 I'm a senior principal here at Rocky Mountain Institute and excited to join and have a chance to talk to you all a little bit more about equity and climate policy with a focus on the shift that we've seen with the Inflation Reduction Act. And I'm gonna, I know that a lot of our interests collectively and of the folks that are joining is really around the role that finance can play. And it's really this intersection between finance and equity issues and the role that public finance and private finance can play to enable an equitable transition that is the focus of my interest. And it's what I'm gonna be talking about when it comes to what Ira has done. And I was gonna say, I had a chance to kind of be part of the series maybe two years ago. And I spoke a lot about some of these equity issues and I'm gonna start with a familiar place in kind of bringing up and talking a little bit more about why some of these issues are as central. And the exciting thing, I think especially about the Inflation Reduction Act is I'm gonna talk about first introduce a whole lot of problems that I see when it comes to equity and climate change and ones that we've seen for a long time. And I'm hoping to talk to you a little bit more about how Ira can be a blueprint to address those issues in a materially meaningful way. So let's start with the basics that everyone knows but I'm gonna kind of focus on the US context which is it is addressing climate fundamentally requires very rapid economy wide transformation. And it's particularly transition of fossil assets and infrastructure that is very stark. And this is just a scenario kind of a very rough scenario for what needs to happen, but it's representative. And what you see is that the emissions reductions that are needed between now and 2030 to be climate aligned, Paris aligned are extraordinarily significant with some of the biggest changes required in the electricity sector. The type of capital deployment that's needed particularly by 2035 represents a wholesale transition transformation of our electricity sector. This all you all know perfectly well. The difficulty in the problem from an equity perspective is that this rapid transition is being done in the context of a set of sectors, the energy intensive sectors that are extraordinarily capital intensive. Most of that capital was deployed by investors who weren't idiots. They protected themselves against some of the changes that might be coming. They designed financial structures that kept them in reasonably protected with usually some kind of long-term off-take agreement, some kind of regulatory protection or other structure that protected them against truly any kind of rapid transitions. So if we're gonna make this move rapidly, then the question of who bears the transition risk is largely to a good degree, not the right question to be asking because it isn't relevant for the investors in these projects, not that it's not totally relevant. It isn't all that terribly relevant because most of them have built these projects with contractual regulatory structures that pass that risk on to energy consumers and effectively communities. The vast majority of folks who would effectively bear the risk of rapid transition are not investors in these assets that are about to be transitioned off. There are consumers, there are individuals, there are communities, there are workers, these are the folks who bear that risk, they're unprotected. And let me give you an example, one of the clearest examples in the regulatory sector, US regulated utility sector. The US regulated utility sector has, is, or vertically integrated utilities writ large across the country are the ones that own the majority of the remaining coal plants in the country, 80% of the coal. These entities are vertically integrated and they don't face competition. They are regulated, they pass their costs through to customers. If you were to transition these assets, the $25 billion in a year that customers of regulated utilities alone pay for those fossil assets in capital costs would not go away. They don't get those assets would not be stranded. They were built with regulatory approval and these utilities can recover those costs and rates in the future. So effectively what happens is if this transition happens those utilities will get their money back and customers will pay that and money on top of it for any clean energy at the end of the day. And abatement of emissions therefore without some kind of policy intervention would add to that cost and hurt customers who have energy and those communities who again are unprotected. The labor does not have long-term contracts. Some of them are unionized, which is great. The utilities are frequently unionized and some of those workers are therefore protected by their unions. But most of the individuals and entities for instance, certainly in the fossil fuel side are not protected in that way. So a lot of the communities and certainly forgetting about the individual workers there but the communities that actually are often have grown up around these facilities fossil fuel facilities for decades. The services provided by those communities often dependent on tax revenues. There is no long-term commitment associated with those tax revenues, those just go away and many of those communities become unviable. So we have a situation where as a result of this kind of imperfect competition throughout the economy and especially in the energy space and especially in climate across the United States while we imagine that there's free market and that something like a price on carbon could transition our economy efficiently the reality is far different. In the real world, these rapid transition would cause and lead to significant additional costs for a significant period of time if we didn't do something about it from a policy perspective. Now, and this is fundamentally why if you really do want to do rapid policy on climate action, you actually have to think about this and you have to deal with this real economy and this political economy problem. As I mentioned, in the absence of intervention I mentioned that the burden of the costs associated with transition would indeed fall on customers and communities. What's even worse is that many, a good chunk of the remaining coal of the assets or the communities that actually have not yet transitioned are in lower income states and a bulk of that burden because of the way in which rates of basically energy costs are extraordinarily regressive. The bulk of that burden also falls specifically and more on lower income communities. And so this is a kind of a graph that's kind of helpful to keep in mind. When you look at energy burden which is a percentage of your income that's spent on energy and you look at that across income percentile there's kind of an obvious relationship. The energy burden is by far the highest not surprisingly among those who have the lowest income because very frequently the energy consumption doesn't scale linearly with income in any meaningful way. It really plateaus. On the other hand, federal tax burden looks very different. And so this if we, and this does exclude payroll taxes it doesn't look quite as stark when we include payroll taxes but it's still a