Jason Bordoff and the Future of Energy

SELECT QUOTES FROM JASON

Auren Hoffman (00:19.886)

All right, perfect. You ready? All right. Let's do it. Here we go. Hello, fellow data nerds. My guest today is Jason Bordoff. Jason is the founding director at the Center on Global Energy Policy at Columbia University School of International and Public Affairs, where he's a professor of professional practice. He's also on the faculty of the Columbia Climate School, where he was the co -founding dean emeritus. Jason, welcome to World of DAS.

Jason Bordoff (00:21.414)

yeah. good. We'll get going. Cool.

Jason Bordoff (00:49.446)

Great to be on. I love listening to it and it's a pleasure to be here. Thanks, Auren.

Auren Hoffman (00:52.974)

I'm really excited. Now, solar energy is growing like crazy. It's much faster than even the most rosy projections like 20 years ago. What's driving that trend?

Jason Bordoff (01:05.926)

Well, we've had a lot of concern for climate change, a lot of support for clean energy, particularly in the US and Europe. But a big factor driving that is China and how significant the role of investment in China has been to build supply chains at scale, just massive industrial complexes and to drive the cost down. So, you know, in the last decade, we've seen the cost of solar, depending on which piece, residential, commercial, utility scale you're talking about, falling 70, 80 percent.

just in the last year or something like a 30 or 40 % decline.

Auren Hoffman (01:37.23)

When you install like a solar, whether it's on the roof of someone's house or a big kind of like solar power plant in the Midwest or something like that, how much of the cost is the actual panels versus all the other maintenance of like putting it together and maintaining it and all the other stuff?

Jason Bordoff (01:56.55)

Well, it's changing because the cost of the modules and the panels has come down so significantly. So the soft cost now, the labor interconnection with the grid overhead, often dominate the current system costs. And improvements in one area can affect improvements in other areas, like high efficiency modules reducing labor and material costs by requiring fewer products to be installed. So that ratio changes as the cost of the technology comes down.

We should remember when we talk about the cost of solar though, and not all metrics for capturing and comparing the cost of electricity. Not all electricity is the same. So, you know, today the base load electricity costs from coal is roughly $100 a megawatt hour. Let's say it's obviously different in different places. Cost for solar can be as low as one tenth that amount. Solar is very good at producing very cheap electricity that is not available all the time. And that's an important caveat.

because we do need electricity to be available all the time. We need the grid to be perfectly balanced. So when you think about the cost of solar, it is important to think about the cost of the additional pieces of the grid that need to be built, whether it's storage or other forms of generation, to try to make sure that you're taking all of that solar and making sure that you have reliable, kind of what's called dispatchable electricity that can be available whenever you need it.

Auren Hoffman (03:22.382)

Because the costs of the panels are going down so much, the more and more of the main cost is like the labor and connecting to the grid and all those other things. Even if the costs of the panels end up at zero, there's only so much more it could fall at this point, right? Or is there still a lot more that the costs can fall?

Jason Bordoff (03:45.318)

Well, I think there's still more that prices will continue to fall. Estimates I've seen are, you know, it could fall as much as as much as another 30, 40, 50 percent in the next, you know, five years or so from something like two hundred fifty thousand dollars per megawatt to around one hundred and fifty thousand. So we definitely have the ability to continue to drive the cost of solar down. The technology is improving different.

forms of solar technology, perovskite and others are coming forward.

Auren Hoffman (04:14.158)

Okay, so like, like it could capture it better, it can capture the sun, but like those types of things as well.

Jason Bordoff (04:19.43)

There's both improvements in technology, the actual way you're doing it, and we're going to see windows that just look like regular windows but are actually capturing solar energy and turning it into electricity, things like that. But then just the efficiency, the scale. And again, that is why it's important to remember that China has been instrumental in bringing down the cost of solar worldwide. That is now a complicated factor, right? Because we see in the US and Europe,

Auren Hoffman (04:21.742)

Yeah.

Auren Hoffman (04:28.494)

That's so cool.

Jason Bordoff (04:45.35)

growing concern with the dominant role that China has not just in solar PV, photovoltaic, but electric vehicles, batteries, you know, we can come to that whole conversation, but that's a big part of the conversation.

Auren Hoffman (04:56.878)

Now, if we start to see solar grow another 10x and it becomes a big, big portion, what are the big implications, beside for maybe the cost of energy going down?

Jason Bordoff (05:05.798)

Hmph.

Jason Bordoff (05:12.39)

Well, first it would be a great thing to see solar grow 10x because that's what the kind of growth we need to get to our climate goals. And we can come to that and talk about where we are in this energy transition. But emissions are still going up. They're not even falling yet for all the growth we've seen in clean energy. Oil use, gas use, coal use are still going up. When you look at scenarios like net zero emissions by 2050, which is roughly when people talk about limiting temperature rise to 1 .5 degrees Celsius, you can model on

There's different assumptions you need to make, but broadly speaking, we would need in a scenario like that, where we meet those climate goals everyone talks about for solar electricity to increase roughly 5x by 2030, maybe 20x by 2050. So we need that order of magnitude growth. And it would mean we're getting on track, at least with that particular technology. There's a lot of other tools in the toolkit for trying to bring emissions sharply down. But I do want to come back to the point I made before, because it is also important to consider

the other implications of this growth. Solar takes up a lot of land. I mean, and to make sure that people are comfortable with that, just give you an example, both wind and solar. If you look at a case where the United States gets to a goal like net zero by 2050 modeling from Princeton shows that the US would need wind farms that cover an area equal to Illinois, Indiana, Ohio, Kentucky, and Tennessee put together and the solar farms.

Auren Hoffman (06:38.926)

Bye -bye guys.

