 Thank you, John. Thank you for having me. I appreciate being here. Let me try to give just a little more context in terms of some of my comments today of the world that I come from. So, you know, was certainly excited to be a Stanford graduate and worked my way into finance on Wall Street. And I was in a energy and power. It was called Pipeline and Utilities. So I grew up learning everything about an electric utility and covered pretty much every one of them some way, shape, or form around the world. And what I really became to focused on was safe, reliable, low-cost operations. Later on in my career, clean energy worked into that mix. But for me, it was very helpful understanding the guts of a utility and reliability was the core of that and really a social good that utilities provide. Electricity deregulated in this country in the late 1990s and that changed the whole game. And they deregulate the power generation side of the business, meaning most utilities, well, probably half utilities in this country, were required to divest themselves of their power generation to create a competitive marketplace with the goal of reducing rates for consumers. A lot of argument whether that was effective or not. I think it was for the for the most part. But it created a whole new class of potential owners of power generation. Electricity is a very difficult commodity to manage. It's really the only commodity out there that can't be stored. And when you have a commodity that can't be stored, I know there's ways there's pump storage and we're getting there a little bit on batteries. But it's a real time when you turn that light switch on somewhere, it has to be produced at that moment. So the volatility around price of electricity when you can't store it is enormous. So on Wall Street, Goldman Sachs, I helped build a very large electricity risk management operation to figure out how to manage this commodity. And from there, when we learned that, we started buying physical assets. I realized that this was going to take a lot of capital and I was better off going outside and raising that capital. So I've been traveling the world over the last 13 years to raise capital, about 20 billion now, because power plants and pipelines and renewable projects, and I'll get to all of those details, they're not cheap. And you can't do it. You can have a lot of good ideas in this world, but without money. And so I formed a private equity firm, and a lot of people have notions about private equity, but I think they forget where the money comes from. Most of the money are retired teachers and government workers. One of our largest, about our largest investor is CalSTRS, the California State Teacher Retirement System. But we have Texas teachers, we have the Packard Foundation, we have Stanford University, all sorts of children's hospitals. And we're really proud of who we serve and who we are trying to get good returns for. It's a difficult environment getting good returns. Interest rates are very low. And to meet all of the pension obligations that we've promised workers in a 2% or 3% interest rate environment, you need your equity returns to be pretty good. And private equity has really been the highest returning asset class over the past 20 years, averaging somewhere in the 13% area, and so a lot of money is flowing into. It's also difficult to be a public company. The rules and regulations around being a public company are frustrating to a lot of folks. And you can see, you know, Elon Musk doesn't seem to enjoy it very much. And so more and more companies are desirous of being in private hands. And so that's what I formed. We're now the largest independent generator in the United States. We're the largest generator of electricity in California. We're the largest renewable investor. We've invested almost $3 billion in renewables around the U.S. We're a control investor, meaning we own and operate everything we do. This is not a passive. I'm not buying securities in some other company. And so we have almost 20,000 people in operations managing all the facilities. In California, we purchased a company recently called Calpine, which is one of the largest independent power generators. It's a $17 billion purchase. And so we are the predominant. We are the largest natural gas generator in the state. I'm going to talk about that because natural gas is critical to provide your reliability to back up intermittent renewables. We have a very large wind portfolio here in California. And we own the geysers, my favorite renewable asset in the world. This is a renewable asset that is not intermittent. Geothermal, and it's in a beautiful area up in Napa. Geothermal, it's available all of the time. So this is baseload renewable. That's kind of nirvana. We wish there was more baseload renewable. This one asset throws off about $300 million a year of cash flow, the most profitable renewable asset in the world, because of this constant nature of the geothermal resource. So my comments are going to come from boots on the ground and having done this for over 35 years, really with the context of a background of reliability is the number one goal. Safe operations, environmentally compliant operations, and now quite a focus on clean energy. So I want to hit with some realities of just some basics about the energy industry to maybe just give you a little bit of a different perspective perhaps than maybe some of you have heard and maybe not. So I'm going to start with coal. As you know, the United States, oh, 10 years ago, was 70% coal and nuclear. We're now probably about 50% in shrinking coal and nuclear of where our electricity comes from. And the major culprit in the United States of the declining share of coal is natural gas because of the fracking phenomenon. Probably one of the best things that has happened environmentally in this country is the technological advancements in hydraulic fracturing and horizontal drilling. So we have abundant natural gas, which is a much cleaner fuel than coal. And because of its low cost, because there's so much of it, the price of natural gas has dropped almost 90% here in the US. It is outpricing coal. So it's easy to blame environmental regulations on coal, but it's predominantly just market driven. Rest of the world, not so much the case. Coal is a predominant fuel in many, many parts of the world, still a predominant fuel in India and China and continues to have a leading share. I get the data from the IEA. And a little bit, some of it is dated, but that doesn't change all that much, the International Energy Agency. I highly recommend their book of statistics that come out. It really is unbiased. And they publish every year just volumes and volumes of data. But the brown is the