Alex Epstein, author of Fossil Future and Energy Talking Points, and James Showalter, who actually runs a solar and battery company, both support the Trump administration's efforts to get America back on track on energy policy.
00:06:38.000Alex Epstein, the author of Fossil Future, along with first-time guest named James Showalter, who actually runs a solar and battery company.
00:06:49.000And despite coming from very different perspectives, And different sides of the energy spectrum, they both support the Trump energy policy.
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00:09:28.000Guys, joining me now, the author of Fossil Future and Energy Talking Points, Alex Epstein, along with the founder of Energy Access Innovations, James Showalter.
00:09:44.000Guys, thank you so much for both being here.
00:09:49.000So I thought we would do a little something different with this episode, and we have more of a discussion or perhaps even a debate on energy policy.
00:09:57.000You both have expressed quite a bit of support for the Trump energy policy that's been coming out, but you both also come at it from very different angles.
00:10:06.000Alex, you've been on the show before to discuss the case for fossil fuels, while James is actually in the solar and battery space, which we often think of as...
00:10:15.000Perhaps being at odds with fossil fuels.
00:10:18.000So I guess to start, James, can you just introduce yourself a little bit to the audience and talk about your unique perspective?
00:10:28.000I started Energy Access Innovations, which controls Signature Solar Electronics, which is the number one B2C consumer platform for solar parts in the United States, and also EG4 Electronics.
00:10:43.000Which is our own battery and storage brand.
00:10:46.000And we reached number two in volume in the residential battery space last year.
00:11:03.000We have a coal mine that got shut down.
00:11:06.000And I started the company when I was 24. Previous to that, I was a solar installer between 19 to 24, and I kind of saw some of the problems of the battery-less net metering dependency solar.
00:11:18.000And previous to being a solar installer, I was a barbed wire fence builder working on dairies, and I ran a hardware store before then.
00:11:28.000I graduated high school early as a homeschool gig.
00:11:32.000My parents took advantage of whatever unfunded school choice there was.
00:11:37.000So I was able to leave high school by the time I was 15 and just have been running ever since.
00:11:42.000I love entrepreneurship and I love independent energy.
00:11:45.000And we've been a big part in trying to move the industry towards just return on investment and independence.
00:11:54.000And we see an exciting future for the technology and an exciting future for an America with dropping energy prices and more energy abundance overall without government intervention.
00:12:06.000So that's kind of a based background for a solar guy.
00:12:48.000With fossil fuels, I don't just have a fetish for fossil fuels.
00:12:53.000I didn't come from a family background of fossil fuels.
00:12:56.000I didn't come from industry or anything like that.
00:12:58.000I like fossil fuels because fossil fuels are, in most cases, the most cost-effective form of energy on a free market, which means they're affordable, they're reliable, they're versatile, they can power everything, including airplanes and container ships.
00:13:11.000Nothing is as versatile as oil in particular these days.
00:13:15.000They're available to billions of people in thousands of places.
00:13:18.000So politically, I don't stand for fossil fuels at all.
00:13:21.000And in fact, I'm very at odds at the moment with the fossil fuel industry on subsidies, which we'll talk about in a second, because they want certain subsidies that I don't think are right.
00:13:30.000What I'm really for is energy freedom.
00:13:32.000So the freedom of all different industries to produce and compete, and then the freedom of consumers to choose.
00:13:39.000And there are many, many impediments to energy freedom, and the current administration is doing a good job.
00:13:45.000At fighting many of them, I'd say particularly on the control and regulatory side.
00:13:51.000The battle that we have coming up that I've been advocating on this show and others needs to go in a certain way is with regard to what the president calls the Green News scam.
00:14:05.000They call them tax credits to make it seem like, oh, we're just letting people keep a little bit more of their money.
00:14:09.000But these are, in fact, overwhelmingly a mechanism to just give money to otherwise unprofitable businesses.
00:14:15.000So if you were to take the things that the fossil fuel people support, sometimes like hydrogen, carbon capture, for the most part, these cannot.
00:14:23.000They cannot be funded in a free market.
00:14:25.000They can in a very limited way, but not in the way they are.
00:14:27.000And so they're demanding, you know, upwards of hundreds of billions in subsidies.
00:14:32.000If you look at the biggest single subsidies that are a problem, it's what are called the clean electricity ones, which historically and currently are focused overwhelmingly on solar and wind.
00:14:42.000Depending on the estimates, you're looking at between about $300 billion and $900 billion.
00:14:54.000It's not just the amount of money for the budget.
00:14:56.000The main issue is these have dramatically distorted electricity markets.
00:15:00.000Because what they do is they pay utilities a huge amount of money.
00:15:04.000I mean, the mechanisms are complex, but they pay them a huge amount of money to use solar and wind whenever they happen to be available, even though they're not reliable on their own without massive storage.
00:15:13.000And that defunds the natural gas and coal.
00:15:16.000Because if the natural gas and coal don't get paid when solar and wind happen to be available, they get defunded, they have less money.
00:15:24.000That plus the regulation has given us a dramatic, dramatic shortage of reliable electricity supply.
00:15:30.000So what I am for is getting rid of all these subsidies, getting rid of all favoritism, and setting up market rules where any form of energy, including solar and wind...
00:15:40.000Can succeed if it can actually contribute to reliable energy at the lowest cost.
00:15:45.000That's what I'm for, and that's why I think we should get rid of all the IRA subsidies, or as President Trump has put it, terminate the Green News scam.
00:15:52.000So James, how would you respond to that?
00:15:54.000Because again, obviously there are subsidies across the energy sector.
00:15:58.000Oil and gas certainly gets it as well, but you certainly hear it.
00:16:04.000Solar's definitely made some advancements over the last few years, but I sort of, you know, someone I know who's a banker in New York once sort of said, you know, solar's been the next big thing for the last 30 years.