Jason Bordoff (06:39.846)

the solar farms would cover an area the size of Connecticut, Rhode Island, and Massachusetts put together. And that's if we make the most cost efficient decisions for where to put all of that. And obviously not in my backyard means we might not do that. I mentioned before solar is a great way to make electricity that's not always available, so -called intermittent energy. Not necessarily a great way to make cheap electricity that is available all the time. So to get 10X increase in solar to your question, and make sure electricity is available whenever we need it,

We need to overbuild renewables and build a lot of transmission way more than what is needed because sometimes it'll be available in one place when it's not in another, or we need to build batteries or other ways to store energy. And the scale and magnitude of what's required there, I think, is hard to like grasp your head around. Today, you can do that for hours. It's harder for days, weeks or months. And this is a big issue. I think the amount of solar energy in Europe in the summer is more than twice what it is in the winter.

so, so you, you, you really need to like overbuild or the amount of storage you would need, you know, the Tesla gigafactory, a $5 billion battery plant. It's the largest battery factory on earth in Texas. It it's annual output stores three minutes of us energy. So, it just gives you a sense of like how much we need, how much we need in terms of existing technology and the technology will get better. And it doesn't all do batteries or other ways to store electricity.

to get something like 10x growth. But that's what we need to do along with lots of other technologies. We're not going to get to our climate goals with solar and wind alone.

Auren Hoffman (08:16.718)

When I lived in California in the summertime, sometimes like in the, you know, say midday 1 PM or so energy prices often went negative. and so you could see like, I always like set my Tesla to charge, like when they went negative and stuff like that. like you could see a scenario where things in the, from like a technology standpoint, maybe training models and stuff like that. Maybe they're not.

Jason Bordoff (08:26.118)

Okay.

Jason Bordoff (08:31.462)

You

Auren Hoffman (08:44.654)

cost efficient to do at night, but maybe at like peak solar time, they become very cost efficient to do. And we could start to like rewire society to do things at certain times, assuming that there's no storage capacity. Like how do you see the landscape changing?

Jason Bordoff (09:01.702)

Well, I think there's huge potential for that. So there's a lot of demand that can be shifted in time of day when you charge your car, when you run your dishwasher, or as you said, in bigger scale, when you think about big tech and data centers and how dramatic the growth in electricity need is for that. Not all applications, and you and many of your listeners would know this as well as anyone, but some of that doesn't need to run.

Auren Hoffman (09:11.726)

Yeah.

Jason Bordoff (09:29.574)

24 seven and actually excess cheap solar can be a pretty good way to do that. Not all models need to be trained at a chosen time, depending on the application in which the model is being used. That requires technology that requires a system, frankly, that is a little more sophisticated than the one we have today. It's difficult for most people today, just in their daily lives to shift electricity. You can get, you know, maybe a smart meter like a nest thermostat or something like that. But we need a much better way to have

connectivity with the grid where the car that is in your driveway is drawing electricity. Sometimes it's providing electricity to the grid. These are big batteries that are sitting there. And there's a whole set of things for demand response. I think demand response can be a really powerful way to help balance the grid in a world where we have much more intermittent electricity. We just need the systems and we need the pricing and we need the incentives, right? Like we need people to...

think about it. Today, most people barely think about the cost of electricity. So to be conscious of that in ways that give the consumer some control over that, I think there's a lot of opportunity there.

Auren Hoffman (10:36.014)

There's been a lot of talk about the problems with the US grid and that it's antiquated. Like, how real are those discussions and how much do we need to invest there?

Jason Bordoff (10:48.582)

We need to invest a lot and especially to see that kind of growth in renewables. We're taking an energy system that developed over 100, 150 years, wires and pipelines and everything about our energy system and energy transitions in history have been slow. You read the literature from energy historian like Bakalav Shmill or something, 60, 70, 80 years is the typical timeframe it takes.

Auren Hoffman (11:14.062)

Yeah, the whale oil or it was still dominant for a while.

Jason Bordoff (11:17.51)

from coal and the industrial revolution and the steam engine to oil and et cetera. Now we're trying to do this in the span of maybe 20 or 30 years if we want to take these climate goals seriously that are so important. So it's just happening so much more rapidly than one can imagine. And we have a grid today that really hasn't changed a huge amount from when it started to be built after Thomas Edison 100 plus years ago.

So there's new technology that needs to be built and just so much infrastructure. I think that it's hard sometimes to wrap your head around the scale and magnitude of the infrastructure that has to be built. Like doing this energy transition means so much steel in the ground. And it's challenging. It takes an average of 10, 15 years to get a new transmission project across the finish line. If you can, there's an interconnection queue, the pipeline of projects, almost all renewables that are waiting to be connected to the grid today.

If you add up what's in the queue waiting, it's twice the amount of electricity we generate in the United States today. And we just got to figure out how to get that online faster. It's really hard to build things. People, different states fight with one another. People don't like transmission lines crossing their land, their states, their backyard, the government environmental permitting process. And it is important to have a good environmental review process, but it is very slow. It's very cumbersome. It can be subject to abuse by people who want to stop projects.

So there's a whole discussion in Washington now about so -called permitting reform, and we just need to get a lot better at building infrastructure and putting steel on the ground much faster, because that's so important to this energy transition and so much of the conservation movement. I'm a trustee at the Nature Conservancy in New York, which I'm proud of. It's a phenomenal organization, and it's spent decades and decades and decades often trying to stop projects from happening because of the environmental consequences on ecosystems, on wildlife.

And that is an important goal. We can't sacrifice that, but we also have to recognize that this energy transition means we have to build at scale in a way just we have not before. And we kind of lost muscle memory, whether it's roads and bridges and the big projects like the Brooklyn Bridge where I am or something. We just don't do that anymore as a country. And that's what we have to do for this energy transition.

Auren Hoffman (13:30.478)

What is part of the reason that solar has grown so fast because people worry about the climate or is it just because like it's a very effective cheap way of getting energy like whether you care about climate or not it seems to be you know seems like a lot of people don't care about climate are investing solar too.

Jason Bordoff (13:43.814)

You

Jason Bordoff (13:51.014)

Yeah, I think increasingly that's the case. So I think this gets a push early on from government investment and R &D in the early days. But I think increasingly people are making choices. And I don't want to overstate this. As I said, coal use is still growing globally. Gas and oil use are still growing globally. So we can come back to what the whole transition state of the transition is. But often, if you're looking right now at what's the most economic way

to add new generation capacity to the grid around the world on cost, even often accounting for that intermittency and certainly with some government support in different parts of the world, you know, renewables just win. They're the cheapest form of electricity. And so that, you know, that's in a sense, that's what we need to get to in this clean energy transition. We're seeing around the world, look at the European elections. We'll see what happens here in this country in November.

