by Stephen Lacey
March 15, 2017

Stephen Lacey: We're on week seven of the Trump presidency. For the last four months or so since the election, we've been stalwart in our views that things are not as bad as they seem. That despite the contradictions and confrontations, clean energy will emerge unscathed because it is unstoppable. That may well be true, but it's impossible to ignore how quickly Trump's team has worked to unwind the country's environmental policy. As more details emerge, it's becoming clear that this is not a team devoted to a traditional conservative approach to environmental protection or a thoughtful redesign of top-down regulations -- it is a team intent on burning them to the ground. We were once warned by Peter Thiel to take Trump seriously, but not take him literally. It is now time to take him literally. That's our topic of conversation to start, the impending reversal of climate, fuel and efficiency regulations; new staff with no background in the sectors their agencies govern; and across-the-board budget cuts.

Then we're going to shift over to some bellwether business activity in the solar industry. What does AES' acquisition of leading developer sPower say about the health of America's utility-scale solar sector? We'll end with a discussion about why electricity prices in Ontario, Canada have skyrocketed. Who exactly is to blame? As always, I'm joined by Katherine Hamilton in Washington, D.C. and Jigar Shah in New York City. Hello, Katherine.

Katherine Hamilton: Hi, it's beautiful here in this incredible springtime town.

Stephen Lacey: You always say it's beautiful there. Every week it sounds like springtime there, but yet, when you read the news coming out of D.C. it sounds like Mordor.

Katherine Hamilton: Climate change, my friend. Climate change. That doesn't mean I don't already feel 150 years old seven weeks in though.

Stephen Lacey: I feel 150 years old just preparing for this week's show. Jigar, how are you? How are things in New York?

Jigar Shah: I'm feeling very young and chipper.

Stephen Lacey: You sound it. Get ready, let's apply that energy to this week's show. We were expecting this announcement from the White House on rolling back auto fuel standards and the crown jewel, the Clean Power Plan. It appears that the focus on rolling back Obamacare has stalled that plan until next week, but Evan Lehmann of E&E News broke a story on the coming executive order which will instruct the government not to defend it in court and end the Clean Power Plan without any replacement. We'll talk a bit about that. Kudos to Evan for breaking that story. There's a lot more to consider as well. Since we last talked about Trump, his administration has proposed slashing EPA's budget 25 percent and dismantling 38 EPA programs including Energy Star. Reports suggest the DOE's office of renewables and efficiency could get a haircut by $700 million or even up to $1.5 billion, according to some rumors.

Finally, there's a lot of news dribbling out about new hires at EPA and DOE. People who come from the furthest reaches of the conspiratorial, climate-denying right, and who in some cases have zero experience with the agencies they're helping run. Also, this today, right before we started recording, EPA administrator Scott Pruitt said on live television that he does not believe that carbon dioxide is a driver of climate change. We have known about the role of CO2 in atmospheric warming for over a hundred years. Where to start with all of this? God knows what will happen during this recording. I guess we start with the money, right? Katherine, a lot of speculation about budget cuts, some leaked information on budget cuts, still a ton of unknowns. We do know one thing for sure, White House proposals are far from the final word in this process.

Katherine Hamilton: Yes, absolutely. Think of the budget as a political document. To put this in perspective, Obama's last budget proposed a $10-per-gallon tax on oil to fund a clean energy transportation system. Never happened. It's a political statement about what he thinks is important. When you think about that...all of these agency cuts are statements about what is important and what their priorities are. The issue is, as opposed to the case with Obama, because Congress does write the budget and write the appropriations bills -- it never turns out that the president's request is what Congress comes out with, but normally the president's request has agencies advocating for their own programs. In this case, the agencies are advocating against their programs because they want to cut them. What it means is that Congress is either going to have to take it upon themselves to advocate for those programs in the appropriations process or groups from the outside are going to do that. In a lot of cases, these agency programs are public/private partnerships, but not all of them are.

A lot of this is there are government programs that are important to keep going, but don't necessarily have some kind of big, industrial constituency behind them. That's where the rubber hits the road. Congress is going to push back a lot on this and yet the agencies are not going to be advocating for their programs.

Stephen Lacey: The EPA cuts seem to be the most devastating. A 25 percent cut would amount to over $6 billion. It would shave off things like coastal community protection. It would get rid of Energy Star which would be privatized or just shoved out altogether without any sort of transition. There's a lot of stuff in here that's not just being phased down but would be completely canceled out.

Katherine Hamilton: Yes, these are really popular programs. Energy Star, most people when they go shopping for appliances say "Where's the Energy Star label? Where do I get my appliance?" That's been a really popular program. One thing that the administrator Pruitt does like, he does like the brownfields and the Super Fund Program. Those are some potential opportunities because those funding pools do provide grants for technology innovation. There may be some way to do some interesting technology innovation through those programs if he decides not to give those as much of a haircut.