00:16:19.000Yeah, gosh, there's so much to unpack about what's in those subsidies.
00:16:24.000Normally I'm on podcasts discussing like products technically line by line.
00:16:28.000So I'm going to just, if you'll entertain it, let me discuss the IRA like it's a product and kind of go line by line on those credits.
00:16:37.000Just to check the theme here for a second, this is, I think, one of the reasons why me and a few other people in the solar industry are realizing that, you know, our future is not in the green lobby.
00:16:49.000And we aren't fighting for what they're fighting for.
00:16:52.000We are fighting for at EAI and many other companies that I think will come out of the woodwork and support this movement, which could really change the landscape of the green movement.
00:17:09.000We stand for homeowners and end users having a right to generate their own power.
00:17:14.000And we think that a lot of the future of a competitive, innovative, energy abundant landscape is going to come from energy that is generated sometimes at the end of the line and not the beginning of it.
00:17:26.000But at the same time, we're not the ones that want to see Any other fuel source get penalized.
00:17:34.000I want this administration under the leadership of your father to jump in and make natural gas as cheap as it can be without subsidizing it.
00:17:43.000We don't want to see a seesaw where, okay, when one party's in power, the fossil lobby gets free money.
00:17:52.000And when the other party's in power, the renewable lobby gets free money.
00:17:55.000I believe in innovation and the free market.
00:18:35.000And if you're not counting carbon, I'm going to make a better battery and I'm going to sell you on energy ROI and energy of independence.
00:18:42.000And I'd like to do it in a way that does not use public money and does not use subsidies.
00:18:47.000So how do we frame an even playing field?
00:18:50.000The even playing field I'm interested in is businesses and homeowners becoming a part of the energy generation marketplace.
00:18:58.000I want millions of competitors to the central mistake that has occurred as these public monopolies in the power of business have had 100 years to vegetate and go from seeking the public interest to, frankly, I think they're like insurance companies where they make money.
00:19:15.000Every time that we have a justification to raise the price, I think the green situation has been a boondoggle for some of the biggest operators because it's just like, you know, if you can raise the cost of medical care, then, you know, there's more overall profit for the insurance companies.
00:19:29.000Yeah, well, it's no different than education.
00:19:31.000There was no cost to raising the price, so they raised the price, even if the value derivative of that education is demonstrably less each and every year.
00:19:41.000So, frankly, you know, I've got to, you know, take a step back and just kind of make sure that we're going on the scope here.
00:19:47.000I think, you know, the American people came out and supported policies of saying, look, you're not right unless you cut my power bill.
00:19:54.000And I think there's so many grid disaster tales around the United States where people's energy, energy poverty is one of the biggest problems we're facing in our time.
00:20:21.000And we think all, like for us, it's the power companies and the homeowners and businesses.
00:20:26.000And what we want is a truly abundant market where millions of players are involved in there.
00:20:30.000So I think if we want to see super competition with all technologies, and by the way, we're open to, I build battery systems that work with solar panels.
00:20:39.000Show me another fuel source that I can deploy at the end of the line, and I'll integrate that too.
00:20:44.000I'm open to squid oil and methane and all kinds of other things.
00:20:47.000So for me then, okay, framing, how do we get to a free market?
00:20:52.000And where does the IRA intersect with distributed generation?
00:20:55.000I think that the IRA fell victim very quickly to regulatory capture, as they call it.
00:21:03.000Where basically people who were involved in lobbying for the bill then wrote the regulations afterwards and they created massive loopholes.
00:21:09.000You've got to pass the bill to find out what's in it?
00:21:12.000Well, they passed the bill and then it went to executive branch administrative groups that frankly surprisingly did things that were vastly in favor of public companies.
00:21:24.000We don't benefit from the PTC, the power tax credit where we pay wind turbines four cents a kilowatt hour to make power no one wants so they can call up the grid and say we'll sell to you for negative one cent, right?
00:21:34.000So we can get power four from the Fed.
00:21:40.000We want to be part of a revolution that is creating independence and ROI for our customers and driving down the cost of power for all of our neighbors that aren't yet doing that.
00:21:53.000The one tax credit that's in the IRA that I believe is a free market equivalency, is I believe my logical basis is that homeowners and businesses should have the exact same competitive environment to make power as a power company.
00:22:07.000That's the reality of distributed technology, which currently is batteries and solar panels.
00:22:13.000But frankly, in some cases, it'll be battery, solar, and natural gas.
00:22:15.000I think flare gas and batteries will be amazing for AI.
00:22:19.000In areas where we aren't able to utilize natural gas.
00:22:22.000We can use distributed technology to use all kinds of energy, and I'm just for energy independence.
00:22:28.000And so when you look at a homeowner, the tax credit for homeowners is supposed to be 30% of the cost of the system.
00:22:35.000Now, a homeowner has to use after-tax dollars to buy their generation system.
00:22:41.000The power company which they buy from...
00:22:43.000Writes off that generation asset, writes off the lines, writes off all the labor.
00:22:47.000So I do think that there's one group where if we're going to serve the American people, we want to put homeowners in the market of having all the choices they can have.
00:22:57.000We need to facilitate something like an equivalency, and it's about 30%.
00:23:01.000Now, I would say that the residence tax credit is also a perfect example of what got ruined in regulatory capture afterwards.
00:23:10.000Because, well, what's that 30% based on?
00:23:12.000Well, it should have been based on actual costs.
00:23:15.000I think it actually should be worse than that.
00:23:17.000It should be based on a competitive target so that we actually drive the cost of the technology down.
00:23:23.000I think when you have an unlimited cap, you create, in the U.S., currently, home solar with batteries in the United States is a minimum of $3 a lot.