coal projected to grow by 2.2% through 2040, which would make it the fastest growing fuel resource. So we have a little bit of a different scenario in the United States with regard to coal, relative to what's going on in the rest of the world. I think this is a surprise to people that the most used fuel out there and still one that is slightly the fastest growing is coal. Greenhouse gas emissions, we put a lot of focus on coal as the culprit. Roughly less than 20% of global greenhouse gases come from coal. Agricultural activities have been a much larger contributor than coal. This is a rough pie of where CO2 comes from. You can see the bottom one, 24% agricultural forestry and other land use. We were joking earlier, I've become a vegan in the last year, mainly for health reasons and I'm the best thing I've ever done and I'm loving it. But I also do feel good when I think about not being so much of a hypocrite. It's hard not to be, I hate to say this and I'll look at myself, not to be a hypocrite when you come and you talk about CO2 and those type of things and I'm gonna get to our use of fossil fuels in society and I flew in from New York today and we have all of that. But when I think of livestock and I think the impact of livestock and CO2, whatever, I feel a little bit better that maybe I'm doing a little bit to make myself a little bit less of a hypocrite but I'm healthy and I lost a lot of weight too so I feel good about that. But coal gets the brunt of the focus and as I said, less than 20%. I'm not saying coal's a good thing, I'm just saying we gotta put it in perspective. There's a lot of other sources of CO2 in society. 90% of global coal consumption is outside the United States. You know, we are focused so much on reducing our use of coal but that focus is not as great elsewhere and even if we are wildly successful, have we really changed that much on the planet? And don't forget there's two kinds of coal and there's one kind of coal that is flourishing here in the United States. We're a large owner of it. Thermal coal is what is used for power generation and when that coal is burnt, CO2 is released into the atmosphere. Metallurgical coal is baked. That is the primary input to steel. Steel business is booming in the United States. There's tariffs that have gone on steel so domestic steel production is up and Met Coal is doing very well so there are pockets of places in places like West Virginia that are doing very well and while it has a bad name, there are no CO2 emissions that come from the use of metallurgical coal. Our share of CO2 emissions globally, roughly about 14%, it's projected over the next 15 years to drop to 12%, predominantly because of fracking, predominantly because of the low cost of natural gas is displacing coal, not because of renewable policies but just because the use of coal going down pretty dramatically because it just can't compete and as a member I said, about half of the United States market was deregulated in power generation. So I'm an economic being when it comes to how I produce electricity. I'm gonna produce it with natural gas. That's the cheapest way to do it. That's where I earn my highest margins, not with coal and that's really what's causing the decline here but still 12% of the global total, how much can we really do? And you can just see a depiction in terms of just the CO2 emissions globally in tons and where we are as a relatively small piece of the equation. If we eliminated all of our burning coal in the United States, global CO2 down by about 1% to 3%. So again, not a dramatic impact to what's happening to the planet. I know some people, you maybe like to think you put a bubble around your state and it'll be great but it's a global phenomenon and we do have to think about it I think in a global context. This is just another way of looking at it of just the world CO2 emissions which are expected to rise out through 2040. Continued to rise pretty dramatically is the base case. Again, driven by population growth around the world driven by the heavy use of coal in places like India and China. And if we took all of our coal out of the mix really doesn't change the trajectory of that line very much at all. China and India are contributing the most to CO2 growth. If you recall the Paris pledge their pledge was to continue to grow their emissions at high level only agreeing to slow their growth rate not reverse it. This is a good the top is China the gray there till you see 10,000 that was their actual a couple of years ago. They're projected out by 2030 was the red line and what they agreed to is to back up the red line to the black line but I look at that a little differently that's agreeing to a massive increase in CO2 emissions. Wow. United States, we're now no longer a party to this. We were actually agreeing to reduce our CO2 emissions. India same phenomenon as China. We're gonna increase them a lot just not as much as we thought we were going to do. And you might see a little bit of why maybe the US was saying is this really a fair deal of we're actually planning to do something. Now the US has done it. I don't think it's quite fair to give credit so much to renewable policies. I give credit to fracking. I give credit to this phenomenon of an enormous amount of low-cost natural gas which has just placed coals as the number one contributor to why the US has brought this down. There's another side which I'll get to to low natural gas prices which is not a good thing for CO2 and that is its impact on nuclear. United States is still the largest nuclear power producer in the world. At the peak we had about 100 nuclear power facilities. We're beginning to shut them down. They're old is one of the issues with them but they're becoming less competitive. Less competitive because the price of natural gas it's cheaper to generate electricity using natural gas. We'll do questions at the end. We'll have plenty of time for it. Okay, California emission reductions and the benefit of renewable programs are a rounding error relative to China and India emissions level. China and India are expected to increase fossil fuel generation by about 2,000 terawatt hours by 2030. California expects a decrease of 28 terawatt hours in terms of fossil generation. So 2,000 versus 28, how much does that 28 matter? I'm gonna get to the cost of electricity in California which to me is quite staggering. So we've put an enormous economic burden on this state and maybe we're a model and maybe that counts for a lot that we're leading the way as a model but in terms of the math, we're not making a dent. That's just a depiction of, you can see California in the bottom left. We're a little peanut versus China versus India and the red is what's planned