very similar situation where effectively relative to tax burden energy burden is far more regressive than tax burden would be. And when, just as we think about the sort of situation with sort of the communities that had been the particularly steam plant and mine communities that have been really for when it comes to coal have been at the ones who have been for decades, generations often the ones who've really allowed us to have access to very cheap energy. If you look at recent history what's really been happening is kind of a worst of both worlds which is that actually employment in mines and coal plants had been declining secularly for quite some time for at least a decade or more. And the reason for that is a lot of automation and the far fewer plants larger plants that use that are more efficient that survive most of the older smaller plants went away that had a lot of the employment mines became much more efficient they are using fewer people much more automation. And at the same time, if you look however at the net book value of the capital assets that have been deployed in the coal sector that those have been increasing. So you have a situation where fossil profits that go to investors have been significantly increasing in coal communities while employment and revenues have been significantly decreasing or narrowing. So this has kind of been a lose lose for a lot of coal communities that's about to get much, much worse on a forward looking basis. And just as with energy burden if you move rapidly on climate you're gonna you're ending up putting extra burden on precisely those who are least able to bear it if you don't do something different. And let me talk about one last issue which is the ongoing health burden of fossil plant emissions. These again and there've been some really good studies I've got a picture here from a study from 2019 that kind of compares where what the PM 2.5 mortality risks are by by race and income. And it's again, very stark and disproportionate which is that effectively household income groups that are particularly African-American groups but a number of other groups are facing significant burdens continues to be a very significant issue and there is a racial component that's material and meaningful to all of this as well as a low income as a challenge associated with the fact that essentially the majority of the burden is again concentrated in lower income households relative to higher income households. So the health burden is also being borne disproportionately by low income communities. Now, on top of all of that, let's ask ourselves how we found ourselves in the situation where 80% of the coal is owned by these vertically integrated utilities because we're supposed to have energy markets in this country, we have RTOs, we have regions where you're supposed to be able to anybody supposed to be able to build energy that's supposed to serve a reasonable chunk of the United States. Well, obviously competition helped but that wasn't the only part of the story here. It turns out that the way that we had structured clean incentives prior to IRA prior to about a year ago just flat out did not work. We're not structured to be useful or usable really by fossil heavy utilities or their customers and really weren't intended to help their communities. Essentially when we built clean energy in much of this country, what happened is you have a developer, developer comes in is able to either buy some land or get someone to lease land to them and give them royalties. The developer builds a lot of clean energy most of that capital investment and most of those jobs go come really aren't in those communities. There are those jobs and much of the investment is ultimately investment benefit is going outside of those communities and most of that power then is also being shipped to the coast. All of the tax incentives that come in also flow out to reduce the costs of basically people away from those communities getting a benefit from the clean energy. So in a situation where largely in most of the country clean energy meant somebody coming in shutting down a plant, destroying a community building a lot of clean energy and sending all the tax benefits off to people in California who wanted clean energy. This was not, this happens over and over again across the country. You might understand why this wasn't viewed particularly enthusiastically as an opportunity. It wasn't, and in fact, the problem was even worse than that not only was this the way it was happening the option for those communities to actually get to own or the utilities in those communities to own the clean energy was not particularly was actually quite economically disadvantaged and the reasons are a little bit complicated. But number one, the way that we incentivize clean energy was with tax incentives. It turns out that utilities that own 80% of the coal across the country did not have tax liabilities for a number of different historical reasons and couldn't actually use those tax incentives at all. So effectively you cut out most of the utilities. Second, there are actually specific tax rules that were in place that disadvantaged in vertically integrated investor owned utilities competitively relative to third parties were coming in basically building power in their service church break and sending power elsewhere. It turned out that really the only way that you as a customer of that utility could have used clean energy was to buy the power from a third party. Again, might have been invested and might have been an outside company might have been a private equity fund whatever it is doesn't necessarily have any collect connection locally. And as a result of some of these things particularly this was an issue with the investment tax credit that was used for solar the production tax credit was slightly better and we did see some wind built by regulated utilities that happened to have tax incentives or tax liability to be able to use the tax incentives but that was a very small build up. And as a result, new sale of solar was largely seen as a threat to utility revenues because not only was that, you know is it the case that the only way to get access to the tax incentives for a lot of utilities was to have somebody else build it own it and sell you power. But in fact, PERPA which has been a law in the land for a very long time that was meant to encourage sort of independent power producers also required that utilities buy power from these third party entities in order to kind of promote competition which was a good thing but that made it basically even if that power was quite expensive the avoided cost formula was often such that it forced a lot of utilities to buy very expensive power from solar producers. And for a lot of customers and consumer advocates this was just a terrible thing it wasn't necessarily viewed in any way as a positive because some of the formulas for how that PERPA avoided cost was calculated were not really updated in ways that reflected real costs on the ground. So effectively new solar was seen as a threat by most of these revenue, these utilities and their customers felt the same way. Fourth, I talked about the fossil costs, capital costs they don't go away if you transition these