00:23:31.000But some of my installer guys are down to $2.60.
00:23:33.000We drive the competitive end of the market.
00:23:35.000The Australian market is at $1.20 for solar and storage.
00:23:41.000American solar, when everyone's lobbying for American solar, what they're really lobbying for in most cases is an uncompetitive and lousy business model.
00:23:53.000So in Germany and Australia, that low price per kilowatt hour is not a derivative of extra subsidies?
00:25:12.000I think homeowners need a tax credit for a generation investment or some way to correct the fact they have to invest in generation assets with post-tax money.
00:25:20.000I think that there's 25 states in the United States to charge sales tax.
00:25:24.000On generation equipment for homeowners and businesses and the labor on such.
00:25:29.000And I think that there are sales tax exemptions for power generation.
00:25:33.000I actually worked with a Republican house rep in my district.
00:25:38.000So is this a new subsidy or you want to modify the consumer one or you want to modify the investment tax credit?
00:25:43.000The investment tax credit for homeowners needs to be idiot-proofed and it needs to be kept because we need to create an even playing field.
00:25:51.000But you want to get rid of it for industrial solar?
00:25:56.000There is no mandate from an American ratepayer that wants to pay extra for solar power unless they want to pay extra for solar power, and those governments shouldn't subsidize that.
00:26:08.000Okay, so I think you're talking about then getting rid of the ITC, so investment tax credit.
00:26:16.000You're talking about getting rid of the vast majority of that, because what you're talking about is a tiny portion of the market compared to what industrial.
00:26:24.000So with this, there are two aspects to this.
00:26:30.000So one is this issue of, like, should you be able to sort of, if you're a homeowner producing electricity for the grid, should you get some sort of, like, the same kind of tax deductibility that a business should?
00:26:42.000And then there's this whole issue of, like, is it really good to think about these homeowners as in any way equivalent to what?
00:26:54.000I think the best way would just be to say, hey...
00:26:57.000Homeowners can business expense certain kinds of things if they want to sell electricity to the grid.
00:27:02.000It can just be like a little home business.
00:27:03.000You don't need tax credits to do that.
00:27:06.000So you can get rid of the whole IRA and do what you're talking about.
00:27:09.000I do want to say, though, this distributed generation thing, like right now, solar is preferred not just with subsidies, but is preferred with a form of market access that is totally insane.
00:27:22.000Solar gets to sell to the grid, so the grid will take solar or wind at any time in any quantity, regardless of the reliability that it's contributing to the system.
00:27:33.000And then they'll say, well, solar is cheaper than fossil fuels.
00:27:36.000This is like, you know, I have a 10-month-old.
00:27:37.000This is like somebody saying, hey, I'm a babysitter.
00:27:40.000I'll only charge you $15 an hour, but I only come a third of the time and you don't know when.
00:27:45.000And I'm way cheaper than that babysitter that comes all the time when you want them.
00:27:50.000So what I'm advocating is that we need grid rules that require everybody to meet the same standards of dispatchability or reliability in one way or another.
00:28:00.000So if homeowners want to do this, it can't be like the past where they can sell electricity randomly and we have to take it.
00:28:05.000And with net metering and subsidies where they get a huge bonus, it needs to be you provide...
00:28:11.000So if a homeowner can provide electricity using their solar panels and batteries with the same reliability as a natural gas plant, more power to them.
00:28:19.000But the current state of affairs is just screwing up the grid further with this so-called distributed generation.
00:28:25.000So do either of you think you could actually ever have a truly fair marketplace with all of these things competing on equal ground?
00:28:39.000One is this is the most radical would be like you have total property rights in the country and you make it easy to build things and you literally can have competing grids.
00:28:48.000The second way to do it is what I indicated, which is having the kinds of markets we have right now, but having tech neutral, what are called dispatchability or reliability standards where all the different players have to meet.
00:29:00.000You have to make electricity available on demand in certain quantities.
00:29:04.000You can't just make it available randomly.
00:29:06.000And then the third thing, which is what the old utility system used to do sort of with laws, is what's called long-term system cost analysis, where you figure out a given entity serving the consumers and accountable to them.
00:29:19.000Decides what is the right mix of things.
00:29:21.000So it might decide, hey, solar is good for 7% because it's cheap on the margin, but it's not very reliable.
00:29:28.000Maybe a little batteries, maybe this much natural gas, this much coal, this much hydro.
00:29:35.000So you can either have the market that's fair, or you can try to do this system thing, or you can return to a society with full property rights, which is obviously a long way away.
00:29:45.000Alex, I think you're glossing over something, and I just want to make sure we're clear on the solar we're talking about here.
00:29:52.000I actually spoke at SolarCon earlier on last week, and what I told the industry was two things, one of which you'd probably very much agree with, and that was that net metering and any kind of grid subsidy is incredibly unfair to people's neighbors, and it needs to end.
00:30:09.000And the other one is that within two years, I think all solar will have 100% battery attachment.
00:30:22.000What does that mean for those who are less energy inclined?
00:30:25.000Yeah, 100% battery attachment means that the solar that has been going into the market, and this is why I started EG4 five years ago, the solar that's been going into the market is a bad product.
00:30:36.000It is just solar panels converted directly to AC, and then basically there's no way to store it.
00:30:43.000So some of that power runs your house and a majority, 60% of that, actually just goes out to the grid.
00:30:51.000And the grid company pays for that export.
00:30:54.000And then depending on the green inclination of the grid company, they've been subsidizing that export.
00:31:00.000So the California PUC, because they finally woken up and realized that their electricity prices are insane, did a measurement of the cost of buying that power.
00:31:10.000The way that they do it, you know, because they want to give a premium return on that power.
00:31:14.000It's $8 billion on a $24 billion residential market.