Stephen Lacey: On the DOE side, the numbers that are being floated around are between $700 million and $1.3-$1.4 billion cuts at the Office of Energy Efficiency and Renewable Energy. You could look at that a couple of different ways. One is that it hampers this transition and a lot of the good work that's being done at DOE. Another way of looking at it, which is what some people have expressed within DOE, is that, boy, we thought we would get zeroed out, so a $700 million or even a billion-dollar cut wouldn't be so bad. Goes to show you what kind of expectations the administration has set. Jigar, any commentary on EPA or DOE budgeting that you've been thinking about?

Jigar Shah: I've taken the point of view that I just don't process or engage this information. It's just so stupid. This president basically puts it out there, I think, mostly to get headlines all day and get people to chase their tails. I'm going to wait and see what the sausage making process in Congress actually reveals. My sense is that there's a tremendous amount of support for a lot of these programs within the Republican side of the Congress. I think when you look at the Affordable Care Act replacement that Paul Ryan put out, I think it was deliberately constructed to fail because he knows he can't fix Obamacare. Then they're going to go to tax reform. I want to see what they're going to do on tax reform. I just think that all this commentary around EPA and DOE and this and that and whatever else when this president clearly has a screw loose is just not worth my time.

Stephen Lacey: That would be admitting that the podcast itself is not worth your time.

Jigar Shah: No, no, that's not true. I think there's real news, and then there's this made up stuff that Donald Trump puts out every week or every morning on his Twitter feed just to make people run around like crazy. I just think that the notion that you're going to have somebody like G. Michael Brown from Carson's campaign who's in DOE who was basically at Chesapeake Energy before that, is going to say let's get rid of all this stuff. Maybe he will, but my sense is that he won't. When you hear about all the stuff we heard about Proterra and electric buses, now faster moving, there's a lot of Republican lead municipalities around the country that want access to those electric buses. All the support they need is going to come out of the Clean Cities program which, guess what, is in EERE. My sense is that when they dig deeper into what programs are actually cutting, they're going to realize that actually a lot of the mayors that are on the Republican side of the ledger use these programs.

Stephen Lacey: A couple things there. First, Trump does put out trial balloons and often does try to float ideas either to see how people react or to distract from something else. The budget stuff that we've seen doesn't seem to be coming from Trump himself or his aides. There are definitely leaks to reporters that seem more damaging than not. They're definitely not coming from Trump or his very close aides. They don't seem to be a distraction, let's put it that way.

Jigar Shah: Well, they're coming from OMB, which is a complete distraction.

Stephen Lacey: We don't know exactly where they're coming from.

Jigar Shah: They're coming from people working on the budget. They're not coming from Paul Ryan and Mitch McConnell who are the two people who care, who matter.

Stephen Lacey: My point being, I don't think that they're necessarily a distraction from Trump. My other point is that there are a ton of new people who are coming into these agencies now and they are starting to learn about what these agencies actually do. The positive take from people who work there, who are staffers, who've been there for a couple of decades throughout administrations are that once people start learning about what happens, the need to cut diminishes. I think that's probably most commonly felt at DOE because folks who've come in there recently look around and realize oh, this isn't a regulatory agency. This is an organization that hands out grants and works directly with the private sector to help with projects. My feeling is that, or the feelings of others is that, there's a real perception issue here and maybe some of these big Draconian cuts that we're hearing about may not materialize as people learn more about agencies. Again, that's more true for DOE than it is for EPA.

Katherine Hamilton: Yes, and it depends on how intellectually curious these folks are. A lot of people probably don't remember back in the Reagan days when he had a Secretary of Energy named James Watt. While Watt may sound like an electrical term to people, he was actually a dentist. It was one of those situations where they put somebody in charge that had no knowledge of the agency at all. He did put people in the lower positions who did understand electricity and energy and everything else that DOE does. Part of the issue is that the people who are coming into DOE on all levels, and these are not political appointees, well they're political appointees, but they don't have to be confirmed by the Senate. They don't know anything. I've heard that people sit in rooms and that one of the questions was where is the research and development? Where do you do the work? They actually thought that inside Department of Energy building were laboratories. They did not even realize that there were national labs. That's what worries me. This just unbelievable lack of understanding of how everything works and where it's done.

You hope that they will learn and they'll want to go out to the labs. I very much worry about the labs and all of that intellectual brain power we have out there, to make sure that these folks actually see what's going on and that it does relate to real life and real jobs.

