performance car at an affordable price, that’s an E.V.
And so I think we entered office with maybe, what, like 500,000 vehicles or so sold in 2020. And today I think we’re four to five times above that number. So it’s been a remarkable period of growth over the last four years.
I think that today, we are now at escape velocity on E.V.s, and people now believe that it’s only a matter of time before this happens. Both my in-laws and my parents just bought a plug-in hybrid, and they never drive over 34 miles a day. And so they are pretty excited. Basically fully electric — and they love it.
And I think that when you think about where American innovation is headed right now, I think we’re on track to meeting the goal of 50 percent E.V. sales by 2030 with E.V.s or plug-in hybrid vehicles.
Meyer: The E.V. supply chain is so different from the conventional internal-combustion vehicle supply chain. And I think L.P.O. has invested in nearly every part of it.
So can you talk me through just the different parts of that supply chain? The battery section, the car, the charging network. Where do we stand on each of those sections?
Shah: Yeah, so I think that we’re not done yet. But I’d say that we’ve got battery manufacturing. And now you’ve got the 30D tax credit.
And so the 30D tax credit says: Buy your components to make those batteries from the United States. And so lithium processing, graphite processing, nickel, manganese.
When you think about the battery manufacturing facilities that we’re building now, all of them have already been future-proofed so that when those next-generation technologies come in, they can immediately be inserted into the existing manufacturing process.
Meyer: There was a Bloomberg report earlier this month that China has gotten its E.V. battery costs below $100 per kilowatt-hour. And that in climate tech and in the clean energy world, we’ve been talking about this $100 per kilowatt-hour benchmark for a long time as the place where E.V.s and electric vehicles will outcompete internal combustion cars on price.
This is the mythical benchmark that we need to hit. It seems that China has now hit that mark. And if you look at their E.V. adoption figures: Nearly half, more than half, of vehicles sold every month now are either plug-in hybrids or battery electric vehicles.
Under Biden, the administration has made a lot of efforts to onshore the supply chain. But how are we going to compete with the Chinese E.V. manufacturing complex that seems to have achieved all these cost reductions that we’re not close to yet?
Shah: It’s a complicated question. I think that we just talked about all of the technology breakthroughs that we have in our pipeline that we’re not going to be sharing with China this time around and that we’re going to be manufacturing and deploying here.
China has hit that price point by bankrupting their lithium suppliers. And so every lithium supplier in China is losing money, and they have started shutting in capacity.
So like, do I love the fact that the cost of batteries is lower? Yes, of course I do. But do I love the fact that everyone in their supply chain is losing money right now? Not really. It doesn’t make me feel like this is a very stable supply chain that is going to be able to be trusted to build our next-generation grid on top of.
And so I think it’s important for us to recognize that when we think about diversification, we think about national security, we think about global competitiveness. But we also think about figuring out how to make sure we have stable companies that can actually participate in the private markets, raise capital, do the things that they need to do to honor warranty claims, to honor all of the all of the other things that we care about.
And I just, I sometimes think — the solar industry is the same — that we just champion these price points without thinking through, Is this a price point at which we can actually build our entire electricity future? Maybe.
But in some cases, I would say no. We need to make sure that these are stable companies that can provide the maintenance, provide the warranties, provide all these things. So that we can actually build our entire modern energy infrastructure on top of it.
Meyer: What would happen to the investments that the Biden administration has made in battery chemistry, in battery manufacturing, in E.V.s themselves — like the big Rivian project in Georgia — if some of these policy supports, either on the manufacturing side or on the consumer side — the $7, 500 E.V. tax credit — were to drop out?
Shah: Well, I think that if you remove any of those policy supports, the question is, What do you replace it with? Right? And so you replace it with tariffs, you can replace it with other things. Now, that is a recipe for making things more expensive, not less expensive. But those are all policy choices. People can make those policy choices.
But in the end, if these companies go bankrupt, what happened last time is that those technologies made their way to China. And so I hope that that doesn’t happen this time around. I hope that people recognize that these are American technologies, that we invented them, and that we now need to make sure that they are supported so that we can actually make sure they flourish here in the United States. And then we can export them around the world.