Voters are pointing in polls to the cost of energy, the perceived cost of this transition as one of the factors that's kind of encouraging support for right -wing parties or populist parties. I can fill up rooms and rooms with papers from economists arguing that the most efficient way to deal with climate change is a carbon tax. And our politics has told us that's going to be very difficult to do.

not just in this country, but think about the billions of people that use very little energy at all and make their energy more expensive. That's kind of not. So if we're going to make this transition work, not in every case, some things like flying an airplane with zero carbon emissions is going to be probably more expensive. But in a lot of cases, whether it's vehicles, transportation, electricity, we want to get to a point where the green premium, as Bill Gates has called it, the amount you're paying to make it green is as low as possible or even negative.

Auren Hoffman (15:42.894)

The real estate assets in the US that are rising the fastest in price are the ones that are the beachfront properties on the East Coast of the US, Florida, Martha's Vineyard, Long Island, New Jersey, Maryland. And those seem like the ones that will be most negatively affected by climate change. Like, why is this disconnect happening?

Do people just not believe in the climate change? Do they think we're going to solve it in a few years? And so it's not going to be, you're not going to have as many hurricanes. Like what's the reasoning why the price has gone up so much.

Jason Bordoff (16:08.056)

Well.

Jason Bordoff (16:20.998)

think it is not top of mind for a lot of people there is still uncertainty maybe skepticism about the connection between extreme weather events and the kind of sea level rise that some of the worst predictions of climate change bring about.

Auren Hoffman (16:38.51)

By the way, a lot of those people are the people who are like are the biggest donors to climate change things, right? So these are, yeah, yeah, exactly. People who buy properties in the Hamptons are probably the ones most likely to be the climate change kind of advocates, right? It's very trendy among that crowd.

Jason Bordoff (16:45.958)

the people who have that property, you mean? Yeah.

Jason Bordoff (16:57.094)

I mean, these are attractive places to live, right? Michelle, my wife, who you know, we have a small, modest place for the weekend down at the Jersey Shore, just south of New York. And I remember when we were purchasing the land and built a small house there, you know, trying to find information about it's it's not it's it's maybe a 15, 20 minute walk from the beach. So it's not right on the beach.

Auren Hoffman (16:59.79)

Yeah.

Jason Bordoff (17:23.75)

how vulnerable is this? What is coming? It was very difficult to get information about that. Then I talked to the builder about trying to elevate things. The guy looked at me like I had three heads. He's like, what are you talking about? So I think there's just not real awareness of this. You look at literally yesterday and today with, you know, Hurricane Barrel barreling down on Texas, the earliest ever recorded category five hurricane, but hurricanes have happened for a long time. So are they being made worse and more severe gradually over time by the impacts of climate change? Yes, but I think

Auren Hoffman (17:27.918)

Yeah.

Auren Hoffman (17:32.686)

haha

Jason Bordoff (17:53.222)

There's no one hurricane that happens just because of climate change. So it's hard for people to to kind of understand the connections. But but they are there. And, you know, the last time the surface of the ocean was as warm as it is today was one hundred and twenty thousand years ago. At that time, the surface of the ocean was twenty five feet higher than it is today. That's 19 feet higher than the mean elevation of Miami. And so there's uncertainty about all of these predictions. We can't tell you Miami is going to be.

20 feet underwater at any given time, but it's clear that the direction is putting these properties more at risk. And then I should say, because I run a center with the word policy in its name, policy often provides perverse incentives. We try to provide the government steps in to help people with flood insurance because the market is increasingly making it harder and harder to afford. The market's a good friend of mine who's out in Santa Fe and said, you know, they couldn't get wildfire insurance for their home. They had to self insure.

And then often, because of that, government steps in to fill the gap. But actually, that creates a perverse incentive for people to keep building in areas that maybe we want to gradually pull back from or build in a more resilient way.

Auren Hoffman (19:00.718)

Now, the US is now often the largest producer of oil and gas. I think like even 20 years ago, I don't really think anyone would have predicted that. Like what is happening here? What's going on with this kind of shale revolution? And how does that like trend going forward?

Jason Bordoff (19:20.361)

It's it's it's the word revolution is is warranted. I mean, it's a really remarkable thing that happened in the United States over the last 15, 20 years. So as you said, not many would have predicted it when I arrived in Washington to serve in the Obama White House 2009. I think Washington was just starting to realize something was happening with natural gas production. You should remember if you go back a few years before that 2004 or five, six, there were dozens.

10, 20, 30 projects being permitted for people who wanted to spend billions of dollars building projects to import liquefied natural gas from the rest of the world, countries like Qatar. And then

Auren Hoffman (19:57.262)

Right?

And there was all these people talking about peak oil back then too. It was very common.

Jason Bordoff (20:02.662)

Well, and you know, since oil was discovered in 1859 on my birthday in Titusville, Pennsylvania, roughly every 30 years, the world has worried that it's running out of oil. And then some new innovation, some new technology comes along where we're able to extract it from places we didn't think possible or ways we didn't think possible. We've known that there's oil trapped in shell rock for a long time. The question was, could it be extracted economically? And a few people

saw that possibility. So you know, you said not many saw that 20 years ago. Well, there was a man named George Mitchell, who's kind of the father, so known as the father of fracking. And he spent the 1980s and 1990s experimenting and perfecting the technique ridiculed by many of his peers, right? It's notable it was not the Exxon and the Chevron and companies like that. It was the small innovators like him who figured out how to do this, sold his company and I think around 2000 or so.

for a few billion dollars to Devon Energy, which realized he had figured out how to do something. It started with natural gas, which is more permeable. And we thought we suddenly had a huge amount of natural gas in this country, more than we could imagine. And then that technology was applied to oil production as well. And the numbers are really striking, as you said. If you go back, US oil import, around 2005, 6, 7, the US imported around 60 % of its oil.

use. Today the US is a net exporter. So this is sort of a stunning turnaround. And the US is now the largest oil producer in the world, larger than Russia, larger than Saudi Arabia.

