Can America Keep the Lights On? | Jack Spencer

0:003, 2, 1, there are all engine running. There is no other institution that has the ability uniquely without a heritage every generation starts over to remind the current regime. We the people tell the government what it is allowed to do. We get back in their box and stay there. Let's go! From the Heritage Foundation, this is Heritage Explains. Welcome back to Heritage Explains. I'm Doug Blair, filling in for Mark Gainey. Energy is the nucleus of everything. The oil that powers our cars, the natural gas heating our homes, and the nuclear keeping the lights on, it's all tied back to energy policy. Reliable energy is essential to both American prosperity and national security.

1:04But dear listeners, I'm sure you as well as I are a little confused when it comes to just what's going on in the world of energy to help lay out just how essential this all is and give us a little insight on where we are with energy policy. I spoke to Jack Spencer, Director of the Center for Energy Climate Environment at the Heritage Foundation, as well as host of the Power Hour Podcast, and to tie off his extensive resume, author of the book Nuclear Revolution, Powering the Next Generation, our conversation next. Jack Spencer, Director of the Center for Energy Climate and Environment at the Heritage Foundation, thank you so much for joining us in Heritage Explains. Great to be here, Doug. Let's talk about the baseline. What does American energy policy currently look like? It looks good for the first time in a long time, actually. We've gone from the Biden administration of being really one of intentionally producing energy scarcity, whether it's through regulations that make it more difficult to drill for oil

2:08or to rack for natural gas, to trade in oil and natural gas, to build nuclear plants across the board. It was more difficult to produce affordable energy. What we have now, which is truly an era of energy abundance, or we're moving toward an era of energy abundance, it's easier to develop gas and oil reserves. It's going to be easier to build a nuclear power plant. Frankly, though the subsidies aren't there, if you want to build wind and solar, and it makes economic sense, it's going to be easier to do that, regardless across the board. We are in an entering an era where it's easier to produce more energy, which is now, it's always the right time to do that, but it's a critical time now because we today for the first time in a long time are seeing massive demand increases for electricity and power production. Where are some of those arenas where we are seeing those increases in demand? Obviously, data centers are the big conversation topic right now, but are there other sectors

3:08of the economy where we need more energy across the board? Because we're all using more electricity in our personal lives, but even in our professional lives, we are becoming more electrified. Any facturing is increasing in the United States. That all requires energy. Then, of course, there is the data centers. It's not all data centers. I think that that's one of the sort of misnomers that are out there that this is all being driven by data centers. Now, data center centers is an important part of this to be sure, but it's also industrialization and it's also just our standard of living. We'll get back to data centers a little bit later on in this conversation, but there is this sort of idea that energy is the centralized economic value, right? All things, all roads lead back to energy. How accurate is that? Is this truly a policy area that hits every part of the economy, every part of the American life? Let me throw some stats at you, Doug. And I didn't know you were going to ask me this question. This just demonstrates that you're talking to the right guy.

4:08From a lendy, literally thousands of years, human beings existed in a state of feudalism, trying to survive in today's dollars under a thousand dollars a year, sort of what we think of now as the Western world. For literally thousands of years, that's how we existed. We lived to about 35 years of age and then we died because the king killed us or whatever, like bad living. And then two things happened, magical things. We figured out that you could burn coal to produce energy and a bunch of guys in Scotland started thinking about and talking about free enterprise and natural rights and all of those things that sort of provide the foundation of what we've of the American dream, the importance of private property, the importance of the individual, the importance of self fulfillment, all of those things. Well, coal and that happened at about the same time the mid 1700s give or take. And from that time forward, from that time forward, people started living longer.

5:13We now live 80 years give or take and we now make 70,000 bucks a year give or take. That's what energy is done. It's made us much richer. It's made us live much longer. So any of these people, any of these people who try to downplay the importance of energy or more importantly, more importantly, increase the cost of anyone who promotes a policy that purposefully increases the cost of energy, which therefore makes it easy for the rich guys, the kings to have what they want, but not for the poor people. Anyone who does that, we should call them out for what they're doing. They are denying people the ability to raise their standard of living and to live longer. That's what energy brings us in addition to like driving our cars and stuff, but historically the numbers. That's what energy does. And we throw the defensive energy from Jack Spencer, only kind of defense on it. Exactly. A very energetic defensive energy by Jack Spencer. Moving back to you mentioned that the Trump administration has been very good on promoting energy abundance.

