Neil Chatterjee: More and more, politicians and CEOs and celebrities are making decisions about complex things like resource adequacy that are boring and wonky and technical that used to be made by engineers and economists. At the end of the day, it's a math problem and you know who can solve math problems? Engineers. Let's get the politicians and the CEOs and the celebrities out of this and let's let the boring, wonky, technical experts, the nerds if you will, make these decisions.
Jason Bordoff: The Federal Energy Regulatory Commission, or FERC, regulates the nation's energy transmission and pipeline networks and its wholesale rates for electricity. For much of its history, FERC was a little known federal agency, but that's changing. Today, topics like energy affordability and the urgent build-out of data centers to support AI are putting FERC in the spotlight.
This fall, Energy Secretary Chris Wright directed the commission to fast-track grid connections for certain large loads such as data centers. But many communities have pushed back against new energy infrastructure. So how is this independent agency handling pressures to reform its policies? How are politics playing out or not in its rulings and key court decisions that impact the agency? How might FERC change in the coming decades and outside of the agency? What are some solutions to building more energy infrastructure faster?
This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I'm Jason.
Today on the show, Neil Chatterjee.
Neil is a former commissioner of FERC where he also twice served as its chairman. Neil recently joined us here at the Center on Global Energy Policy as a distinguished visiting fellow. He also currently serves as an advisor and investor in a number of organizations and his chief government affairs officer at the residential solar company, Palmetto. Early in his career, Neil worked for Senator Mitch McConnell as his energy policy advisor.
Neil and I talked about his career evolution from being known as McConnell's coal guy to his current role at a renewable energy company. We discussed his tenure at FERC and looked at where the agency is headed today. We talked about the ways that AI is transforming the grid and the need for bipartisan permitting reform, and Neil shared his thoughts on current threats to FERC's institutional independence and why he wants to see energy policy become boring again, at least at the regulatory level.
I hope you enjoy our conversation.
Jason Bordoff: Neil Chatterjee, great to see you again. Welcome to Columbia Energy Exchange. Good to talk to you again.
Neil Chatterjee: Thanks for having me.
Jason Bordoff: Lots to talk about. Welcome to the family. I am not sure the timing of when this podcast is coming out, but we're excited to welcome you as part of a new class of distinguished visiting fellows at the Center on Global Energy Policy. So great to talk to a colleague now as well.
Neil Chatterjee (03:13): I'm honored, humbled, and excited. And really looking forward to this discussion, and more so spending the next year really digging in on these critical issues.
Jason Bordoff (03:23): Well, same here, and the issues you work on have always been pretty high on the agenda, but maybe more so than ever. I've been working on energy like you for a long time and a lot of talk of gasoline prices, but significant focus on power prices feels a little bit new. Electricity is what everybody wants to talk about now, along with the technology that lies underneath it, like rare earth restrictions and all the components we buy from China and all the rest. So a lot to talk to you about because you're squarely in the middle of all that. Just help everyone…your story is pretty interesting, like coming to this work spending part of your childhood in Kentucky, working for Senator McConnell, coming to the role of FERC chair in the first Trump administration with, tell me if this is fair, like a perception that a McConnell guy is going to be a coal guy and how you came to the role you had before and how you think about energy policy — and then versus today.
Neil Chatterjee (04:22): Yeah, no, thank you for that introduction. Yeah, look, I'm a kid from Kentucky who worked for Ms. McConnell as his principal energy policy advisor and who was appointed chairman of FERC and later demoted as chairman of FERC by Donald Trump. And I think there's no question that during my tenure as a congressional aide, I worked on behalf of the constituency that Senator McConnell represented, which largely constituted players in the coal industry in Kentucky. And when I first got to FERC and had a platform of my own, I made it very clear that I believed climate change was real, that man had a significant impact and that we needed to take steps to decarbonize, but that we needed to be smart about it and pursue market-based solutions and not in my view heavy handed regulations or mandates, but it's tough to kind of intertwine yourself from the work you've been doing up to that point in your career.
I'd spent almost a decade working for leader McConnell on behalf of the coal industry in Kentucky. And so when I got to FERC, I was maybe a little bit artful in how I comported myself, and I think a lot of people did think this guy, and this is McConnell's Cole guy here to pursue a political agenda at an otherwise independent agency. I think I learned from some early mistakes and by the end, I do think that most folks would say they might not have agreed with every decision that I made, but most folks I think agree that I tried to be independent and do what I thought was in the public interest.