Auren Hoffman (21:41.966)

Why is shale exploration not really a big deal in most other countries? Like, why is the US such a special place?

Jason Bordoff (21:53.126)

There's a couple of reasons for it. I mean, we know that there's shale, the resource of shale oil exists in other places.

Auren Hoffman (21:59.534)

Yeah, apparently it's very plentiful in Europe, right?

Jason Bordoff (22:03.238)

There's some parts of Europe. I think the biggest places would probably be Argentina, some parts of Latin America. There's a shale formation there known as the dead cow, Vaca Muerta, that has been talked about for a long time. Russia, China. There are parts of Europe that have shale like gas in the Netherlands and they were producing, trying to produce some of that. The UK has some, but there's a lot of...

Auren Hoffman (22:07.246)

Okay.

Jason Bordoff (22:28.102)

resistance for environmental and other reasons, community opposition to developing it there. One thing that's important to note about the United States is the incentive to make this work because the landowner owns the resource in the United States. In most other parts of the world, the government owns the resource.

Auren Hoffman (22:52.27)

The government owns what's underneath the land in most countries.

Jason Bordoff (22:59.302)

Yeah, so the incentive in the US to lease mineral rights is something that you don't always find in other countries.

Auren Hoffman (23:08.11)

But look, you could imagine in China, they could like change that tomorrow to incent people to drill, you know, to explore shale, right? And for China, you can imagine like they're a massive net importer today. Like it would be in their best interest to make shale happen.

Jason Bordoff (23:23.366)

For sure. And they face other challenges, right? China, as you said, if China makes a top -down decision in the government, they can make things happen pretty quickly, as we've seen with solar, electric cars, other forms of technology. They have some of the largest shale gas reserves, actually. They lack the infrastructure to deliver that to market, so that requires a huge build -out in pipelines and everything else. Water is a really key component for shale extraction. A lot of the shale resources abroad are populated in places where water is at a premium, and that's

is can be an issue in China. Expertise, I mean, we did make this work in the US because of experimentation and a lot of small companies kind of competing with one another and a lot failed, but some made it. You don't have that in parts of the world where there's like one big state owned company that often isn't necessarily as entrepreneurial as risk taking where the downside of failing is potentially high.

Auren Hoffman (23:59.886)

Yeah.

Jason Bordoff (24:16.998)

And so that is part of the reason why the kind of entrepreneurial private sector spirit in the US, I think, made this happen. You know, we talk all the time about the oil companies, so the oil industry, especially in the climate world, too. We should remember the companies that come to people's mind, Exxon, Chevron, BP, the so -called super majors. There are, I think, seven of them, or what was known as the Seven Sisters. They're 15 % of the world's oil and gas suppliers.

More than half the world's oil and gas supply are nationally owned companies, right? Companies owned by the state like Saudi Aramco and others. And some of those are very good and very, very technically sophisticated, but many are not. And so it can be harder because to make shale work in many parts of the world that we're talking about, you would need to work in partnership, I think, with some of the big global majors that really have great expertise and technology and the service companies as well.

Auren Hoffman (25:08.174)

It seems, I still don't, it's not a, for some reason, I just don't, I still don't get it. Like, I still don't get it. Like it's, it's now been like almost 20 years since like people started to really understand the shell revolution. a lot, you know, most countries, especially countries like China are very good at like, you know, taking the technology that may have been developed in the U S and scaling it up. They've done that so many times in the past. This is so core to so many countries like.

security needs, it's core to their industrial needs, it's core to their economic needs, it's core even to their national pride needs. Like, why aren't more people investing in this around the world?

Jason Bordoff (25:49.382)

Well, you also need the economics to work, right? I mean, in Saudi Arabia, you can in many parts of the country extract oil for five, six, seven dollars. Well, no, I'm just saying so. So we're in a market. We're in an oil market now that is relatively well supplied. And so I think people look at the outlook and at some point these things go in cycles.

Auren Hoffman (25:56.718)

Yeah, of course. I understand why it's not happening in Saudi Arabia. Yeah.

Auren Hoffman (26:12.174)

Yeah.

Jason Bordoff (26:12.518)

when people say, well, where, you know, and so we just had a massive discovery in Guiana. Guiana is going to become one of the largest oil producers in the world. And that was, you know, 10 years in the making. And now it'll have oil production for probably decades to come. I think when you look forward and. Well, that's right. So there's geopolitics in all of these things. There's more uncertainty today about the outlook for oil. I think that is one thing genuinely different. If you go back decades in the past.

Auren Hoffman (26:26.99)

Unless Venezuela messes it up or something.

Jason Bordoff (26:41.574)

Commodity traders obviously made money because there's unknown fluctuations in price. But if you said to someone in the long run, where's oil demand going, everyone knew it was going up, not down. Today, that's actually in question.

Auren Hoffman (26:52.11)

Okay, so like because 10 years from now there may be less oil demand than there is today. In fact, that actually could be a likely thing that could happen.

Jason Bordoff (27:01.446)

It's certainly possible. There's a lot of talk about peak demand. Some people think it'll happen in the next couple of years. Some people think it'll be in 2035 or something. There's uncertainty about exactly when, but the probability that oil demand is just going to march up at 1 % to 2 % a year, year after year after year, that I think is there's much more skepticism about.

Auren Hoffman (27:19.886)

Okay, especially if this is like at least a decade project to invest in to get to start getting returns coming out of.

Jason Bordoff (27:26.502)

Yeah, although it's interesting in the US and part of the reason I think you saw Exxon by Pioneer for $60 billion, a big shale producer. Shale is so -called short cycle, right? And that means you, you, US went from producing 5 million barrels a day to 13 million barrels a day. To do that, you need to continually frack new wells because the decline rate is very fast. You frack a new well, you get a certain amount of oil from it, but the extent to which the oil coming out of that well diminishes is much faster for shale.

than it is for something like a conventional project or an offshore project. There's something desirable about that if you're uncertain about future oil demand. You might not want to invest tens of billions of dollars in a new offshore project that's going to take 20 years to pay back. You want to invest in things where you can shut it down or ramp it up quickly because we're in a world of new uncertainty. So I just think when people look at where the market is.

