[00:00:00] Welcome to the Powering America podcast. I'm Bryan Hyde, and today I'm joined by Elizabeth Stelle, vice president of policy at The Commonwealth Foundation. Elizabeth, welcome to the program. Take a moment, if you would, and tell us just a little bit about who you are and what you do. Sure. Well, thank you for having me on. Um, I am the vice president of policy at The Commonwealth Foundation. We are Pennsylvania's free market think tank. So that means that we spend our time taking free market policies, turning them into legislation, and then eventually law, so that all Pennsylvanians across our commonwealth can prosper. We are nonpartisan. We work with any lawmaker, um, or individual that aligns with our principles. And Pennsylvania, as you may or may not know, is a major energy state. I'm looking forward to talking a little bit more about that, and how what happens in the Keystone State really impacts what happens in all states when it comes to energy affordability and reliability. So off the top of my head, [00:01:00] when you talk about, uh, you know, Pennsylvania and, and being an energy state, I think coal. But I, I suspect it probably goes beyond that as well. Tell me a little bit more about, uh, about Pennsylvania's standing in terms of, uh, being an energy powerhouse. Sure. Well, yes, we have a historical reputation, um, with coal. Uh, we are still the second-largest producer of, I think now third-largest, excuse me, producer of coal in the nation. Uh, but we are actually the birthplace of oil. Um, the oil industry was born in Pennsylvania. A lot of people don't know that. Uh, we also have the Marcellus Shale, which is one of the largest natural gas plays in the world, so we are the second-largest producer of natural gas. We are also the second-largest producer of nuclear energy, um, electricity from nuclear energy. So anytime you think about a big nuclear plant, um, think of Pennsylvania. We have a lot of those. Uh, so we're really at the forefront of a lot of different energy sources, which makes us such a powerhouse and gives us the ability to export more [00:02:00] electricity than any other state in the nation. So let's talk about, uh, about how that advantage that Pennsylvania enjoys, uh, could be used to, to tackle rising costs. And let's, let's frame this in the context of, um, what are energy costs looking like today compared to, I don't know, we could go five, 10 years ago, 20 years ago? Sure. Well, Pennsylvania, uh, benefited from a long time period of very stable, relatively low electricity rates. And I'm gonna focus on electricity rates here because that's, uh, what's, you know, most, uh, accessible to people. You know, they think of, of power, they wanna know how's it gonna affect my utility bill. Uh, so in, in terms of residential electricity rates, we went through almost a 30-year period of pretty f- um- Low and dropping, in many cases, rates. We were below the national average, um, for most of that period, even though we had begun that period above the national average. But now we are, um, entering a new period where we are [00:03:00] seeing rates rising. I mean, it's not just Pennsylvania, it's across the nation, but especially here. The latest data, if you put together residential, commercial, industrial, all the different types of electricity consumers, we are now above the national average at 14.11 cents per kilowatt hour. The national average is about 13.6. So we are now above that threshold, not a place we wanna be, but the more important part of the story is why. Why is that happening? And it's a lot of different things, but, uh, if I had to boil it down to the most compelling factor, it's because of poor state policies that have, uh, that have pushed states away from building more electricity, more power plants. Um, you know, we like to say the magic word data centers, and I'm sure we'll jump into that, but it's not just data centers. I mean, think about electric cars, think about how many devices you have in your home that maybe you didn't have five, 10, 15 years ago. [00:04:00] All different sectors of our lives are now becoming, uh, more dependent on electricity, and so that has an impact, and I think that's, that's all hitting in a relatively short amount of time. So a system that was designed and for over a century operated on a very slow growth curve in terms of electricity demand is now having to contend with electricity demand growing three, four, five, in some cases even 8% a year, which is completely unprecedented. So, um, let's, let's just jump right into this. Are we on the verge of, of a shift in, in terms of not just energy, but, uh, but how we live our lives, how, uh, how we pay for, for that energy? Um, I, I, I mentioned to you before we went on the air, I think back to the days before the internet, and I'm old enough to remember, you know, what, what life was like before the digital world, and I, I just still can't believe how much it has become a part of where we are. And it feels like we're shifting similarly, especially with AI and, you know, with, with the, the need for [00:05:00] computing power. Are, are we on the cusp of something that, that is going to change our world similarly or maybe even more? Yeah, I, I think hopefully yes. Um, it's very early obviously, but the, the productivity gains that we could gain from AI are very exciting. We're just beginning to understand them. Uh, it, it, it's a tool. Like any other tool, it could be used for good, it could be used for bad. Um, but I think if we get this right in terms of making sure that we can bring more affordable and reliable energy onto the grid