assets because again investors that invested in these utilities did so being protected again the even if clean energy was deployed it would cost customers about $25 billion a year. And then finally, maybe not surprisingly we don't exactly have as a result of all this perhaps we don't exactly have the friendliest system in place and permitting is a nightmare. It may not be hard to understand why if your fundamental interests as communities across the country are not really aligned with seeing third parties make a lot of money off of your land or land nearby maybe you're not so interested in seeing these assets permitted. And indeed that's part of what has driven significant resistance and permitting structures and transmission and interconnection barriers that are really built to protect incumbents and to sort of push out any third party from investing in building. Just one conclusion. So when these renewable developments were happening in the areas which are traditionally like vertically integrated companies where it existed how is renewable development in that area impacting their assets like the assets of the vertically integrated companies? So some of the vertically integrated companies are actually sitting in RTOs. And for them, they really do control their service territories but there is the possibility of third parties building in the ISO. So they don't necessarily depend on the ISO for meeting their capacity requirements but they need to have an open tariff and so there is an open process for building out. And so that in principle can affect the dispatch and the of their own assets. And if they have relatively low cost assets they may be in, as is in the case in the West there's a lot of resistance to sort of sharing that that might actually increase costs locally. For the purposes, when it comes to the reason solar was seen as a threat is mainly because solar could have been an alternative and there may have been they're starting to be particularly with tax incentives it's starting to be even with PPAs that solar power can be quite cheap. And if the utility were not able to completely recover its costs then this solar power would have them use their assets less if their assets are used less and less in an economic dispatch then their regulator starts questioning whether those assets should continue to be operated and whether the customer should continue to pay for them. And even though it is unlikely that they would lose their investment it may be possible that they would be pushed to retire the assets early and recover their investments more rapidly. And that again decreases forward earnings it reduces their control over the system. And again, it is effectively something that would erode their asset base. So there is a risk to them. It isn't completely riskless. And so when I say that they're protected they are mostly protected they'll get their capital back but there may be earnings that could be still at risk with clean energy coming in. It just would be it's something that they can fight and they have fought very effectively with their regulators. So that subtlety is important. So it's a good question. So what did Ira do? And really the answer is it actually meaningfully addressed each and every one of these issues to a good degree, not completely but meaningfully. And part of the reason why I think Ira's so important is because it is starting to address these ground up challenges in a way that wouldn't have been what an economist told you to do but if you actually studied what was actually happening and talked to people and understood the political economy is actually the type of thing you probably would have to you would have had to do something like this in order for us to move quickly in climate. We still don't know that it's gonna work. The jury's still out but it's a pretty darn good attempt to address some of these issues. So what did it do on tax incentives? We still weren't able to move away from tax incentives but we were able to get provisions in place that allows entities that do not have tax liabilities to transfer that tax benefit to someone who does with less friction. There is direct pay so that entities that do not have tax liabilities utilities like municipal utilities, government utilities now can actually take advantage of these same incentives with some slightly different rules but they are able to do so. It addresses leveling the playing field so that storage and solar in particular which had not been aligned with utility interests and it's interesting to ask how much solar do you think has been built by the vertically integrated utilities that own 55 serve 55% of the customers across this country? 55% we have 100 plus gigawatts of solar they have built one gigawatt of solar. So you know that this hasn't been working for them something was wrong. And this was one of the key issues that was wrong. It has been fixed to some good degree because they can now take the production tax credit which works better for them and they don't have this limitation in being uncompetitive when it comes to using the investment tax credit for building solar. Further, again, I would say that a lot of advocates for low and marginal LMI communities and for customer advocates and consumer advocates across the country as well as industrial customers were very were for good reason not particularly enthusiastic about solar and storage because of cost and now one of the really interesting things is with the adders that I'm going to talk about specifically aimed at low and moderate income communities to address some issues associated with just transition. There are real and meaningful changes to the way that those tax incentives are structured to make it more attractive for citing the assets and serving communities that previously had been underserved and to making it attractive for entities that are for entities who are for developers and other entities to focus their building in areas that have previously hosted energy infrastructure. However, I do also want to flag there's a couple of areas that aren't addressed by these tax changes that are also really important to note which is that the fossil capital cost issue and some of these permitting issues are not obviously addressed. And when you hear about the IRA you mostly hear about these tax incentives but I want to flag one other really big piece which is the loan program, a couple of different very big loan programs and financing programs. One in the USDA and the other one that I've noted here that actually address some of these fossil capital cost issues those historical imbalances and some of the financing challenges that have made this transition a really difficult one. And I'm going to talk a fair bit more about that. I know I've gone through a fair bit but that's the second half of this conversation. I want to talk a little bit about the tax incentives and then I'm going to turn to these financing mechanisms that are mitigating some of these fossil capital cost issues and some of the financial barriers that fossil heavy utilities face. So again, I should also note that IRA is not being done in isolation. It is being done as part of a much broader set of policies that have been put in place that really are about kind