6:13Drill, baby drill was one of his campaign promises. The other angle to that was energy independence, where we are now able to produce our own domestic energy as opposed to importing it from other places. How are we looking on that front is energy independence becoming better under the Trump administration? I would reframe that a little bit. I'm not a huge energy independence guy in the purest sense. What I think is important is that we develop our domestic resources as much as makes economically sense, but have access to the resources that we need to drive our economy forward to keep prices affordable. That sort of thing. Some all for American energy. Like I want to I love domestic energy production, but that shouldn't be the goal. The goal should be ensuring that American families and businesses have access to affordable abundant, reliable energy. And that means trading with our partners. That doesn't mean policies that force us to become dependent on China and Russia. So we don't want.

7:14We for a long time and still in if you're interested, we can talk more about how we became relying on Russia for nuclear fuel. How we were well on our way to becoming dependent on China for renewable, I mean, like call it green fuel, whatever. It's not green either. This intermittent wind and solar garbage at this, the government was imposing on us. That was not only did it have cost, you know, cost and environmental implications, but it was making us dependent on China. So when I say we should have access to the world's resource, I'm not talking about forced dependence on them. I'm talking about having functioning energy markets between the United States and our friends and allies. And we should have policies that allow the United States to be the central point of that economy. And that's where we're at. So yes, we are far more independent than we would or put another way we're producing far more energy domestically and have greater access to friends and allies, both that we're producing for them. But when it makes sense that we're getting from them and that's the direction we're

8:18headed in and that's where we have made a lot of progress in that space. One good example on the export side is one of the things that Biden did was put what he called a pause, but it's actually a what's worse than a poll and a moratorium on natural gas export is and that during a time when Russian made Ukraine is just insane. Now some people say, well, that makes sense. We want to keep it here to keep prices live. That's not how energy markets work. By exporting you create the incentive for domestic suppliers to produce more of it. You spread those fixed costs over a greater marketplace and our prices go down. The more you produce, the more you can spread those prices, the lower prices are. And because we have such an abundance of natural gas, it's great that we were that that President Trump allowed that export. Not only does it have really important strategic implications, but it's really good energy policy as well. On that note, about external sources of energy and external relationships with energy, a new Venezuelan US energy agreement will give Washington majority control about 65 billion

9:22barrels of oil reserves from Venezuela. What are the implications of this deal for the American energy market and as you were explaining the global energy market? Well, we don't quite know yet because though the Venezuelan oil reserves are now available to be developed by American companies, which is awesome. Especially at a time we would hope to continue to work with the Canadians, but there's some trouble on the northern border. But I am sure that will get worked out because it has to be worked out. But as that's going on to make sure we have access to this Venezuelan oil is important. There are similar types of oil and our Gulf Coast refiner are set up for those types of oil, so it fits well with our oil economy. So what does it mean? I mean, Venezuela has the biggest oil reserves in the world, but it doesn't produce it like one would think who has the largest oil reserves in the world. So it creates this opportunity to add a lot of additional molecules onto the market, whether

10:26it's in the United States or into the broader global energy market. So it's all good. Not only does it provide a reliable source of oil, but by bringing that oil into the market, it will drive prices down hopefully over time. But because of the political, and I'm not a political guy, my job at the Heritage Foundation is not to be a political guy or to be in a foreign policy analyst. So I'm not going to get into those details. I will just say that. There's a lot of details to be worked out on the international political side to really allow that resource to be fully developed and not just benefit US, but has real benefit for the Venezuelans. It's not Washington controlling what's in Venezuela. It's the Venezuelan resource being available for development by US oil companies so that

