Resources

• Overview of Carbon Dioxide Removal: 6 Ways to Remove Carbon Pollution from the Sky (World Resources Institute)
• U.S. Department of Energy
  • Loan Programs Office
  • Office of Fossil Energy and Carbon Management
  • Carbon Negative Earthshot
• Project mentioned
  • ADM’s facility in Decatur, Illinois
  • Frontier carbon removal project
  • Lake Charles Methanol Project
• Glossary of terms
  • Class six wells: wells used to sequester carbon dioxide in deep rock formations
  • 45Q: section of the U.S. Tax Code that provides an incentive for carbon sequestration
    • The Inflation Reduction Act increased the incentive as well as including several other provisions related to the incentive
  • Technology Readiness Level (TRL): a method to determine the maturity of specific technology
  • CO2 trunk line: a pipeline that transports carbon dioxide
  • Yieldco (yield company): a company that owns operating assets, such as solar or wind power, and raises funds by issuing shares to investors
  • National Environmental Policy Act (NEPA): a U.S. Federal law that requires government agencies to engage in a review process intended to discover any significant environmental and public health impacts before a decision is made and construction begins on a project such as infrastructure building
• White House Climate Plan

Guests

Climate Rising Host: Professor Mike Toffel, Faculty Chair, Business & Environment Initiative

Guest: Jigar Shah, Director, Loan Programs Office, U.S. Department of Energy

Transcript

Editor’s Note: The following was prepared by a machine algorithm, and may not perfectly reflect the audio file of the interview.

Mike Toffel:
Jigar Shah, thanks so much for being here on Climate Rising.

Jigar Shah:
My pleasure. Glad to be here.

Mike Toffel:
Let's start with an introduction. Can you describe your role at the Department of Energy?

Jigar Shah:
Sure. I am the director of the Loan Programs Office, which is the office that was set up in 2005 and really had its heyday from 2009 to 2011 when we put out over $30 billion of loans for solar and wind and geothermal and transmission and nuclear and Tesla and Ford and Nissan and others. Then the program was largely dormant. And then we've really been able to get it back up and going now. So, we've got about 91 active applications, seeking roughly $93 billion of loan proceeds. We have about almost 200 people now.

Mike Toffel:
Got it. And how long have you been at DOE?

Jigar Shah:
Since March 3rd, 2021.

Mike Toffel:
And you come with an entrepreneurial background and an entrepreneurial finance background. Can you talk a little bit about where you've come from and how that's prepared you for this role?

Jigar Shah:
Yeah, I mean, I'm a mechanical engineer by training and I'd say that the concept that has driven me through my entire career is that we have all these technologies that are ready to scale and this amorphous thing that we call capitalism or the private markets, have not been capable of scaling them. So, whether it was starting at SunEdison where we really pioneered solar as a service, pay as you save solar, which is now a trillion dollar sector. Or when I went to Generate Capital and we figured out how to finance renewable natural gas. We figured out how to do battery storage.

We figured out how to do all these new sectors, using the principles that we learned in solar and wind and lithium ion batteries. And then really trying to figure out how that continues over and over again. There might be some people who say, "Well eventually Jigar, you'll be so successful that the banks will be jealous and they will put you out of business and they will just do it themselves." And that hasn't proven to be the case. And in fact, I think they've actively suggested that they don't want to get involved in the first $5 billion worth of transactions and want to come in later. And so, I think that turning these anecdotes that have made up my career into a science is probably my next endeavor in figuring out whether there's really a pattern here.

Mike Toffel:
And so, given your experience in the private sector funding energy transition technologies, and we run into folks here at HBS, a lot of our alumni are in that space as well.

Jigar Shah:
Yeah.

Mike Toffel:
Some might ask, "Well, what's the need for the federal government to get involved in this space? Why not let the private sector sort out the funding of these early stage ventures?" What's your response to that?

Jigar Shah:
The tools that we have today are ones that the government played an enormous role in 20 years earlier, whether it was the feed-in tariffs in Germany for solar or wind or battery storage. Or whether it's the work that they did to make sure that all of the waste was turned into renewable natural gas and things like that. When you look at the enormous investments we've made in ethanol in the United States, thank God that we did those things. Can you imagine if we had systematically 10% more demand for gasoline in this country and we didn't invest in ethanol?

And so, the question really becomes for these essential infrastructure services where your upside is capped. You can't charge $99 a month for broadband in the energy sector. If I said to you, "Hey, you should pay 4X what you currently pay for electricity using these technologies." You'd go tell me to pound sand. If diversification is needed to make sure that we actually have all these tools in the toolbox to make sure that people can live a modern lifestyle, and drive their cars wherever they want to go and heat their homes whenever they want to heat or air condition their homes. What role does the government have in making sure that all those tools are ready for primetime and gigaton scale? I think at this point, the entire world knows that that's obvious.

Mike Toffel:
So is your perspective there, that the government will take on projects that are too risky for private sector capital?

Jigar Shah:
Oh no. I'm not suggesting that. I'm suggesting that the private sector in infrastructure is incapable of being creative or interesting. When you look at wastewater treatment plants today, we have technology that's 25-years-old that uses 90% less CapEx to do the same job or even better job of taking PFAS out. But the engineering industrial complex has said, "Do you want to do something weird or do you want to do things exactly the way that your grandfather did?" You should do things exactly the way your grandfather did because the guy who runs the Wastewater Treatment Authority doesn't get paid that much.