Jason Bordoff (06:20): Well, you probably, maybe you remember when I think we first met when you came to speak here at the Center on Global Energy Policy when it was very early in your tenure and pretty early in the Center's existence just a couple of years after we started it. And the same thing like, well, the McConnell's coal guy is coming is leading FERC, and you've spent most of the session talking about your views on climate change, on decarbonization, on market-based solutions like a carbon price if I remember correctly.
Neil Chatterjee (06:46): Yeah, look, what I remember about it is I had to have a security detail present. They were worried about what the potential backlash might be and what I find, and I tend to take an optimistic view of life, a lot of the folks that protested me at that session that you hosted have subsequently sent me messages over the years thanking me and apologizing and commending me for actually taking steps to protect the planet. And that's why I think forums like this are so important. None of this is static, none of this is permanent. These are complex issues that as technological innovation and policy changes come into the mix, things change. And I'm someone who acknowledges that, look, I saw the opportunity in innovation and aggregated distributed energy resources and things like solar and storage and geothermal kind of transforming the energy landscape and enabling us to pursue a decarbonized clean energy future in a market-based way. Perhaps in a way that I didn't early on in my tenure when I was still transitioning from being McConnell's coal guy. And I do appreciate that some of the folks that had probably the greatest heartburn about my participation at the time that you and I did that initial recording came around and saw that I came around and that we could be reasonable.
Jason Bordoff (08:22): Yeah, look, in a best case scenario, you find areas of common ground. Maybe people evolve their thinking a little bit by hearing perspectives that they might not have been exposed to before or might disagree with. You don't have to, you can still disagree, but having places to have respectful and evidence-based dialogue and disagreement, it's pretty important to our mission and we need more of that. I think you would agree. And unfortunately, I think people, the story you were just telling about the need to think about security given events we've seen in the world, it's probably going up not down. And that's unfortunate and frightening, and I think I'm curious your view of the political environment now to have conversations like that on both sides of the aisle, the sort of sense of … we had Carlos Curbelo on recently who had been a distinguished visiting fellow here a while ago and helped to take leadership roles on climate from the Republican side of the aisle. Is that possible anymore? I mean, how do you see where your party is on the issue of climate change that you talked about here a decade ago when you visited?
Neil Chatterjee (09:23): Yeah, look, again, I refer back to my previous statement that I'm an optimist, so please take this with a grain of salt and factor in the variable that I tend to be a more forward leaning person who sees the best in people. I do think we are in a tricky spot today where we are kind of mired in this old school paradigm that if you are for fossil fuels, you're of the political right? And if you're for clean energy and climate solutions, you're of the political left and there's not a lot of room for cooperation or compromise. And I actually think we are on the precipice of finally breaking out of that antiquated paradigm. And there's a couple of reasons for it. Someone that I respect greatly who angers people on both sides, Senator Joe Manchin, former Senator Joe Manchin of West Virginia, who was kind of the architect of the energy provisions in the 2022 Inflation Reduction Act. I think what he did in passing that legislation was set up a paradigm to where red supply would feed blue demand, where a lot of the beneficiaries of the tax incentives that he put into place would be in red states and rural, red House congressional districts, and that those states would feed that clean generation into blue states that were demanding that power. And quite frankly, we saw it play out in the one big beautiful Bill Act, the O-B-B-B-A that Republicans in Congress passed via reconciliation this past summer. A lot of the key provisions, while many were gutted, I'm not going to ignore that many of the key provisions were gutted, but a lot of the critical ones were maintained because Manchin was right to tee up that red state supplied blue state demand paradigm. And I think that was the first step in kind of breaking us out of the politics of the moment.
The next one is going to be AI. If you look, President Trump made two promises to the American people when it came to energy. One was to win the AI race against China for national security purposes with an understanding that it would require a tremendous amount of energy of electricity to win that AI race. And two, to significantly bring down the cost of electricity for Americans who are suffering the pressures of inflationary burdens. Well, here's the reality. Those two goals are seemingly antithetical unless you bust out of your partisan political corners. And what it will mean is that on the political left, there has to be a recognition that we cannot possibly win the AI race while maintaining affordability and reliability without fossil fuels, that we will at least need natural gas for the foreseeable future. And that's going to mean new gas turbines, new gas plants, new gas pipeline.
