Below is an abbreviated transcript of our Energy Gang episode with David Crane, recorded live at Columbia University. Listen to the full episode here.
Stephen Lacey: Let me tell you what the four of us are going to be doing on stage this morning. We are going to start the conversation off with, what else? Donald Trump. We're going to look at the turbulent first weeks of the Trump administration. We've had nominations, executive orders, blackouts, bans, proposed budget cuts, resignations, rogue Twitter accounts, and growing protests. We're just 14 days into this administration. What can we expect for the next 100 days?
Then we turn the mic around on David Crane. In 2014, while CEO of NRG, he wrote a letter to shareholders saying the power provider needed to become the Google, Apple, or Amazon of the energy sector. It didn't take long for shareholders to sour on that vision. What does that say about how hard it is to transition from brown to green, and what does that mean for other companies thinking about doing the same thing?
Finally, how to get a job. We're going to go through many of the questions that people ask us when looking for a job in cleantech and try to pass on some advice worth listening to. As usual, at the end of the show, we're going to tell you something you may not know.
First, onto our obligatory Trump section. I'm not even quite sure where to start with this one. I guess I'll just start on day one. Minute one of the Trump presidency. As soon as he was sworn in, the White House website was changed to reflect Trump's policies. Guess what? All mentions of renewables and climate change were stripped out. Everything. Gone. In its place was a simple page for an "America First Energy Policy." It promised to expand oil and gas and dismantle Obama's Climate Action Plan. We speculated a lot about what this energy plan was going to look like. Finally, minutes after he was inaugurated, we had a plan. It's the firmest evidence yet of what this administration plans to do. Katherine, I want to get your reaction to this immediate change.
Katherine Hamilton: Womp womp.
Stephen Lacey: There you go. Transition section over.
Katherine Hamilton: Sorry.
Stephen Lacey: A normal part of the transition is to change out the website, archive the old website. But this was different. They scrubbed any mention of climate change as it related to their energy plan. How different is this, do you think? What does it say? Again, we speculated for a long time about what kind of plan might emerge. Now we actually have something in writing.
Katherine Hamilton: It seems really last week that they did that. There's so much that's happened between then and now. But a lot of what the government websites do is provide really interesting, critical information on how the government works. That's part of what is missing from the White House website, is you don't really have an idea of how everything works and how it fits together. The other websites have not been scrubbed in the same way. EPA and DOE weren't completely changed over. I assume they'll change.
Stephen Lacey: They are changing now.
Katherine Hamilton: As those administrators and secretaries are put in place and they start deciding what they want to highlight and the priorities that they want to have. But I think it's a shame, from the point of view of information to the public, because it's changed so drastically that people who went to find things in certain places just couldn't find them.
Stephen Lacey: Jigar, what did you think of the America First Energy Plan?
Jigar Shah: I think, as most folks know, I generally don't get too [worked up] about these sort of things.
Stephen Lacey: I will say, and not to interrupt you that quickly, but I will say you've always talked about renewables needing to be as strong in the public eye as oil and gas. People need to see this as workers putting steel in the ground, not some sunflower blowing in the wind. What the Trump administration put forward was a plan to develop the strong technologies that are going to make America stronger. That's exactly counter to what you've been arguing. It does matter.
Jigar Shah: For sure. It certainly matters in the sense that we're going to be leading from behind, or whatever they try to say about these things. What I mean is that when I talk to investment bankers, when I talk to corporate CEOs in the renewable energy space, they haven't changed their 2017 targets. They haven't restated earning expectations. They haven't reduced total capital allocations to the sector. From their perspective, they still see this sector continuing to move along at breakneck speed with growth targets and storage and in all these other places. Until that ideological bend to the White House starts to move these plans and investment plans and other things, then it's just noise, like a lot of things that comes out of this president.
Katherine Hamilton: I would just say, you need to differentiate between messaging and policy. The website is messaging. It's like the alternative facts about energy. That's what's on there. That's very different than what is going to be rolled out in policy. It doesn't necessarily mean it's the same thing. He promised he would do more about coal. That's what he's put out there. I think that that's something to keep in mind -- there's a difference between the messaging that he's putting out and what's actually going to happen.
Stephen Lacey: David, do you think we're making too much of this change out in terms of what it actually means to the investment community and to long-term policy?
David Crane: Yes. No, I'm with Jigar. If you teach a child how to play defensive back in football, you teach them, "Ignore the head fakes. Ignore the hands. Ignore the feet. Watch the belt. You can't fake with the waist. That's where the receiver is going." My biggest concern in the media is just, turning on CNN last night, 30 minutes dissecting Donald Trump's little verbal joking with Arnold Schwarzenegger. Is it serious? It's going to exhaust our society. Clearly we have a president that throws around words in an impolitic way. Maybe that gets us into trouble. Who would have thought that we'd be on the brink of World War III with Australia?
I don't think it matters in the energy sector at all. Words clearly don't matter to this president, so I think that the actions are important. First of all, I don't think energy's a high priority for him. [...] He's a builder. I used to think that that was possibly a positive and would be good for a certain part of the energy industry if he decided that he was really excited about high-voltage transmission lines. That could be good for the wind industry. My understanding from people working on his trillion-dollar infrastructure plan is that energy's about a 10th priority, that Donald Trump's interested in infrastructure that he personally experiences, so airports and things like that.
Jigar Shah: Golf courses.