00:31:18.000So what it means is the 15% of people with solar in California that do that, they don't have backup on their homes.
00:31:24.000And they're raising the rate of power 50% for all of their neighbors so they can get this payback on an overpriced solar system.
00:31:32.000And what I also noticed when I build this company in technology is that the solar tech companies Price their products to the subsidies.
00:31:40.000The moment the subsidies step back, the innovation steps forward.
00:31:44.000And America, again, has three times priced solar.
00:31:49.000So the insanity of what we've done in the market with subsidies in terms of grid regulations, there should not be any net metering in the United States.
00:32:00.000I'm curious what the thing we disagree on.
00:32:02.000Yeah, I think the only thing that we disagree on...
00:32:06.000When we talk about the reliability requirements, that's fine, but most of my customers, all of my customers are battery-attached, Alex.
00:32:13.000And most of them will only export 0% to 5% of their power they ever generate.
00:32:19.000All of their energy savings happen behind the meter.
00:32:23.000Unless the grid company invites them to participate with their battery bank, which is a dispatchability, to your point, a dispatchability structure, I've got power companies calling me up.
00:32:34.000As a guy with a fleet with tens of thousands of battery systems deployed in the United States with the volume that we've got, saying, hey, can we work with you and build a control system so your customers can give us power during peak time?
00:32:46.000My own house, I don't even have solar on it.
00:32:49.000I've got two batteries, and I've been able to cut my energy prices by 75%.
00:32:54.000Is that because you're charging those batteries during off-peak times, James?
00:32:59.000Yes, and utilizing good old fossil fuel at the off-peak time or nuclear or whatever, because some of these things, you know, the best dispatchability technology in the world right now is a battery, followed by your natural gas peakers and then the nuclear solutions, which are great for base power.
00:33:15.000But the reality that I want to see us head to is that the thing that is called batteryless solar is recognized as a scam, and frankly, free market forces move away from it.
00:33:25.000So we need to, the energy abundance leadership.
00:33:28.000That is so clear behind the people that supported the president and behind his administration.
00:33:34.000We need to make sure these power companies cease to create these kind of market distorting and punishing subsidies that hurt everyone's neighbors.
00:33:44.000The sales reps will stop selling the bad product the moment that the grid doesn't want it.
00:33:49.000And the grid's almost an accomplice in this.
00:33:55.000Retail energy providers buy into this whole structure on the buyback because they're like, well, once I got a homeowner with a batteryless solar system, they have to export.
00:34:04.000Like they've invested in an overpriced batteryless solar system, $60,000 or something.
00:34:44.000One is this idea of, I forget how you put it, it's battery attached.
00:34:48.000But battery attached does not mean it's anywhere near fully dispatchable.
00:34:53.000Like, batteries are relatively expensive.
00:34:55.000And if you're talking about a pure backup where you can have a self-sufficient system not connected to the grid, like you can have a self-sufficient, like Elon, for example, you know, in Memphis is building self-sufficient things.
00:35:35.000Solar plus storage is not at all the same dispatchability as natural gas or anything like that.
00:35:38.000And all we need is rules that just say, hey, if you can actually, if you have a big battery bank, if you can provide power by the same standards of natural gas, you should be allowed to.
00:35:47.000We just need to allow the same standard being met by homeowners.
00:35:50.000But so far, as you've agreed to, homeowners have been able to scam other people with these ridiculous net metering.
00:35:58.000Well, you know, I think the only thing I push back on that, Alex, is your grip on the technology versus, you know, our focus in the business.
00:36:05.000Our customers are putting over a 12-hour reserve on their homes, which is typically two hours of solar production because you make a point about the solar capacity factor being about 20%.
00:36:14.000You can achieve this with the right size battery bank.
00:36:17.000Our focus has been reducing the cost of battery banks.
00:36:23.000I want you to be able to compete, but I have no lack of grip on the technology in terms of, like, nobody is actually making purely dispatchable things on a large scale with solar and storage that can be grid independent.
00:36:34.000So they're depending on the grid, but then they're claiming to be, you know, distributed and independent.
00:36:39.000I mean, I got 100,000 customers, Alex.
00:36:44.000The grid is a backup generator providing maybe 2-3% of their power unless they live off-grid entirely and they get that backup generator from a gasoline source or something else like that.
00:37:26.000I want energy freedom, so I totally support your customers.
00:37:29.000Doing that, what I don't support is this idea that everyone is saying, like, we need our particular subsidies for the IRA.
00:37:37.000This is what every group is saying, right?
00:37:38.000The battery people are saying or the homeowners are saying we need ours.
00:37:40.000The oil people are saying we need the carbon capture and the hydrogen.
00:37:44.000The solar people are saying we need investment tax credit.
00:37:46.000The wind people are saying we need production tax credit.
00:37:48.000The biofuel people are saying we need clean fuels or whatever.
00:37:53.000Net-zero airlines are saying sustainable aviation fuel.
00:37:56.000What's going to happen if we don't put a stop to this is everyone's going to demand their own little thing, and we're going to have $1 to $2 trillion of IRA kept around, and we're going to still screw the grid.
00:38:06.000And all of this administration's goals are not going to be possible on the grid as long as we have the solar and wind subsidies.
00:38:12.000And for everyone watching, again, who's not an energy expert, the IRA is the Inflation Reduction Act, and anyone who's been watching...
00:38:19.000Understands that anytime Congress names a bill, it usually does the opposite.
00:38:27.000There's no reduction in the Inflation Act whatsoever.
00:38:30.000Yeah, and I think that the key thing here is that it's not radical to say that homeowners should have access to a free market generating power.
00:38:39.000And the tax implications of investing in generation.
00:38:44.000For a homeowner should be the same as their power companies or better.
00:38:50.000And if you want the power companies living in a no-subsidy environment to actually do their job and innovate and use any source necessary...