But on the political right, I think there needs to be a recognition that we can't possibly win the AI race and bring down the cost of electricity with fossil fuels alone, that we will not only need solar and storage and wind and geothermal and nuclear and hydro, but we'll also need negawatts, things like demand response and energy efficiency and virtual power plants and grid enhancing technologies to maximize the efficiency of our existing infrastructure. Things that conservatives have historically opposed because utilities have resisted these things because they can't recapture their value in rate base. I actually think we're at a moment where the universally agreed upon need to win the AI race for patriotic American national security purposes will give us the opening to get out of some of these partisan political headaches that have really prevented us from having sensible energy policy.
Jason Bordoff (13:58): Well, I appreciate your optimism and the drivers you talk about make sense. We have these hyperscalers with massive capex, massive capital budgets to spend that might pull the demand forward, might pull the timeframe forward for technologies that were costly and far away like nuclear. We are concerned with power prices and want to bring those down. What I hear you saying I think is on the political right solutions that address those challenges like geothermal and nuclear demand side technologies, the sort of improved grid that you just talked about to use electricity more efficiently is interesting. It does seem like there's solar and wind and electric vehicles have sort of become ideological issues that somehow get treated differently than all the other stuff you just talked about. Do you think that's right or that's going to change too?
Neil Chatterjee (14:51): Yeah, I think the answer to your question is both. I think that is right and I think it has the capacity to change why I think it's right. And to be honest, I worked with a number of clean energy groups in the solar, storage, and EV space during the period that led up to the passage of the inflation reduction Act. And I begged these folks to not spike the football, to not celebrate this politically and turn this into a political thing because if you actually look at the tax title that comprised the Inflation Reduction Act, it was all carrot, no stick, it was all tax incentives, things that Republicans have historically supported. And I actually think had it not been for the manner, the procedural manner in which the Inflation Reduction Act was enacted, which was vis-a-vis budget reconciliation, which is an inherently partisan legislative tool designed to circumvent the minority party in the Senate. Had it not been for that procedural tool, I think you would've had a dozen to two dozen Republicans in the Senate that might've supported that.
But it's because it was done in a partisan way that no Republicans voted for the IRA and then despite my request to not spike the football, literally the White House held a birthday party for the IRA every year on the south lawn and people showed up and it just turned this thing into a political football to where here we are in the fall of the first year of the second Trump administration. And I understand that during the campaign, the rhetoric was very much drill, baby drill and in the early days of the administration that it was still very much an emphasis on fossil fuels and drill, baby drill and reversing course on policies that the Biden administration had pursued.
I would've thought by now that in order to win the AI race, we would've realized drill baby drill alone isn't going to do it, and we'd embrace a genuine all of the above approach. And I'm a little frustrated to be honest, that it hasn't happened. I'm frustrated with the Biden administration for rubbing it in after passage of the IRA, and I'm frustrated with the Trump administration for not pursuing necessarily sensible energy policy. But the prevailing ethos seems to be: If Democrats pursue this to achieve their decarbonization goals, we’re against it. And neither approach to me is very responsible.
Jason Bordoff (17:42): Just so I understand the approach you're talking about on the left, or would you say Biden was rubbing it in or you're referring to supply side policies, blocking, permitting, blocking development of domestic oil and gas resources? Is that what you're talking about?
Neil Chatterjee (17:56): I mean, I think there was a clear effort on the part of the Biden administration. I'll stick to what I know and my former agency, FERC, there were steps taken in market reform design methodology to suppress capacity prices to accelerate the retirement of existing fossil generation, mainly gas peaker plants. And those accelerated retirements we're now paying the bill for that because we're short capacity at a time when demand is surging. So there were definitely concrete steps taken by the Biden administration designed to drive out and accelerate the retirement of fossil generation to open up market space for clean energy. And in doing so, they set up this dynamic where now Republicans are paying them back and they're propping up fossil generation and taking steps just since July 4th, since the passage of the O-B-B-B-A, I have been kind of shocked to see we have gone from my party, the Republican party saying renewable energy shouldn't be subsidized, which I don't quibble with. I'm for a ramp down to move away from subsidies to demonstrate that renewables can compete on their own and be investible businesses without government largesse. I'm okay with that, but we've gone since July 4th from renewables shouldn't be subsidized to now outright punitive steps against renewables, which to me is very damaging. Every bit as damaging as the Biden administration taking steps to suppress capacity prices to drive out fossil generation.
So both sides are doing it wrong, but to bring it back around to me being the optimist, I think AI is going to be the thing because of the need to win it for national security purposes. AI will be the thing that breaks us out of this, but it's going to take a case to be made. I think we need everyone from the Oval Office to governor’s mansions to C-suites to nonprofits, to environmental groups to make the case to the American people that AI isn't just about making goofy cat videos or enabling high school kids to cheat on papers. Never Columbia students just high school kids, but
Jason Bordoff (20:36): We just do the goofy cat videos here.