David Crane: Yeah, key infrastructure. I think [there is] one thing I would be concerned about. I think there's been some effort to give everyone comfort, circulating that the solar industry now employs four times more people than the coal industry. My response would be that, but Donald Trump went to West Virginia and told the coal miners that he was going to be their champion. If we have learned one thing in these two weeks, is that he's hellbent on fulfilling his campaign promises, no matter how illogical or irrational and no matter what the consequences. There's a little bit of concern there. But I can't figure out how he actually saves the coal industry, since it's actually natural gas that's killing coal, not renewables.
Stephen Lacey: I don't think anybody can.
Jigar Shah: And he's pro natural-gas fracking.
David Crane: Yeah, exactly. The federal government could just do anything it wants, I guess, to keep coal plants alive. I don't know what he's going to do. I don't think just because the solar industry employs more people and has created more jobs over the last four years that that's protection against what the Trump administration might do.
Katherine Hamilton: Trump, in his move to try to help the coal industry, does have a complicit Congress. One of the things that they can do is under what's called the Congressional Review Act that Newt Gingrich passed in 1996. It's only ever been used once, back during the Clinton days. It can potentially be used 50 times by this Congress. They have to do it soon, because it's only regulation that was passed after June 2016. There's a short time window. But there are 50 rules. Yesterday they removed the Stream Protection Rule, which protects people in communities from toxic waste and sludge dumped into streams from the coal industry. It pulled back the Methane Rule, which protects people from one of the most harmful greenhouse gases out there, and also the Resource Extraction Rule, which basically holds the oil, gas, and mining industries accountable for disclosing payments to foreign governments, which our new secretary of state had lobbied against that rule when he was at Exxon.
All of those are going to be rolled back. The issue is they can't ever be brought back in substantially the same form as they were before. We have not tested that yet, so we don't know what exactly that means. You could probably get creative. But for now they're rolled back, and we could see CAFE standards for trucks and many others go too.
Stephen Lacey: Let's talk about what's happening within individual agencies now. I think the most relevant would be DOE. I am talking to a lot of folks within DOE. Former political appointees, longtime staffers, people who are working directly with the transition team. I'm actually getting a lot of conflicting information from folks. Folks high up at EERE, I've heard many people say, "Actually, the transition team, despite what you've read in the press, is doing a fairly good job asking good questions. They really want to know about how things like SunShot, for example, work." Then I'm also hearing from other longtime staffers that it's a transition in disarray, that they're clearly aiming, their questions are aimed to figure out what they can gut. The Hill last week reported that the Heritage Foundation had been co-crafting a proposed budget for the White House that would gut the DOE and gut EERE. I honestly can't sit here and say I know exactly what's going to happen. Nobody can. But I am, in my reporting, getting a lot of conflicting information from folks within DOE.
Katherine Hamilton: A little context on that Heritage report. That was leaked by two transition staffers that put it out right before their last day on the transition team. That is their wishlist. That's not necessarily what they're going to do. I would just take that with a big grain of salt. That stoked a lot of fear.
Jigar Shah: Sea salt.
Katherine Hamilton: Yeah. In DOE, though, I've seen that Pat Hoffman, who was the assistant secretary for the Office of Electricity that does all the grid cybersecurity issues. She was a career staffer that was moved up through the ranks. She was not a political. They've kept her in the mix, which I think is really good, because she knows every program at DOE. She can tell them a lot about what's going on there. I think that's heartening. I've met with the transition team at the Department of Interior, and those folks were people that also knew a lot about the Department of Interior. I'm hopeful that the transition team is keeping enough people in the agency who know where the bodies are buried and know what the programs do and who know how to think about the programs other than through carbon reductions, because you can use a lot of metrics which they've also captured to try to figure out which programs to keep.
Stephen Lacey: Jigar or David, what kind of clues are you picking up from people you're talking to or from the press? Is there anything that particularly worries you or leaves you saying, "Hmm, no. Not a big deal quite yet"?
David Crane: About the Department of Energy?
Stephen Lacey: About the DOE specifically. We can go into other agencies.
David Crane: I think the only thing I can add to this is I have some working knowledge of Governor Perry, because my former company was the first or second largest power company in Texas, and dealt with him several times. What I would say is that you expect someone who's governor of Texas for over 10 years to be an energy expert, and he's not. I would say that I just don't expect much out of the Department of Energy one way or another. I would think what Governor Perry is gifted at is being a retail politician with particular appeal to people from Texas. He's out of central casting for that role.
He loves the limelight, like a lot of elected politicians do. In my perfect America, almost every government department with 80,000 employees would be run by an ex-CEO. I can see why other people...but that would be my personal bias. They would not be run by formerly-elected politicians. I would guess that Governor Perry wants to create as few waves as possible as head of the Department of Energy. I would also guess, not that he's told me this, is that he's watching what happens with Cornyn or if Cruz gets elevated to the Supreme Court. Then he'll try and take one of Texas' two Senate seats. Because that's what he really loves, is being an elected politician.
The details of how a department with 20,000 employees, or whatever it has, and $80 billion -- no, it's $20 billion budget and 80,000 employees -- I think he just wants to be Secretary of Energy to get himself back in the public dialogue. I think I would be looking for a Department of Energy that makes no waves.
Stephen Lacey: Rick Perry is a guy who's easy to make fun of because of some of his statements on the campaign trail, particularly for this role, because in 2012 he famously talked about agencies that he was going to get rid of and DOE was the one that he forgot. You've got to give the guy some credit. During his testimony, in his opening testimony, he said, "I met with officials at the Department of Energy. I learned what the DOE does." I can't believe he's learning what the DOE does.