Stephen Lacey: This is actually probably a more important and immediate conversation because the budgets are relatively speculative. They are just a political document, and it will be more interesting so see what happens in Congress, but now positions are getting filled at EPA and DOE. Many of the people who are coming into those positions have zero experience with the agencies that they're helping run. ProPublica, yesterday, released a list of the hundreds of beachhead appointees that have come into the Department of Education, Department of Interior, Energy, EPA. If you look through the list, many of them not just don't have backgrounds in environmental protection or in energy or in whatever it is that they're working on, many of them are coming from the Breitbart wing of the Republican party. That they're just hardcore conspiracy theorists. For example, on the transition team is a guy Steve Malloy who runs junkscience.com, a climate denial blog that I follow. At DOE, there are a bunch of new appointees who've come in and if you look through the list, you go through their backgrounds, many of them have zero experience in energy.

In fact, in late February, Eric Trump's brother-in-law, who has no experience in energy, was given a position at DOE and reportedly, from people who are at DOE, he's just kind of floating around. He has no position. He doesn't have anything official to do yet. They're throwing in people who have been political supporters of Trump, not because they have any experience, but because they've been supporters of Trump.

Jigar Shah: That's normal, par for the course stuff. I am not suggesting for a moment that this transition or these first hundred days has been normal in any way, but putting in people who actually helped get you elected is par for the course.

Stephen Lacey: Definitely. Yes. There are plenty of political appointees who don't have direct experience. What is different about many of these appointees is that they are either actively campaigning against and hostile to the agencies that they're coming into or they come from a very bizarre conspiratorial wing of the Republican party. Now, I'm not trying to paint every person in the Trump transition team with that brush. I want to be very careful. There are a lot of examples of this. The ProPublica reporting that we've seen in the last day shows that this is a pretty interesting trend within the Trump beachhead team. There is something very materially different here.

Jigar Shah: Oh, yes.

Katherine Hamilton: Yes, I remember working at DOE and having the Schedule C's coming in. They were all very enthusiastic and interested. They may not know all the stuff about how everything worked, but they were interested in learning about it. They had an interest in energy and certainly, where I was working, in clean energy. It seems a little different now when you have a massage therapist coming in.

Jigar Shah: Look, I think that in general, Trump got elected based on the fact that a lot of his base was tired of Republicans basically tacking to the center after they got elected. That's basically what people accused Bush and Cheney of doing. It's not surprising to me that they brought a bunch of crazy people in to try to get them to stick to their campaign promises. A lot of those campaign promises were stupid. Hopefully, they don't actually make it through the Congress and budgets and stuff like that. The one thing, I did want to talk about was Energy Star. I'm increasingly thinking that it might be a good idea to cut Energy Star. It just feels like something that could be done by the private sector better.

Stephen Lacey: Go on.

Jigar Shah: I just think that the government has done a lot to promote Energy Star. It's great and the budgets are huge. When you think about the testing regime that can be done by UL, you think about nonprofits that could actually bring us forward like ACEEE or NRDC that helped with the cable box, a lot of the stuff can be done in the private sector. You could have a lighting trade association that did Energy Star products for them and appliance folks that did that. You could even see California taking it over and actually turning it in to a Japanese-style Top Runner program where actually only the top ten most efficient products get promoted, so that you really get radical innovation on the efficiency side as opposed to this incremental stuff we're getting now.

Katherine Hamilton: You need somebody, though, to connect the dots. Whether that's government or an NGO, you do need an organization that feeds the new research into the standards out into the deployment program. You need somebody to connect the dots, but I guess it doesn't have to be the government.

Stephen Lacey: Right, and that's an interesting point, Jigar. I think this is why we can't think about all these cuts in the same way. When I outlined the 38 programs at EPA that would be cut, you can't just think of them all as the same importance. There probably were a lot of interesting roles that the private sector can play that maybe we're not thinking about because they've always been government programs. I'm very open to that. That's the sort of sensible policy making that we need to see more of. Cutting isn't always a bad thing. What is different is just saying that we're going to slash our climate satellite program without any other plan. We're going to decimate many of the programs that protect coastal communities from over-fishing, from acidification, from sea storm surges. There are a lot of things that are very central to the governments role that probably wouldn't be as effective in the private sector, but there are a lot of other stuff that maybe we need to think a lot more creatively about. That's the kind of conversation I want to be having. I'm afraid that we're not having that conversation.

Katherine Hamilton: Yes, and if you do have that conversation of transferring and transitioning from government to a non-governmental role, you need to have a transition period. You can't just cut it off at the knees and expect it to survive.

Jigar Shah: Don't you think that that's what's going to happen? Do you really think that there are no Republican Congressmen and Senators that support Energy Star?

Katherine Hamilton: Oh, no, I think there are a lot who support Energy Star.

Jigar Shah: I'm assuming that that transition will happen. This is what I'm saying. I honestly think that this White House has no idea what it's doing. I think when you look at the tweets that Donald Trump put out in 2012 or 2011 or 2010, it's literally exactly the same pattern. They just haven't learned how to run a White House. I don't think the Congress is going to make the same mistake.