Auren Hoffman (28:09.294)

Yep.

Auren Hoffman (28:16.462)

In some ways also like that would stabilize prices. So like prices would never get too low, never get too high if you could like ratchet up and down shell.

Jason Bordoff (28:26.15)

That was the idea when Shell first started. I remember an op -ed by Alan Greenspan in the Financial Times sort of arguing that. And I think that's become a bit less true over time as there's been more consolidation when you take these massive global companies like Exxon with large balance sheets. They have a certain production plan. They're going to probably stick with it through cycles. But, you know, we did see that in the pandemic, for example, right? The U .S. production went from five to 13 million barrels a day. And then it collapsed from 13 to 10.

because for a short period of time, the world just didn't want oil because we shut down the global economy to deal with the pandemic. And you saw very quickly in the United States in particular, companies, idle workers, idle rigs, just say, we're going to stop. And then production actually fell really fast in a way that would not be the case in many other parts of the world.

Auren Hoffman (29:15.246)

Now, Germany moved very quickly to transition its energy system after Russia stopped selling gas to it in 2020, in 2022. What allowed Germany to move so fast in response to Russia?

Jason Bordoff (29:32.87)

Well, I mean, it comes actually it's not unrelated to the conversation we were just having, which is the role that shale gas in the United States played in the global system. So the, as I mentioned, the United States in the mid 2000s was going to become a huge importer of liquefied natural gas. So you can move natural gas by pipeline. That's kind of the easier way to do it. But when you move it by pipeline, it's point A and point B they're connected. You can't shift it to some other place.

You can take that natural gas and super cool it and put it on a tanker. And then you can send it anywhere that has the ability to regasify it, to heat it back up. And that infrastructure is getting built out more and more. So you saw it. And the US helped move this along. We can argue about whether it was good or bad. There's a pause the administration under Biden has put on it, and people concerned about the climate impacts of it. But what we saw is that

Auren Hoffman (30:23.246)

Why are people so concerned about the climate impacts of natural gas? It seems like natural gas is, you know, of all the fossil fuels is the best for climate.

Jason Bordoff (30:33.574)

Well, I think of the fossil fuels, that's probably the case. There's uncertainty and people kind of argue about how much methane leaks when you're using natural gas in a leaky system that may have pipelines 100 years old or something. Methane, which is natural gas, if it is combusted, it is lower carbon than oil or coal. It is also cleaner from the standpoint of local air pollution. You go to India or Beijing, like it's definitely better in that regard. If you just

emit it into the air, it's a very powerful and potent greenhouse gas. So we really have to get methane leaks down. That's one concern. And then the other concern is even if it's better than oil or gas, people argue that, or sorry, oil or coal, people argue it's still not zero, it's still a fossil fuel and we're kind of running out of time to get to net zero. So, you know, we can have a debate about whether you let the perfect be the enemy of the good, there's still a lot of coal. Coal is doing great. I mean, this is one story that kind of gets missed these days. We talked about that, that solar is doing well.

Coal is doing really well too if people wanted to invest in that and make a ton of money. Right now, the outlook for coal is frighteningly good. I say frighteningly for people who care about making progress on our climate goal. So this is a question of time frame. You say, can we diminish that role of coal in the next, say, decade or whatever with natural gas? I think the answer is still yes. And then people worry that, OK, that's fine. That's the next.

10, 15 years, but we're building infrastructure that's going to be there for 40 years or 50 years. And what do we do with that if we have to get to zero? Let's just move to zero carbon energy instead. That would be the argument that people would make. And I do think that there's a role. Sorry, go ahead.

Auren Hoffman (32:09.294)

Going back to Europe, you were saying before that because of the US LNG, Europe was able to survive the decrease in the Russian supply. So the US really was able to supplement the decrease in Russian supplies to kind of on a one -for -one basis.

Jason Bordoff (32:20.518)

You

Auren Hoffman (32:35.118)

Or were there other things that Europe was able to do to survive the last couple of years?

Jason Bordoff (32:40.55)

Yeah, so it wasn't just the US because it's a global market, right? It's kind of like oil. It doesn't it's all it's all a fungible global market. But because the US became such a lot, we went from zero exports to roughly 14 billion cubic feet a day. The US consumes or produces about 100. So just to give you a sense of scale. And we're going to double that number in just the next couple of years. That helped to contribute to a more flexible, more fungible, more liquid global LNG market in the past.

Auren Hoffman (32:43.406)

Yeah.

Auren Hoffman (33:09.358)

God kept the price down.

Jason Bordoff (33:11.91)

kept the price down and it also allowed market forces to work in a way that they didn't always in the past. Big, big producers historically like Qatar, they had so -called destination restrictions. They had contracts that did not allow the buyer to resell it to other places. The US LNG export structure changed that. And so it allowed market forces to work so that when Russia cut off gas supplies by pipeline to Europe,

Europe saw shortages, they saw the price of energy skyrocket to unprecedented levels, and then kind of markets work the way you would expect them to work. A tanker that was headed to China pivoted and some trader like Trafegoro or someone else, VTOL, you know, said we can make more money if we divert that into Europe. Europe had spent the 10 years prior actually undertaking a series of gas market reforms to build more LNG import infrastructure, to build reverse flow capabilities in its pipelines so that the ability to import

more from the global market. That, of course, caused prices to go up for everyone all around the world. And the United States made up quite a significant part of the gap, because it wasn't the US government deciding to send energy to Europe, but it was just that's how markets work. So in response to the price signal, US natural gas went to Europe instead of Asia or somewhere else. That wasn't the only factor, to your point. Demand also fell.

Some of that was voluntary conservation, like people adjusting their thermostats. But we just put a paper out a month or two ago about the reduction in industrial gas demand in Europe, heavy industry, fertilizer, aluminum, glass, paper, that really didn't paint a pretty picture for Europe. And a lot of it was so -called involuntary demand reduction, meaning just high prices destroying industrial activity.

in Europe and it's not clear that a lot of that industrial activity is going to come back or is coming back even though natural gas prices have fallen a lot. They're still expensive relative to pre -invasion but obviously much much cheaper than was the case in the past. So you know high prices do what high prices do and incentivize people to use less, destroy economic activity and force a manufacturing plant to idle or move somewhere else.