Jigar Shah: He found out where the waste was buried.
Stephen Lacey: He said, "I regret" [his previous statements]. He found out that they do a lot with nuclear waste and weapons. He walked back his statements publicly in a very clear way. I think that, given the circumstances, that is actually a fairly bold thing for him to do. Disagree with me if you do.
Jigar Shah: It's not the disagreeing part. I've obviously had a love/mostly hate relationship with DOE these last eight years. I really am very happy to see a politician in that position. I really hated having physicists in that position because they were people who didn't care about U.S. manufacturing and they didn't really care about the retail politics and that, frankly, is the reason why Hillary Clinton lost. I think when you think about Rick Perry, he is somebody who is very susceptible to our good news. If we go to him and say, "Here are the 17 new manufacturing plants we're building in the United States for solar. This one's doing trackers. This one's doing inverters. This one's doing whatever."
He is the first guy that's going to get on a plane to cut a ribbon right in front of that plant and try to help broker a deal with the county and the local officials to figure that out, which Steven Chu and Ernie Moniz had no interest in doing. I think this is going to be really good for us, actually, because he really does want what David's talking about. He wants the limelight. He wants to sit up there. He wants to cut a ribbon. He wants to get retail politics to work in the backroom of a steakhouse to get these deals done.
Katherine Hamilton: He and Chuck Schumer are going to be fighting for camera time for sure.
Jigar Shah: I think it's going to be great. I do think that the biggest challenge I think within DOE is that they have to figure out at a staff level what they want. Because DOE itself has been conflicted for a long time. I like Pat Hoffman a lot, but she, for instance, for five years was anti-distributed generation. There was a big fight between EERE and her office for a long time around new standards. I hope DOE actually gets out of its own way and figures out what it wants to do. SunShot was a very specific program that I had a lot to do with to get DOE to focus on deployment. They never replicated SunShot across combined heat and power, zero-energy buildings, all the other sectors that they researched. DOE's got to figure out what it wants to do. The staff level has to figure out what they want to do and stop the infighting.
Katherine Hamilton: It'd be great if they could break down the silos. I'm sure you have a lot more faith in it than I do. I've seen a lot of different administrations, and it is a really hard thing to do.
Stephen Lacey: I guess this gets to a bigger question about what role DOE should take. In 2008, they were arguably still an R&D type organization that was supporting up-and-coming conventional renewables. Since 2008, we've seen a two-thirds decrease in the cost of utility-scale solar, 73 percent decrease in the model cost of batteries. You could go on and on. 90 percent decrease in LEDs. Now what does the DOE support? One would argue that Rick Perry shouldn't be going to all these ribbon cuttings and supporting conventional renewables. He should be looking at basic R&D and thinking about new form factors for solar, next-generation manufacturing. I think there's an argument to be made, Jigar, that maybe Rick Perry shouldn't be focused on that and we now need to look to the next generation of technologies, because over the last eight years conventional renewables can now stand on their own. That was not necessarily the case in 2007-2008.
Jigar Shah: We can have this argument. But I think it's safe to say, as someone who's worked in the solar industry for a very long time, that the vast majority of the cost reduction from solar occurred after we freed up the shortage of silicon in 2008. Most of those technologies were baked in by the University of New South Wales and many other research institutions around the world in the '90s. It just took 10 years to get a lot of the technology into manufacturing-ready status. The R&D that DOE did under ARPA-E will bear fruit 10 years from now, which I think is wonderful. I think it's good that we invested in new R&D.
But to suggest that anything that this DOE did resulted in battery storage costs coming down, et cetera, is ridiculous. Lithium-ion cost reductions started in the Japanese program where they invested heavily between 2000 and 2004 with Panasonic, and then the Koreans with Samsung, et cetera. I just think that that's how long it takes to do energy R&D. It's not something where it comes out of Don Sadoway's lab at MIT and then the next day suddenly you've got a $100 a kilowatt-hour batteries.
Katherine Hamilton: Also, the secretary serves at the pleasure of the president. My sense is that this president is going to be a lot more hands-on than President Obama was of his Nobel Peace Prize winner. I think this president is going to have a lot to say about what happens over there. I think there could be some great good news stories. [...] The four criteria for infrastructure that Trump has said that I think that Perry could continue to develop would be public safety or national security; having [projects] shovel-ready, so 30 percent of the design or engineering complete; creating direct jobs; and increasing U.S. manufacturing. I think that if we can show that our projects are doing that then and feed into what the president wants, I think that's going to be the winning strategy for him.
David Crane: Can I add something about that too? I think that one of the consequences of the Trump phenomenon is that other parts, the working parts of the federal government are going to be diminished for the next few months because there's going to be this total fixation on what's happening in the White House. It's clear I think after two weeks that that's not going to be settled very quickly. When you look at the pace of leaks and the stories about the inner circle, I think when President Trump finds out just how much knifing in the back goes on in government, it's not going to make him a more expansive person, a more delegator of a person. It's going to make him even less so.
What happens at Energy or EPA? I think it's all going to be about what happens at the White House. I think people at the EPA and Energy are just going to be sitting there waiting for some instruction, waiting for the fight over who controls the White House. Is it Steve Bannon, as it appears now, or is it one of the others? I think there's more or less paralysis. What I think I want to make sure that we focus on as we focus on Washington is actually the strength and the possibility of harnessing the strength of the counter-Trump movement.