of on-shoring not just sort of the supply chain for clean energy but a broader set of activities that have the potential to take advantage of existing infrastructure across the country in meaningful ways to kind of resource the manufacturing and other pieces. And so this broader industrial policy in many ways is well timed just because it provides opportunities that maybe may not necessarily be in the energy sector for a lot of the communities that have been negatively impacted and creates again the possibility of growing demand to reduce some of the challenges that we face in making a transition like this in a declining demand situation. So let me talk first about some of the adders. So the new adders are one of the ways that IRA really is built to incentivize projects that are kind of from the ground up that meant to be a bit more friendly from an equitable transition point of view. The first and most important adder is that there is a significant adder that foresighting these assets in existing energy communities. And from a sort of a public benefit point of view this is a great way to address an externality that is not carbon, which is the negative externality of communities that are left behind and often polluted and don't really have any resources to address those issues. This creates an incentive for reinvestment in those communities that takes advantage of existing infrastructure in a meaningful way. A second significant benefit is a domestic content which again creates a self-reinforcing community benefit that is likely to sort of push reinvestment in communities, in local communities to make sure that both from a national security point of view but also from the point of view of sort of externalities for publicly born externalities associated with rapid transition, we are reinvesting in ways that make sure that the manufacturing capability is built out in the country to the greatest extent possible. And doing so in ways that are likely going to be cited at least proximal to some of those same energy communities. So the combination of the two really helps sort of address some of the community justice points. And it does so because these are being done with incentives rather than sort of punitive measures, it does so in a way that reinforces reductions in likely potential energy costs tied to those investments. So that is you're not doing it in a way that necessarily will penalize the customers. You're doing it in a way so that this will be chosen if it leads to the lowest cost for customers at the end of the day. So this burden isn't necessarily for making these choices to address these externalities, isn't necessarily following on energy customers in a way that would be regressive. It's using tax money to do it, which again, as I pointed out earlier in the United States is highly progressive relative to energy burden. So as a result of this, there is really with the suite of supply side incentives a really significant potential for an equitable transition in the utility sector, a writ large, as long as of course utilities and the regulators actually use them. This is one of the huge challenges we face. There is by no means, these are all carrots. There's no guarantee that we will be able to overcome a history of really what is negative partisan politics and negative and unfortunately a kind of a breakdown in trust that has led us to a place where there is a lot of mistrust for anything that the federal government might do in many of the communities that could benefit from this. And so there is a significant challenge here in actually making sure that utilities and regulators in states that have the greatest potential for transition and benefiting from it use it. But I also wanna mention that of course, Ira goes far beyond just the electricity supply and it also creates significant incentives for broader equitable decarbonization by providing significant incentives on the demand side, whether it's through electrification, home efficiency or deployment of clean resources in distributed clean resources and storage. These incentives are also potentially encouraging significant decarbonization. However, again, that is gonna be contingent on regulatory action as many of those benefits are only likely to be available to low and moderate income communities if there is action proactive action by utilities to enable and unlock the benefits. It's very difficult. And I'm happy to get into that in later detail, but I won't focus on that so much here. So there is through both on the demand side and the supply side, in Ira a really significant suite of incentives that make it possible for both utilities to really move rapidly towards decarbonization and for customers to participate and invest in it themselves, but only if regulators act and this is one of the challenges. You can't solve all these problems at the federal level and there is a need for engagement across the country to make sure this actually happens. So let me take another, so I wanna, so with that, that's the big picture of what I think, you know, Ira really is doing and why I'm so excited about it from given all of these problems that I've laid out. It's a pretty comprehensive set of measures that is intended to address in a very surgical way, many of the political economy challenges that we faced in the real economy, in the real world that for decarbonization in the context of rapid transition of an existing system. But I wanna take an example to kind of dive into why what I've spoken about so far, which is just the tax incentives aren't enough and why there's actually more in Ira to address some really serious financial challenges that go beyond what I just spoke about. And I wanna focus in particular to kind of illustrate this point, a particular sector of the problem that is a very meaningful and important one. I wanna talk about rural electric cooperatives across the country. They have provided low cost services to much of the land mass of the United States for nearly a century. They are unlike other utilities in the country, they're cooperatively owned by their members. They, the much of their history is tied to the rural utility service, a USDA agency that really financed and helped make this a reality. We got universal access across much of the United States, except for tribal lands, because of this program, because of a government program of lending. And we did it in a way so that at the end of the day, the ownership of those utilities was in the hands of the customers, which is a fascinating thing. These cooperatives serve 42 million people in the United States in places that would have otherwise been very difficult to serve would have been expensive to serve. They also serve 92% of persistent poverty counties across the country. They are serving some of the counties that perhaps have not seen the best economic development have been somewhat left out, left behind, relatively speaking. These cooperatives don't all own giant fossil plants. They pull their resources together and they work with what are called generation and transmission cooperatives, GNTs, that actually own the bulk of the generation and transmission system that serves them. And those GNTs usually finance these investments using federal debt as well