00:38:58.000The only way to really make that happen, or one of the best ways to make that happen when you do the right thing for homeowners and give them an even playing field, is put the power companies up against tens of millions of Americans that are saying, you know what, if you don't do a good enough job, the battery-attached solution is,
00:39:24.000You drive innovation and competition in those institutional monopolies.
00:39:29.000What I don't see is why we have to drag homeowners into the green agenda with solar farms and wind turbines making power nobody wants whenever they want to do it.
00:39:40.000The bottom line is, and this is where we fought for And we actually filed a bill in the state of Texas with a Republican sponsor on a sales tax exemption for all distributed generation.
00:39:50.000Because there's no reason why the state should prefer centralized generation versus distributed generation.
00:39:54.000And also because of, frankly, the weight that these technologies carry.
00:39:59.000If someone does a system that saves a $300 a month power bill, even if power stops inflating, it's somewhere in the neighborhood of $80,000 of output on $20,000 of hardware.
00:40:11.000Who's an economic driver that's going to put cash in the pockets of middle-class American homeowners who've been squeezed out of this economy?
00:40:22.000Again, if it's like right now, just quote-unquote distributed generations getting a lot of special preferences, including access to the grid to sell non-dispatchable electricity.
00:40:30.000So what I'm in favor of is hold them to the same standards and give them the same...
00:40:42.000And if there's some issue with business tax deductions for homeowners for their own selling electricity to the grid, let's fix that separately.
00:40:50.000But we don't need to keep the IRA at all.
00:40:52.000And none of those IRA credits are focused on what you're talking about.
00:40:55.000Converting the homeowner tax credit to a tax deduction is a very anti-middle class move because most of the middle class takes the standard deduction.
00:41:49.000They get a 30% equivalent, so it's maybe $7,000 to $9,000 if you're not manipulating the value, which is a big problem I want to talk about, which is the real big cheese.
00:41:57.000That's 80-plus percent of where all the money's going is the manipulation.
00:42:01.000Okay, so what happens is that they get their withholdings refunded when they get a tax credit.
00:42:52.000So the way that individual taxes work, if you really dive into the issue, you'll see the efficacy of...
00:43:00.000The residential tax credit, and I think what we need to do is go after the 80% of the resident, even within the residential tax credit category, I think 80% of the cash is going to a scam focused on lease ownership and multiplying the value of those systems.
00:43:15.000We're putting $30,000 systems, when they wrote the regs for the tax credit, they set it where you take a $30,000 system and put it in at $110,000 based on a third-party appraiser of cash.
00:43:27.000I think the key is, if we look big picture, if there is some legitimacy here and it can't properly be done by the business tax deduction, as I suspect it can be, Then what's going to happen is if you try to preserve just this little part of the IRA or just this sub-portion of the IRA,
00:43:45.000then you allow all the lobbyists to preserve their portions.
00:43:49.000Everyone is arguing for their particular portion.
00:43:52.000So versus if there is some legitimacy here, if homeowners are in fact being screwed, whereas right now they're being actually benefited through access to...
00:44:00.000To sell unreliable electricity that is not fair to everyone else.
00:44:03.000But if they're in fact being screwed in some way, then through reconciliation we can set up a new thing that addresses that fairly.
00:44:10.000But we still need to get rid of the entire IRA.
00:44:12.000And if we don't get rid of the entire IRA, and if people who are generally free market like you argue for your own little slice of it...
00:44:18.000Then we're going to lose the whole thing.
00:44:20.000And here's the macro, just so Don at least has my perspective.
00:44:23.000Like, right now, I'm holding an energy conference with a lot of the, you know, today and tomorrow, some of the, like, leading electricity energy people.
00:44:45.000You cannot subsidize unreliable power and defund reliable power and handle a grid that needs to expand to accommodate AI, let alone EVs if we have more EVs.
00:44:57.000It's so urgent to get rid of the IRA and to get everyone on board with getting rid of the IRA.
00:45:04.000And if there are any other changes to tax code that are fair, then we can do those separately.
00:45:09.000Alex, you guys mentioned the word sort of, you know, the very technical nature of this.
00:45:14.000You know, having been around politics for quite some time right now, how many people in Washington, D.C. How do we get to a solution that is actually fair and just in something that the vast majority of the 535 people in Congress likely will never understand
00:45:59.000What's happening, though, is so everyone knows fundamentally, like most Republicans at least know, like you want a free market if you're subsidizing things that's making things more expensive and or lower quality.
00:46:14.000And the IRA, and I'm putting out something on this probably before this comes out, like every single one of the IRA subsidies is in some way making things less efficient.
00:46:23.000What people are mostly, they're mostly confused.
00:46:27.000They're being pressured by special interests.
00:46:29.000So what we need is as many people as possible, you know, at the White House, the House and Senate to say we have to rise above this.
00:47:42.000It's just there's all these special interests confusing it.
00:47:45.000And that's what we need to try to get above.
00:47:47.000Given the natural sort of demands that we need as a country and where we're going, you mentioned EVs, electric vehicles, what will be the data centers that are going to be required around AI.
00:47:59.000Enough energy to be competitive with China, who's firing up a new coal-fired power plant every other day.
00:48:06.000It does feel like we probably need all of these methodologies to be able to work together to actually be able to generate the electricity that we need to be able to actually fund that innovation.
00:48:15.000And if you fall too far behind in the AI race, all of this is over anyway.
00:48:56.000And by the way, just so people know, I know this is controversial, but right now we're making some big decisions as a country about trade.
00:49:03.000And I would say I'm definitely on the side of let's make sure we have really good trade relationships with our allies because Canada and countries like that, they can be really, really big allies.