to serve the data centers, the electri- el- electrification, um, of our economy, we will all have a much higher standard of living for it. Um, but we have to work through all the uncertainty, right, that comes along with that. And what we want to avoid are, um, policies that are really just jerk responses to some sort of fear or, uh, misinformation, uh, or, or just, you know, uh, controlling the [00:06:00] unknowable. Uh, that's what we're working on right here at Commonwealth Foundation in Pennsylvania is to make sure that whatever policies we put in place are good for data centers, they're good for, um, you know, new power plants, they're good for new factories, they're good for any sort of major development. They have transparency, they have accountability. Um, but we don't wanna move into a situation where it's just, you know, not in my backyard, I want no development at all, because what that's done in Pennsylvania already, and other states, we can point to Illinois, for example, is it's driven people out. And we hear all the time in Pennsylvania, you know, I want my kids to be able to find a good paying job here. I don't wanna have to go, you know, five states away to visit my grandkids. But when we shut the door to these types of innovations, um, either because we won't allow ourselves to produce the power they need or we're just scared of, um, new development overall, what we do is, is we, we drive the young people [00:07:00] away, and we're already an aging state, a shrinking state. Um, so the... when I talk to people about these issues, I'm like, "Look, the investment is going to happen somewhere. Wouldn't you rather it happen in your state? Wouldn't you rather benefit from it?" Um, and when you put it in those contexts, they're like, "Okay, well, let's just make sure it's done responsibly and transparently." And that's where state policies can come in and make sure that, you know, we're avoiding a scenario where folks have to pay for the new power lines because a data center is moving in. Let's make sure we structure that cost so that the person bearing it is the one responsible for it. I think you nailed it when you alluded to the fear that comes with change. And, and the question that that raises in my mind is, um, why is it that, that it seems like so many people fear the market? I mean, can, can the market handle these kinds of changes and respond to what, what is actually needed and, and, you know, the tolerances of how far are people willing to go? And, and if, if it can, [00:08:00] why, why do people fear that, uh, somehow it won't? Yeah. It's, uh, you know, I, I hear this a lot, um, and my favorite example is to put, uh, look at the grocery store and say, "Hey, like, we trust the market to get us our food. Uh, what's more basic than food?" Um, but if you wanna, you know, put an energy spin on that, I would point to what Pennsylvania did, uh, 30 years ago. The reason we had relatively low electricity rates for such a long time, we actually, uh, deregulated, and we said, "We'll let the market take over and decide, uh, what kind of power plants we're going to have." That used to be all controlled m- by the government. The utility would come and say, "Please, we wanna build this coal plant," or, "this natural gas plant," or, "this nuclear facility. Give us permission to do it, and then we're going to figure how much it costs, and then we'll, you know, disser- um, disperse that cost over utility bills for such and such years using all these complicated formulas." What happened is they overbuilt 'cause [00:09:00] they had an incentive. The more they built, the more they could bill. And so what happened is we ended up paying for a lot more infrastructure than we needed. That wasn't good. We said, "Hey, let's let the market decide how much we need and what kind of energy we need." Um, and that's worked out really well. But now there's actually a push in Pennsylvania and some other states to reregulate the generation side as well. And I think again, it's, it's out of this fear that we're not gonna have enough power when the only reason we've been able to have enough reliable power in, in an affordable way is because of the market. So I think we're constantly relearning lessons of the past, um, and that applies, you know, very much here when we're talking about energy. So let's talk about, uh, Pennsylvania specifically as it applies to, um, the advent of AI. Um, what are some of the things that, that the Commonwealth is doing right that maybe other states could look to as an example for how they could handle this? Well, you know, I have to tout, um, [00:10:00] some of the great things that our lawmakers recently did. Uh, it's more, you know, a defensive thing, like what not to do. We stopped something really bad, and that's carbon taxes. So this is happening a lot in the northeast. Um, Virginia just went back in to a new carbon tax, um, a regional greenhouse gas initiative. It's a bunch of states together that decide they're gonna tax their carbon. Uh, that, that would've been extremely detrimental. Uh, it would've increased, uh, electricity rates in Pennsylvania. We estimated it would've increased rates about 30%, uh, at the very time when rates are already rising, right? Even without this added tax. So avoiding carbon taxes, you know, that's really important. Um, a- unfortunately, that needs to be repeated because a lot of states are continuing to do that. Um, the other thing, uh, that I think Pennsylvania is starting to do, we have a long way to go- Setting clear rules for the game. Uh, the Utility Commission of Pennsylvania just came out with a brand-new