as debt from certain specific rural co-op focused lenders. Now, most of these cooperatives are nonprofits and most are exempt from federal income taxes. So this is a bit of background on how rural co-ops came to be. This is the problem. So rural cooperatives, they have a cooperative business model. They're owned by their members. They've built out a system, they've enabled near universal energy access in low income areas. They've done that over a century. Unfortunately, that means that they've taken on debt over that century. And effectively, they have essentially been overlevered to do this. They've also had to comply over the last couple of decades with increasingly stringent emissions control requirements that have caused them to significantly reinvest in their facilities. The way they raise equity is not like a public corporation. They don't have shareholders to raise from. If they were to raise equity or to try to raise equity to make a big shift, they would have to raise rates from their members to do it. And if you ask them to invest very quickly to transition in the next decade, you're gonna get what we've seen from these rural utilities for the last decade, which is a statement of hell no, we can't do this. We really can't do this. And the reason for that is because these cooperatives have relatively small balance sheets. And as I said, their leverage is already at limits. So for example, I'm just gonna take an example. Let's suppose that you're going to go to a bank to buy a house and to get a mortgage for a house. Well, they'll want you to put 20% down unless you happen to have some federal supports from FHA. Well, co-op is kind of required to do something similar. And unfortunately, co-ops have very limited resources to be able to do that. And if you ask them to go invest, they barely have any equity as it is. And if you ask them to go and put down a huge amount of go and get a whole lot of debt to invest today, well, the only way they get debt is from their members. And the only way that they can raise debt from their member or equity from their members is by raising rates. Yep. There's no question. Oh, sure. No problem. Could you read it? Apologize. Yeah. Question numbers. Can co-ops receive loans from contract investors who are willing to accept less than normal equity insurance? In principle, some of the cooperatives can. They are able to get investment. So it is absolutely possible. The difficulty is the scale. So I know impact investment is still relatively small in scale cooperatives need. And this is the problem. Cooperatives right now have, you know, on the order of 40 or $50 billion in assets, this is over their whole history. That is the size of their balance sheets writ large. In order for them to transition just their electricity sector, they need $100 billion over the next decade. So they need to double their balance sheets. Where is the equity going to come from? Where the heck are they going to raise the $20 billion in equity? And the only answer is it's got to come from their members. I just told you their members are some of the largest, most persistent poverty counties in the country. And our answer is that, well, you should raise their rates so that we can finance clean energy and a climate transition. That's not going to work. And that hasn't slept. And that's why they've been strident opponents of climate policy. So let's look at how bad this is. Go ahead. What's the split between the other for-profit utilities versus the rural electric cooperative? And some of the bigger ones like, do you have a number? So about 55% of load is met by vertically integrated regulated utilities that are for-profit entities. I think it's on the order of another 30% that's met by 20 to 30% that's met by cooperatives, by cooperatives plus public power. And then the remainder is really in of the, of load is served by, yeah, by independent power producers, roughly something like that is the mix. And I think I probably a little high might be, it's closer to 20 to 25, that's not 30%. So it is still like about a quarter of the problem is public power and cooperatives. And then I have another follow-up question. So you mentioned 100 gigawatts of solar has been installed and only one gigawatt by these for-profit utilities out of the 100 gigawatt. So are the corporate buyers the bulk of that 100 gigawatts of solar installation or is it independent of the power providers? So there's a, it used to be the case that either regulated utilities that served either states or cities that had large renewable targets or RPSs were actually the bulk of the buyers early on for I think much of the renewable energy. In the last decade, we've seen a significant shift and it is really corporate buyers that are dominating. And at this point, the power purchase agreements, the virtual power purchase agreements from corporate buyers have really been the bulk of the buyers of power. There's still quite a bit that's being, I think with IRA you're starting to see a meaningful shift and we'll get to that. And we are already starting to see evidence that indeed this is working and we're seeing regulated utilities and utilities that previously really haven't had any interest in clean energy start to get out there and buy this. Sorry. Go ahead. Oh, did you think there was a question in the book? I don't know if you could repeat the question, maybe I'll open that one. My apologies, we'll do. That's a good point. Go ahead, if you wanted to ask one more question. Okay. So let me, just I was mentioning the cooperative financial position and how much it might hinder. So we did a little analysis where we asked, okay, what is across the G and T's, the generation and transmission co-ops that own the majority of the fossil assets across the country, how much clean energy could they deploy given their capital structure without sort of breaching this 20% roughly barrier in debt to equity ratio and avoiding sort of having to raise significant additional, significantly raise rates in the near term to raise equity from their members. And the answer is those red bars on this graph are how much they can't do because they're constrained from financially because of their balance sheet challenges. In other words, before IRA, these regulated, these cooperatives really couldn't own this. The only option they had was to have third parties own it and they have to buy power from it, which loses any benefit they had of being cooperatives and having a lower cost of capital from not actually, from being a cooperative business model that had federal financing, which was kind of insane. So with new era and some of the changes in financing policy, they have been specifically designed to, and size to provide, so new era is a program that the USDA was authorized in the Inflation Reduction Act and the possibility of something called direct pay for these utilities now allows them to actually build the equity by basically the government contributing some of that equity. It's not the most efficient way perhaps to do it, but if we want to transition quickly, this is a way that we can actually make it happen that doesn't put these communities at risk. And the other point I just made is that I want to mention that this is not this sort of