to increase from China and India in terms of electricity generation from fossil fuels through the end of this decade and California the little green is the decrease that we're attempting here in terms of less fossil fuel usage. Reductions in solar and wind power costs is a lot talked about that finally wind and solar are now competitive with fossil fuels. I would say that's not the case. I feel bad for those that have done an incredible job making solar panels more efficient and increasing the efficiency of wind generation but they haven't been able to keep up with what's happened in the price of natural gas. Price of natural gas, we hit a high of about $13 per MMBTU back maybe in 2007 when conventional wisdom was we're running out of natural gas in this country. We found all that we were gonna find. The reservoirs are being depleted. We actually were building billions of dollars of LNG import facility because we're not gonna have enough natural gas here and so the price was through the moon and then boom, the technological advancement of hydraulic fracturing and horizontal drilling and by the way, the technology continues to improve. The costs continue to come down. Horizontal drilling out as far as two miles in six different locations that is abundant supply continues. Demand for natural gas is up. We're using more natural gas for power generation. We're beginning to export natural gas for LNG purposes but still that dramatic price decline has meant that natural gas has been a formidable competitor with renewables. This is just a kind of depiction, a couple of years dated on this but you can see the production in natural gas and these numbers are even much higher now in terms of the production of BCF per day. I think we're over a hundred BCF per day now of production and this is a supply story. This is a dramatic supply increase of natural gas and as simple as supply and demand and the swamping of supply is causing that price to plummet. There's also something called associated natural gas. When we frack for oil, a byproduct that comes up, we didn't mean to get it, is natural gas and so that's in that case kind of a marginal cost of zero just kind of flooding the marketplace and so as I said, we hit maybe a high of $13 per MMBTU. We hit a low maybe of about $1.50 per MMBTU. We're now back up to $3 or so. We had a hot summer, a lot of usage there and we've had a pickup and demand from LNG so that price has come up a bit but still a dramatic drop. So as I say, more expensive and when I say more expensive, there's three things that I add back and three things that don't always get added back to the full cost of wind and solar. I think most people add back the subsidies and I'm gonna talk about those subsidies in a second. The thing they don't add back and I'm gonna show you my electric bill from California in a minute, the thing they don't add back are the transmission costs and the backup generation costs. Utilities love the proliferation of renewables because they get to rate base tons of transmission. Most renewables are out in remote areas. Solar fields out in the desert. Wind farms out in a ravine somewhere and we need hundreds of miles of transmission, billions and billions in dollars of transmission lines. That goes right into your electric bill. That goes right into rate base. Utilities love it. They earn a fixed rate of return on those expenditures. It goes in as a regulatory expenditure and that's going right to your bill and those lines wouldn't exist if renewables weren't there. The other side of it obviously is wind and solar are intermittent and so we need more natural gas to back it up and I'll talk a little bit more about that but it costs something to have these natural gas plants that are gonna run unfortunately maybe some of them only a few hours a year but you got a billion dollar investment sitting there that had to be made for those days when it's not sunny and it's not windy. I make this comment here, bother some people that I make this comment that the solar tax benefits are actually greater than 100% of the cost of solar and people say no, no, no, no. There's just this federal tax credit of 30%. Well, there's two other things. There's depreciation and then these are highly levered assets and there's the interest expense that you get to deduct and the depreciation is, I might use the word a little bit egregious, what solar developers do is once they build out the system they get a fair market value done. They say now that it's built it's worth more and we get to depreciate it on this marked up fair value. So they're depreciating and now that we have accelerated depreciation in the tax code, maybe can depreciate this as quickly as over five years. Depreciation is just another word for a tax deduction and if you're able to depreciate 150%, let's just pick a number of what it cost you to build it and you do that over five years, that is a very large number that's going in as a tax deduction. Generally when you build a solar field you've earned a 25 year contract with California utilities because here in the state we've mandated the utilities 50% of their power comes renewable. We're now talking about 100% of it coming from renewable. How do we make sure that that gets built? Pacific Gas Electric Southern California Edison, San Diego Gas Electric offer up 25 year contracts to solar and wind developers. Well you can take those to the bank. You lever them at 90% and all of that interest that you borrow you get to deduct that, that's a tax deduction. So when I throw the federal tax credit the depreciation on the stepped up basis don't forget about stepped up basis that makes my depreciable base much bigger and I throw in the interest expense. If my solar project cost me $100 million to build over a five year period I will get more than 100 million back in tax credits. So you don't hear about this as much and I'm not saying there's not environmental benefits with it but the subsidies are enormous in this area. All right I mentioned nuclear as an issue. So you know San Onofre it's two left in California. San Onofre and Diablo Canyon. Diablo Canyon will be shut down, I don't know 2024 I think is the year for Diablo Canyon that'll be shut down, something like that. Diablo Canyon? Yeah Diablo Canyon is still running. San Onofre is closed. I'm very happy to report we won the contract to decommission San Onofre. So I'm at San Onofre almost every week so you have any San Onofre questions I'm your guide. So San Onofre is between Los Angeles and San Diego roughly about a 2200 megawatt. Green, green, green power facility. There are no CO2 emissions from nuclear. I like to say on nuclear half of society loves it and half of society hates it. Most things in life