That has been the industrial backbone of the United States for decades. But I think that if the policy support starts to fracture, then these companies may end up being companies that are on the chopping block. And those technologies will go to the highest bidder.
Meyer: Something that the Biden administration, the Trump administration, seem to completely agree on is that what we absolutely should not do is import a lot of cheap Chinese E.V.s. Which, by the way, would reduce oil demand, would help our decarbonization goals.
Why should the U. S. not do that?
Shah: Remember that autos is one of the largest parts of our economy. It is not surprising to me that people do not want the Big Three automakers to go bankrupt, that they want to make sure that they can make this transition. in a way that makes sense for workers, for supply chains, for all of those people who are employed in those industries.
And so we have the best technology in the world. Our automakers have the ability to make this pivot. But they’re going to need a little time. And so we need to make sure that in these really important industries, that we’re not outsourcing all of it to other countries. That some of it a big part of it, is being done here. And that includes steel manufacturing, aluminum manufacturing.
I think it’s important to our national security for them to be very domestic.
Meyer: In some ways that feels like the most classic — I think throughout this conversation you’ve rejected that some of these trade-offs exist — but this seems like the most classic trade-off that there is. Right?
In your argument, we should be favoring domestic deployment of these technologies over the emissions reductions of them, especially if they’re coming from China.
It just seems like you’re taking a real hard stand on this particular trade-off.
Shah: I’m saying that if you think about what it’s going to take to decarbonize our grid by 2035 — which is what President Biden has outlined — and our economy by 2050, you have to bring the American people along with you. And for them, importing every single thing we deploy here in the United States isn’t going to work.
That’s just not going to work. And so we have to make sure that this is something that everyone is cheering about. And we can — because we have the best technology in the world.
We haven’t tried to do big things in these particular sectors in a long time, but we’re doing them now. And I’m pretty sure that when we come back and talk about this in 2030 or 2031, everyone is going to be looking at themselves going: Oh, yeah, we were a lot better than we gave ourselves credit for.
Meyer: One of the big stories of the past few years in the American energy economy writ large is that Americans and the economy broadly is using more electricity again. That is often talked about as a phenomenon of A.I., that it is purely a result of A.I. What do you think is driving that rise in electricity demand. And how big a deal is it for clean energy?
Shah: Well, I think we should start by saying that the Department of Energy has approved so many new energy efficiency measures that we’re going to continue to have energy efficiency for as far as the eye can see. And I think that’s going to play a major role in meeting load growth right now.
But the bigger part of load growth is not A.I. data centers. I think people want to blame data centers, and data centers are important. But a lot of people want to store their photos forever of their children. Right?
And so they pay the extra $2.99 per month to do that stuff. And make no mistake, most of the load growth in the data center side is still cloud. A.I. is coming, but it’s not yet the dominant thing that’s going in. Most of it is light manufacturing, heavy manufacturing, E.V. and heat pumps and all sorts of other stuff.
And so we have multiple solutions to load growth. But I think it’s important to recognize that we have just had so much winning. So many people have chosen the United States as their place to commercialize their technology. And not just American innovators and entrepreneurs. Japanese and Korean innovators and entrepreneurs, European innovators and entrepreneurs —everyone is choosing America to scale up their technology.
And that is awesome. And that’s where the load growth is coming from.
Meyer: So as Americans have used more and more electricity, suddenly, electricity prices have gone up. Companies think they’re going to go up further. Microsoft and Constellation are reopening the Three Mile Island nuclear plant to meet the demands, in their case, specifically of the A.I. industry.
How is nuclear doing in America right now — and how do you see A.I. playing into it?
Shah: Well, I think we have to take one step back. I think there’s a recognition by all the hyperscale data center companies that their power demand is uniquely harmful to the cost of electricity. And so I think there is a recognition by the hyperscale data center companies that they do not want to pass the cost of their data centers on to poor people — like what was happening in the past. Not that they were wanting to do that, but the utilities sort of offered them an industrial rate.
And so there is an awakening by the hyperscale data center companies and the governors and the public service commissions and the utilities to say: Hey, wait a second, if these guys are going to cost so much to serve, we should make them pay full freight.