Neil Chatterjee (20:39): They're just goofy cafes, but it's about national security and it's about warfare in the 21st century. And it's important that we not allow an autocracy in the Chinese Communist Party to win the AI race and we need energy to do it. I think if we make that case, Americans will be willing to accept some of the trade-offs that are necessary to do that, but until we get there, we're going to be stuck in this morass.
Jason Bordoff (21:05): I mean you're describing, I think when I worked for President Obama, what phrases like all of the above were meant to encapsulate. And let me just ask you, you've also talked about the importance of climate change and I'm wondering for someone, I hate these characteristics of right and left, but just to stay with that… someone more to the left thinking about climate top of mind might sort of hear everything you're saying and be like, I get that we need a lot of power and it's got to be, we need all options on the table, but climate change is sort of just a math problem. There's only so many tons of CO2, we can emit consistent with certain temperature increased targets. So while what you're saying is true, there's a reality that the amount of fossil fuels we're using just can't continue at its current rate consistent with bringing emissions down, how do you respond to that or square that? Is there a tension there and how do we resolve it?
Neil Chatterjee (22:03): That's actually the basis for my optimism because I think the mistake that has happened in policymaking in the US in particular, but it's global as well, is that we have been the beneficiaries over the course of the last two decades of relatively flat demand for energy. And as a result, because we have not been burdened by the pressure of meeting increased demand, more and more politicians and CEOs and celebrities are making decisions about complex things like resource adequacy that are boring and wonky and technical that used to be made by engineers and economists. And so to answer your question, what you just laid out, the reason I'm optimistic is to figure out how we win the AI race and meet the coming surge in demand for energy while maintaining reliability and affordability and not backsliding on our decarbonization goals. At the end of the day, everything I've laid out, while it seems wholly complex, it's a math problem and who can solve math problems, engineers.
(23:28): And so my hope in the coming years is that engineers and economists coming out of programs such as yours at Columbia are allowed to actually propose pragmatic solutions to solve this equation. And let's get the politicians and the CEOs and the celebrities out of this and let's let the boring, wonky, technical experts, the nerds, if you will make these decisions. I don't say this to be funny, we need to make energy policy boring. Again, it's not great for podcasts, it's not great for guest lectures at Columbia, but when energy policy is boring, it's actually great for consumers, the economy and the environment. We can solve this math problem if we make energy less interesting and just let the nerds solve it.
Jason Bordoff (24:31): So bringing boredom and nerdiness I, it's not like a great selling proposition for joining us as a fellow, but I think we can accommodate that. And it's funny, I just did my podcast with Dan Wang who wrote that new book Breakneck about America's too many lawyers and China's all engineers. So I wonder whether that ties into the competitive race you're talking about if engineers have the advantage where the US stands in that race. Can you talk a little bit about what you see with, there are new studies coming out every few days on the impact of data centers on electricity prices. What do you see as the drivers of the increases in electricity prices right now and what policymakers should be thinking about it who want to address that concern?
Neil Chatterjee (25:19): Yeah, to me it's the fundamental challenge in the energy and electricity sector for the next probably decade. It's how do we win the AI race while maintaining reliability and affordability and doing so in a way that doesn't fundamentally make us more vulnerable. I think it's multifaceted. The first part is how do we provide the necessary generation? Today, because time to market is such a key issue for these data centers to win the AI race, they need power right away, they need it yesterday. So in order to build new generation in front of the meter, we're talking with interconnection queues in some regions of this country, enough three to seven year wait. We don't have that time to wait to build new generation. So we need to figure out how can we build new generation more quickly and alleviate some of the congestion in our inner connection queues that are keeping some of this energy sidelined that is ready to be deployed.
(26:31): And I actually think that's one area where AI can help us in doing some of the key and critical interconnection studies that are necessary to speed up the process to alleviate some of the tension in the queues. So that's one speed up the queues. Two, if we are to go behind the meter, which I am supportive of with these data center co-location deals, we've got to figure out some complexities there. There's two issues with going behind the meter to provide power for data centers. One is a cost issue. If you take already limited capacity during a time of high electricity prices behind the meter, you take that power out of the market, you're now spreading even higher prices out over even fewer rate payers, further exacerbating affordability issues. To me that's solvable. And I think there's negotiations that can be had regarding cost allocation that you can sort through that. (27:32): The bigger challenge is around resource adequacy, around reliability. If we allow behind the meter data center co-location and a bunch of parties come through and file these co-location deals and FERC and the various RTOs and ISOs approve these arrangements, you could wind up with a situation in which resource adequacy is threatened.
