Transcript
INTRO
Jigar Shah: I'm Jigar Shah.
Sarah Ladislaw: And I'm Sarah Ladislaw, founding director of the New Energy Industrial Strategy Center. This is The New Industrialists, an eight-part series from Energy Empire, made in partnership with the NEIS Center. Every week we talk to people who are doing it. What works, what doesn't, and what it usually takes.
Jigar Shah: Sarah, you and I both served in the Biden administration, and when you left, you embarked on a very ambitious journey. Why don't you talk to us a little bit about what the NEIS Center is and what you're trying to accomplish?
WHAT COMES AFTER GREEN INDUSTRIAL STRATEGY
Sarah Ladislaw: NEIS stands for New Energy Industrial Strategy. And what we work on is essentially what we think is the thing that follows green industrial strategy.
Green industrial strategy was this idea that we were creating new markets and new technologies, and all of those things were going to be predicated on a green, climate-change-focused future. New energy industrial strategy realizes that there are a lot of different priorities pulling on our energy system right now. It has to be more secure. It has to create competitive economies. It has to support emerging new industries like AI and advanced technologies that every country around the world wants to lead in.
And so what we really focus on is how do we take advanced energy technologies that governments want to spend money on, that companies and capital providers want to invest in, and really create advanced energy systems to support all of those needs across the board. So we work on knowledge resources, we work with government policymakers, and we work with companies and investors to try and create coordinated strategies to allow that kind of transformation to take place.
So it was a no-brainer for me, Jigar, when you launched Energy Empire, which was really about thinking through these new companies and tech that was emerging and really shaping the future of the energy system, to reach out and work with you to profile some of these new energy industrialists, the companies that we think are going to lead in this transition to advanced energy systems of the future.
HOW CHINA ACTUALLY DID IT
Jigar Shah: I think people talk about China a lot, but what they don't realize is it really took China the better part of fifteen to twenty years to put something together. And they do have a strategy. They have local champions. Each province picks one and they provide them low-interest debt, and they duke it out.
And then even now, after they've chosen the winners, whether it's in the electric vehicle space or the battery space or the solar panel manufacturing space, those companies are not hugely profitable. So I don't think the West can really copy that model exactly. But it has to copy some model, because there's clearly overcapacity in China, and that's putting a lot of manufacturing facilities out of business throughout the world.
And so part of this is actually figuring out what that new set of norms are, and having companies then opt into those norms, having governments provide a set of services to those companies to be able to get things done. A lot of this is an exploration of how some companies have actually navigated this, and how some politicians believe we should navigate this. I don't know that we have all the answers, but we certainly have exploration.
NOT COPYING CHINA, NOT WALLING IT OUT
Sarah Ladislaw: I think it's a really good point that nobody should be trying to replicate the Chinese model. That's not what this is about. Nor is it about trying to keep all Chinese technology out of every country around the world. That's not a worthwhile goal either.
Really it's about getting much clearer on what are the technology areas where there are real national security concerns, and where are the places where as an economy you need to be competitive. You need to have the most advanced energy system. You need to have a competitive automotive industry. You need to have a competitive battery industry. What are those things that you as a country really need to have inside your domestic shores? And then how do you actually work with other countries so that you're not duplicating supply chains and creating huge amounts of inefficiency?
All of that requires a different level of coordination and conversation between companies and investors and governments, to understand what are the parts of the supply chain that need to exist in different places, and how much of it you can just leave to free market forces. This is not about creating industrial strategy circa the 1970s or earlier than that. It is really about trying to think about how you create priorities and then help companies and governments reach those priorities, which really are about more diversification, which quite frankly is very related to energy security.
THE VENTURE CAPITALISTS WHO WON'T TOUCH GOVERNMENT
Jigar Shah: And the thought process does have to be updated. I do feel like when you go to California and Silicon Valley and you ask venture capitalists why they invest in certain companies, many of them will say that they're libertarian, and if it has an intersection with the government, then they don't want to invest in that technology.
But for a lot of the most important technologies for national security and economic security, they do go through the government, whether it's critical minerals or nuclear power or other things. I don't think those sectors could be stood up without the federal government.
NO THANKS, I'LL SIT THAT ONE OUT
Sarah Ladislaw: I think that's really fair. The role of the government and the role of the companies and role of investors are all changing extremely quickly. And people may have their priors about, no, I'm a free market economist, I don't believe in government intervention. But you don't get to exist in a world where the vast majority of governments are intervening through state-led capitalism in the formation of the future of the energy market and say, no thanks, I'll sit that one out.
And so I do think this is about really engaging with the companies that are navigating that space, because the way that companies are interested in engaging with policymakers is usually on a specific policy or a specific project. Not how do we create an industry, and what is sustainable and competitive over time, and what is the appropriate role for my company in this new industry that you're trying to create, and how much of that needs to be here versus in other countries. All of that is conversations we're not very good at, and we need to get better at more quickly, or else we risk lots of misunderstanding, lots of missed opportunity, and quite frankly, misuses of capital.
WHO ACTUALLY EXECUTES
Jigar Shah: Another angle that I think a lot of countries are thinking about right now, particularly with the conflict in Iran, is how do they stop importing as much fossil fuel. And how do they take advantage of domestic sources, whether that's coal or nuclear or solar, wind, battery storage, other things.
A lot of that comes down to capacity. Whether the government actually has the capacity to regulate their electric utility differently, whether they have the capacity to negotiate power purchase agreements that are settled in US dollars, which the global market actually wants to finance. They don't want to receive the local currency as their payment and then figure out how to convert it into US dollars.
And so where does the capacity come from? Because obviously our current administration in the United States has gotten rid of USAID. The State Department could do that, but we've lost a lot of employees in the federal government. The Europeans don't have as much of a history of providing this capacity. And so part of this is also not just the white papers and the best practices, but who are the government officials in each country that will execute on this?
THE BEST ENERGY SYSTEMS WE'VE EVER HAD
Sarah Ladislaw: It's funny, because I agree that there's this atmosphere of huge amounts of geopolitical uncertainty, huge amounts of economic uncertainty, trade wars, supply chain security. All of that is fomenting this concern about energy security, both in the traditional sense of oil and gas supply security, but then also supply chain security, more on the clean tech side of things.
And I think it points exactly to what you just said, which is government policymakers having to think about the system they have and the system they want. Not supply and demand dynamics necessarily, but how do they craft a system that is going to deliver the best chance they have at having affordable and clean and reliable and resilient energy systems, whether it's for transportation or electric power or whatever the case might be.
And because the external environment is challenging, and the technologies are so good right now, it's actually forcing some very creative thinking about what we need to be doing on a systems basis that's been missing from the energy conversation for a very long period of time. You will be hard pressed to continue to do things the way you've been doing them for the last several decades. And if you can't adjust your mindset to saying, how am I going to rewrite rules to create the most advanced energy system I can with these amazing technologies that exist today, then you're really going to miss an opportunity.
Right now all of this feels very challenging and convoluted. But if we make the right decisions today, within ten years we'll have the best energy systems we've ever had. And that's a really amazing opportunity that I think we can get from conversations like these.
Jigar Shah: That's an inspiring future.