And it turns out that after Microsoft, Google and Nucor did this massive request for information, and they got and they went through them all, that nuclear was one of the cheapest options that they could pursue to not pass costs on to the rest of the ratepayers.
Meyer: Do you see the politics around nuclear changing right now? I think, historically, this is something that Democrats have been more skeptical of — and Republicans have been an enthusiastic support of.
This year, that changed somewhat. You saw a lot of battleground Senate candidates from the Democratic Party supporting nuclear enthusiastically. And it’s actually folks like Robert F. Kennedy Jr. who are now the bigger skeptics of nuclear.
Do you see there being a broad shift in how people are thinking about the politics of nuclear energy on the grid in the United States?
Shah: Well, look, I think today when you look at how much new capacity we need to build, people are saying we need everything. [Laughs.] There is no way for us to meet this just with solar, wind and battery storage, and we will do as much solar, wind and battery storage as we can — and we will still need nuclear and enhanced geothermal and other technologies.
But more important, I think the Department of Energy has done tons of modeling work, and it shows if you can maintain that 20 percent nuclear that we’ve had for many years, it is so much cheaper to run a decarbonized grid with all that nuclear.
And so people are now starting to recognize that instead of thinking just about levelized costs of energy, you have to think about the entire system cost. That also includes deploying technologies that we invented 20 years ago around grid modernization and dynamic line ratings and topology mapping and all the things that we need to do to get 50 percent more capacity out of the grid that we already paid for.
It also means that all of these smart appliances that we’ve had for three or four years now, where even my humidifier comes with an app on it — you can use that to connect it to demand flexibility programs and you can give people a 20 percent discount on their bill to allow their demand to be more flexible.
So your water heater doesn’t have to heat up that water right after you finish your shower. It can wait until electricity is cheap. And that also allows us to make more of what we’ve already paid for.
And so I think where we are now is people didn’t have to think differently for the last 20 years. Today they have to think differently. If they don’t, then we’re not going to be able to have all this economic growth.
Meyer: Trump is going to take office next year, and he’s indicated, and Project 2025 indicates, they want to undo a lot of Biden’s policies around decarbonization and clean energy. What do you think is going to happen to L.P.O. and to this current set of projects?
Shah: I don’t think that American innovators and entrepreneurs have a political party. They want to take their technology, they want to work with their venture capitalists, their private equity firms, their growth capital companies, and they want to build big things. And I don’t think any politician wants to send American companies packing and saying: Sorry, we don’t want you to scale up stuff here.
Because let’s make no mistake: American innovators and entrepreneurs are an unstoppable force. You cannot say no to them. If you say no to them, they will go to another country and scale up their technologies there. They will not be stopped around their ambition.
That’s why we love them so much. They walk through walls.
It is an extraordinary thing to see. And I can’t imagine any politician not wanting American entrepreneurs and innovators to win.
Meyer: Is that what you hear from the entrepreneurs and business leaders that you talk to? How are they feeling about the Trump administration?
Shah: Look, I don’t think people love the tweets. I don’t think people love a lot of the rhetoric that’s coming out of people’s social media right now.
But I think that they’re working hard to do big things in this country. And they are going to play it out. They’re going to work with governors. They’re going to work with all of their champions, and they’re going to try to make sure that the policy here in the United States continues to allow them to raise equity.
Because remember, we’re “private-sector led, government enabled.” And so the private sector still has to write that big check to build that facility in Nebraska or in Kansas or in Georgia or in Tennessee or in Kentucky. And if they don’t write that big check, then they’re going to have to go to Plan B and Plan C.
And so I just think that, in general, these people are very practical people. They just want their technologies to be scaled up.
Meyer: There’s another scenario in the future Trump administration. Which is that Vivek Ramaswamy, the seeming co-lead for the incoming Department of Government Efficiency — to the degree that such department will actually exist — has been really critical of L.P.O. and has said that some of the money going out the door should be clawed back.
Can they do that? And what do you make of that?
Shah: I don’t know. Look, I think that we are making commitments on behalf of the U.S. government. When the government makes commitments to an outside party, that outside party expects the government to honor those commitments. I think in the past, all commitments have been honored.