And I'll give you a personal example. I currently live in the northern Virginia suburbs in what is known as Data Center Alley, and today my neighbors and I, we love what data centers are doing for our community. My 13-year-old daughter, if you saw the soccer facility in which her team trains the US Women's National team doesn't play in as nice a facility as what my daughter has in Loudoun County because the tax benefits that are coming from these data centers are providing huge dividends for roads, for bridges, for parks, for schools, and it's not adding to traffic because once these data centers are operational, there's not a lot of people working in them.
(28:47): So today, my neighbors and I love this, but again, I go back to when I was Chair fe. There were six days a year that I was most worried about the three hottest days of summer and the three coldest days of winter. And what I worry about is in the coming years in my region right here in Data Center Alley is on that hottest day of summer. If the grid operator has to choose between sending power to a 24 7 data center to support AI or to a residential household for air conditioning, it's going to that data center for AI. And I think right now people in my community might be willing to accept increased costs because we're actually visibly seeing the benefits of these data centers in our community. Where the pitchforks will come out is when we don't have air conditioning on the hottest day of summer and we don't have heat on the coldest day of winter.
(29:46): So those are some of the complex challenge, but these are solvable. We got to build more infrastructure in this country. We need bipartisan permitting reform that means more natural gas pipelines to get more gas onto the grid, but that also means more transmission lines, long haul transmission lines to get cleaner energy onto the grid. That means recognizing that there will be increased emissions from natural gas generation, let’s invest in things like direct air capture and carbon capture and sequestration to mitigate the emissions from those kinds of resources. And then let's utilize AI to figure out ways that we can maximize the efficiencies of our existing energy infrastructure, whether that's using AI and satellite imagery for greater wildfire risk mitigation, or as I mentioned, trying to accelerate the time it takes to do some of these studies in the interconnection queue. There's no one clean silver bullet here, but if we're smart, we can figure out a way to do this that doesn't require Americans fundamentally changing their way of life.
Jason Bordoff (31:04): Well, I know you're a pretty involved coach of your kids' sports, so maybe that those benefits accrue especially or visible to you. You've talked about the need to address the challenge you're describing by making it easier to build. Again, there's a growing movement for so-called abundance, and I think there's broad recognition we need to make it easier to build infrastructure in this country. But coming back to what we talked about before, which is how difficult it is to build political consensus for anything anymore, do you see the prospects for meaningful permitting reform coming together in DC?
Neil Chatterjee (31:37): I do because I think there is bipartisan recognition that it's necessary, but if it were easy to be honest, we would've done it already or FERC would've done it right? But unfortunately, FERC doesn't have the tools under the Federal Power Act and the Natural Gas Act to do this unilaterally. It's going to take federal legislation. But look, this stuff's hard. I got to be honest with you. The easiest way to build new infrastructure in this country, whether it's a gas pipeline to deliver natural gas or a transmission line to deliver clean energy would be to use existing right of ways, particularly when it comes to transmission. I think I could make an academic case that, sorry, community, we're going to come through your backyard again and build out more infrastructure, but this time, this transmission line to bring clean energy is going to enable the retirement of a higher polluting source of generation that will ultimately lead to cleaner air and cleaner water in your community.
(32:49): As an academic exercise, I think I could sell that as a real world exercise. That's a very, very challenging sell because the reality is that nimbyism not in my backyard is not political. It's not ideological. Americans don't want infrastructure, energy infrastructure coming through their properties regardless of whether it's for clean energy or fossil fuels. And what folks in these communities will say is, Hey, why don't you go through the community next door? Why? Because they can afford a lawyer up and we can't. So you've got to build through our yards Again, it raises real moral questions To me, the harder question even beyond sighting and sighting is tough. I have had my state regulatory counterparts come to me during my tenure at FERC and say, and whisper to meet Neil. We would love it if FERC would overrule us and just roll over us. That's the only way we can get this transmission line built in this community.
(33:45): And I'm sitting here like, Hey, I like to go on vacation. I might want to come to your community someday. Why are you going to make me the bad guy? Why don't you make the tough call and build this transmission line? But it's hard to do because you get huge blowback. But even beyond siting, the tougher question is around cost allocation. Who pays for this infrastructure? And the scenario I use, you have state A that has a huge amount of renewable capacity. You have state C that has huge demand for clean energy or energy in general, what happens to rate payers in the middle in state B? Now, as an academic exercise, I think I can incredibly make the case that rate payers and state B receive a genuine benefit in the form of alleviated transmission congestion, which is a real benefit, it’s probably the most significant thing that we face in our electric distribution system today.