Jason Bordoff (35:25.606)

and pull in more supplies from the global market. And then we saw alternatives. We saw a little bit of coal being ramped up because it was an emergency. We also saw a huge growth in renewables being deployed.

Auren Hoffman (35:34.574)

Now, speaking of Europe, like in the last parliamentary elections in June, we saw the rise of kind of like anti -green politicians and a decline in pro -green politicians. Like, what is your kind of takeaway from that?

Jason Bordoff (35:53.126)

Well, I mentioned this earlier. I mean, I think it is a reminder that if energy affordability, reliability suffers from how we go about this transition, either in reality or just perception, the first thing that's going to go is going to be broad public support for stronger climate action. And that's, I think, especially true in parts of the emerging and developing worlds that, you know,

did not create the climate problem historically and use barely any energy at all. So people are angry about what they see as very high energy bills. And you see that in polling, you see that anecdotally when you talk to people. And I think they're pushing back on what they perceive as an agenda to transition to clean energy that's kind of moved faster than it should, because they're feeling it in their.

in their pocketbooks. I understand that. I think that's why we need to make sure that we're designing policies in ways that minimize those impacts. That was kind of the idea, I think, behind the Inflation Reduction Act, which was not raising prices or using a carbon tax, but just making every trying to make everything cheaper by throwing government incentives, roughly a trillion dollars at at these problems. But obviously, not every country can do that to try to make sure that we can make this

as affordable for people as possible because it's going to be very hard to accelerate the pay. I do think it's important to remember that in the long run, I do believe a lower carbon energy system is one that increases not decreases energy security. We don't need a better reminder of that than Russia cutting off gas supplies to Europe or the volatility we see in

oil prices still are the importance of Saudi Arabia and OPEC in managing oil prices. So once we get that technology deployed and we start to see a rise in electric vehicles or heat pumps that use electricity, people can see more stability in their energy bills. These things can pay back over time increasingly quickly. But there is a cost. There's a higher cost to not doing anything and the cost we're going to see from climate change as we talked about before with

Jason Bordoff (38:10.246)

beach level property and sea level rise and much more. But it's not free to have an energy transition either. There is a cost and we need to make sure that we're kind of minimizing those costs and thinking carefully about both the politics and the equity and fairness of who bears those costs.

Auren Hoffman (38:24.27)

There seems to be a reaction against these kind of like pro -green protesters where, you know, they'll like, you know, go to like a museum and throw paint on like a venerable painting that's been around for hundreds of years or do these kind of like crazy antics. Like it does seem like they lose the public every time they do that. And the public almost, the public almost moves anti -green when they see those types of things.

Like if I was anti -green, I would actually fund these protesters. Like they seem like they're doing like their entire, everything they're doing, a entire disservice. Do you agree with me or do you think like they actually have some sort of like strategy into what they're doing?

Jason Bordoff (39:12.678)

I think there's a strategy. I mean, the question is whether it's a sensible one. I agree with that. I would not destroy important historical artifacts. And I can't tell whether you raise support for your cause if you cause people to sit in traffic for hours by crazy gluing yourself to a highway. I do think leaving aside sort of specific instances of destroying historic works of art, which we should all condemn, we do need more social mobilization.

Auren Hoffman (39:27.342)

Right, right, exactly.

Jason Bordoff (39:41.958)

and we need more people taking to the streets to call for faster action on climate change. And this is like what the history of the environmental movement tells us. There's a great book I read when I had COVID actually sitting there for in isolation a year or so ago by the historian Douglas Brinkley about the history of the American environmental movement through the 40s, 50s, 60s. You know, the famous book by Rachel Carson about DDT.

the smog in Los Angeles, we had several decades where we polluted the Hudson River, we just despoiled the air and water. And then there started to be more and more attention paid to that, but pretty gradual. And then almost like all of a sudden in the late 1960s, all of that angst came together. The first Earth Day in 1970, one out of every 10 Americans came out into the streets across urban and suburban, Republican and Democrat, and kind of just said,

We can't live like this anymore. We can't have air. We can't breathe and water. We can't drink and lakes. Our kids can't swim. And you have to do something about this. People in Washington. And that's what that excuse me. That's what that Richard Nixon, not necessarily the greatest environmentalist, but it made sense politically to to create the Environmental Protection Agency, the Clean Air Act, the Clean Water Act, the landmark pieces of environmental legislation that we still rely on today. And the point of that, I think, is

It does take social mobilization to call for change and raise the level of urgency about an issue. And I also think it's important because it's easy today, I think, to look at. We see this every day with large financial institutions, with companies. Many are pulling back on their clean energy goals because they're not being rewarded in the market because voters are not happy about this. And I understand that, but I also think it's important to remember that environmental progress and social mobilization

doesn't move in a linear straight line. It has tipping points and it has faces disruption itself. And I think that is coming. I don't know exactly when or where or how it's going to be different, obviously, in lower income countries than higher income ones. The famous American economist Herbert Stein, Stein's law, so called, if something cannot go on forever, it will stop.

Auren Hoffman (41:55.47)

You

Jason Bordoff (41:55.974)

And that's sort of how I feel about climate change. So I don't know exactly. And then I thought recently about the famous quote in The Sun Also Rises by Ernest Hemingway, where that character named Mike is asked how he went bankrupt. And he says, two ways, gradually and then all of a sudden. And when we think about social mobilization to do something about climate change that policymakers and investors and corporate leaders have to respond to,

it's going to happen gradually and then all of a sudden I do actually believe that.

Auren Hoffman (42:28.75)

You've also done a lot of work in critical minerals. What is the market dynamic there? How do you expect that to kind of play out over the next 10 years?