11:28the United States and our friends and allies will have access to that oil, including Venezuela. But the Venezuelan people will get the monetary value of that resource. So it's really a win-win situation if this all unfolds the way that a lot of us hope that it does. We're turning to a topic we discussed earlier at the top, data centers. I don't want to have you weigh in on the data center argument, but where does energy play into that question? There's obviously grid reliability questions. There's pricing model questions surrounding utilities. What is the conservative play surrounding those types of questions? We need to produce, we need our energy companies to produce more electrons. Data centers are being blamed for higher electricity prices. First of all, that hasn't been bor out and it hasn't happened generally speaking because data centers like any industrial power user is going to seek places where there's excess energy or affordable energy so they can get that and then prices have the, in many instances,

12:29they've gone down. But that's not the full story because there's this massive demand coming down the road. And we don't have energy infrastructure in place today to support all of that. That's not the fault of the data center. It's the fault of past energy policy and they didn't possible to build anything new. And when people put the blame on the data center, it's misplace blame. This has to go on the blame has gone the politicians and bureaucrats who made it very difficult to build new energy. The data centers are revealing this inefficiency in the system and forcing the policymakers to do something differently. So what should happen is if, and what is happening now and hopefully continues to happen is that through that by revealing these inefficiencies, changes are being made and we're going to add new infrastructure to the system. So not just that data centers have access to the power they need, but that we all have both we as residential users, but also other businesses, you know, such as data centers to use power,

13:30everyone uses power. So it creates a demand signal. We need to build more and we should miss in the United States. We should be a wash in electrons. I mean, we have nuclear, coal, natural gas, everything. We have the technology. We have the cap. We should be producing more than enough electricity and work and if the politicians will get out of the way and it seems like they are, this will, the data centers will be what drives that modernization of our electricity grid. So that's part of it. Another part of it is being open to doing things differently. This is one of the things I feel really strongly about. Not to criticize the legacy utilities too much. We could do that, but that's not my purpose here. For whatever reason, the evolution of American electricity has been such that we have these very large power producing plants, and then we distribute that power around through transmission

14:31lines. Jack Spen. What the data centers are making people rethink is whether or not that is the only model we should use might it be the case that it makes sense for these heavy industrial power users like data centers, but not exclusively data centers to bring their own power to build a for lack of a better word, a micro grid. That has a lot of benefits to it. First of all, as I'm calling legacy grid, as our legacy grid modernizes for the 21st century, it relieves some of that pressure. So everyone's not just plugging into a grid that's not ready to have everyone plug into it. So relieve some of that pressure. Importantly, and I think more importantly, it begins to establish new ways of doing things because by building a power source that's not plugged into that grid, you're not subject to the same regular, the same regulations, the same oversight. It would be a state overseen thing. And we might see new and innovative ways to produce and distribute electricity on a smaller

15:34scale that will lead to efficiencies and innovations that are applicable on a larger scale. So it's I think that the data centers, if we if we free them up to build their own power, it could lead to greater things that benefit all of us. It may not benefit the legacy way of doing things. Jack's been, but hey, it's not my job to worry about, you know, the legacy way of doing things needs to compete and adjust. You bring up an interesting point. It reminds me every Sunday when I go to church, we drive past these power lines and the massive infrastructure that is required to set those power lines up that was required to set those power lines up in the past because we simply did not have the technology or the advanced ability to put them underground, which might have been a better long term solution to those things. Your answer brings up a very obvious question. What is the most cutting edge technology that we have access to and should we be rethinking

16:35as a nation re retrofitting our current electrical grid, our current electrical energy substructures to give that energy system a boost to make that better? I wouldn't as a matter of policy retrofit the grid. I would allow new technologies to be applied as they make sense as people are willing to invest in them. I would make sure that our policies didn't bias against that or bias in favor of the legacy way of doing things. I think we're at a time right now where it's really important that we provide as the policymakers provide flexibility, efficiency and allow people to go and innovate and solve this problem. That's how Americans solve problems. We don't solve problems in the halls of Washington or state capital halls. They solve problems that they create. American, private Americans and American industry have been solving problems since the beginning of this country.