were unfortunately in this country. We're 50-50 here's another one. We're 50-50 on this one. Love it or hate it. To me if your focus is global warming and that is your passion boy you should be loving nuclear but there's not a lot of love these days for nuclear in California. So San Onofre all of that and by the way it's a base load facility. So not just 2200 megawatts but 2200 megawatts that run 90% of the time. That's like we can do the math. That's like 15 to 20,000 megawatts of wind or solar to get the same megawatt hour production. Carbon-free megawatt hour production. The main culprit is natural gas. So if you're a 40-year-old nuclear plant like San Onofre is and you wanna extend your life 20 years you're looking at the margin that you earn on electricity sales because you're gonna have to put in a few billion dollars to retrofit the pipes and keep its age going. Well return on investment what am I getting from my product? My product is electricity. Because natural gas is the fuel on the margin natural gas is what sets the price of electricity in most regions in this country certainly in California. Again that's the fuel on the margin so that's gonna set the electricity price because of fracking back to that thing again just keeps coming up driven the price of electricity down that drives down the price the price of natural gas down driving down the price of electricity I'm not gonna earn much from selling electricity can I really justify the billion, two billion dollars spend? And then let's say I extend the life for 10 or 20 years does society want me? You gotta put a big discount rate risk factor because you could see a referendum in California or from the federal government shut down all nuclear or there's an accident somewhere in the world and the sentiment gets even worse. So the investments are not being made they're being shut down and I would say it's gonna be almost impossible for the United States to reduce our level of CO2 emissions if nuclear keeps coming out of the system, right? 20% of our power generation and it is carbon free. This is just a depiction of a grid let's say we have 30,000 megawatts on the far right of nuclear that comes out of the system we have roughly 200,000 or so maybe a little bit more than that 200,000 megawatts of nuclear generating capacity the United States is roughly about a million megawatt of capacity system. What's it gonna be replaced with on the left side of the grid? You can't replace something that runs 90% of the time with renewables unfortunately now we're gonna hear a lot about battery and we have some experts on the battery storage side and we so hope that there'll be a breakthrough but there isn't a cost effective major breakthrough yet on large battery storage that turns a renewable resource into a 90% availability nuclear facility so we're gonna have to replace it with natural gas something that runs all the time and if the fossil replacement is 80, 90 or 100% I'll give it credit let's just say 20% is replaced with renewables or renewables with battery and the other 80% with natural gas at 30,000 you got a 7% increase in terms of the tons of CO2 that will be emitted into the atmosphere so we really need to talk about the impact of low natural gas prices on causing a nuclear to shut down it's been wonderful in terms of what it's done in terms of coal shutdowns but we've actually you're now having even a bigger negative impact on the other side by losing nuclear. California cost we gotta talk about cost because at some point there's a day of reckoning in California retail electricity rates I like to say where's the outrage have gone through the moon are really becoming the highest in the world and I wanna spend a little bit of time on that and it's really been driven predominantly almost exclusively by the very aggressive renewable policy here transmission's a big part of it but the biggest expense in your electric bill is the cost of natural gas because that's the fuel that's most predominantly used to make electricity. Your electricity bill should have plummeted in the state it didn't plummet it went the other way. Electricity bills in other parts of the country and even wholesale electric rates in California are down by about a half but retail rates the rates to everybody in this room have gone up dramatically and so let's maybe go into a little bit of why that is I take my two main states no New Jersey jokes on the right here but New Jersey is predominantly a nuclear and natural gas fired generation mix and very little on the renewable side even though they have huge subsidies in New Jersey crazy as it is for rooftop solar because it's just gray all the time there we don't have a lot of sun but we have a little bit and then California you can see 20% renewable and we have a lot of hydro here as well so that's the difference really between these two states that I picked but look at the top rate and I'm gonna get to summer rates which are even higher than this the top rate 14 cents a kilowatt hour in New Jersey and 40 cents a kilowatt hour and I would put forth that renewables in the mix are the reason why the rates are more than twice as high if you look the red line we go back over the last 10 years California residential price and this is the average and I think the average now is pretty close to 20 cents the average retail price that's the average it's not the top marginal I'll get to that in a second but it has gone up pretty steadily continues to go up there's a lot of discussion of rate design being a little warped in the state of California why are we putting all of this on the backs of retail consumers yet wholesale prices have gone down quite a bit there's a good Stanford professor here Frank Wollach that many of you know just wrote a very good paper I thought about this comparing the Texas marketplace which actually has more renewables than California where they have a little very different let's just call it rate design where the retail rate has not doubled and there's a more balance between wholesale and retail but look at the price of natural gas which is the blue line going down dramatically your price of electricity should have followed that line because it is the dominant cost factor going into the production of electricity and that green shaded block there that's the percent renewable power in the state and so really the difference is is the cost of renewable power and everyone can show their studies that say that wind and solar are competitive I look at the whole loaf the whole loaf is how much do I pay every month and that amount has gone up so there's a lot of little somethings that have gone into my bill and a lot of it has to do with the integration and the backup costs of that if you