ruling, uh, that says, yes, [00:11:00] you can, as a data center, work with, um, a company to build a power plant to serve your data center, and we think that's really important that folks have that option. It might not be the right option for every project, but it's important to have that flexibility to be able to do that. And so that's really good. What we need to continue to work on, and what I think other states need to continue to, um, make sure they address, is the regulatory situation. How long does it take to get these projects approved? Uh, what does your permitting look like? Is there certainty? Is there consistency? Is there the right level of transparency? Um, and this is, you know, sort of a different issue, but we, we need to make sure we take a balanced approach here because what's happened to Pennsylvania is, you know, uh, there is, uh, a hearing mechanism for certain permits, and that's a good thing, but what happens in those hearings is they get taken over by people who come in from other places. You know, they're not part of the [00:12:00] community. They come in, they make their political grandstanding, and then if they don't get their way in that hearing, they sue. And so then what happens is the project gets tied up in litigation for five, 10, 15 years, and a lot of times, uh, the plants will just say, "You know what? I can't tie my capital up here anymore. I'm gonna take it to another state." And we had that happen to three major projects in Pennsylvania when we entertained the carbon tax known as RGGI. So, so yes, no to carbon taxes, clear rules of the game for everybody, and making sure that you have a permitting, regulatory, and litigation environment that can weigh both the concerns of the community and the need for speed, um, that businesses have because, you know, the, the AI boom, the data center boom is a little different. It's, it's not, you know, "Oh, maybe in, like, a year or two." They're measuring projects in months, which i- is just astounding but also, I think, a challenge for government. [00:13:00] I'm, I'm curious with the, with Pennsylvania's history of, uh, you know, using nuclear power, um, is it more likely that small modular reactors would, would be able to, to come into play when it comes to, you know, creating power sources for these, uh, these data centers? The obstacles on that front are more federal. Uh, nuclear is primarily regulated at the, at the federal level, and I know there are efforts underway to address some of those concerns, namely- Uh, what do we do with the waste? It's an ongoing issue. Uh, and, and so the short answer is yes, it's possible, but I think it's really going to depend on, uh, the politicians in Washington, DC, whether they wanna make it a priority to address a lot of the, um, extra red tape that has tied up the ability of the nuclear industry to be more, um, flexible. In fact, they're looking at the first, um, SMRs, uh, probably in Africa, uh, just because [00:14:00] they don't have to jump through as many hoops as they do here in the US. And so, uh, again, this is especially we talked about, you know, do we have a friendly regulatory environment where the perception is we wanna help you be compliant, not we wanna stop development and, you know, drag out, um, the project planning process. Where would you recommend people go to get solid information? I mean, you mentioned there's some very polarized views. Some people are like, "Look, it's either, you know, this is, this is doom and, you know, it's gonna be our destruction. Take all the water, you know, raise our rates," or, um, it's, you know, unchecked growth and throw caution to the wind. Uh, you're talking about a balanced approach, which, which to me sounds very reasonable. Um, where can people get the information that would help them, you know, safely find that middle ground instead of being pulled to these polarized sides? Yeah. That is, I think, a real challenge right now. Um, so we're working on it here at Commonwealth Foundation to put together just some [00:15:00] high-level information on how much water does a, um, typical project in Pennsylvania actually use. How much electricity does a project actually use? Um, you know, how are these projects attempting to power themselves? Are they coming in and building, um, new facilities? Are they pulling from the grid? Uh, what does, you know, the noise look like? Um, there's been, you know, concern about light, noise and light pollution. These are all valid questions to ask. What we're running into is that the answers are hard to find. And so we're working on that, um, to just bring some, you know, just the facts, sir, a very factual, um, perception to the matter. But the truth might be different depending on what state you're in. So if you're in Texas, for instance, um, you're looking at projects that are typically much larger in scale. So those numbers might differ. And I would just encourage people to actually look into the projects. Um, if they're not, you know, going to the meetings, um, look at the proposals that [00:16:00] they're publicly making, um, to the different government bodies, because you'll find that information in there. And I think, you know, there's still a long way that, uh, that folks have to go in terms of promoting the broader economic benefits. Um, we're even exploring things like, you know, what if you could do- Some sort of, you know, rebate, um, to the community, right? Um, to incentivize people to welcome this sort of environment, um, this development into t- their environment. So right now, the deck is so stacked against development, um, that, you know, it's very easy to say, "Well, I just don't wanna bother with that. No thank you. Move on." Um, but long term, I mean, this is a national security issue. I- it has so many ramifications that we really need to make sure that communities have accurate information, and too many of the groups that are involved right now are really just, you know, those with a political agenda, and their mantra is just no, no development ever anywhere.