Hillary Clinton may have only won 20 percent of the counties in the United States, but she won 65 percent of the GDP of the United States. What are the states and municipalities going to do? Isn't everyone proud of Jerry Brown now, in terms of him standing up and saying, "California will launch its own damn weather satellites if the federal government stops doing this research." The ability to make clean energy part of the counter-Trump movement I think is very interesting.
I think what's really interesting -- and I would love to hear when Jim Rodgers comes up what he thinks about this -- is how do high-profile corporations play this? We've seen the CEO of Uber already have to step down based on the immigration rule. How do you play this if your employees and your customers are revolting, but you're trying to have a seat at the table because there's no doubt that in CEO Land, CEOs, even progressive CEOs, were offended by the Obama administration's complete shunning of anyone who had ever been a CEO.
Initially, when Trump comes in and says, "Hey, I'm going to listen to you," everyone of course flocks to the table. But now can you afford to flock to the table, because of the people that are so alienated? There are so many dynamics going on here right now that I actually think what happens in the Department of Energy is a pretty low priority.
Katherine Hamilton: I think we definitely need to focus on Congress more, because Congress certainly they're the ones that are going to be held accountable in two years for what happens. They're the ones who can actually pass the laws.
David Crane: Now you have John McCain conducting his own foreign policy for the United States by calling the Australian ambassador and say, "Look, the alliance is strong."
Katherine Hamilton: "We're cool. We're cool."
Stephen Lacey: The Congressional strategy is really important because much of our audience is made up of folks who are in the cleantech industry. We have a very large piece of our audience in the solar industry, specifically. We talk a lot about local solar politics on this show. A lot of folks in the Trump era are saying, "The left, or at least just the anti-Trump movement, wherever they are on the political spectrum, needs to do the same thing that the Tea Party did, and that is go to town halls, record videos, put these members of Congress under pressure." If you're going to make cleantech, renewables, the environmental movement a piece of that, the 374,000 people in this country that are working in solar should be showing up to the town halls and talking to their members of Congress.
Katherine Hamilton: But we also have to talk to the right. We have to talk to the red states and talk to the rural folks and show them.
Stephen Lacey: I'm not saying shutting them out.
Katherine Hamilton: I think this can't just be an environmental movement. I think this also has to be, how do you talk to conservative folks and say that clean energy is also very much based on conservative principles. I think it's really important, given the state legislators are so red and that the rural folks came out to vote, I think we need to learn how to talk to those people too.
Jigar Shah: And given that half of our employees in our sector voted for Trump. I think just keying off of Trump. Keying off of David's point on, sorry David, on CEOs.
David Crane: So hurtful.
Jigar Shah: I think you're going to see a lot of energy CEOs make the wrong move. I think the first one that I think is going to make the wrong move in a really big way is the CEO of First Energy. I think he really believes that this has emboldened him in his quest to take us back to 1970s electricity regulation. When John Kasich basically divorced him last week when he vetoed the renewable energy RPS legislation, I think there's going to be a big fight this year about whether to save the First Energy nuclear plants this year. I think First Energy CEO's going to say, "Only if you kill renewable energy."
We'll see how he gets caught in that vice, because I don't think that Trump actually knows what the hell he's doing at the state level in terms of saving those nuclear plants. But I do think he wants to save nuclear plants. I think, as you know, the CEO of First Energy has been outspoken with Supreme Court cases on FERC Order 745 and lots of other things. I do think the energy CEOs are going to have to be very careful about whether their masters are the Federal Energy Regulatory Commission or whether it's the state regulators and the state governors, where they have a lot more regulation coming from.
Stephen Lacey: I just want to say one last word about the politics of this. Our audience, GTM's audience, is very diverse politically. We were pretty critical of Trump, but we have a lot of hardcore conservatives who hate traditional utilities and really want to learn more about solar and other DERs for a variety of reasons, because they want to free themselves from the utility. I was speaking at a solar dealer conference last week. I went and I was talking to a bunch of people that are all local installers. So many of them are hardcore Trump supporters. They want to say, "Screw the man." They want to blow things up. They see solar as their outlet, in a way.
I just think that we need to be careful when we talk about this in assuming that when we say, "Oh, go talk to your legislators," that we're just talking about liberals who support solar. Also, I think that means that the Trump administration needs to be careful about how it formulates energy policy, because there is a very large and growing movement in favor of a lot of these technologies that are now cost-effective. If they are perceived to be doing battle with those technologies, it could blow back on them in some way.
Katherine Hamilton: We just have to hold them accountable. If they kill jobs in an industry that's growing in their district, they need to hear about it.
Stephen Lacey: Can we just finish up the political conversation by talking about Rex Tillerson? David, you were talking earlier about what you think he is like as a leader. We have not had much of a discussion about Tillerson on our podcast. You said you'd had dinner with him. You'd followed him as a fellow CEO. You think he's a very intelligent guy. Just curious about your perception of him as a leader and what he would bring to the State Department. Then we can maybe talk about the climate change implications of that as the U.S. deals with the international negotiations and international climate politics.
David Crane: Particularly for the young people in the room that are aspiring to run large organizations, Rex Tillerson walking into the State Department yesterday was textbook what you should do, as opposed to Donald Trump walking into the CIA on his first day -- textbook what you should not do. Tillerson goes in. He's worth hundreds of millions of dollars. He's run the biggest oil company in the world. He comes in and says to the assembled multitude at the State Department, "I don't know anything about this. I've been a member of the State Department for 25 minutes. You've been here, on average, 12 years. I'm here to learn from you." He was humble. He used humor. He was self-effacing.