look again retail just is California competitive? California is not competitive and is becoming even less competitive if you look at the electricity rates and they break it out by tears which maybe I'll explain in a second but you know the average you know I think we're closer to getting close to 20 cents but we are dramatically higher than states around here and so there's a lot of burdens on California is on the tax side and we don't talk about as much of the burdens that are there on the electricity rates as well so this is a little hard to read this is my electric bill in San Diego I have a home in San Diego it's about a 5,000 square foot home so it's a large home it's not a palace but it's a 5,000 square feet home July is a heavy air conditioning month I live five miles back from the beach and they have basically zonal rates I'm in zone one in zone one they have a baseline of how much electricity you get this lower competitive rate I thought the baseline was just my average and then I'll try to beat my average it's a theoretical thousand square foot non air conditioned home on the beach the difference in California five miles from the beach is enormous I probably 10 degrees the difference but a big difference and you don't need air conditioning if you live right on the beach you'd need a lot of air conditioning if you live five miles back in Southern California so I use a lot of air conditioning it's a two story house and that second floor to get it cooled down I guess I'm a culprit and the number will scare you it's a big number in July that I use 7,273 kilowatt hours which if those of you that know an average home and that type of stuff I think the average in the United States is closer to about a thousand and so maybe seven time but again this was a July month but my bill if you can see the shocker my bill for the month was $4,100 $4,100 and the gas they do a nice the gas was $200 and the electricity was $3,900 and you can see a summer use there's all sorts of ads on electricity generation transmission distribution nuclear decommissioning competition transition charge local generation charge reliability services I don't know what the total rate adjustment but buh buh buh buh all sorts of little pieces that none of us are supposed to understand I guess there and if just they gave me my dashboard here which is very kind of them so tier one zero to 351 kilowatt hours I get 27 cents which is no bargain by the way the national average retail rate is below 10 cents right so for my first very little bit 27 cents tier two 350 to 1,088 cents and my high usage charge over 1,055 cents so if you average all up do the math I average 54 cents a kilowatt hour where's the outrage you know okay I'll open my windows I'll turn the air conditioning off but still I'm not gonna get that number down too much this is not only the highest rate in the country it's about the highest rate in the world I thought Germany was a tragedy in terms of what they did in their energy policy and I'll get to that in a second I think looks like Andrea Merkel is losing her job in large part of a lot of different things she's done on the energy side but that's a shocking number and go back to some of the numbers I showed you just in terms of California's impact on global CO2 are we really getting the benefit for what we're paying so I think there is gonna be a day of reckoning where I think consumers are gonna start asking the question is this working are we changing the planet and how much do I have to pay for this because it is dramatic and there's an electric bill it's not made up numbers Germany as you know what they shifted to more renewables and less nuclear not great cost among the highest in the world CO2 levels have continued to rise in Germany 30 billion of annual subsidies it's depressed their economic measures the net exports and if you're a very high-cost energy country you're not gonna be exporting much of anything their net exports have dropped by 87 billion their GDP has been flat and this is a new coal plant they've opened in the last two years in Germany why because of reliability issues and Chancellor Merkel looks like as of this week is on the way out so there are ramifications of having a non-competitive you know electricity generation system I'll just say one thing just about you know I don't wanna get too much into the federal policy around energy but the current administration has been quite a promoter of fracking and continue to do that and the largest industry in the United States now should shock you but this is a new thing the largest industry by GDP is the energy industry right because of the tremendous growth of what's happened in fracking the jobs growth in this country is dominated by energy jobs these are very high-paying jobs and from an environmental point of view all of this ease regulation to allow more and more fracking has resulted in ability to export natural gas to places like India and China if you ask me if we're gonna do anything what should be our number one goal to bring down CO2 is figure out how to motivate India and China to burn less coal and selling them cheap natural gas I sure like that trade the United States has had a huge balance of trade problem I didn't think we would ever become the low cost producer in anything ever again right we're just not a cost competitive country and lo and behold it just fell in our lap that we become the world's pretty much low cost producer of energy especially natural gas and we can use it for an enormous environmental advantage by sending it to places that are burning coal which is what we're doing right real quickly on electric vehicles and then we'll wanna leave some time for questions Tesla's this one just bugs me truth in advertising if I ever in my investment business if I ever give false advertising they're putting the handcuffs on me we gotta be down the middle of the plate so they're not emissions free they admit about 125 pounds of CO2 per 300 mile driven and you know why because where does electricity comes from it's still dominated by fossil fuels get that little tag when you buy your Tesla it says zero emissions and people get very excited that this is the answer at zero emissions it's so far from zero emissions depending on even in Los Angeles where you see a lot of Tesla's there's still LA Department of Water and Power still buying coal they'll phase it out but coal fire generation from places like Utah and Arizona so electricity in most regions of this country is dominated by fossil fuels yes switching somewhat away from coal to natural gas but it's not zero the other thing I'll put in there do you think Doug in San Diego at 55 cents a kilowatt hour is gonna sign up for an electric vehicle my goodness