17:36By the way, that also goes back to those guys I was talking about earlier and the people who started burning coal. But that's what Americans do. People talk about American, are we exceptional as the American dream to? Yeah, America is exceptional and the American dream is not dead because we have a system that relies on individual motivation to go do stuff and we haven't had a government that is so pervasive that people can't go do those things and to reap the benefits of their decisions and hard work. That's why we solve things. So you put a bunch of Americans in a place and say we need to get this electricity over there quicker. Just let them go do it and they'll go do it. So I'm hesitant to say, yeah, let's go retrofit everything because whatever. No, let's give the American industry the flexibility to go solve this problem, whether it's new technology or old technology. We asked what's the most cutting edge technology? I don't know. There's lots of cutting edge technology out there. And if you've been in this business long enough, you'll have everyone pulling up with a PowerPoint with the best WizzBang technology ever saw that did mayor may not be real.

18:41I don't know. The market will tell us what's real and not real. So let them go out and compete and show us what the most cutting edge technologies. But let me still answer your question a little bit. There are cutting edge technologies that allow our existing infrastructure that the legacy system be more efficient to get more electrons across existing infrastructure. That would be really important to be able to do the power production side. Nuclear. I'm a nuclear policy guy. There's all kinds of new nuclear reactor technologies that are on the threshold of being commercialized that can be brought to bear big small micro giant. All of them different all different kinds of stuff. You have even things like new geothermal technology that people are people are out there developing that makes geothermal allegedly or potentially make a lot more sense. All of those things are out there. I would even I would even go so far as to say things like wind and solar.

19:42If we if we get rid of the subsidies, got to get rid of the subsidies and let the the wind and solar people. Let that industry let the most promising aspects of that industry move forward and figure out where in this new energy infrastructure, this new energy world where they might have a competitive advantage and then exploit that competitive advantage into a business that makes economic sense. All of these things I think have a place to play. If we get rid of the subsidies and let them go off and compete and let the market determine where they make the most sense. Well, you brought up nuclear so let's go nuclear. You literally wrote the book on it nuclear revolution powering the next generation and cards on the table. I worked in France for many years where nuclear is king. It's just their primary source of energy production. It's obviously not here. It's just not a technology that we have in America. Is it still resistance to things like Chernobyl, through my island Fukushima or is there a larger block on getting nuclear developed here?

20:46Well, first I have to say we have more nuclear than France does. Really? Yeah, that is news to me. Heritage explains. Did I add? We have more nuclear energy than France does. France has a higher percentage of their power. So about 65% of France's electricity is produced by nuclear, about 18% of ours. But if we go toe to toe reactor for reactor with France, we have more reactors than they do. However, your point is still well taken and here's why. Nuclear is king in France. France not only relies on nuclear energy to produce the preponderance of its electricity, but it has a functioning nuclear waste system. So it reprocesses its nuclear waste. It has the lack of progress on nuclear waste management. It's not a challenge for France. What is a challenge for France is the same thing as a challenge for us, which is nuclear energy costs a whole lot of money. That's also that is a challenge for France. It's not a challenge for us is that we have abundant natural resources.

21:49So then becoming so dependent on nuclear was a policy decision that rose out of the energy crises that hit up most Western countries in the 1970s. They made the policy decision at that time, we're going to build a bunch of nuclear power plants. We were sort of the opposite of that. We had built most of our, we had ordered and begun construction of most of our power plants by the mid 1970s, but for a series of reasons, which you can read my book, Nuclear Revolution of Finance, or you can invite me back on this podcast to explain again, to explain in more detail why at that point in time, we basically stopped building nuclear power plants. So most of the nuclear power plants we have now were built and or ordered by the mid 1970s and then built slowly for the ones that weren't built by the mid 1970s were slowly built over the next 10 or 15 years. We haven't, we've built virtually not, we've built two nuclear power plants that were very expensive since that time. Great nuclear power plants, but very expensive. That's a extraordinarily long-winded way of getting to the answer of your question, which

22:52is does nuclear have a future in the United States? It absolutely does. Not only does it have a future, but we are at a point in time because of this massive demand that's coming down the road where nuclear is probably going to be an important part of the answer in the, not near, not tomorrow. Natural gas is going to continue to be what really drives us forward in the near, near term, but in the next five years or so, we're going to start saying nuclear, a new nuclear entering onto the grid in a commercial way. At that point in time, we will see if the United States has figured out how to do it economically. My prediction is we're either going to build five nuclear power plants or over a thousand nuclear power plants because that's how much power we need. So if the companies now who are investing in nuclear energy are able to figure out how to build it economically, then that will be, I think, a really important, a massive piece of our future electricity development. If they don't, if these reactors are being started now, if people are thinking about