Jason Bordoff (42:40.742)

Well, we need a huge amount of so -called critical minerals, metals for this clean energy transition. Some of it are rare earths and kind of rare metals and minerals. Many are not. We just, you know, the amount of copper you need to build an electrified economy is staggering. You know, an electric vehicle uses, I think, five times more copper than an internal combustion engine car. You can't build

huge transmission lines and electrify everything without it. We're going to roughly double copper use by 2030 today, like the current trajectory. And we're nowhere close to being on track for our climate goals. Nevertheless, what would happen if we were? Now, many of these are not rare. There's a lot of critical minerals in lots of parts of the world. We just got to get to work extracting them. But that's not easy. It takes, on average, 15 years or so to develop a new mine.

There are huge challenges in a country like the U .S. which wants to become more less import dependent, particularly on China. But mining is a nasty business in many respects. And it's not clear to me that lots of people want mines all around their neighborhoods and backyards. And so doing it in an environmentally sensitive way, doing it in a way that respects native and indigenous communities, a lot of these resources in the U .S. are located very close to Native American populations, is really

challenging and

Auren Hoffman (44:09.902)

It's not just a mime because then I assume you have to like post process a lot of these things afterwards So there's a lot of chemicals that have to happen as well, right?

Jason Bordoff (44:19.686)

100 % and actually that is where China's dominance comes from. So people talk about China being dominant in critical minerals. They are in a few of them like I think they mine 70 % of the world's graphite. Most of the critical minerals are produced in Chile and in Australia, cobalt in the Democratic Republic of Congo, but almost all of that 70 to 90 % of the world's lithium graphite cobalt is refined and processed in China.

Auren Hoffman (44:22.99)

Yep.

Auren Hoffman (44:45.134)

Right. It gets sent all the way to China, sometimes like thousands and thousands of miles away to get processed and then it gets sent back, you know, where it has to go.

Jason Bordoff (44:56.518)

Yeah, so there's a lot of growing concern about what that means for China's role in these supply chains, whether that could be weaponized the way we were worried about after the Arab oil embargo. There are important differences between critical minerals and say oil, right? So people often say, I remember Joe Manchin during some of these debates on policy saying we don't want to go from dependence on oil in the Middle East to dependence on China for critical minerals. And there's truth to that. But these are pretty different things, too. We depend on the daily flow of oil.

to keep the economy humming and cars and trucks moving and factories operating, critical minerals are an input to a finished good. If there was a disruption in critical mineral supply, your lights wouldn't go out, your heat wouldn't go out the way heat did in Europe.

Auren Hoffman (45:37.806)

Yep. It's not as much of like a variable cost on a day to day.

Jason Bordoff (45:42.118)

It would mean that new solar panels, new batteries, new electric cars would face backlogs, would face cost increases. So there is an important difference there. But there's much more concentration with critical minerals. We mentioned before the largest oil producers, the US, Saudi, and Russia, each of those, depending on what you're measuring, is between 10 % and 20 % of world supply, the largest producer of certain critical minerals.

each country that is the largest producer in many cases produces more than half the world's supply.

Auren Hoffman (46:13.102)

Wow. Now, this is a tech podcast. And, you know, Mark Zuckerberg made some headlines earlier this year about how the amount of energy needed to like train AI models in the future could be just massive. Just like for one kind of training, it could be like, you know, a whole nuclear power plant. Do you see more investment going into like private energy generation?

Jason Bordoff (46:17.734)

Hmph.

Jason Bordoff (46:41.542)

Yeah, it's really interesting. I mean, absolutely. And I think when you look at what the future of the electricity sector will look like, the utility sector, these major tech companies are hugely focused now on making sure that they have access to affordable, reliable electricity. And they don't want to depend on the grid for that. So so -called behind the meter investments building their own.

power generation capacity, perhaps building their own nuclear plants, depending on how that technology evolves, I think is the direction that we're going to see utilities may become less important and private companies generating electricity even more important. We got to think about what the broad systematic impacts of that are, what that means for the overall grid. The numbers, frankly, are all over the place right now for it. And you can go back. I mean, I'm curious what you think, too, because you're a student of this history. You look at the late 1990s.

there were a million estimates for how the internet revolution was going to cause electricity demand to go through the roof. And that never happened because the technology got more and more energy efficient. So what do we expect to happen to the next generations of Nvidia chips and others? They continue to use energy more efficiently at the same time. You know, so the question is, is there something different about AI? And I, many people think, and I probably agree. The answer is yes, just because we barely have scratched the surface for what the use cases and application for this technology.

is going to be how much electricity will be needed for running and training. These models estimates today are three, four, six percent annual increase in electricity use. Could be more than that as we start to see AI being deployed in ways that are hard to even imagine today. But I will say on the flip side.

It's also the case that AI is probably to our earlier conversation about demand response and people using energy more efficiently in their homes or businesses, that you could see a very significant reduction in electricity use, maybe a reduction in emissions by deploying AI data to use energy more efficiently. Because we don't take efficiency as seriously as we should. It's always kind of the forgotten fuel that we can do a lot more with how efficiently we use energy. And I think AI can help with that too. That's the flip side of the coin.

Auren Hoffman (48:57.07)

One of the things with data centers back in the day, or even up to currently, is they often have to be at least connected to some place that has super fast internet. If you're building a data center just to train AI models, you could be offline. You don't even have to be connected to the internet. And so the places where you could put it grow dramatically. You have more spots where you can put it around the US. And so if you can find a place where you can put a power plant,

or your own little nuclear reactor or whatever, you could build like a little data center right next to it and that could be just like the core customer of that power.

Jason Bordoff (49:36.646)

Yeah, no, we see that, right? We see Amazon and Google and Meta and others building a huge amount of renewable capacity. Amazon just bought a nuclear power plant, taking it off the grid. So we got to be careful about that too, but trying to make sure that they had access directly to the amount of electricity they need for Amazon Web Services and whatever is going to come next with AI.

It is really hard as this comes back to the permitting reform conversation. We talked about how long it takes to build things in this country. Can you build the transmission lines you need? Can you get permits for these projects? And you know, these companies are and need to move pretty fast to do this. I think one of the things I see is a lot of other countries in the world with very cheap low carbon electricity. You can think of that countries in the Gulf like Saudi Arabia or the UAE. They're trying to lure these countries. These companies there too.

Auren Hoffman (50:29.39)

Yeah.