(34:49): But as a real world exercise, going to rate payers in state B and saying, you'll benefit neither from the generation nor the consumption of this power, we're going to build a transmission line through your backyard that you don't want and we're going to make you pay for it. That's a really, really, really hard sell. And so that's why it's going to take a bipartisan, federally negotiated legislative permitting reform deal, and that's why it's hard to land. I thought our best chance was before the election when you had Senator Barrasso of Wyoming and Senator Manchin of West Virginia. Bipartisan duo. Tried to do what they could on permitting reform. They couldn't get it across the line. I'm skeptical we can get it done now because I think when you have one party control of government, whether it's all Democrats or all Republicans, they're not willing to make the necessary compromises to get something this significant done.
(35:52): Neither party's going to blow up the filibuster in the Senate to do permitting reform. So it's going to take a compromise, and I fear it will take divided government to do so because we're running out of time and we don't have time to wait for the ideal political circumstances where the cynical part of me comes into play. I would've thought a reliability crisis would have triggered action on the part of lawmakers. We've had multiple reliability challenges throughout the country in the last couple of years. It hasn't moved the needle a bit. I would've thought an affordability crisis would've been what it takes to move the needle. We're seeing surging prices all around the country hasn't busted people out of their partisan political corners. What I cynically think it's going to take is one of these data centers that was planned for PJM or ERCOT or MISO that is intended to undergird AI. When that data center goes outside of our borders, whether it's to Alberta where they have surplus capacity or to Japan or South Korea or God forbid China, that is going to be the event, the triggering event that awakens lawmakers in the US and they realize, oh man, we got to get it together or we're going to lose the AI race. I think that's what it'll take to unlock some of the policy changes that are going to be necessary for us to win the AI race while maintaining reliability and affordability.
Jason Bordoff (37:32): I mean, some of that's happening, right? Hyperscalers are going and doing huge numbers of deals around the world in the Gulf and elsewhere and putting data centers in many other places, not just the US. Obviously we need a geographically diverse set of data centers that you can't build them all in the US to serve global needs, but it is hard to build things in the US.
Do you think that this requires a legislative strategy or when you look at what the courts have done, like the recent seven county decision in the Supreme Court or deferring to agencies in NEPA review or administrative agencies like FERC, which a lot about which recently voted to revise its regulations on the implementation of NEPA in response to I think one of President Trump's executive orders, the goal being to simplify the environmental review process, let FERC move at an unprecedented pace, I think was the quote.
How do you think about the role of environmental reviews and nepa, what you saw in your time at FERC, what should be done, if anything, to reform that and does that require Congress or can that be done without Congress?
Neil Chatterjee (38:45): It has to be done with Congress because we need stability. And look, I've told folks on all sides of the energy debate not to make decisions today based on the immediate moment. So on the clean energy side, look, I'll be honest, I've attended a bunch of clean energy conferences in the past few months, whether it was New York City Climate Week or RE+ plus in Nevada, and people are despondent. And you've got investors who are moving away from clean energy assets because of the vibes that they're getting from the current political environment in the US. And I'm trying to tell them, these are still pretty smart, long-term investments. Don't make panic decisions based on the immediacy of the political moment. And I'm similarly telling my friends in the fossil fuel industry, whether it's LNG, nat gas pipelines, oil companies, coal companies, like hey, these are long-term investment decisions.
(39:53): Don't make big bets based on what you're seeing today. Because if you get a change in policy and political leadership in 2029, you may wind up with a bunch of stranded assets because things may go the other way. And this is where I think we need stability. And that's where I think FERC has been really, really important in the past decade or so. I think FERC has been a beacon of stability in what has been an otherwise volatile regulatory landscape. What do I mean by that? Look at the US EPA. EPA went one direction under the Obama administration, went a completely different direction under the first Trump administration, whipsawed back again under the Biden administration, and then now is whipsawed again under the second Trump administration. As someone now who works in the private equity space, who works in the investment space trying to deploy capital, it is maddening to try and peg investment decisions, long-term investment decisions to the political pendulum, swinging wildly back and forth like that. We need more stability and FERC has been stable. Did FERC go in a different direction under my leadership than my predecessors in the Obama administration? Absolutely, but it wasn't a dramatically different direction. Did FERC go? Yeah,
Jason Bordoff (41:19): I was going to say part of that I presume is a function of how it's been a while since I took administrative law, but the function of these agencies, some are political with cabinet members appointed by the president, they are supposed to change when the president changes. And then you have the so-called independent agencies of which FERC is one. And I'm wondering how you think about that independence — what it means. Obviously we know statutorily what it means. There are terms, it doesn't work quite the same way, but do, how important is FERC's independence, and do you think FERC’s independence is being compromised today by some of what this administration is doing to target other places like the Federal Reserve and sort of demand more consistency with administration policy? It seems?