that electricity is far more expensive than putting gasoline in my car at those kind of electricity rates so you have kind of an issue here in California not everybody can put solar on their roof I'm in a homeowners association that doesn't allow solar which supposedly is illegal but I've tried and not gotten anywhere so I wanted to give you that don't forget that we're I don't know we're spoiled in this country 60% of auto sales are SUVs and light trucks and electric vehicles remain below 1% of total sales the big cars the big gas guzzlers are flying off the shelves and still dominate what we're driving in this country methane this is just a little different topic a big potent greenhouse gas contributor is uncombusted natural gas methane and there's a lot of buzz that it's fracking that is causing the release of this and there's a lot of studies and I think Stanford had done some studies and if you do the infrared studies of where methane gas leaks are coming this is Boston they've got old pipes Boston Washington DC you go back east natural gas delivery we got a lot of dollars to spend to improve these systems we've got natural gas leaking all over the place we had a horrendous natural gas leak in a storage field Aliso Canyon back a couple of years ago in Southern California that also wiped out a lot of the benefits of renewables when that goes into the atmosphere so methane gas leak is a big issue and it's not been fracking it's been from old distribution systems and leaky storage systems around the country just on you know I use this there was a big flurry of divests from fossil fuels in the Stanford endowment and I took a picture of a lot of the folks that were camped out at back then at President Hennessy's office and I put arrows on all the things in their possession that came from fossil fuels and I do think we have to be a little bit honest with ourselves in terms of quality of life and if we go to a lot of lesser developed countries that many of them the thing that they'll tell you they want most is electricity and you know if we look at you know what fossil fuels are used for I think the let's just say the energy literacy in this country is not where it should be you know it's important to have passions but make sure you have the facts and you have the literacy around things pharmaceuticals you know a lot of the medicines that many people in this room are coming you know fossil fuel derived I'll pick on the football team the football and things like that the carpeting in here we can go on and on of everything in our possession and a lot of our clothes you know fossil fuel and we think about you know just what life would be without them and the quality of life with them it's just something to ponder a little bit just make sure here at Stanford I just hope energy literacy and there's been a lot of efforts to get energy literacy up so we're all talking from the same page same thing with regards to the hurricane activities it's very fashionable to say that you know the volume of severe storms is directly related to global warming I think it's very debatable if you go back and you take the last 60 year chunks 1895 we averaged six to seven hurricanes per year 1955 six to seven hurricanes per year 2015 six to seven hurricanes per year I hate when we take billions of years of data and try to compress it into the last two years and say that this is now a trend so I think we have to be careful with statistics there we have it I think I've left 10 or 15 minutes to come at me and so please have at it and I will stay around after as well for quite a bit and but however you want to do this John great we usually start with students if that's okay let's go away in the back there are you a student good let's go in the back and then back up thanks a lot for your talk I think what was a bit suspicious about it initially you were talking about how the US is just a small fraction of the problem however you were not talking about per capita data so when you compare it to India or China each of these countries has four times the population that the US has so if you look at per capita data actually the US is the largest emitter of any large country in the world when it comes to CO2 and also I think it's important to consider that but what's damaging the planet is actual levels of CO2 not per capita like actual levels of CO2 so when we look at actual levels in China and India they're much higher than the United States you're exactly correct about that but I think we're trying to get the absolute amount of CO2 down in society not just to have a winning statistic I think my point is that we all like the whole world has to work on this and the US is just a small part of the world and actually per capita it's one of the worst controversial law and I also want to make a comment to the electricity crisis I'm personally from Germany and I'm not living in California and I- Well you know how to pick them I do feel like we're doing fine here like people are doing fine that's just my point Thank you for that up here I'm not doing fine I got it Great question Why hasn't cracking taken off? So we have some inherent advantages in this country one thing we're very rural if you next time you fly from California east and it's a clear day look down you're going to see these little dots all over the place those are all frack jobs but you don't see anybody that lives there so enormous swaths of land in this country we just don't have a big population so it's just not it doesn't agitate many people that do that the other thing we have royalty rights we have a legal system that is very well defined of who owns that stuff way down a mile down beneath the earth's surface so if we go to Europe that plenty of areas have similar rock formations and could frack a lot closer to population and not as clear a legal system of whose rights they are so I think I would put those two out as ones that maybe jump off the page towards the top of the list I would say I'm an economics major and I like to say that economics at the end of the day may take a long time but economics generally win the United States is collecting such enormous economic rents so this isn't a little product this is an enormous product with the United States as the low-cost producer you've seen the growth in our GDP energy has a lot to do with that you've seen GDP measures in other parts of the country other parts of the world, not good how long will other countries sit there and let the United States gobble up these massive economic rents I can't see this continuing forever I think they're gonna get passed figuring out how to frack I would say you're gonna start seeing it proliferating in other parts of the world out of economic necessity I