Jason Bordoff (50:31.142)

And that raises really interesting kind of what I spend a lot of time thinking about with my background at the National Security Council. How do we think about the geopolitical or national security implications of a significant amount of the data center technology that is necessary for the AI revolution? What if that sits in other countries? And is that something that we should be concerned about as a country? What kind of agreements do we have for them? As Microsoft just had with the UAE,

what role does the US government play in saying, well, we have some rules around this, and maybe you can't be using technology from China in the system.

Auren Hoffman (51:09.07)

What are the biggest stories in the last five years in the tech world has been Nvidia and just the rise of Nvidia. And now is there some sort of trade? Like if you're long Nvidia, do you have to be long energy generation? Like how do you, how do you trade that side on the energy side?

Jason Bordoff (51:29.158)

Well, I think as we've been talking about, there's a strong case to be made that increasing use of AI and data centers is going to lead to an increase in electricity for sure. So I do think that significant growth in demand for what NVIDIA produces suggests that we're going to see a lot of very significant increase in electricity. So you would be long electricity generation to your point.

I do come back and I just don't know the answer. It's not my area of expertise, but I am very interested in trying to understand the order of magnitude, how significant the potential is for Nvidia chip technology to become more and more energy efficient. I mean, if you look over the last 10 years, or a competitor, yeah, right. But over the last five, 10 years in what I have seen and read, the efficiency of

Auren Hoffman (52:11.566)

Or a competitor. You can see competitors. Yeah.

Jason Bordoff (52:22.886)

NVIDIA's technology has just improved enormously and the ability to generate the same computing power from less electricity has increased enormously. So I think that's the offsetting factor. And there are a lot of ways in which AI can actually help accelerate that, I think.

Auren Hoffman (52:41.486)

Now a few personal questions, you and I, we've been friends for over 20 years. And I think during that time, I don't think I've ever seen you unhappy. You always have a smile on your face. You're always positive. Like, why do you think you're that way?

Jason Bordoff (52:55.75)

Well, I'm not sure that's true, first of all. But maybe it's because when I see you, I'm so happy to see you. No, but look, often when we see each other every year, it's in a gathering of lots of friends and interesting people. And I think it's sort of.

Auren Hoffman (52:59.022)

I should have called your wife first before I, to answer this question, maybe.

Hahaha

Jason Bordoff (53:18.726)

underappreciated how when we talk about the things that bring us joy and the things that bring us happiness, how much personal relationships and friendships are an important part of that. So, so it's probably not I mean, I'm saying it facetiously, but it's probably true that that when I see you, it's because you do a wonderful job of bringing people together, dinners, whatever it is to spend time together. And those are some of the experiences that I enjoy the most are spending time with friends. So you

I'll just video myself when I'm alone and then you'll see I'm not always happy. But when I get to spend time with really interesting people and frankly, like people I may not always agree with, we don't do that enough either, I think is spend time with people who have different points of view than ours. It's just, it's really exciting and enriching, rewarding, and I really enjoy that. So appreciate your creating settings for us to engage that way.

Auren Hoffman (53:49.006)

Hehehehe

thank you. Well, all right, two more questions. We ask all of our guests. What is a conspiracy theory that you believe?

Jason Bordoff (54:19.366)

have a hard, I thought about this question that I feel like I'm.

Auren Hoffman (54:27.406)

Yeah, you don't strike me as a conspiracy theorist person.

Jason Bordoff (54:31.654)

Yeah, I have found it interesting. So I'm not a conspiracy theorist person. You're right. I tend to have faith in institutions and trust in our big institutions like government. Maybe that's misplaced. I do find it interesting that people I know well, like John Podesta, for example, the climate advisor in the White House, have taken the idea of extraterrestrial activity and UFOs as seriously as they have.

whether there have been instances of that that maybe people know about but haven't told us about at least seems possible to me. So I don't know, maybe that's a conspiracy theory that I wouldn't be totally surprised if it turned out that was true, but then we didn't.

Auren Hoffman (55:14.51)

Yeah, there seems to be a lot of movement on that the last couple of years for sure. This is great. Last question we ask all of our guests. What conventional wisdom or advice do you think is generally bad advice?

Jason Bordoff (55:18.566)

Yeah.

Jason Bordoff (55:28.198)

well, if you things come to mind, right, if you, you often hear people say, if you want something done right, do it yourself. I don't think that's true. I think most people are better at lots of things than I am. And I've really enjoyed building the center on global energy policy. This kind of now one of the largest energy think tanks over the last 10 years. And if I've learned anything, it's just build a really good team who are better at lots of things than you are and empower them and give them authority to.

to go to work and get that done. What's most important is the team around you, not your ability to do it all yourself. I guess another like conventional wisdom saying is, you know, you can't teach an old dog new tricks. And that seems wrong to me too. The thing that's so interesting about life is constantly taking on new challenges, new hobbies, learning new things, deciding as you get older, it's harder because you're going to be really bad at something. It feels to be bad as we build expertise and we're supposed to be really good at stuff.

But I think it's important as we get older to take on new challenges, whether it's an instrument or anything else, and be bad at it and be comfortable being bad at it. But try to learn new skills and learn new things over time. Which again, is why I really enjoy spending time with you and all the people you help us bring together. Because I learned so much that I had not been exposed to and hadn't thought about.

Auren Hoffman (56:46.382)

I love the can teach dog, old dog new tricks. Cause that is, that is common conventional wisdom that is probably quite wrong. Like people do change quite a lot. Well, yeah, absolutely. Maybe people don't change cause people don't expect them to change. All right. This has been awesome. Thank you, Jason Bordoff for joining us on World of Daz. I follow you at Jason Bordoff on X.

Jason Bordoff (56:58.278)

Maybe you should change more than they do. Yeah.

Auren Hoffman (57:11.534)

I definitely encourage our listeners to engage with you there. Also, you have great, you always write great things on foreign policy and other types of places. So encourage our listeners to read your writings as well. This has been incredible. Thank you again for joining us.

Jason Bordoff (57:12.394)

Right.

Jason Bordoff (57:25.446)

Thanks so much for being on. It was great to work with. Appreciate it.