Look. He's got the position. [...] He doesn't need to beat his chest to prove that he's got the testosterone flowing. I think it was a great start. I wish that there were others in the government that were like that. He's a very competent guy. He's a very conservative guy. What I like about him is he's a fact-based guy. I think one of the biggest problems with at least half of Washington is the biggest I think victim of this whole election cycle is that truth doesn't matter anymore. But truth matters to Rex Tillerson. He will act based on facts. I think at this point that's, in this administration, that's about the best thing that we have going.
Jigar Shah: Just to second that, my wife used to run the Budget Office at State Department. She got a tremendous number of notes yesterday from her former colleagues at State with very positive reviews of Tillerson in their initial meetings. I said it in the last podcast, I actually am very happy to see an energy executive at State. I think that there are, let's call it 25 countries where he can push LNG or fracking or other things. I think [in] the rest of the countries, he's going to be pushing our stuff, because that's all he has to push. There's no oil or natural gas to develop in those countries, but they have wind and solar to develop in those countries. The U.S. has OPEC and Export-Import Bank and the best manufacturers in the world and technologists in the world to provide the technology that those countries need. He's going to use those as negotiating chips to get what he needs to get done from the State Department.
Stephen Lacey: I will say that I have seen a number of promising statements from Tillerson publicly, both in his testimony and in stories that I've read, about him recognizing that climate change is an important pillar of international negotiations. There's a lot that can be said about Exxon talking about a carbon tax and embracing that climate change is a fact, but also still funding groups that supported climate denial. But I will say that it does bring me some hope that he has a very firm recognition that climate change is a very important part of his job, because it is central to how countries are talking to each other now.
David Crane: Can I push back slightly on that?
Stephen Lacey: Sure. Please.
David Crane: When Exxon, after all the decades, came out, and I think I could be getting the year wrong, it was March of 2014 or maybe it was 2013 because I put this quote on the board at an NRG leadership meeting. Exxon has just come out and said, "Climate change is happening. It's caused by man, and we have to do something about it." To that effect. It was put out by Exxon corporate, not in the name of the CEO. To me, the way I would operate is there were certain things that would be put out in the name of NRG as a corporation.
But if I felt strongly about it, I would put, "Said by David Crane, CEO of NRG." Maybe they have a different approach there. I would have felt much more comfortable about it if that was a personal statement of Rex Tillerson as the CEO of Exxon Mobile, particularly after all the years of obfuscation and otherwise. Maybe I'm reading the tea leaves a little bit wrong, but that was a little bit of a disappointment. But, like I said, he's a fact-based guy. The facts, even since they made that statement, are so inexorable as to where we stand in terms of fighting the climate battle that I do think he's on the right side. He has it in his brain, but does he have it in his heart? We're to the point where people need it both in their brain and they need to have the passion for it as well.
Jigar Shah: He's a fellow Eagle Scout, so I think he has it in his heart.
Stephen Lacey: Getting the government to meet the climate challenge is hard, but, as we just heard, very, very hard, given the state of American politics. As a result, many, including myself, are saying, "Hey, look. The biggest companies in the world are investing in renewables, politics be damned. That's a great sign, right?" Of course, it is. But, as David Crane knows, it's not an easy undertaking in the private sector either. A lot of companies give lip service to climate action. But as CEO of the independent power producer NRG, Crane tried to restructure the company completely around his climate thesis. Why didn't shareholders bite and what does his experience say about the enormity of the transition?
I want to first turn to the 2014 letter that you penned to shareholders, which was quite dramatic. You talked about Google, Apple, Amazon leading this revolution in consumer-centric services.
David Crane: And Facebook.
Stephen Lacey: And Facebook.
David Crane: The four that would inherit the earth.
Stephen Lacey: That's right. Then, your recent piece was the Four Horsemen of the Apocalypse.
David Crane: Working with fours.
Stephen Lacey: Why was that not happening in the energy sector, in your opinion, and how did that guide the eventual investments that you made as a company? I want to start there with your 2014 thesis, which got a lot of attention.
David Crane: You want the business case or the moral case?
Stephen Lacey: I want both. I want the business case first, and then the moral case.
David Crane: The moral case should be clear about what our responsibility is to be stewards of the environment. If you care about your children and your grandchildren. The business case, you have to understand where the independent power sector sits within the electricity sector, which is high-risk. The electricity sector is considered a very low-risk sector because it's rate-based. No matter how many mistakes you make, your state public service commission, if you've played golf with them, will bail you out. The ratepayers will pay for your mistakes.
The independent power industry is a small segment of that that's highly risky. If you're running a public company, you're always in competition for investor dollars. If you're running a company whose business model is inherently high-risk, you have to offer growth, high growth, because that's the only thing that adjusts and compensates for risk. I never went to the NRG board and said, "We should turn from brown to green because it's the right thing to do." I think that's a flaw in American corporate governance. You should be able to go to an American board of directors and say, "We're doing this because it's the right thing to do." But I would have been laughed out of my boardroom if I had said something that stupid.
So I said, "We have to go into renewables because it's the only innately high-growth part of our industry." Because electricity demand growth in the United States is a fraction of GDP growth, which is itself small over the last 10 years. But because of mandates and a variety of other things, renewable energy was going to actually grow high, admittedly from a small base. That's how I justified it from a business perspective. Also I said, "Look. We have to mitigate and diversify away from our inherent carbon risk," because of some 50 American power generators we were the second most carbon-intensive of all power generators in the United States. Then we compounded the problem by actually buying the first company, called GenOn.