balance sheet challenge that we see in cooperatives is far from an isolated issue, right? If we think about low and moderate income communities, businesses, individuals, low and moderate income countries, they face pretty much the same problem. If they have made any investment or if they are constrained because of their finances in any way, they're sitting in a similar position and many across the world we've had development finance that has enabled the electrification and sort of bringing power to much of the world. We've done that, especially China has done a lot of that over the last decade by loading a lot of these countries with debt, but building a lot of resources to finally give them power, which is critical for development. This is a success. And now we're asking them to break that all up, double their balance sheets and the answer we're getting is no. And this is part of the reason why they really cannot do this in a meaningful way. And this is the fundamental problem with climate finance. We go out there and say, we'll give you green finance. And the answer is crickets. And part of the reason why is because they can't take on this additional debt if they've just recently electrified. There may be some countries that haven't been able to electrify, but those are often ones that were already either unable to because they hadn't reached a stage of development where it was reasonable for them to afford it or they are very constrained in their ability to do so. This particular type of financial support is in the United States how we're dealing with this. We have low and moderate income communities across the country. The rural communities that have been electrified were only possible to electrify because of federal policy. And this is about the only way that we can think of to really address the challenge. We have to address the financial challenge that they face. And indeed, you could do this in other ways, but this is perhaps the most direct way to do it. I will say that this wasn't, you do need some outside equity to make this happen. This could have been done, for example, with third-party equity. It could have been possible with a gradual third-party equity transition. So there were ways that you could have imagined doing this that might have been more efficient, but this is pretty good in that it delivers the benefits while still keeping local ownership, which is an important, I think point of pride in an important way that you can build ownership over this. I will mention that, as I mentioned in the United States, rural communities aren't the only ones that are low-income by any means. We also want to and hope that there will be a more equitable transition and that ownership of clean energy could be more equitably distributed. And I will flag that there is a program called the Greenhouse Gas Reduction Fund, $27 billion that could be used if they're used to their full potential to provide financial assistance to low- and moderate-income communities across the country and members of those communities to facilitate their ownership in these assets as well. But it is far from clear, however, that that will be structured efficiently to enable that. And that's a very large and different conversation. But I will flag that this exists and Ira has the potential to make this happen, but this is a clear issue. It's an issue that we see across the country. In the rural co-op side, I'm excited to say that it's likely to move forward and we're hopefully gonna see a more equitable solution. We are yet to see where the Greenhouse Gas Reduction Fund goes or if it survives the debt ceiling, tobacco were about to enter into. With that, I wanna point out one other final project and one other final vehicle. So we've talked a lot about how transition, we're trying to find ways to make the transition work for energy communities. And I think we've had in the tax incentive conversation a couple of really meaningful and powerful tax incentives that create those tools. But the type of financing challenge that I just laid out is also relevant and meaningful in that the capital cost issue, the fossil capital cost issue and the lack of financing for really cleanup and a lot of other reinvestment in energy communities continues to be a real issue. And I wanted to flag a program called the energy infrastructure reinvestment program, which really is only $5 billion with the headline $377 billion in the Inflation Reduction Act, but that's because, but it's really a $250 billion lending program, an enormous program. And it just recently released guidance last Friday and what it allows is for financing specifically tied to really doing the right thing with energy communities. It's financing that's targeted making sure we reuse that infrastructure, reinvest in those communities, remediate some of the damage that we've done and basically do right by those communities and make sure that we put back what we messed up effectively. It is also a program that also can significantly and must when it's used by electric utilities pass through that benefit of the financing to ensure either the communities are compensated or that and that customers are seeing the benefit of the lower cost financing. And I'm probably gonna just say a few more words about it. It's very, very flexible. It's an enormously, it in particular can even address some of the transmission challenges we face. We've been hearing a lot about how, and if you've been sort of following where we are in the United States, you'll hear that the Inflation Reduction Act could drive a whole lot of deployment but there's a whole lot of concern that if we try to build all this clean energy, the grid really can't take it, that there's no place to interconnect, that it takes eight years to build something. There's two terawatts of solar and wind out there that can interconnect. Well, this program should make it less costly for a utility to, in fact, significantly less costly if they're willing to, to pull forward reinvestment in transmission infrastructure to upgrade, re-conductor to upgrade substations to facilitate interconnection. And so there is a program here that there's something that can help and it's a matter of actually getting, starting to get people to understand that this is actually another tool that they have at their disposal to sort of mitigate this challenge. And I'm not going to go into the details. We've done some math and sort of thinking about how some of these types of programs can actually also make it attractive. And one of the challenges, we've got a lot of carrots. These carrots can work, but we need to move so fast that we have to have carrots that can actually pull forward investment even beyond what the sort of the tax incentives can. And I'm going to maybe pause there to say there's more to talk about. There's a lot that these incentives can do, but one of the, you know, the most powerful messages I hope you take away from this is that Ira has basically the kitchen sink of approaches to actually make sure that climate change and climate change mitigation can work in the real world to address some of the real barriers that we've seen across the country that have kept people from being excited, interested and in their interests in a meaningful