really do let's see, I think they're there they're there on there okay, back up so right there towards the end of the talk you're talking about how the methane leaks can you speak a little louder? yeah, so right there towards the end of your talk you're talking about how the methane leaks in Southern California undid a lot of the benefits of renewables but it kind of sounds like they undid a lot of the environmental benefits of natural gas did I misunderstand that or would you like to no, I'm just comparing when you, I wasn't saying just the data when methane in an uncombusted form is released into the atmosphere it is an enormously potent greenhouse gas the volume of gas, of natural gas that is leaking into the atmosphere through old, decaying natural gas distribution systems and perhaps, same thing on some storage systems when that happens it wipes out the benefit and I'm not saying don't do renewables I'm just comparing the two that it's a large number relative to the benefit yep natural gas that's where it's coming from it's natural gas I've used the word natural gas it is from natural gas so it just increases the emissions of natural gas yes I guess my question is there's no, so let's go through all we could go through every form of energy they also have pros and cons every single one of them as pros and cons, a nuclear has a safety issue right, associated with it I've talked to the renewables having an intermittency issue and a cost issue associated with it natural gas while it's abundant and cheap right now we have leakage I think we can fix those things by putting dollars into upgrading those systems so we have less of that but absolute, there's pros and cons of every form of energy no doubt about it let's go up here, polka dot shirt yeah, there's one word I've never heard here in this discussion negative externalities I've never heard it mentioned once could we not include it in the actual price of natural gas and fracking? I think it would be a better way of viewing what's the future of energy and what's feasible and a sustainable way of generating the negative externalities and fracking do you mean the drinking water methane gas leakage earthquakes, those things? the wet in Florida? like flooding? flooding cities? no, that's probably related to CO2 emissions in a way or another probably, maybe not I don't know there's been a lot of floods in Florida over the years and another comment on metal like you said, there was no emissions related to making metals or anything when they represent like I didn't say that but there are emissions related to making metals you meant that metcool did not have any CO2 emissions related to it when actually 7% of the global CO2 emissions come from metal activities so I think it's a couple of factors that you could double check manufacturing, any kind of manufacturing has CO2 related to it really, really anything making a Tesla it's got a lot of CO2 related to that anything I agree with you let's go back here on that up I talked a little bit earlier the presentation about how there's a negative public perception that comes from the power of this you know, being shut down in that sense nuclear negative public opinion regarding nuclear yes and then in that same sense I've read a couple articles about earthquakes that come from fracking when you rank those like realistically, not in public opinion is one greater than the other? well, let me talk about earthquakes around fracking very quick I think that the public's perception around nuclear post Fukushima well, I'll go back post Three Mile Island post the movie China Syndrome there was a pole done how many people were lost their lives in the Three Mile Island accident and the average response to that was 500 people lost their life and the answer is zero but public perception is kind of what matters and we won't get into the different designs of different nuclear plants but there is a among a lot of people a pretty severe perception around the safety of nuclear power and the disposal of waste I think the earthquake thing is personally is a little bit overblown relative to that if you ask people in Oklahoma you know, and it's a little different between the San Andreas Fault and the water that's re-injected from fracking the water that comes out and re-injected which causes the earth to settle this is not like two plates moving and I think people in Oklahoma are not saying we don't want fracking we like the economic benefit and the earth shifts once in a while we'll deal with it so I don't think it's actually close in terms of the perception between those two I think that's a personal opinion that I think the emotions around nuclear are a lot higher than the earthquakes around fracking Okay, up here, then there and then in the back, go So I think a lot of the folks that you brought up are definitely valid and angry looking at it in normal detail I'm curious, from your perspective what would you hope I mean, many of us in this room are hoping I'm working on the huge infrastructure transition over the next three decades what would you hope us to learn from the harsh lessons of this day what would you suggest that we might focus our work on the economy? So I'm investing when we include I said equity that I invest 20 billion I lever my projects so I've in the last 12 years invested maybe 50 billion dollars in the United States and energy infrastructure I don't know for the largest but just about the math has to work the numbers have to add up my job is to make good investment returns for my investors follow the rules around safety, reliability and environmental compliance because I'm out of business I mess up in one area there I'm out of business but I've got to do this in a cost I have to do projects that are cost-effective that society wants and will pay for otherwise they don't happen and so I think the focus there's a lot of infrastructure dollars being spent but you want to focus on things that society will pay for and society needs I would say that would be my kind of litmus test when I focused on where should I focus my efforts we have an aged infrastructure in this country in everything transportation, roads energy that has to be fixed and for your generation you know there's going to be a lot of projects to straighten this out Kostya if you are ma'am in the middle of your investment I just wanted to address your comment about Oklahoma are you from Oklahoma? yes, born and raised how do you feel about earthquakes? very strongly, negatively it went from the first 15 years of my life we never had any earthquakes and in the past 10 years it's actually gone to the region of the world that has the most earthquakes daily including California what's the average on the Richter scale what's