00:49:15.000Dealing with the China situation, which is a real problem, is making sure that we have maximum freedom here and that we have sort of interaction with free allies as well.
00:49:24.000I think like we need to scale that up.
00:49:26.000So get rid of all the barriers as quickly as possible.
00:49:29.000That's the urgency supporting, like giving money and tax, you know, these special favors to people.
00:49:35.000That doesn't accelerate anything on any scale.
00:49:39.000How does, since you brought it up, sort of how does tariff and trade policy impact?
00:49:45.000I mean, I think we all agree that energy security is national security.
00:49:52.000I've been saying that for years, ever since they cut off Keystone Pipeline and all of these other things.
00:49:57.000I'd love for you to both to lay out what it means to you.
00:50:01.000Maybe we'll start with James and then go to Alex.
00:50:04.000Yeah, energy security and just really the future of the America First policies.
00:50:09.000You know, as a job creator, You know, the the industry has been taking subsidies from D.C. and then basically borrowing homework from China.
00:50:36.000We started renovating it, stood it up.
00:50:38.000It was a facility in a town next to us that has 10,000 people.
00:50:43.000It lost 1,000 manufacturing jobs 10 years ago, really hasn't recovered.
00:50:47.000And we set forth a plan to move all of our manufacturing from overseas back to that facility over the next few years, I think.
00:50:55.000American manufacturing of energy technology takes vertical integration, so you have to go back up the chain.
00:50:59.000We've let capacitors and heat sinks and all the passives that actually it takes to make energy control equipment, we've let that all go overseas.
00:51:12.000You're obviously so dependent on rare earth minerals.
00:51:14.000China's been making that play forever.
00:51:16.000How do we break that dependency on China and their policies?
00:51:22.000Rightly or wrongly, but certainly intelligently, seem to have cornered a lot of the market on those minerals required to make batteries, whether, and again, whether that's for what you're doing, whether that's for EVs, etc.
00:51:33.000Yeah, I think I also want to point out that China has a dependency on imported lithium, right?
00:51:38.000The batteries that I've sold were manufactured in China from lithium from Chile.
00:51:43.000So, like, basically, they are two rides across the Pacific because they're not completely self-sustaining.
00:51:51.000I think, you know, as somebody who's moved from, you know, a product development and OEM to manufacturing, I mean, the shocking level of just not having a focus in the past 25 years on critical rare earth minerals.
00:52:08.000And that, I mean, I think that, you know, if we want to see energy security, we're going to have to go after that.
00:52:14.000But I would say lithium batteries and solar cells.
00:52:17.000We can make those in the United States within 10 to 20 percent of what China makes them for in a robotic factory.
00:52:23.000But frankly, Chinese factory owners want to see made in a country where they can keep their money, which is a big problem in the Chinese economy right now.
00:52:30.000So we can actually be we can be the next generation.
00:52:35.000I think in the security dimension, there's a couple other ones we try to address.
00:52:38.000We were the first battery company to make an EMP hardened, like military tested battery system for a house that would continue to operate in the case of a grid emergency like that.
00:52:48.000And as a standard issue, some of our competitors are like charging extra for it.
00:52:51.000And we also are working on, you know, I think what we really need is a signal from the DOE or the DHS as to a cybersecurity standard that they'll get behind the best.
00:53:02.000You know, cybersecurity people in the world work for the American government.
00:53:06.000And we either need a platform or a signal.
00:53:08.000I think the whole grid does as to where are we going to go the next stage with cybersecurity.
00:53:13.000But we can match and bolt that on with anything we're doing.
00:53:19.000The third one is the economic security of energy.
00:53:21.000And I do a lot of humanitarian work in East Africa, and I see what happens to communities that are energy scarce.
00:53:26.000We need a competitive energy market that's dropping in cost.
00:53:29.000That also is more reliable in the case of a backup situation.
00:53:34.000And I think my technology is a huge part of doing that.
00:53:36.000I think my competitors, as long as they aren't driven by distorting forces, we're going to do the same thing and going to really contribute to an abundant future.
00:53:45.000Alex, what about you as it relates to tariffs and trade policy right now to be able to secure that production for the future?
00:53:52.000I'm putting out something on this soon.
00:53:53.000I have, I think, a considerably different position than I've heard.
00:53:57.000I think part of what's happened is there is a really legitimate concern about certain structural issues with the United States economy, including dependence on China.
00:54:09.000And in particular, we definitely have...
00:54:41.000I think the actual solution is entirely, I mean, it's basically two things, but the main thing is much more industrial freedom.
00:54:49.000The reason for the problems that we have is just a dramatic decline in industrial freedom over the last 50 plus years.
00:54:57.000And, you know, I mean, we could go through this chapter and verse, but the whole National Environmental Policy Act or NEPA just making it impossible to build things.
00:55:04.000But just to give you one example, I've studied the early oil industry, the first ever pipeline, long distance pipeline.
00:55:22.000In the 1870s, we know the Empire State Building was built in slightly over a year with technology of a century ago.
00:55:28.000So it's all that we are hamstringing ourselves.
00:55:31.000If you have a country with property rights and clear laws against endangering others, but not like...
00:55:37.000Quote-unquote, protecting everything in the world from any impact by us.
00:55:40.000If you have that, if you have innocent until proven guilty for businesses, if you have clear laws...
00:55:46.000Written by usually Congress and enforced clearly, like that system, there is no comparison to that.
00:55:51.000There's no comparison to that whatsoever.
00:55:53.000But unfortunately, we created this kind of green fascist system, which in many ways this administration is trying to undo, but it needs Congress's help a lot because you can only do so much to the executive.
00:56:03.000But this lack of industrial freedom is the reason for our diminished industrial capacity.
00:56:09.000Part of this industrial freedom, part of what makes it better is actually trade, particularly with allies who also have industrial freedom and are aligned with us.