way to drive action. And, you know, I think there, you know, I've heard many, many worries that people felt that the Inflation Reduction Act perhaps didn't go far enough that it wasn't any action at all. But I hope I've convinced you that perhaps if you look more closely, there is unprecedented action to address the real problems and challenges and something that we can hopefully build off of occurring in the rest of the globe. Well, that's all I've got. So, Uday, it's very interesting. Thank you for the presentation, Ugoway. When we are doing this free investment, it doesn't mean that we are, you already mentioned operating and retard at the spot. You know, basically, when we are trying to, like, first of all, mean that then the original business system is changing, right? Then are you, like, are you saying that it's going to be the same asset, the same contract, and then just changing the means? Or you fully terminate that financial contract and then start the new contract? Yeah, it depends on the particular circumstance. So the question here was, when, at least with this reinvestment idea and the refinancing concept with the Energy Infrastructure Reinvestment Program, does it mean that the reinvestment is happening by the same entity that either owns or by the same asset that is currently owned? Or is that reinvestment happening by that entity or would be envisioning that that reinvestment would happen with a third party coming in, basically, to take out a contract? And the answer is it's pretty flexible in how it can work. The, if it's used in the regulated utility context, it is usually the same party that's coming in. And it can be the same asset, an existing asset that continues to operate, for example. But that asset may continue to operate, but what you can do is, for example, if it's a coal asset or a natural gas asset, you can build out clean energy around it and gradually reduce its operation, perhaps moving it to seasonal or mothballing it. But, and it doesn't mean it may not close, but the massive advantage of doing something like that with this financing is, you can remove some of the significant capital cost overhead associated with the existing asset. You can keep its capacity benefit so that it's still available as a capacity resource for the grid. You, you know, fortunately, you still have significant fixed costs associated with salaries of workers there. But if you keep those folks on, you can help them get acquainted with and transition over time, if they choose to, to start to operate some of the new assets that you're building in. So you have a workforce transition plan that's built in. And you're getting subsidies because it's located in an energy community to make this work out so that it's not going to fall on rate bears. It's going to be absorbed to a good degree by the federal government. We're paying for this transition to happen in a more rational way. And the financing basically kind of augments that. It is financing that essentially further reduces the rate pair burden associated with that reinvestment and mitigate certain risks. For example, whenever you build around a brownfield, there are unknown, unknown environmental risks. You might run into asbestos. You may have coal ash pond cleanup that if you disturb, you have to fix. And this provides financing to basically mitigate some of those risks as well. And so what it is, is it's kind of a comprehensive financing approach that promotes reinvestment that might otherwise be unattractive or basically a utility might say, okay, if I'm going to shut this down, the easiest lowest risk path for me is to just shutter the thing and not think about it for 30 years and slowly remediate and let my rate pairs pay for it. This creates a different option. Regardless of the concept of the idea of reinvestment, giving the very practical need for the system like to pass with your facility to make the profit and return faster. The reason why I was asking about the, whether there's a change of the ownership or change of the financial conflict, I was curious about how we manage the, any agency problems. For example, because when you are completely refinancing it, then maybe the specific owner wants to, maximize the current price of the, the scripting price of the current flexibility so that they can just catch up a lot and then sell it out. So then maybe there'll be any like overestimation on existing, like pass with your facilities, when we are changing it to, like when we are trying to be following. Yeah, I mean, thankfully in the regulated context and for a large number of the, sort of the opportunities that we're seeing, the, because we're in a regulated utility context, the underlying book value is really very fixed and it's very transparent. And so there isn't really as much of a likelihood of that problem. For a third party, absolutely there is a risk that this kind of the, that all of these incentives, at least this type of incentive could basically escalate the price, the market price of existing fossil assets because their interconnection is valuable. Now, and indeed this does in a situation where interconnection is constrained, this creates potentially a perverse incentive for the folks to basically sit on interconnection, basically sit on interconnection rights and existing assets, maybe beyond what they otherwise would. On the other hand, the tax incentives are pushing in the opposite direction. And effectively what you have is you have a balance here and in some places they're gonna be small winners and losers, but what this tries to do is break basically a logjam where inaction was a possibility, particularly across much of the United States, which is, again, 80% of the coal is not in the deregulated markets, the place where we really need to open up these interconnection rights is largely not in, not, you know, these are regulated or effectively regulated tariff regions. So it's a little bit of a trade off, but they're, you know, again there's some, there's some natural sort of, there's some natural barriers that make that a little harder. And apologies, this was the question of whether the, there could be a perverse incentive tied to ownership of these assets. You said a little bit about the, like there's so much money available if we're able to use it and ultimately investors actually access it. Could you speak a little more to like, how do we make sure that they are using it and are actually trying to maximize the amount of money available? Are there, what are the barriers that, and we talked about a bunch, what are there other things that we can try to do to encourage usually investors to use it? Yeah, I mean, this is a place for consistent advocacy at all levels, consumer advocacy, regulator awareness, investor awareness and advocacy with investors, kind of pushing them, getting them to understand that there is an opportunity here and they kind of push them to make sure that their utilities are taking advantage but utility management can be lazy. I mean, like one of the problems with monopolies is you might have someone close to retirement and they just don't want to do anything. They'd rather just retire. Like these are real problems that we haven't solved here. So I don't want to, this doesn't