The AI Revolution and Its Impact on U.S. Energy Demand

Hi and welcome to the Impact on FinTech TV.

I'm your host Jeff Gitterman.

I'm joined today by Ying Wangxi.

She is the head of structuring at MNA.ing, so nice to have you on the show today.

Thank you for having me.

It's really nice to be here.

So at least to get started, tell us a little bit about M&A.

Evolved out of and then we'll get into your role and what's going on at the company, OK.

Oh yeah, of course, yeah, so we are Emanate Energy and we are one of the largest independent power producers in the US focusing on solar storage and EV charging.

So we have operating asset of 4 gigawatts of solar and 1.1 gigawatt hour of storage of 28 days.

And also over 40 EV charging high power EV charging stations hold off 10 states.

So and at the same time we also have over 9 gigawatt pipeline we're still developing.

Uh, originally the team was founded with Dean Goldman at the end of 2017, focusing on solar and storage investment, and we spin off from Goldman in August 2092 and since then rebranded as the MD Energy.

So when you talk about a private producer, a lot of the audience may not know the difference between a public producer and a private.

Can you talk about where does a lot of the energy that you're producing go?

Where are you connecting to, who's utilizing it?

Yeah, that's a good question.

So yeah, I mean for us like you know, either renewable ITT, so we basically we with most of our assets, I mean. based on the wholesale electricity markets, right, so we have footprints in California, Kaiser Market, TJM Urcat, New England and New York as well.

And I mean here in the US, the buildings that is that you have a lot of deregulated markets.

So yeah, and we basically the deregulated market is our bread and butter, so that's.

Where they independent our producer company role.

So where we own and offered assets to generate electricity and all the electricity flow into the grid, and from there you have the utility company transmission and distribution then that eventually goes into the end customers.

So yeah, I would say that's the kind of like the difference from a regulated utility company.

So now let's dive into the US Energy market and what's happening with demand and growth.

For decades we've kind of seen pretty stagnant energy demand growth in the US.

Now all of a sudden with the AI race, things seem to be dramatically changing.

Can you talk us through that a little bit?

Yeah, of course.

Yeah, so as you said, the last two decades, I mean, the The low growth is really, it's really a very, very slow in the US the kind of annual average kicker is only 0.1% low in the last two decades because a lot of the energy efficiency and other trends that was kind of really shifting what the picture on the low in the past two decades.

But right now, as you said.

The data center AI driven locals is really a game changer and together with also like electrification, right, so you have you recording and also like a key to electricity that a lot of electrification is another factor and At the same time, a lot of industrial onshoring, so more manufacturing jobs coming back to the US.

Those are three as together back to really we're seeing this unprecedented locals, but the front and center is definitely the AI driven data center demand.

So I think now depending on different forecasts, but you are seeing like 2 to 3% annual growth people are expecting in the next several years, which I mean I think for the average person they hear 2 to 3% that doesn't.

Seemed like a lot, but that's a huge increase in US energy demand that arguably the grid potentially isn't really ready to deliver, correct?

Yeah, yeah, that's a great point.

Yeah, that's that's exactly what's happening on the braid right now.

So we're, so this 23% growth, but that's actually crastinating into say.

Dozens or even say 100 gigawatts, you're going to throw like incremental demands on the rate for the next several years, but at the same time in the because on one hand we have on the transmission side in the past in the half 5 years actually we have command this like slow down in high voltage.

Transmission line build up.

So the 2023 there was only like 55 miles high watermission line and 24 only like thick of 70 comparing to the previous in the 2010s, there was an annual average is over 1000 miles of high high voltage transmission line.

So people had been kind of like the because of the in the past the law was really growing, so the whole grade people have never been really it's like people haven't been prepared for a tremendous low jump up again.

So that itself is creating a lot of challenge but also opportunities to grow our system.

So talk about that opportunities for the system and for private man.

What does that look like in the US right now?

I think the US energy market, something interesting is different by different regions, different ISO.

It has a lot of different structure.

So for example, like the PGM market and MySO market, those are But Oma had two of the largest ISOs, and their peak load in TGM market last year is 153 gigawatts, and that is expected to grow by another like 30 gigawatts in by 2030.

The majority of that is coming from their virginia.

Yeah data center grows, right, so that and done causing a big reliability, you know, crunch right on it's reflected in the capacity market price.

So the most recent capacity market auction just cleared at the cap $3329 for leg per day.

And the Paris here, it's already, it's already tenfold from the year before and most recent year it goes even higher, so that's a tremendous like reliability but also affordability, you know, consideration.

And then in other markets like like URA URA, which is the Texas market, Texas market is known to be, well, the fastest market where people can build a generation and loads and rather faster.

So that is another kind of big market that attracts a lot of data centers, give up department as well, um, because in the end if you don't have the generation.

To serve the load that you can really build the load as well.

So any air market you see a quick deployment of solar and storage.

It's almost like fast forward than any other market.

So right now it even have more solar and storage in the California market.

So but part of the reason obviously is because the IRA market, it was size is larger so.

It has a tip load of over 80 bio gigawatts, and in California, obviously the key feature is known to be a first mover in the solar deployment and as a result they had a lot of battery storage as well.

So relative in the energy mix percentage-wise, California is still being in the way in terms of like solar and battery penetration.

So I think there are different characteristics of different market.

It's that jobs like a unique nature of different, like different opportunities in the market, but I think overall that the big thing is we need a lot of new generation, right?

So we, I think this now the data center, this unprecedented locals coming from data center really gave like the whole I would say the energy kind of community like.

A renewed interest regarding a new generation bill.

So we're not only energy transition but also energy addition, right?