[00:17:00] Uh, and that's, you know, that's- that's not a way, um... Well, first of all, we'd say that's, you know, that's g- the antit- antithesis of economic freedom and giving people the ability, um, to, to exercise things like property rights. But second, like, that's not going to help America prosper for the long term. So I wish I had, like, a great resource and say, "Go here and get all the information," but the truth is it's still, you know, emerging. We're still learning a lot, and I think over the next year we'll have a much better handle on, you know, the reality versus the rhetoric. It sounds like a good rule of thumb might be if you are reading or hearing things that are making you afraid, that's a good time to step back and say, "Why does someone want me to be scared?" And, you know, just that alone w- will, will hopefully help you recognize if, if you're, you're being, you know, led in a direction of someone else's choosing rather than being given just solid information. Um- Mm-hmm ... is there anything else you can tell us about, uh, Pennsylvania in [00:18:00] terms of what, uh, what else might the, the other states look to, uh, the Keystone State in terms of energy policy, um, that, that again, is working and, and that might save them a little bit of trouble, since you guys apparently have, have, have sussed out a number of these things? Well, you know, I think something else that's a little unique about Pennsylvania, uh, we do have this, this... And again, I'm gonna go a little bit on the defensive here. This, this bad policy, um, it's called in Pennsylvania the Alternative Energy Portfolio Standard. In most states it's called the Renewable Portfolio Standard, and essentially it's just a mandate that you have to use X amount of certain types of energy sources because we said so. And the idea, going back decades when we first implemented ours, was that, you know, solar and wind and some of these other, um, renewable energies and resources were new, they were emerging. They needed, you know, sort of a, a hand up to get started, um, and [00:19:00] so we were going to subsidize them in order to give them a chance to compete with, you know, the big boys, so to speak, the fossil fuels. Well, here we are- In Pennsylvania's case, 20 years later, and we still have these subsidies on the books. They're not infant industries anymore. We're just realizing they can't compete in many cases because they're not 24/7 energy sources. They're intermittent. So if you want to have them on your grid, you know, people aren't okay with their power just going on and off. When the windmills are spinning, when the windmill aren't, they want consistent energy. So you have to pair them with batteries, which are still very expensive and only run for about four hours, or you have to pair them with some other sort of fossil fuel energy source. And what that's done for Pennsylvanians is that it's increased our energy costs about $700 million every single year. So not increasing those, um, and a- oftentimes states talk about like, you know, net zero, or we're gonna be at a certain percentage by 2030 or 2035. [00:20:00] They're talking about these policies. So if you can avoid, um, extending those or making those, um, carve-outs bigger, those subsidies bigger, that's really important. If you can begin to roll them back, like what Ohio recently did, that's better. That's great. Um, because, you know, at Commonwealth Nation, we're not against any particular energy source because of the energy source. We just want what is reliable and affordable. And, you know, solar and wind, they're, they're fine, but they're not reliable. And oftentimes they're actually not affordable either when you look at the cost over the life cycle. You know, all the equipment, h- how often you have to replace the equipment, how do you dispose of the equipment when it's, um, uh, past its useful life. So when you put all those pieces together, you realize that, oh, this isn't affordable or reliable energy. Um, and the crazy thing in Pennsylvania is that even with those, um, realities, you now, because of the competition we have on the [00:21:00] generation side, you can choose green power. You can say like, "Okay, I want to have, you know, 100% renewable power." You can sign up for it, and sometimes you don't even have to pay that much more for it. So there's a way to continue to support those industries and that type of power, if that's what you would like to do, within the market without forcing everybody else to pay more. So that's just another component that's really key in a lot of energy discussions at the state level. Um, and it's not something that the federal government has. I mean, the Trump administration actually moved away, you know, from a lot of these tax credits, and so that's winding down. So then you see, uh, those coming to the states and trying to wind those up at the state level because, you know, the gravy train at the federal level is on its way out. We are talking with Elizabeth Still. She is Vice President of Policy at the Commonwealth Foundation. Um, this has been very enlightening. Thank you so much for joining us today on the Powering America podcast. My pleasure.