solve all the problems and these are the types of problems that it doesn't solve. The utility may not be positioned and because it's a monopoly, it doesn't necessarily, their management doesn't necessarily have the incentive to go do this unless you have this outside pressure coming in. So an investor coming and saying, like, I'm going to replace you before you retire unless you go do this, it's pretty darn important for actually motivating that. And we don't necessarily have that in the cooperatives and some of the municipal utilities that has to, that's another challenge. This is thankfully, that's also one of the reasons why this had to be rich enough for them to really drive change. Because, you know, you don't indeed, it is indeed possible for a cooperative owner just to say like, yeah, well, I don't want to do anything. And so, and there is no other, you know, their members can pressure them. There is pressure coming, but it is all of these different types of advocacy pressure, pressures from investors, advocates and consumer advocates that needs to happen to drive it. What sort of labor do you think the finance community has, you know, the banks and the wealth managers who are sort of keepers of the stock of these regulated utilities to force them to decarbonize through the financial angle rather than the incentive angle? So I think without the incentives, it is, you know, we are, we did see a lot of pressure coming from the financial community already. We have seen that pressure. The pressure really came from divestment movement. So it was ESG sort of mandates and we did see that that was material, that was significant, that started to drive action. But it was very difficult for these utilities and their management to respond to that pressure in any meaningful way because they could always make the claim that their regulators weren't going to let them do it because that was going to require they raise rates and the regulators weren't going to let them raise rates. So they status quo made. And so what we saw is that even though they were setting ambitious targets, those weren't ever really climate aligned because they knew they could set a 2050 target and say to their investors, I'm going to be net zero by 2050, but I'm not doing anything until 2030 because my regular role in me. So forget, and that's basically the pattern that we've seen or 2040 because my climate alignment is going to be, I'm going to keep emitting until 2050 and then by magic I'm going to go to zero in 2050. This makes it that kind of argument. And I was critical from the incentive side to make that argument more because if a utility today isn't looking for ways to deploy capital right now and take advantage of these IRA incentives, it's commitment is committing malpractice for its shareholders. There is so much money to be earned in the near term and so much of evaluation boost. We're in a stage where, because of electrification, the electricity industry in the United States needs to become the energy industry. There's an enormous amount of capital that needs to be deployed about 3 trillion by 2035 in the electric sector which is like a tripling of their asset value. And this is really the thing that should drive shareholders to the table at the end of the day. So it is still very meaningfully tied to the incentives because the incentives are there to make sure that it actually works for ratepayers. Oh, it's very much at risk. I mean, the only thing I will say is that, it is very much at risk, but 12 years ago when we tried to pass climate change legislation, Joe Manchin took a shotgun and shot the legislation. This time around, Joe Manchin went online and was the hero that made this happen. So there's been a change and this is because this is really very differently structured. It really is supposed to work for red states. And my hypothesis is there's still some time till 2024. Some of this stuff is gonna get built by 2024 and it's gonna get harder and harder or because almost all of this is gonna be built in red states, quite frankly. It's gonna be harder and harder for politicians in red states to say they don't want this. And they said to say they wanna pull it apart from no matter the partisan politics that's gonna get tougher. They might still do it and the partisan politics may be so irreconcilable that that's still what happens. But it's as good of a shot as we've got to convince them. How involved were partisan politics with red states in the formulation of these programs? Like the rural sector cooperatives? Did they were involved in it at all? Or were they just sort of put it, mentioned just invented and put it into that? No, this was a long process of engaging with them that resulted in this particular policy being put together. So we started many, many years ago in those conversations. And there's not just some support, at least on part of something. NRECA put out the National Industry Association for Cooperatives enthusiastically put out their support when this program was passed. So this question was around the risk that funds are made available, but rural low income communities are unable to navigate the bureaucratic process to get the funds. Yes, absolutely, there's a risk. This is what, and I should say it, my hat is at RMI. We work with a number of advocates across the country. We have a team that is focused exactly on this issue. Thankfully, the bulk of again, the 80% of cooperatives get their power from generation and transmission cooperatives. There are 15 of them that really are the bulk of the power. And so there really is, it's not completely unmanageable. You can sort of help a smaller number of larger organizations and still meaningfully do this. And the second question is on whether there are reasons to consolidate electric cooperatives to accelerate transition. And indeed, this is partially what the generation and transmission cooperatives do. They are the ones that they have done this historically. Unfortunately, even they are still in a difficult financial position after having invested. And they still, but they make it a little easier. The distribution cooperatives have been trying, unfortunately, because I mentioned earlier, the generation and transmission cooperatives, their management don't necessarily have the incentive to rock the boat. They don't, but they're starting to get it from some of their members and from their distribution cooperative members who saw all this clean energy deployed nearby and weren't getting the rate benefit from it. And so that pressure has been meaningful and it is leading to some consequences for certain utilities and cooperative utilities and their management. And one of the drivers of bringing the co-ops to the table on this was really that pressure. So it did, there was some meaningful and important pressure that came from the grassroots that sort of built the will to get the new era program passed as part of IRA. And the generation and transmission co-ops see this as an important opportunity to transition their fleets while more importantly keeping their businesses alive by keeping their distribution cooperative members together. Thank you there for the presentation. Really enjoy listening to your recent work. Thank you for having me.