Yeah, also storage, which I mean, I think the big problem we're having is that data centers need constant supply of energy.

They can't have peak and low demands.

They have constant on, so storage is becoming, I think, critical and does M&A play a role in trying to advance and develop storage into the grid and Emanate we We, we own and operate a 1.1 gigawatt hour of storage already, as we are a strong believer in the critical role that battery storage could play in the in this market new market structure.

So on one hand it's regarding the reliability and also the flexibility, right?

So because we, so for example, like right now almost like over 90% of the interconnection Q is all coming from renewable energy projects so.

But with this huge, with this tremendous los, that's renewable is going to continue to play an important role.

Relatively, there's still one of the, the fastest and the cheapest kind of resource that you can install to the grid.

But at the same time, what the grid needs is also not only megawatt hour but also more importantly in the megawatts show up in the right hour.

So that that's where battery storage can play a very important role.

On one hand is because it adds solar and wind, the intermediary nature of renewable energy resource and battery could play such a critical role in balancing the log shape, right, in balancing your generation profile.

And then on the other here on the on the on the low side, so I think there are a lot of interesting initiatives as well.

So boys and boy IRA, there is the Senate Bill 6, right?

So it's the, so that bill is regarding how the large load to the interconnected rate, how they will operate, and they even refer the large load to be able to help themselves, kind of like during the emergency system conditions and so those in that in order to achieve that you will need in the concept behind the meter battery solution to combine with large load so that's another kind of direction as well and also some other interesting like um I would say structure is like the demand response right more power plant like another that's another area so but battery itself.

It is going to be very critical to enable all the different measures and we emanate.

We were from the area in storage and we also work with a lot of the hyper scalar in a large actual customers.

They are our customers as well and it needs to be very strong interest from like data customers in 24/7 24/7 carbon free energy.

So that they also have a lot of strong interests not only in, you know, short duration battery but also longer duration battery.

So I think eventually things could go to that direction.

You would have some renewable, some some energy storage, but even long duration storage as a whole to provide a 24/7 DD solution.

So what do you say to the climate focused investor who's looking at a lot of the incentives? wind and solar being pulled back on the IRA bill and concerned about where to focus their investment around climate friendly investing in energy.

What would you say to those people right now?

Yeah, so yeah, I think when when I talk with other other investors like in the in the community, I think everyone needs so even though there are some policy uncertainties, but at the same time, This unprecedented low growth is really kind of the tailwind for the entire industry.

And people are thinking basically solar renew renewable, they're not going anywhere we are so there will, it will, it's still it's the majority of the interconnection field is still going to can build and I, I think also like the the customer interest in this carbon free their commitment regarding like in their Islamic and climate commitment it's still very they're still very serious about that.

So I think in the in.

Um, I would say, I think at the same time, a lot of the interesting stuff, I think not only say on the On on the generation, but also how could the grid be more flexible and be more latter, right?

So I think some of the kind of climate related innovations we have seen is, for example, some enhanced the kind of like interconnection study process, right, or some dynamic line reading of the transmission line.

How do you kind of like Using a smarter way to unlock more happy room in the grid, right, so on one hand that could increase the speed no matter on the load all on the generation side to interconnect.

And then at the same time I think there are also some AI kind of like enables supported solutions help people to better.

Focus on the load and the generation.

So I think some innovations in that area, it also could be an interesting area for climate investors.

I don't know if you saw this morning, but Druckenmiller came out this morning and said that he had, or at least it came out that he had shifted his investment portfolio from the kind of AI darlings to the picks and shovels, the grid, the investment in the grid, the infrastructure, and you know, certainly he's been a leader in investment. thinking for decades now, and it was interesting to see him really focus on what you're talking about that infrastructure around the grid, not just the NAI company, but, but how is that NAI company going to get the energy they need to actually stay in business?

So very interesting to see that this morning ahead of our show.

Um, so the last thing is what are you looking at as far as collaboration, how are you networking within other industries, because this is kind of all hands on deck problem.

If we're going to get this amount of energy, we're going to keep the grid from having rolling brownouts and other things that we've dealt with before when energy demand was too high for the grid.

But where do you see collaboration these days?

Yeah, I, I don't see a lot of collaboration, so yeah, that's, you know, that's the way I and we actually partner with the inside Coallab roundtable, and I'm actually on the advisory board of this really cool community.

So we're, we have private dinners with like private equity like a capital and also like startup founders, all different people.

Coming from different angles try to solve this problem together.

So and I, I personally also, I went to some conferences as well.

So and some of the conference we see like I see like the convergence of the the regarding energy infrastructure and digital infrastructure.

You see like big banks, they not only do project finance, not on the energy side, but also like a data center side.

But I think at the same time the innovation like trying to see new ideas like that's really cool as well.

So that's why I really like the cola roundtable dinners.

For me it's to see some of the new innovation it's really helping me to to see kind of like how the future would look like.

So I think, yeah, I think end of the day this is obviously.

There's no EI there's no AI without EI.

That's what people say.

It's like no AI without energy infrastructure.

So I think energy is going to continue to play a really the most critical role in supporting AI.

But I think at the same time the innovations on the AI side could also not only be part of the problem but also part of the solutions as well, for sure.

Yeah, this has been awesome.

Thanks so much for being on the show today.

We'd love to keep in touch and hear more about what's going on because this is the problem that's not going away.

So I think we're going to hear about interesting innovation solutions coming from M&A as time goes on, and thanks Insight Collab for introducing you for having you on the show today.

It was a pleasure.

Mike, great honor to be here.

Thank you.

Thank you for our collaboration.

That's it for the impact on FinTech TV.

I'm your host Jeff Gitterman.

Until next time.