Part of it was mitigating risk, but part of it was growth. In your preamble when you talked about the investors not liking the move from brown to green, I ended up getting fired because our stock price went from $37 to $12 a share. I was definitely annoying to our investors because I talked about being brown to green. But the stock went from $37 to $12 a share because Wall Street lost faith in coal-fired generation. They realized it. The way that that gets translated into Wall Street speak is, I'd get questions like, "We're concerned about the terminal value of your coal-fired power plants." I'm like, "Well, they are 40-some years old, and they're not competitive economically against natural gas, and they're environmentally challenged."
I think it was a little bit more nuanced than that. I actually think that the basic problem that we face with corporate America and big energy companies, public companies, is that there's no market for internal transformation. There's no investor that likes that story. The toughest question that I would get time and time again is, I'd go to Fidelity or someone, and they'd say, "Okay, so you own coal-fired power plants like Dynegy and you think the future is home solar like SolarCity. I can't just go out as Fidelity and buy Dynegy and SolarCity. Why should I make a bet on you being able to transform your company from one to the other?" I never had a good answer to that.
Jigar Shah: At the time at which you determined that there was this other future and you were making speeches about it, at that moment in time you were making a bet or a decision that you believe that those coal plants would actually lose value because of the transition. Why wouldn't you have traded? Why wouldn't you have sold the coal plants at that moment in time, because you knew that they were going to lose value over the next three to five years, even if everyone else didn't, and then put that money into renewables? I think that the challenge for me on the brown to green, which I've talked about a lot on this podcast, is that the inertia just holds folks back. If you were a trader, if you were at a DE Shaw or you were at Blackrock, as soon as one of your analysts said, "Those coal assets are going to go to zero because of natural gas and wind and solar," you would have sold them to a greater fool that would have bought them. You would have taken the cash and then reinvested it into something that had more value.
David Crane: The answer to that question is, and just to add to Jigar's point, one of the problems that we face is that, by our own count, depending on what point in time we were relative to SunEdison, we considered ourselves the largest solar power company in the United States. But it was less than 10 percent of our overall portfolio. To Wall Street investors, it didn't matter. We actually even at one point commissioned an external investor relations group in San Francisco to say, "Hey. Can you get clean energy investors in our company?" They gave up the assignment after two weeks because they said, "Look. We found a lot of people that think that NRG's doing the right thing, but they can't go to their boss and say, 'We're going to invest in a company that's the fourth largest polluter in the United States, because they're moving in this direction.'" There are these structural elements to it.
But to specifically answer Jigar's question, I think in retrospect I should have looked to sell some of our plants. But absolutely selling all the coal plants, first of all, it would have been tough to find a buyer for that. But the coal plants were actually providing the money. Solar, as you know, is a capital-intensive upfront thing. The profits, NRG threw off a billion dollars a year in free cash flow that we were pumping into it. That came from the coal fired power plants. That was the balance.
Jigar Shah: Doesn't that portend, then, that that's going to happen with all brown to green, whether you're Shell, where Sir Mark Moody-Stuart talked about this, or John Browne did before they all got replaced, that ultimately that will always be the case. You see Engie, the old GDF Suez, doing this now, where they sold all their plants to Dynergy and a few other folks. They're now sitting on $14 billion in cash.
David Crane: Their stock's in the gutter.
Jigar Shah: Their stock's in the gutter. Then we'll see whether they actually make this transition to storage and solar and whatever. But it feels like, for me at least, what I've been saying on the podcast, is that it feels like it's actually an impossible task to move companies from brown to green.
David Crane: This is the problem. I'm glad you brought it up. A good friend of ours who is chairman of Shell, Chad Holliday, a founding member of U.S. Climate Action Partnership, former head of DuPont, great American climate advocate. As you say, look at if we had this problem at NRG which at its peak was an $11 billion market cap company, the big oil companies are 30 times larger. Say you're the head of a major oil company and you realize the stupidity of the oil model right now, which is we spend billions confirming reserves that the world cannot afford us ultimately to burn. But I'm valued on what I make now plus whether I replenish my reserves, so I'm going to just keep doing it.
If the head of Shell suddenly says, "You know, the future of energy is the smart home, and I'm going to turn my company into a software company," if he ever said that in public the investors would be like, "Screw you. Your expertise is punching holes in the earth. Go back to punching holes in the earth until we tell you to stop punching holes in the earth, which we'll never do. We'll just sell your stock." You're right. I think the brown to green of established companies, there's no proof that it can be done. But if you don't try and do it, you have a $6 trillion a year industry that's going to fight you. That I think is a huge challenge that we face.
If we're going to solve the climate change issue, we all have to be rowing in the same direction. Someone who's making $6 trillion a year in revenue, which is the size of the global energy industry, if they're fighting you every step of the way, look at how successful Exxon was for 20 years. It would be better if they were on our side rather than fighting a rearguard action.
Katherine Hamilton: But those guys a couple of weeks ago at the World Economic Forum were all talking about a cost on carbon, and that making the difference in how they dealt with their portfolio. It's not going to happen here any time soon.
David Crane: The anti-coal movement was funded by Aubrey McClendon as natural gas. A cost on carbon, it depends on who you're trying to displace.
Jigar Shah: The enemy of my enemy is my friend.