Neil Chatterjee (42:03): Yeah, it's a great question and I do think fess independence is essential. So for your listeners who may not be as familiar with these wonky technical details, FERC, when at full strength, has five members. No more than three that can come from one political party and all five members serve staggered, independent five-year terms, so that theoretically you could outlast the president that appoints you so that you can act independently. The thought being that when it comes to something as consequential as electricity, which literally touches every single American, we don't want politics infecting long-term decision making. And that's where I think FERC’s stability has been so important. And in my view, look, the issues that FERC deals with aren't cleanly political. I mentioned, and you and I discussed this whole issue around data centers and how to power data centers. The Trump administration is split on this. You've got some in the Trump administration who want to win the AI race for national security purposes, and you have others who are fixated on bringing down the cost of electricity and they're split on how best to go about that.
And so I think a politicized FERC doesn't do you any benefits. All it does is create greater uncertainty and instability, and I am worried now that, look, one of my former colleagues, Mark Christie was the chairman of FERC for the better part of this year. I thought he did a genuinely admirable job navigating the agency. He was not renominated for another term because he wouldn't bend the knee to the administration. One of my dear friends and former colleagues, Laura Sweet, who was confirmed by the Senate last week was just appointed while we've been recording this podcast as chair FERC, she's the new chairwoman of FERC. Congratulations, Laura, you're hearing it here first, I'm congratulating you. I think if Laura Sweet is given the opportunity to be an independent chairwoman, she'll be outstanding. What I worry about is that she's going to have to clear every decision through OIRA and OMB, and if that's the case, then she's no longer an independent chairwoman of FERC, she's essentially an administration staffer, and that's not good for long-term stability. And so I'm hoping my friend Laura is strong in defending FERC's independence and will make decisions based on her experience, which is high quality, that she can do what's right for the American consumer.
Jason Bordoff (44:47): FRRC… I hear you that FERC needs its independence. I presume FERC also needs a lot of technical expertise, and I'm wondering how you view, I think FERC's been under a hiring freeze for maybe since the start of the administration? I think losing various key staff members. Head count has been falling. Now we have the government shut down. Are you worried about FERC's capability, the human capacity there?
Neil Chatterjee (45:15): I'm less worried about that. Look, having been chair of FERC, I can tell you you could always do things more efficiently, and one of the things that is intriguing about the FERC space in particular is it tends to draw some of the most kind of competent, qualified people in society. Folks that have the engineering and economic and legal backgrounds to apply for jobs at FERC. I mean, these are some of the most qualified folks you'll ever meet, and so I think there are plenty of folks there who are willing to meet the challenge and there are folks in the queue that can step in if there's turnover. I don't like seeing turnover. I do think particularly we're seeing a generational shift here where you've got a lot of senior leadership, senior experience retiring. We need to encourage younger people, Columbia grads, instead of going to Wall Street or to go to work for a big energy company, go serve your country, work at FERC. Or if you don't want to move to Washington DC or a regional office, go work for an RTO or an ISO in a critical role helping us maintain reliability and affordability. That's my long-winded senatorial way of saying I'm okay with greater government efficiency and I'm not concerned about FERC because of the quality of the people there.
Jason Bordoff (46:48): Well, hear hear on, we need more talented young people going into public service. I only have a couple minutes left. I wanted to ask you about what you see as the outlook for a few areas of power production, generation. So I mean, again, coming from Kentucky and Leader McConnell in your background, we just saw officials from the Trump administration unveil a raft of policies to increase coal mining, delay the closure of coal plants. Does that make sense and is it going to work? Trump talked about bringing coal back the first time he was in office and it didn't really happen. Is it going to work this time?