I expect in the future, all commitments will be honored. This is the whole point of trust. And so if you’re worried that after you get a loan commitment that that commitment is not real, well then why would you subject yourself to the process of getting a loan? If the government doesn’t keep its promises, then it makes all applicants suffer, whether they’re in the preferred sector or the not-preferred sector.
And so, I can’t imagine for a second that people of any stripe want to hold back American innovators and entrepreneurs. Like, they’re going to fail, they’re going to succeed, and frankly, we did not get a lot of blowback for the other loans that were done in a different way. Like when they failed.
So we’re going to have a lot more failures. That is why the government is supposed to lean in.
But we’re going to have so many successes. And I just think that that is something that we are so proud of, not just within the Biden administration —but the entire American public. They love bragging about how awesome we are at inventing new stuff.
And pretty soon they’re going to be bragging about how we’ve all scaled it up here.
Meyer: I guess I agree with Americans love bragging about this. But I’m not sure that their love of doing big things comes through the political system.
For instance, Biden has tried to do a lot of big things. And Biden’s party just lost the presidential election.
Shah: And you really think that the presidential election was all about energy?
Meyer: I don’t think it was all about energy. But I don’t think it was about this stuff at all. I think Biden made a pitch to voters that he was going to bring back a certain type of American dynamism. We saw a lot of that in the economy, and then it wound up not mattering.
It seems to me these trade-offs are pretty important, and it also seems to me that the way that political parties are set up right now, the set of incentives that they’re acting under: Are we really set up as a country to be able to do the big things that we want, and are we going to be able to get there?
Shah: So let me say this a different way. We have unprecedented load growth in the United States right now. The tools that got us here are not going to be able to solve this problem in front of us.
If we don’t scale up new nuclear, if we don’t figure out enhanced geothermal, if we don’t figure out grid modernization, if we don’t figure out virtual power plants, then we will not meet this moment. And we will have to sacrifice economic growth.
I do not think that anyone wants us to lose the A.I. race. I don’t think anyone wants us to lose these manufacturing plants because we cannot interconnect them. And before you say: Don’t worry, we’re going to do it with natural gas, you build as much of that as possible. It’s not enough. And building new natural gas pipelines to all those plants is not an insurmountable hurdle.
And so we’re going to need all these technologies to succeed. We need it to be able to meet this moment. And I just think, I can’t even fathom, that any president would say: I’d rather us not grow economically.
Meyer: What is your advice, if there is an L.P.O. next year, what is your advice to that office’s director, to the next L.P.O. director?
Shah: There will be an L.P.O. next year. There will be an L.P.O. And we have 212 active load applications seeking $324 billion.
And my advice to the next L.P.O. director is: Enjoy this extraordinary team that we were able to build. Enjoy the amazing people who have decided to interrupt their careers and move it here to the Loan Programs Office and to the Department of Energy. And dream big. Do big. Figure out how to help these American innovators and entrepreneurs realize their dreams.
Meyer: And, final question, what are three books you’d recommend to the audience?
Shah: Oh, my goodness! I was supposed to be prepared for this.
The book that has forever changed my life is Nassim Nicholas Taleb’s book “Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets.” I read it before I started SunEdison a long time ago. And it reminds me today that all the things that people take credit for, a lot of it was luck. And it’s important to figure out luck versus what you actually did.
The second book would be “What If We Get It Right?: Visions of Climate Futures” by Ayana Elizabeth Johnson, and she is such an inspiring person. I’ve had the pleasure to know her for years. And she’s really attracted many of the brightest minds in the climate movement to think through what this looks like and how this can be a positive world that we’re going into. Because I really do think that getting this right is going to be an amazing future for all of us.
And then the last book was I recently read “Romney: A Reckoning” by McKay Coppins. And I think that when you think about his journey and the journey of many folks who just want to do right by people, who just want to make this place the best version of what America can be — I just think it’s superinspiring.
Meyer: Jigar Shah, thank you so much for joining us on “The Ezra Klein Show” today.
Shah: Thanks for having me.
You can listen to our whole conversation by following “The Ezra Klein Show” on NYT Audio App, Apple, Spotify, Amazon Music, YouTube, iHeartRadio or wherever you get your podcasts. View a list of book recommendations from our guests here.
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