Katherine Hamilton: Let's hope so. I hope there are a lot of champions that are going up there now and making sure that these folks hear the message.

Jigar Shah: We have to see whether the strategy of having all these Republican Congressmen on the Alliance to Save Energy board has actually worked for the last 30 years.

Stephen Lacey: We're punting again to the congressional sausage-making. We are probably all in agreement that Congress will not agree to the Draconian cuts that the White House is floating. Once again, folks, we find ourselves in a wait-and-see holding pattern. However, let's get to some other news. What did you guys think about the seeming conflict reported by the New York Times about what to do about the Paris Climate Agreement? It sounds like Rex Tillerson's State Department is supportive of staying in the Paris Climate Agreement and that many of Trump's aides want to see the U.S. quickly walk away from it, and naturally we have Ivanka and Jared Kushner in the middle who are advocating and bending the president's ear, but seemingly not getting anywhere. There's just an interesting internal fight about the Paris Climate Agreement. There's this push-pull there.

Katherine Hamilton: One thing that Tillerson really knows is that if he were to do that, we would be at an extreme competitive disadvantage globally. I think whereas some of the DOE funding issues or EPA is kind of a drip, drip, drip, this one would be big, and it would send a signal, and everybody would start shifting to working with China. That would have an immediate negative impact.

Jigar Shah: Yes, well, it makes complete sense. I mean, if you're not part of an agreement and you're shouting from the sidelines, then you really have no influence. If you're in the meeting and in the room, even if you disagree with what's going on, then you have a lot more influence.

Stephen Lacey: Marc Morano of Climate Depot, one of the more influential climate denial bloggers, came out and said that he thinks that Rex Tillerson is the biggest impediment to getting the U.S. to walk away from the Paris Climate Agreement. I thought that was interesting.

Jigar Shah: I think, Stephen, the Paris Agreement is, first of all, a non-issue. I don't think that this is even in the top 20 on Trump's list. Even if it was on his list, I don't think they're going to exit the Paris Agreement. First of all, they can't. All they can do is say negative things about it. The Paris Agreement makes it very clear that it takes three or four years to exit. They can't exit. I think we're falling into the trap of talking about Trump all the time.

Stephen Lacey: It's hard to ignore. There's just endless stuff to talk about. What I'm saying is that there is concrete evidence given the stamp of approval that this president has given to undoing environmental, climate, and clean energy programs. The next logical step would be the global climate agreement. I don't think that's such a far stretch. I think that saying possible impeachment or that his administration will unravel within weeks, months, or a year, that's a much further stretch.

Jigar Shah: I just think that this notion that the Paris Agreement is going to fall on its face because Donald Trump and Scott Pruitt have some crazy maniacal hatred for it, I don't think that's what's going to drive policy. I think even Jeff Immelt from GE is now saying, look, this is affecting our sales and we are losing out sales to international competitors because you're saying these kinds of things. I just think that your evidence trail assumes that logic is being employed. My sense is that one day he's going to wake up and Breitbart's going to say something different, and he's going to say, oh, I changed my mind.

Stephen Lacey: Let's talk about what we do know. What we do know is that there's going to be an executive order coming up, maybe some time next week, to dismantle the Clean Power Plan. Essentially, according to this story from Evan Lehmann at E&E News, the government will just tell the Department of Justice not to argue in the D.C. district court for the Clean Power Plan. It instructs the government to end its case. What happens after that, Katherine, assuming that that is the plan? Basically, it just means that enviro-groups or groups that are arguing for it need to step up and continue the case?

Katherine Hamilton: Yes, states too. There are a lot of friendly states on it and the environmental groups and anyone else who wants to join it, all those who are parties to the case would continue it. The one thing they're not going to be able to do, it would take a lot of work to do, is to reverse the findings about greenhouse gases. That's still going to be out there and there's still requirements to mitigate that. I don't know if they can slow walk it. The EPA is required by Massachusetts versus EPA to do something.

Jigar Shah: We all talked about the fact that the Clean Power Plan was a lowest common denominator anyway. My sense is that the scrapping the Clean Power Plan basically means that it's possible that a lot of coal plants run for two to five years longer than they should have, which costs us thousands of premature deaths, which is a big deal. I don't think that clean energy will be slowed down in any way by the Clean Power Plan being scrapped, and I think that coal plants will still die. They'll just die two to five years later.

Stephen Lacey: Yes -- going back to the original point that we made and that I have been arguing -- clean energy doesn't get impacted in a huge way. Many of our projections at GTM Research never took the Clean Power Plan into consideration in the first place. We're predicting pretty strong growth. I think what I'm hearing is that people are starting to worry about what happens at FERC now. Now that there are a number of seemingly negative decisions. Does FERC become more of a target than people originally thought? Do they start targeting PURPA, which has been huge for supporting utility-scale solar installations? Do they dismantle previous orders that benefit distributed resources and storage? There's much more of a possibility now. I'm hearing from companies that although there's still a really strong pipeline of activity, many of the long-term political concerns are slowing down spending on marketing dollars. They're easing up on some of their investments. There's a little bit of pumping of the brakes. It's not like things are coming to a screeching halt, activity is still strong, but there's definitely a pumping of the brakes.