Neil Chatterjee (47:25): It's fine. I think what's different now than the first Trump administration is that we are seeing this surge in demand for power, and so I think keeping resources like coal and nuclear and hydro afloat is fine, but it's not additive. The reality is in order to meet this coming surge in demand, because nobody's building new coal or new nuclear anytime soon or new hydro, in order to add electrons to the grid, we're going to need different resources. I think gas is largely sold out through 2032, and because of supply chain constraints, we're probably not going to see new gas online before 2029. And while I would love to see advanced nuclear come online, I think we're probably a decade away, and as I mentioned, no one's building new coal or new hydro, so how are we going to get new electrons onto the grid? In my view, it's solar plus storage with gas peakers to balance the grid, and then negawatts like demand response, energy efficiency, virtual power plants, grid enhancing technologies to squeeze efficiencies out of our existing infrastructure.
(48:46): It's the new electrons and the negawatts that I think are going to be the key steps that the administration is taking to prop up existing coal while it drives proponents of markets crazy. I'm actually okay with it because we do need the electrons. I think there were a couple of instances in which DOE intervened and prevented the retirement of coal plants that were slated to retire this year, and those plants actually wound up being dispatched during the summer heatwave, which I think validated DOE's approach, so I'm not going to throw shade at them. What they did is okay,
Jason Bordoff (49:28): I mean, you said earlier you didn't think renewables should be subsidized, but it sounds like you're saying you're okay subsidizing existing coal to prevent its closure. Right. Is that a fair characterization?
Neil Chatterjee (49:41): I'm saying as a proponent of markets, it's not great, and in the same way that I hope, and to be clear, I want to clarify a point when I said renewables shouldn't be subsidized. I also made the case all summer during the OBBBA negotiations that you can't pull the rug out from underneath people who had deployed capital with an understanding that these were the rules of the road. And so what I asked for, and in many instances, Congress granted was a runway to enable renewable generators to move away from subsidies, so I didn't want the subsidies taken away overnight. Yeah, coal subsidies, which is what this basically amounts to. Again, in the face of this coming surge in demand, I think we need every available electron. Here's the difference, quite frankly, between, I work in residential rooftop solar. I think resi solar come 2029, 2030 when prices unfortunately are going to be so high for consumers, consumers won't need a subsidy or a tax incentive.
(50:55): I think they will be motivated to put panels on their roofs for cost savings because the business case will have improved. I don't know that that will be the case for coal fire generation long-term, but in order to meet the coming surge in demand, while I don't love out-of-market subsidies, whether they be clean energy credits or nuclear subsidies or coal subsidies, I don't like any out-of-market credits, but in this moment, if the government's going to pursue them, at least be consistent. If you're going to subsidize coal, don't simultaneously pull permits for almost fully built renewable facilities that are ready to deploy electrons. We really need to be smarter about all of this and less political.
Jason Bordoff (51:48): What do you think the grid looks like in a decade? Say, how are the broad percentages different than today? Where are we going to see the most growth? I
Neil Chatterjee (51:56): Think it's going to be a far more distributed grid. I think we are at the precipice of moving away from sort of our centralized system of generation distribution and consumption of power. I was proud to have played a small role in that in pushing FERC orders 841 and 2222 that removed barriers to entry for some of these aggregated distributed energy resources to enable them to be compensated for all of their attributes, for capacity, for energy, for ancillary services. It's taking a little bit longer than I would've hoped at the time that I promulgated these rules, but I am confident that by 2030, 2035, we are going to have a very, very different looking grid. And I do think this surge in demand being driven by AI that's going to drive up prices, will be the mechanism that allows for greater deployment of these aggregated distributed energy resources.
Jason Bordoff (52:51): It's really interesting. We'll have a lot to talk about as the focus of so much energy policy now is on the grid, on power prices, on electricity. So really, really helpful to learn from you and hear your thoughts and perspective on this and excited to continue to engage with that here at the center in the coming year and beyond. Neil Chatterjee, thank you for making time to be with us today. It was a really interesting conversation.
Neil Chatterjee (53:14): Thanks so much for having me. Love having these conversations with you as always, and look forward to many more during my role as a distinguished visiting fellow.
Jason Bordoff (53:29): Thank you again, Neil Chatterjee, and thanks to all of you for listening to this week's episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University.
The show is hosted by me, Jason Bordoff, and by Bill Loveless. Mary Catherine O'Connor, Caroline Pitman, and Kyu Lee produced the show. Gregory Vilfranc engineered the show. For more information about the podcast or the Center on Global Energy policy, please visit us online@energypolicy.columbia.edu or follow us on social media at @ColumbiaUEnergy. And please, if you feel inclined, give us a rating on Apple, Spotify, or wherever you get your podcasts. That really does help us out. Thanks again for listening. We'll see you next week.