the average level of earthquake? between 2 to 4 so it's true that what level do you need to be able to feel an earthquake? I've felt personally once between 3 and 4 3, I think 3 is roughly below 3 and I can't feel yeah, exactly but I just wanted to comment that it's been felt strongly enough that Oklahoma has actually implemented regulations to decrease fracking so I think the statement that Oklahoma's don't want to completely stop fracking maybe a little overblown and it is something that has caused a negative impact on the region the volume of oil and natural gas production out of Oklahoma has increased every year for the past 10 years that's an issue it's an issue it's an issue go away over there I've done some reading about financial crisis that could be let the debt related to fracking could lead to do you mind talking about debt, debt and fracking I do love debt that's used in the fracking industry to pop up fracking and I'm just curious to explain that connection and if your thoughts on analysts saying that it might need to that's unstable it might need to so this is finance and in finance you want to build your investment with the lowest cost capital as possible so debt is cheaper than equity mainly in this country because you're allowed to deduct the interest expense but we're in a period of very low interest rates so you're trying to maximize your returns equity is expensive so whether you're building an apartment building or you're investing in an oil and gas well you're going to put as much debt that is prudent because it's lower cost money has been easy in this country for quite some time and so most oil and gas projects have been able to borrow 50% some cases maybe a little higher debt it's cheaper and so a developer is an economic being he has investors he wants to maximize his returns he's not doing an evil thing he's reducing his cost of capital probably the first thing in econ one or finance class you learn about so the question is if oil and gas prices plummet will there be bankruptcies will those developers lose their project yes there will be bankruptcies if oil and gas prices plummet from where they are because there's a fair amount of leverage in the system whether that's good or bad I can say the same thing about the real estate business I can say that about any business if the price of the product goes down dramatically people won't be able to service the debt let's do one more student question and I'll stay around for more thank you so much for your presentation I think you brought some different perspectives perhaps the most of us are exposed on a regular basis I tried I wanted to return very briefly and citing a different way to the question of externalities when it comes to climate change you said that you you want the best options for your investors you want an incentive structure that drives you towards the best investments for the long term would you support a higher sort of price on carbon to be incorporated into investments that you would make in fossil fuels based on the fact that estimated cost from climate change is going to be in hundreds of billions or trillions of dollars in the next few decades sure so from an investor point of view right which is very different from a personal preference point of view but from an investor point of view I just want rules I just want rules and I want rules that don't change tell me what the facts are if you want to put a carbon tax you know fine and there's a lot of different ways to structure it just tell me what it is and I'll work that into my investment and I'll price it and we'll go forward generally any of those that's going to be passed on to the consumer that's going to mean a higher cost energy I've got no issues for you there are externalities there's no debating that there's not externalities and make sure that the high cost now versus externality costs down the road exactly well if you're going to put a tax on it to be collecting funds to deal with those issues down the road somebody's going to have to pay for that the way that most any product works right the price of the product goes up it's not I'm going to say okay I'll take an 8% return when I really want 12 I'm still going to want a 12% return and if I can't get a 12% return investing in energy because there's an externality that I have to pay for I will go build an apartment building I will no longer invest in energy and therefore the projects won't happen it's a it's a competitive market for capital in the world and so that's fine to put anything you want on this which may be very valid from a societal point of view I would think it would be valid from a societal point of view that's going to be passed on to the consumer just like you saw my 55 cent electric bill but I'm going to invest in and I don't really care that it's 55 versus 10 from an investment point of view I'm still going to demand my 12% rate of return no matter what the rules are if the rules keep changing I'm going to demand a higher rate of return which is going to cost the consumer even more and one of the problems in this country is our politics and the rules keep changing and so I have to put a risk factor in in any investment because I don't know what the rules are going to be for the next ten years it's it's hard it's a it makes it hard to invest two things closing if you're really interested in climate impacts the global energy forums taking place on campus here on Thursday and Friday Doug will actually be a speaker as will Chris Field I've been trying not to do too much on the climate impact side in this series because it's really a Woodson's Institute thing if you want to do it here I we know all the people and we could do it we could even have Chris talk we have had had some of the people in this group I think some of the numbers coming out of the press coverage of the IPCC are not very credible but I do think I was on the National Academy social cost of carbon committee I do think the numbers and there are probably about right but there are more like forty dollars a ten is opposed to four hundred so we could do lots of more things I encourage you all to get educated on that side as Doug mentioned I have actually looked at storm damage estimate three recently I would say there's a tendency for the scientists to focus on the instrumental record and they don't actually tell you that the instrumental record goes back maybe not two years but maybe twenty years thirty years if you go back to the Dust Bowl era or the the drenching of California to the place in a particular and so that you'll see it's not that unusual I would argue it's probably getting worse but it's not like night and day so anyways with that let's say you could be around for a little bit