Jigar Shah: They tried to kill PURPA during the Bush administration. They failed, so they repealed PUHCA, the Public Utilities Holding Company Act, but not PURPA. We'll see. It's not just the clean energy guys who are on the side of PURPA, though. It's also AES and Calpine and all the IPPs. Dynegy, NRG, all these guys have tons of PURPA contracts. We'll see who wins the day on this. This is where Tom Kuhn earns his living over at Edison Electric Institute. They have gone full throttle against distributed generation and full throttle against PURPA. We'll see whether he can win the day.

Katherine Hamilton: Chairwoman Murkowski of the Senate Energy and Natural Resources committee had pulled anything that had to do with the Federal Power Act and PURPA out of the last version of the energy bill just because she thought it was too controversial, but there definitely are going to be more runs at it, especially in the House.

Stephen Lacey: Let's get out of politics for a while. Late last month, the global power giant, AES, announced its intent to buy up sPower, one of the top solar developers in the U.S. for $853 million. Full disclosure, Jigar sat on the board of sPower. He's mentioned that a few times in the past. This acquisition tells us a few different things. Utilities and independent power producers like AES, are gobbling up developers because they see solar as an important asset class. This is part of a bigger trend toward acquisitions and investments in distributed energy among global utilities, which we've tracked at GTM Research. It shows how valuable it is to have a pipeline of utility-scale projects since a number of pipelines dried up or shrank a little bit after the ITC surge last year. Jigar, who's sPower? Why would AES want to buy the company? Of course, knowing you sit on the board, let's try to describe them with as much objectivity as possible. Why are they an attractive target for AES?

Jigar Shah: sPower is a company that was started by Ryan and Steve Creamer. The Creamers, particularly Steve, have been in the utility industry for a very long time. They started by creating a coal services company and then a nuclear services company and then sold it and started putting their own money into solar development. I think that the story here is really around private equity. When you think about big finance, the question becomes, is clean energy a place where TPG, Apollo, Carlyle, all of these big guys, can they actually use their model in clean energy? sPower is basically the first major proof point that the model works. That's why it's such a critical and important transaction.

Stephen Lacey: Give me an example. Give me background on that.

Jigar Shah: sPower's story started from Silverado. Silverado is a company led by John Cheney who got into trouble because Martifer was the investor and Martifer ended up going bankrupt in Spain, I think, or Portugal. Jeff Tannenbaum who is the principal at Fir Tree Partners, who has been really critical, frankly, on the PACE financing. He's put a lot of money into encouraging PACE financing and that kind of stuff. He invested of his own family office into Silverado. Separately, he got wind of the fact that sPower was looking to grow and so he invested in sPower. He merged the two together. If you remember from Greentech Media reporting, Silverado had this great strategy of locking up queue and substation positions within California. You had all these key positions and those kinds of things and then you had sPower, who has extraordinary amounts of utility experience. Steve Creamer had the ability to basically call up the CEO of Southern California Edison, or other utilities and say, hey, let's go for a round of golf. Let's solve this problem with this PPA or this interconnection or whatever. In ways that the solar developers before really couldn't do.

When they bought Silverado, the total amount of projects that were ready to be constructed was like 30-60 megawatts. They had all these key positions and other things. By the time sPower got through it all, they realized that they basically had on their hands something like 600 or 700 megawatts worth of solar that they could build by the end of 2016 because of the key positions and the favorable stuff that Silverado had done, but couldn't get to the finish line. It's at that point that Jeff Tannenbaum said, well, crap, these guys really have an extraordinary opportunity, let's raise a bunch of money. He brought his firm, Fir Tree Partner, back into the story, raised almost $1 billion very quickly from his limited partners and that allowed sPower to build all these projects. They didn't have to go through construction financing and debt financing and tax equity and all that stuff. They could just use this money to build all these projects to beat the 2016 ITC deadline.

Stephen Lacey: I guess the question is, is the AES acquisition, is that a good fit for sPower? Is that the appropriate move?

Jigar Shah: AES ended up being victorious out of the process, but the process really started because SunEdison went bankrupt. There were a lot of suitors for SunEdison's assets. Because of that, I think, Jeff Tannenbaum over at Fir Tree decided that it was the right time to see if any of these suitors really wanted to look at an opportunity that was not damaged. He hired Barclay's and a few other folks, I think Marathon was involved and a few others. We had over 50 suitors who looked at the deal. In the end, there were a couple of last bidders who were bidding up the assets and AES ended up winning. The main reason why I think this was a good deal for AES was as you guys know, AES has a long and torturous history of trying to figure out renewables and they haven't been able to find a great team. They overpaid for these assets because they really wanted the development team and they really wanted a new team to be able to mirror the success that they've had in the storage business.