David Crane: We've lived in a world of energy surplus for the last eight or nine years, which was not what it was like for the 30 years that most of us came up in the industry. Fighting for market share against other forms of energy, I got involved in electric vehicles, not because I care about electric vehicles. I own four electric vehicles. But because I wanted to take market share away from oil for electricity, because we needed something new in the electricity space, because we hadn't had anything really good come along since the air conditioner.
Stephen Lacey: I just have one last question to wrap this segment up, David. That is, have you changed your thesis on the consumer-centric approach? Is it going to come from a power provider like NRG dipping deeper into the retail space? Will it come from an analysis software analytics firm that's already working to do disaggregation in homes? Is it going to come from an Opower or a solar company developing a relationship with the customer and layering services on top of it? Who is going to be that company serving the customer and becoming the Facebook, Apple, Google, or Amazon?
David Crane: If you think of the energy space, it starts as an absolute commodity, ends as a service. The industry, because it was developed during a period of commodity scarcity, focused on the supply side. You cannot find a senior executive at an oil and gas company that rose to the top because they knew how to stimulate demand for the product. They never worried about it. They're called E&P companies for a reason, because they just assume whatever they produce people will use. But the world has changed now, so it's all around the customer. As you say, the person who's going to dominate the customer hasn't really emerged yet. That's the most exciting thing.
If you ask me to bet who is going to be the Apple, Amazon, Facebook, or Google of the clean energy future, it's actually one of those four. If I were betting today, I would bet on Amazon. I'm no consumer product expert. What I hear from Alexa is that Alexa could win the mindshare and one of its apps could be the home energy brain. Amazon's got mindshare and cloud. If you said, "Bet on one company or some new company," it certainly wouldn't be a incumbent energy company. It would be Amazon.
Jigar Shah: I'd bet on Verizon.
Stephen Lacey: I'd bet on some sort of Trojan horse technology, because clearly the ones that are just focusing on energy have had the hardest time connecting with consumers. If you have an energy-only platform, that's probably the most difficult way to get into the home.
Let's go to the last segment, how to get a job. A lot of our listeners, many of whom are in university or are graduate students, as well as a lot of people mid-career who are looking to get into renewables or clean tech or just the energy field generally, are interested in chatting with us and hearing more about what they can do to find a position.
For whatever reason, we've gotten a lot of new demand from people looking to revisit this topic. We've touched on it. What should they be studying? How did we get into the field? What's the most promising field to pursue in energy? What skills are in highest demand? For our listeners, of course, we're speaking at Columbia University, and we have four unique perspectives up here. This is the perfect opportunity to talk about careers and jobs. First, just briefly talk about each of your career trajectories, and was there an aha-moment when you knew a particular decision would direct your career where you wanted it to go?
Katherine Hamilton: Mine was circuitous, but I was a creative writing major and have a master's in French. When I went to find a job, the only thing I could get was working for a law firm in D.C. for $6 an hour serving subpoenas. The only thing that job did was make me hate attorneys.
Stephen Lacey: That's why you moved to D.C.?
Katherine Hamilton: I was desperate. I moved to D.C. to get a job. I went to a utility. I had worked for utility as a technical writer during my summers. I went back to the utility. I think a utility is a great place to start. I ended up designing grids. I went to night school in electrical engineering. I had to take a test every six months so that they knew that my calculations were correct. Basically, my theory is if you can write you can do anything. Engineering is kind of like reading a cookbook, but I didn't say that. Honestly, I think working at a utility gave me a really broad sense of what's out there, how do things work. I would urge people to learn how things work. Then you'll be able to step back and work on public policy or other things, but knowing how something works is so important.
In my "aha" moment, at the utility, besides being told that as a woman I wouldn't get past a certain point, that was in the '80s, was that I found a memo in somebody else's in-basket from somebody from the Department of Energy. I called that person and said, "I think what you're doing is really neat and I want to work for you." He's been my mentor. I ended up going to the National Renewable Energy Lab and continuing to learn how things work and doing technology before going into public policy. When I flipped to public policy, I figured out, "Oh, I know how to write and communicate. Now I can take all this technology and figure out how to talk about it."
That was my path. I've done policy ever since then. But really, the key thing is learning how things work and also be willing to take risks. I was willing to put all four of my kids and my family in complete and utter financial danger by saying, "Yeah. I'll take that job. That seems like it would be really good." I trusted my gut and my instincts, and I was willing to take the risk.
Jigar Shah: I think engineering is the new liberal arts degree, so everyone should become an engineer. As someone who's hired a lot of people over the last 10 years, what I'd say is that we have a tremendous amount of interest to join this industry. It's heartening on one side but it's disheartening to be in your shoes. When I started in my career, I graduated from college in 1996, I had no competition. Nobody else wanted to work in this field. I called up 100 companies who were doing stuff and had a few job offers. It was fairly easy to get in. Now we're getting over 500 resumes a month into our firm unsolicited, and they're all extraordinary people like yourselves.
What I would say is I think the first thing is you have to figure out who you are, not who I want you to be. You should be very good at writing, if that's what you're passionate about, or French if that's what you're passionate about, or communications or engineering or technical work or financial modeling or whatever it is. We want people who are genuinely passionate about what they do and actually genuinely want to be really good at it. If you read some sort of book and say, "Well, I'm going to get those skills, because that's what that person had to get this job," it's not going to work for you. The way you differentiate yourself is by showing how passionate you are about the stuff that you are in.