00:56:19.000Because that way we get to take advantage of the resources of other places.
00:56:23.000Canada has three times our oil reserves.
00:56:26.000They have three times our oil reserves.
00:56:27.000We could have an amazing relationship with Canada.
00:56:29.000They, like us, have limitless natural gas.
00:56:31.000The two of us together could just be even more dominant on the world stage.
00:57:12.000And one final thing is, there is a legitimate thing of, hey, we need some things domestically for wartime, but I believe the way to deal with that is not to subsidize industries and not to pass general import taxes, which is what tariffs are essentially.
00:57:25.000It's to say, hey, the government needs to set aside certain critical minerals deposits.
00:57:30.000It needs to set aside even certain manufacturing facilities as part of its military strategy.
00:57:34.000So we can make some of that stuff a military expenditure, but I don't think that we want to pass taxes.
00:57:40.000And screw up our relationships with our allies and create uncertainty in the markets.
00:57:44.000Because unfortunately, what you're seeing right now, and this is why we need really good trade deals soon, is we have a lot of uncertainty in the markets.
00:57:53.000And that's really hurting the oil industry.
00:57:56.000And they're not going to do anything until they have more certainty, plus their steel costs are going up.
00:58:01.000So I think if we can, you know, there are different forces and different advisors.
00:58:04.000And I'm not an official advisor, but my advice is go in the direction of...
00:58:09.000Double, triple down on the industrial freedom, double down on the trade with allies having even better relationships, and then do some specific stuff with regard to security in China.
00:58:21.000James, do you support increasing oil and gas production in America?
00:58:24.000Do you agree with the notion of the importance of ramping that up?
00:58:28.000There's obviously been a lot of debate, but there does seem to be some common ground in pushing back against the left sort of climate hysteria.
00:58:37.000And I think actually to utilize all of America's oil and gas resources, I think there's going to be some incredible opportunities to leverage battery technology in areas that, you know, I've talked to oil.
00:58:48.000I know the number one natural gas rights owner in Texas.
00:59:42.000So what I have to do every year is make a 15% compounded better.
00:59:45.000So yeah, we're talking to those people.
00:59:48.000I have people that are, I'm so busy with the manufacturing side, but we have people in the oil and gas field that are discussing, hey, how do we take the AI centers?
01:00:37.000And we're in this with your father on finding the right spot, and we know he's going to get a good deal.
01:00:44.000So if you're the administration, what are the next steps that you're trying to do to figure these things out?
01:00:48.000You know, our focus entirely is hiring more manufacturing workers, training them up, because job training and education for high school-level people in rural America is not where it needs to be.
01:00:58.000So if you're a manufacturer here, you've got to invest in your people.
01:01:02.000We've done it at Signature Solar and EG4.
01:01:04.000Now we're doing it at Solar 76, our factory company.
01:01:07.000So we have to put people up to production levels where they are meeting or exceeding Chinese productivity, because the Chinese are about a third of our labor costs, although labor is only a 15% driving factor on a product.
01:01:18.000My goal is to make rural Texas competitive with China, which means I've got to get people who first meet the productivity level of China.
01:01:26.000We're very close on an everyday worker already, like a few months into full production.
01:01:31.000And I think what Americans will do is sit around the break room and actually innovate on manufacturing, and they're going to adopt AI better than the rest of the world because of the culture that we have of freedom and of individual contribution.
01:01:45.000So my goal is to make this new generation technology a completely American thing.
01:01:53.000We're going to support the government by changing our supply chains to match the foreign policy that our lead negotiator came out with.
01:02:06.000And that's what it is to be an American right now.
01:02:10.000Can I just say one quick thing about China?
01:02:15.000I want to avoid any wrong implication.
01:02:17.000So I think China, like, there are a number of diplomatic tools that we can use against China in different kinds of things, and there are all sorts of issues with them, like stealing our technology, stealing IP.
01:02:28.000There's a laundry list, which I'll write about soon.
01:02:31.000But I don't think tariffs right now are the effective way of dealing with them.
01:02:35.000Like, if you look at the nuclear industry, like, they're really getting harmed by that fusion in particular, which is an important area of innovation.
01:02:53.000industrial freedom your way out of that have specific targeted punishments toward China that are not tariffs that punish us, but that actually punish China.
01:03:01.000So there's more to say about that, but I just want to be clear, like, I don't think the tariffs are the right mechanism right now.
01:03:06.000I think that we need to do other things to solve the problems that are rightly being recognized.
01:03:13.000I don't even disagree with you as it relates to some of the sort of instability in the markets right now, but isn't there also a sort of a cost?
01:03:48.000How do we avoid those pitfalls so you don't end up basically being in the same place?
01:03:53.000Well, I mean, I think this is another controversial view, but I think ultimately, like, you want...
01:03:58.000Yeah, I think ultimately the long-term deals, like, you need to be made by Congress, and it's just because, like, the stability is very key to all of these deals.
01:04:07.000And so Congress, like, gave the executive a certain amount of power, and I can understand the temptation to use it, but, like, I think it needs to be a congressional thing, because you're seeing right now the instability and unpredictability of depending on any particular person is a real issue that the markets will always have.
01:04:23.000I think, I mean, like, you know, I'm not...
01:04:26.000So, you know, we're in a certain position right now.
01:04:28.000I would say that, like, in general, the deals are going to be lowering the tariffs.
01:04:34.000Like, I think the negotiations that should happen are fairly straightforward in terms of fundamentally, you want to get other countries to lower barriers and have us lower barriers.
01:04:43.000So that's primarily lowering tariffs, but then also lowering if they have some particular, like, refusal to import our stuff.
01:04:50.000I'm not saying that justifies a tariff by us, but, like, that's the kind of thing you want to negotiate.