Katherine Hamilton: Yes, I talked to some folks today at AES who said they're looking for long-term U.S. contracts and the pipeline that sPower has is huge. They'll be able to do a gigawatt a year. 500 megawatts to start out, but they have a 10-gigawatt growth pipeline. AES is about 40 percent coal, but they have 25 percent renewables now. They're going to move quickly to a combinations of gas, solar, wind, and they've got more experience in storage than anybody else. They've operated 3.5 million megawatt hours to date. They're in a great position to be able to use the capacity that sPower has in their team, to be able to not just build in the U.S., but expand to other locations where AES has need.

Stephen Lacey: I've just heard from a number of people that sPower has a really phenomenal team.

Jigar Shah: It really is. It's 90 people doing just amazing work. It's because sPower really doesn't do development. sPower really takes other people's broken deals and fixes them. That has been their MO. It hasn't been doing core, early stage development, which has been really interesting. Their niche is actually expanding because there's so many early stage developers who've run out of cash or run into problems with PPAs, interconnections, etc.

Stephen Lacey: I was going to say, it's a good time in the industry to be doing that. The pipeline piece is quite interesting to me because when you look at the post-ITC extension market, installations and utility sector are going to fall, year after year. There are 10.6 gigawatts in 2016. They're going to fall to around 9 gigawatts this year, according to our GTM Research analysts. I was talking to Colin Smith who does our utility-scale data tracker. He says that installations could fall to around 6 gigawatts in 2018 and they'll steadily rise through the end of the decade. Basically sPower has one of the strongest long-term portfolios so this gives AES really good access to projects even though a lot of other developers and independent power producers are going to have a falling pipeline of projects in the coming years.

Katherine Hamilton: Yes, they have 1.3 gigawatts of 20-year contracts, right?

Jigar Shah: Yes, that's right. The other thing that they've got going for them is SunPower and First Solar are both showing a lot of wear and tear. First Solar has basically said that they're sort of exiting the development business and focusing on equipment, and SunPower is threatening to do the same. You're seeing a lot of weakness from their biggest competitors so I do think that this is going to end up being a real home run for AES.

Stephen Lacey: Really good story there for the solar industry that's been in turmoil. And speaking of some turmoil, I guess we'll travel up to Ontario now where electricity prices have been soaring. Since 2002 electricity prices have risen faster than any other commodity in the province. In surrounding provinces, they've risen along with yearly inflation. In Ontario, they've risen by double digits, forcing many rural customers to seek financial help. It's becoming a bit of a political crisis for Premier Kathleen Wynne, who's had to admit that not enough was done by power authorities to protect consumers and properly structure the market. What exactly happened? Conservatives are blaming renewables. Liberals are blaming market structure. It is, as usual, very complicated, and it's a good case study for market reform. Katherine, you've been steeped in this for the last week, what were you doing with the officials from Ontario in the first place?

Katherine Hamilton: I was up in Toronto for two sets of meetings. One set was with the energy minister of Ontario, Glenn Thibeault, who basically said, this is considered the worst job in the government historically. It's just completely thankless. Each minister lasts maybe a year and then they get kicked out because they can't fix the problem. Historically, what happened before 2003 is that the system was really outdated, unreliable, there were brownouts and blackouts, and in summer 2003 there was a big blackout that really forced them to rethink what they were doing. Their demand had gone out by 8 percent and their generation down by 6 percent so, as Thibeault said, it was like Niagara Falls going dry, which is their biggest generating plant. They switched over to clean and green generation resources. They modernized their grid. They put $35 billion into cleaner generation and then $16 billion into transmission and distribution upgrades. They got rid of coal. The Green Energy Act is what they put into place and that's been blamed somewhat. There are a bunch of other factors. One was that it wasn't so much that it wasn't the right policy, rather it was how it was implemented.

One thing they did was they had a standard offer for renewables and natural gas peakers that meant that they would lock in long-term contracts at really high prices with virtually no competition. That was something that really kept the prices high. The actual cost of electricity was small, but it was this big other charge for these contracts that has been really, really expensive. The other thing is that when the recession hit in 2010, that also caused demand to go down and again there was less need for all of these resources so again the prices reflected that. Since then, they've tried. They've done this larger noble procurement that is much cheaper because it's pushing competition rather than setting prices at an artificial level. It's much more technology agnostic and outcome based. Another thing they're doing is they're really trying to do wholesale market reform. That's another big piece that they're looking at to try and fix this. It's a long-term prospect. No telling if that government's going to stay in place in the next set of elections. They may be kicked out too. It looks like they've kind of figured out what the problems are.