23:53building, beginning to invest in, if they're not affordable, then we're going to be back where we are, where we were five years ago, which is, yeah, nuclear theoretically is good, but it just costs too much money. And the Trump administration has been it done a lot of things, a lot of things to create the potential for that nuclear power to be less expensive. The question is whether or not those opportunities will be fully exploited in order to drive prices down as low as they can be, which at the end of the day, whether it's nuclear, when and solar or gas and oil, economics matters. So that's so I can't predict what the future will be, but certainly that we have the potential today that we haven't had in a long time for nuclear to be really successful in this country. I'm going to out myself as a nerd here, but there is a concept in theoretical physics called a Dyson sphere and the idea is that you basically surround the sun with a bunch of mirrors and that this allows you to reflect 100% of the sun's energy to power multiple different

24:55devices and it basically offers unlimited amounts of energy. Nuclear is a more scientifically viable promise of that type of energy. What is the potential for nuclear energy? I mean, you spoke a little bit about you can't predict the future, but what is the potential if America was to go all in on nuclear energy? I mean, would that fix most of our energy problems for the foreseeable future? Or would we still have this conversation in 20, 30, 40 years? Depends on what you mean by America going all in on nuclear, but let's just say what you mean by that is America's nuclear industry figures out how to build it economically and competitive and that becomes a predominant source of energy in the United States because it's economically viable. It is then virtually unlimited, absolutely, because not only is the fuel readily available, but when you use the fuel, there's still a lot of energy left in that volume of fuel even

25:58after the reactor has used at that first time. So you can do something called reprocessing that fuel. That gives you access to additional fuel resources. We often think about uranium as the primary nuclear fuel, but there's also plutonium. There are thorium fuel cycles. There's just a lot of options out there to use that basic physics of fission to produce energy. And I don't know if it's unlimited because unlimited is a long time, but as far as you and I are concerned, it's virtually unlimited. For sure, and that doesn't seem to get into fusion, which is a sort of nuclear fission's cousin, some might say, brother. I don't know. It's related. That gives you a whole another avenue to produce virtually unlimited energy. So the technology is absolutely there. That's why I'm not worried

27:04about when people say we should, we need to worry about using up all of our oil or all of our natural gas or oil work. That's not my view. I say use it. Use it because what will happen is if hundreds of years for now, we use up all we will never use up all the natural gas because at some point, it will become expensive. And at that point, these other technologies will be brought to bear. What we need to focus on the what the politicians need to worry about is not not preserving energy resources. They don't need to worry about efficiency. Americans can handle that with our own personal decision making. What they need to worry about is creating a regulatory system that allows innovation to happen. That allows competition to happen. That allows markets to function properly. And that way, we won't organically transition from a hydrocarbon based economy to a fission based economy to a fusion based economy. And how that all unfolds over time. I don't know, but it will unfold over time in a unfold in a way that benefits American families and businesses

28:08if government gets out of the way and lets it happen. And nuclear is at the point where it may be able to organically begin that transition. Well, Jack Spencer, I think we might have to have you on for a power hour at some points, Fignia, which you can check out, Jack, on the Power Hour podcast here at the Heritage Foundation. But Jack, I really appreciate your time. This has been a wonderful conversation, very energetic. And we will speak to you again. Thank you very much for the opportunity. And I look forward to it anytime you like. Thank you to Jack Spencer for joining us. There's a link to the Power Hour podcast and Jack's book in the description. And as always, thanks to you for tuning into Heritage Explains. Feel free to drop your thoughts, questions, or suggestions at HeritageExplains at Heritage.org. And until next time, this has been Heritage Explains. Heritage Explains is brought to you by more than half a million members of the Heritage Foundation.

29:11It's written and produced by Mark Garnie, Lauren Evans, and John Pop.