I do think that we're continuing to hire thousands and thousands of people every month, and so I do think that we are going to onboard a lot of these folks, but it's just the competition is fierce because there's a lot of people in the oil, gas, and electricity industry who are trying to join our industry mid-career too. There's just a lot of folks trying to get in.
In terms of my aha-moment, people view me as a disrupter. I think the reason I'm good at what I do is because I worked at BP. When I worked at BP, I spent a lot of time understanding why BP worked the way it did, without judging. I do the same with NRG or Duke Energy, with GEM and others. What is exactly the box that they're in? Why do investors force them to do the things that they do? Why do these things happen? It's one thing to rage against the machine and go to North Dakota and protest the Dakota Pipeline, and all that stuff is fine and you should do it if your heart brings you there. But to really be good at what I do, you actually have to understand how everyone gets paid and why everyone acts the way they do, because they really are acting rationally in their own rational self-interest. That aha moment was brought to me by Chris Mottershead, who is the head of innovation at BP. That served me really, really well in my career.
David Crane: I don't want to be too redundant of what's been said. What I would say, the younger generation, which for me at my age means let's just say under 30, and so hopefully at Columbia, that's a fair number of people we're talking about here, is that, first, I think writing. I think the younger generation does itself an enormous disservice with its reliance on Twitter and things like that, in that learning to write in longer form, which is important in business, you don't have that skill. It's still an incredibly valued skill. If you can write, if you can express yourself, and not in some sort of really boring, long, legal brief way, but with passion, in a way that shows personality, that shows care.
You talk about that 2014 letter, which I wrote on an airplane. I do my writing on airplanes, because I don't watch movies and there's a lot of time to just sit there and not do anything else. I've been handed just the typical statement that a CEO is supposed to make, and I'm just like, "I'm sick of doing this. I've been CEO of this company for nine years. I'm going to just write what I really feel." I wrote it out in about 15 minutes. But it expressed very strongly how I felt personally.
Stephen Lacey: We have job openings at Greentech Media.
David Crane: You should comment on what you're seeing in the writing skills. But that's an area in which I think the younger generation is not as good as its predecessors. But you have these digital skills which are incredibly valued. I would say the quickest way to have an impact at a young age is I've got this theory of demographics which, at least in the energy industry, there aren't really 30-year-old CEOs. Most CEOs are, at the earliest, in their late 40s, early 50s. People having kids late. That means a lot of people are CEO with kids that are still teenagers. You don't know this if you're not in your 50s, but you think you understand your younger generation through the prism of your own children.
What I found was that, and I got married late, when I was 33, had a lot of kids, but they were still younger. I thought I understood teenagers because I had a lot of teenagers. I didn't understand people in their 20s, because I didn't have anyone in their 20s. I couldn't remember the last time I'd had a conversation with anyone in their 20s. That demographic, the millennial demographic, is now both the most populace and the greatest purchasing power. Now the oldest millennial is, what, 33 years old? Because it's 1984 to 2004. People in their 50s crave understanding of that generation. They know that the best way to do it is to get some people very close to them.
I see a lot of situations in big hierarchical corporations where CEOs are getting a little cluster around them that avoids the EVP, SVP, VP, people and they're 40, 45, 50. They're getting some phenoms, some 25- to 28-year-old phenoms around them to help them understand that generation. The greatest power I think that most people can have at a younger age is to get that shared power. Make yourself indispensable to someone who has power, that's what I would say is the best thing that you can do when you're in your 20s. I would just say, look for the job where you can have the most impact soonest.
Create that, because the whole former way it was done, job description, posted online, you get fit into a box, you don't need to do that. I wouldn't go into a place that says, "OK. You're employee grade level four and you're going to do this for the next five years." Get in a situation where your natural skills can manifest themselves over time and you have room to grow and have impact beyond any narrow job description.
Stephen Lacey: The first part of your answer was particularly relevant for me, because I'm always looking at this through a communications lens. I get a lot of people who are not interested in writing, who want to get into the field and just ask me about companies that are hiring, or companies that are scaling up who may be interested in hiring. I can give pieces of advice on companies that I think are doing something interesting, but the actual piece of advice I usually give is, if you want to make yourself indispensable, there are so many outlets now for you to be able to create your own voice. It's so easy now for you to become a potential thought leader and exercise your ability to communicate and present yourself as someone who has worthy ideas.
We've actually at GTM published stuff from people in graduate school and in universities who are really strong writers who are seeing things that we may not be reporting on, either op-ed pieces or reported pieces. We're looking for people who are strong writers, not necessarily those who have worked in journalism for five or 10 years. I cannot tell you how important it is to become a thought leader in the communications world and to use all the tools at your disposal. There's nothing worse than getting a resume from someone who gives me something from three years ago, a writing sample from three years ago from when they were in a class or something. I want to see something that is really up to date. If you're truly passionate about the subject, it should be something that you're writing about now and reacting to and have something interesting to say. It is easier than ever to be able to do that. That's my general piece of advice that I give folks.
David Crane: To me, the total turnoff was someone who comes in and they appear as an empty vessel. They want a job. They don't want to say anything that's going to alienate me. I'm looking for some point of view. I say, go in and be yourself, because they're going to find out who you are sooner or later anyway. Again, I think in a world where increasingly machines can do everything better than humans can do, the only thing that we can do better than machines is have passion. I'm always looking for that fire within when I'm talking to a young person, the light in their eye. That, to me, is the most important thing. Express yourself. Don't just try not to make a mistake with the person that's interviewing you.