Stephen Lacey: The structure of the contract seems to be the biggest problem. When they tried to phase out coal, they built a couple big natural gas plants as well, right? Those were quite expensive.

Katherine Hamilton: Absolutely. Now when they're looking at their longer-term plan and they're doing a capacity action, they're going to look at demand response, storage, efficiency more. They actually are growing their advanced manufacturing sector and their economy has been growing and energy efficiency has been going up, but they need to really have an all-source-outcome-based procurement in order to bring down those prices.

Stephen Lacey: It's clear that renewables didn't play a central role, but they did play a role. According to some data that I saw from the Ontario Auditor General, wind and solar and bio energy which has been important for helping phase out coal plants, they account for about 6 percent of total electricity and they account for over 16 percent of total generation costs. There is an impact from renewables.

Katherine Hamilton: Yes, but it wasn't what they did, it was how they did it. I think that it's hard to pin it on one resource. It's better to pin it on how they did it, how they executed on it.

Stephen Lacey: That brings us to the Jigar Shah playbook. You got to have volumetric reductions, feed-in tariffs, and the way they were designed at least seven or eight years ago doesn't work, right? Competitive options.

Jigar Shah: Can we call it the Jigar Shah Rule?

Stephen Lacey: Whatever you want. The Jigar Shah commandment.

Jigar Shah: Someone add it to my Wikipedia page. The Jigar Shah Rule: Countries should not have stupid policy. Ontario absolutely set themselves up for a fall in multiple ways. Number one: they had a communist type structure in Canada, which they still have around hydro. They paid off this hydro so long ago and they basically roughly have two cents per kilowatt-hour, one cent per kilowatt-hour hydro. Instead of doing what British Columbia was doing, which was basically saying, hey California, pay seven cents for it and subsidize the people living in British Columbia, they said, hey, why don't we liberalize the markets here in Ontario and get everyone to pay wholesale prices to the hydro producers. Now, the hydro producers were getting two to three times more for their hydro power than they were getting paid before because they had liberalized markets and now they were traded. They should have known that was going to happen. That's exactly what happened in Maryland when they deregulated the market in Maryland, it's what happened in lots of places where they deregulated. I think separately the nuclear/coal debate in Ontario has been nothing short of confusing.

Shutting down the coal plants is fine, but I think the way that they did it is Draconian. They shut it off all at once as opposed to phasing them out over time like they should have to reduce drain of cost and keep capacity there. The new nuclear plants that they're building are, of course, over budget. The new premier shut them down which lead to shortages of capacity in the future. The whole thing is just one big mess. I don't feel sorry for them per se, because they should have known better. The state of California did the exact same stupid stuff that caused the California electricity crisis in 2001. They sign up to a lot of long-term contracts to try to fill the gap. That created the California Power Authority. The state of California's still paying off all those high long-term contracts.

Stephen Lacey: The people you feel sorry for are the customers and more particularly the rural customers who are paying hundreds of dollars more in electricity bills now. The program, the government program to help people with their bills has just ballooned and I think there's been a 20 percent increase in the last couple of years. There's also a problem with the lack of investment from the early '90s to the early 2000s.

Jigar Shah: That was true globally. South Africa, the United States, all sorts of people in the '90s thought that we had reverse gravity and you no longer had to invest in basic infrastructure. Even the U.S. grid was starved of capital for going on 20 years.

Stephen Lacey: Right. Then all of a sudden when the government came in in 2003, when the liberals came in and they noticed that they had to start investing in infrastructure, and then all of a sudden you had to pay for that infrastructure and it was woefully inadequate because of a decade of no investments.

Jigar Shah: It's not that it's woefully inadequate, it's that we told the government of Ontario to do grid edge technologies.

Stephen Lacey: Who's we?

Jigar Shah: The solar industry, the wind industry, the lobbyists. We said, look, here's all these technologies that will allow you to actually use what New York is now calling REV, in Ontario, back in 2008, 2009. Instead of doing any of that stuff, they said, oh no, we have to make exactly the same mistakes.

Stephen Lacey: Yes, but who believed in that stuff then?

Jigar Shah: They should have. When you think about demand response and load controls that EnerNOC was pitching, or some of the other technologies that folks had that were active, that PJM was deploying, etc. Those were 90 percent cheaper than what they ended up doing. They ended up spending $16 billion on new grid infrastructure. It was crazy how much money they spent. They didn't need to spend that much money. We had already done the analysis post the 2013 blackout, we had done the analysis of what was wrong with their grid.

Katherine Hamilton: I think there is a commercial and industrial command response market. There isn't one for residential, but that's probably going to change. I think that's where the greatest opportunity is now. When they start their capacity auctions, I think they're going to include more grid edge technologies than that to allow those to participate much more effectively and also to allow solutions for consumers because that's going to be a big deal -- giving consumers choices and allowing them to decide how they want to spend their money on energy because right now it's not sustainable.