01:04:53.000But I think fundamentally, Overall, the deals are not that complex, especially with your allies.
01:05:03.000A tariff-free zone, where with your allies with Europe, with Canada, with Australia, we need a lot more industrial freedom at home, and then we need freedom to trade with them.
01:05:13.000Also our allies in Asia, you know, Vietnam, Japan.
01:05:16.000Like, that's what we want, is this entire block of free nations, or relatively free nations, that have incredible free trade, that are all doubling down on industrial freedom, to counterweight China.
01:05:26.000You know, just being in Africa, I've been there.
01:05:29.000But for my honeymoon, even, like, go to the different places.
01:05:32.000I mean, China's just trying to take over there.
01:05:56.000Yeah, so you want to minimize as many of those as possible.
01:06:01.000So that's, again, and I can mainly speak to energy and industry because those are the things I know most directly.
01:06:08.000Like, right now, that's what I'm saying.
01:06:11.000It's just what I think, but it's also...
01:06:13.000What I'm hearing from other people, if they had stability, if we had what Elon is advocating and others are advocating on the free trade side with more industrial freedom, that would be a really exciting level of stability, and it would be more economic growth, which for oil and gas is what they depend on.
01:06:28.000If you're in the Permian Basin, there's no amount of deregulation we're going to do there that's going to materially affect their finances and their ability to drill baby drill.
01:06:37.000If they have an innovation 10 years from now, yes.
01:06:39.000But the main thing is they need prices to be at a certain level.
01:07:10.000If I had my team try to lead the company by committee and question everything I did in a few-week pattern when something complex was underway, I've gone through it a lot in just five years as just a small little company that's grown in scale.
01:07:25.000And again, I just kind of, like, on the current situation, the big picture is...
01:07:31.000Especially if you're something critical to the American economy, you're going to be better off making it in the United States.
01:07:36.000And the future of manufacturing is automated.
01:07:38.000It's great middle-class jobs for people who run those automated lines.
01:07:41.000So as an American company, your only safe bet is to invest in America.
01:07:44.000I feel like it's been that way since last year.
01:07:47.000So for me, we have confidence in technology.
01:07:49.000And our supply chain can go to allies.
01:07:52.000It can also go straight to the U.S. I'm sitting on a smack over region, which is some of the highest quality lithium in the world.
01:07:57.000It's going to be refined 20 miles down the road with a lithium refining position, with a lithium refining joint.
01:08:03.000As long as it's clear, especially on energy, that we want to follow an American First policy.
01:08:10.000We're businesses that work in this economy.
01:08:12.000I think everyone knew the power the executive had on tariffs from the 2018 timeframe, and they sent Donald Trump to the White House.
01:08:18.000And the bottom line is, you know, I don't want my employees losing confidence in their CEO in a few weeks.
01:08:24.000And so, you know, we haven't lost confidence that all of a sudden the Trump campaign doesn't listen to people.
01:08:32.000You guys got elected listening to people.
01:08:34.000So I hope everybody's keeping track of the effect on the economy and the effect on small businesses.
01:08:55.000And what I would say is that there's a lot of anti-China rhetoric, but I think we need to be careful here because we're going to avoid learning the right lessons.
01:09:05.000This country is moving away from subsidies on green stuff.
01:09:10.000When they're doing well, we assume that they're cheating.
01:09:13.000We have to say, no, actually, maybe we're doing poorly because Washington is so bloated because of the kind of subsidies that Alex and I are ready to fight against.
01:09:21.000Yeah, well, they're more than happy to still sell us sort of overpriced subsidized windmills that they're making and manufacturing because that's a benefit to them.
01:09:28.000They may just not use them themselves.
01:09:29.000No, they're just laughing that we're subsidizing because they're not stupid enough to subsidize windmills anymore.
01:09:35.000But I would highlight, like, so there's the subsidies, which, you know, I'm totally against, and we should totally get rid of those.
01:09:42.000But the main thing they have on us is they actually have much more industrial freedom than we do.
01:09:46.000Because they don't have as much industrial freedom as we used to when we had real property rights.
01:09:50.000But you can actually build stuff quickly in China.
01:09:52.000And so that's what we need to do with Congress and the executive, but especially Congress.
01:09:56.000We need to really radically make it easier to develop things in the United States.
01:10:31.000Well, by the way, there's going to be a big difference for all of that between the red states and the blue states, and I think that's going to create some of its own internal strife.
01:10:39.000I wouldn't be trying to do this in a blue state because on any given day, the whims could change the regulations because it sounds like we're actually talking far more about regulation right now than we are about innovation or control or anything like that.
01:10:53.000The regulatory component of that is going to be big, and so it does seem like the red states have created the freedom for you to do what you need to do, that you're not going to get in a blue state.
01:11:03.000The federal government interferes with that so much, so it's true.
01:11:06.000If you look at, say, oil and gas in the Permian, things where the federal government is staying relatively out of, yes, in Texas in particular, it's very industry-friendly, much more so than California where I live.
01:11:17.000But there's a lot of federal stuff like NEPA that can just interfere anywhere.
01:11:21.000And when you have the wrong administration, it can do stuff.
01:11:24.000And that's part of why you need congressional action.
01:11:26.000And this is one role the president can play, is encouraging Congress to take serious action in reconciliation and then beyond with bipartisan.
01:12:00.000I mean, getting it done legislatively so it can't just be sort of erased with the stroke of the pen.
01:12:05.000I think we'll also create a lot of the stability that we're all talking about and we want in the market.
01:12:09.000So, Alex, James, thank you both for a great discussion.
01:12:12.000I look forward to seeing sort of how all of this plays out and, you know, definitely want to see advancements in all of these technologies so that we can continue to have American hegemony and dominance in the energy space and in so many other places.
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