Stephen Lacey: I think we need to probably wrap this one up. Oh, Ontario, will you get your act together? We'll see. It seems like there's a major recognition that some market reforms need to be put in place. Katherine, thanks for filling us in on the latest there, because it's an interesting case study. Let's tell our listeners something they don't know. I guess we'll go over to you Katherine.

Katherine Hamilton: This is something that you guys covered at Greentech Media, but I don't know that we ever mentioned it on the show and I was pinged by AES to mention it, which is the Aliso Canyon Energy Storage Project. They're replacing a bunch of their gas generation with 70 megawatts of storage that they're able to put in place in six months. That's unheard of for any kind of generation. 20 megawatts from Tesla, 20 megawatts from Greensmith, and 30 megawatts from AES, which I think is the largest battery project in the world. Pretty cool that they were able to do that. That's been their pitch all along is we can replace peaker plants.

Stephen Lacey: Yes, look, what's happening in California is going to be a wake-up call for a lot of other states. The fact that utilities can demand these different types of storage projects to fill in gaps in the grid and get it very quickly -- a lot of eyes will open up. Jigar, what's your story?

Jigar Shah: I don't think this is a new story, but it's definitely been resurfacing again. Utilitysecrets.org., which is a great website, has more audio of Edison Electric Institute's director of external affairs basically enlisting third parties to help attack rooftop solar, trying to bring more highlighting of the three or four complaints about Better Business Bureau stuff and others. I think that it's important to note that the Edison Electric Institute is actually deciding to proactively attack distributed generation in a way that's not covert anymore, but actually is the official policy of EEI. I think that's a huge problem because I think it means that the utilities in the U.S. have basically decided that becoming pro-sumer and doing all the things that we've suggested they need to do based on the example of Germany has been lost on them. Instead, what they're going to do is just fight it tooth and nail and see if they can win where Germany failed.

Katherine Hamilton: They're not monolithic, right? Aren't there some utilities that are going to take a different approach?

Jigar Shah: Yes, but I'm not going to give them credit unless they actually leave Edison Electric Institute. If they say, we're going to protest Edison Electric Institute by not giving them money anymore, then I'll give them credit, but for them to say, well we're doing great things by ourselves, but our trade association is trying to undermine solar. I'm not giving them credit for that.

Stephen Lacey: There's a big difference between how some of these individual utilities act and how EEI acts. There's probably a lot of pressure bubbling up from many of these utilities. The question is how strong is that pressure and would they be willing publicly to differ with that strategy if they say they're as progressive as they say they are. I think we'll have to work on getting the right utility who's a member of EEI to talk about this in a candid way. Good conversation.

Jigar Shah: Well, there's a list of them. They're on SEPA's board, and I've been railing against all of them on SEPA's board.

Stephen Lacey: I'm sure they've heard it. All right, I was poking around for some good news as I was talking to people and reading so much about Trump, and what do you know, I read a David Roberts column at Vox (who's still one of my favorite writers), and he had this great piece on a new report on bike sharing in the U.S. It's pretty remarkable how much bike sharing has taken off. There were 328,000 rides, bike-share rides in 2010 in the U.S. and last year there were 28 million rides. In 2010 there were four, just four bike share systems across the country. Now there are 55 and counting in 2016. Between 2010 and 2016, there were 88 million total bike-share trips. I just think that's a remarkable statistic, how quickly bike sharing has taken off. It's the combination of people getting used to the service, better city planning and the use of mobile phones to connect and pay for these bicycles. It's the convergence of a number of really good factors that will not let up.

Jigar Shah: And the leadership of Gabe Klein.

Stephen Lacey: I don't know Gabe Klein.

Jigar Shah: Gabe basically did most of these bike sharing programs. He was head of DOT in D.C., put it in place there. Then he took that technology and put it in place in Chicago; he also was the consultant who put it in place in New York. My sense is there's nobody who deserves more credit for getting it done than Gabe Klein.

Stephen Lacey: I think that's the show. We'll call it at that. As usual, you can access all of our episodes at any app of your choice. We've got it on SoundCloud, iTunes, Stitcher Radio, NPR1. I personally use Overcast. There are a ton of apps out there that are really good and so whatever you choose, you can use that. We want to hear from you. We always love hearing from our listeners. Our email is [email protected]. Due to a high volume of email, we prefer Twitter messaging and we can interact with you on a more immediate basis. Our Twitter handles are all there on The Energy Gang Twitter page. Feel free to tag us all, debate with us, ask us questions, give us story ideas -- we love to interact with folks. With Jigar Shah and Katherine Hamilton, I'm Stephen Lacey and we are The Energy Gang, a production of greentechmedia.com. We'll catch you all next week.