And it's all downside risk, no upside risk for him or her. Or if you're an electric utility company and you've got a bunch of natural gas projects and you know for sure that they failed you during the polar vortex in Texas, and you don't want to spend $4 billion to weatherize them. Why wouldn't you figure out how to diversify away from 60% gas in those places? And even if you said, "Well that's culturally inappropriate for Texas." The Northeast is exactly the same.

That is what happens when the government doesn't intervene, which is what we've been doing for the last 35 years in the United States. And now we have to say, "How do we make sure that we're more resilient and why don't we use US technologies to do that? Why are we forcing all of our entrepreneurs and innovators to go to Canada or the UK or Australia or South Africa to commercialize our technologies, because we refuse to do any of it?"

Mike Toffel:
One of the exciting areas that DOE is engaged in is in carbon removal and carbon storage. So, these are technologies that aren't usually on the radar when we think about adaptation or mitigation as the two main levers that society and businesses have at their disposal. And let me just first set out what I think we're talking about with carbon removal and carbon storage. So carbon removal, this is removing carbon from the atmosphere, either from the air or from concentrated streams like smokestack emissions. And there seems to be two ways that folks are talking about this.

Nature-based solutions. These are solutions like planting trees or figuring out how to do agriculture in a way that sequesters more carbon into soils. And then there's technology based approaches, things like direct air capture, for example. And then there's carbon storage, especially in areas like direct air capture and other technology based solutions that pull carbon dioxide out of the air. You're left with this concentrated massive carbon dioxide that you need to either store on site or put a pipeline in place to move it to some place where it's stored and then you got to figure out the storage technology. So, that's the landscape as I understand it. Is that a sensible way to understand the carbon removal and carbon storage space?

Jigar Shah:
Yeah, I think that's great. We should steal that.

Mike Toffel:
You're welcome to. So, let's talk a little bit about DOE's role in these areas of carbon removal and carbon storage, and maybe we just start with carbon removal. The place where I think DOE might be involved, but also I think other government agencies might be, is in the nature based side. So, this is where folks are figuring out how to plant trees, take carbon out of the atmosphere or how to sequester carbon in the soil or perhaps in the oceans. What's DOE's role in that type of technology?

Jigar Shah:
So on the technology front, I would say that that is really led more by USDA. So in the last Farm Bill, I think there was $50 million that was set aside to help put together the construct of how you would even measure whether it was successful or not, they're going through that now. But in general, I would say that the challenge with nature-based solutions is that they are by definition temporary. They're essential, right? So for instance, soil carbon in this country, I think is down to one to 2%. In general, it should be at 10%. At 10%, the soil holds a lot more water. It actually is better. There's less fertilizer required. There’s all sorts of reasons that you should want your soil carbon up to 10%.

But you have to do things differently and use cover crops and figure out a way to do no-till. And there's all these practices that you have to engage in and you see Monsanto, Bayer and others, starting to pay farmers to do this in exchange for carbon credits that they might get for it or that kind of thing. But the challenge with those solutions is as soon as you stop doing those tasks, then the carbon sort of goes back to one to 2%. And so, it's not permanently affixed in the soil. Now, there are ways to permanently affix it. That's biochar and things like that, where it's more permanent. But even there it's not as permanent as what we're talking about on the technology based solutions. And then on the other side with trees, I mean, you just see this every day. I mean, we all love trees.

I mean, who doesn't love trees? But you have wildfires that occur that folks didn't think were going to happen. But the notion that we can rely on nature based solutions to get us from where we are today in terms of carbon dioxide in the air back down to 350 parts per million, is very difficult to see because of all the feedback loops that are happening in the climate today.

Mike Toffel:
So, that's the story on nature based and on the technology based solutions. It sounds like DOE's more heavily engaged in technology based removal and storage technologies. Is that right?

Jigar Shah:
Well, we have a clear role to play in the technology based solutions. So starting in the Energy Act of 2005, the Energy Act of 2007, but then also ARRA Stimulus in 2009. There was a lot of money given to DOE to do research and development in those areas. Including development demonstration projects. Some of which went great, like the storage facility at ADM’s facility in Illinois where we've been consistently bearing a million tons of CO2 in class six wells there. And not so successful projects, which are many, that occurred during that 2009 to 2011 timeframe. And so, we've learned a lot from that and now there's another set of projects that are happening and they're seeming to be quite a bit more successful in terms of capturing CO2 and then sticking it in a pipeline and then burying it in class six wells for permanent sequestration. And I think you see a lot of private sector validation from the work that Stripe has been doing with Frontier and other solutions to validate that, not just from DOE research, but also from others.

Mike Toffel:
And just to clarify, class six wells are the wells used to inject carbon dioxide underground for long-term underground storage.

There's certainly a growing number of firms interested in trying to achieve their net zero or science-based targets by focusing specifically on carbon removal technologies. That's definitely a trend I'm observing as well. What are the categories of technology based carbon removal solutions out there?

Jigar Shah:
In general what I'd say is that you've got industrial processes that have CO2 as their waste product. Let's call it ethanol production, ammonia production. There's a couple of other processes that have almost 100% pure stream. For us to capture that CO2 and stick it in a pipeline and put it into a class six well, is cheap. For the biggest ethanol plants, they can probably do it for $30 a ton. And for the smaller ethanol plants, they probably can do it for 50 or $60 a ton. And so, if you're paying $85 a ton, which is where the 45Q credit is now, those are quite cost effective.

Mike Toffel:
And 45Q is the tax incentive for carbon sequestration.

Jigar Shah:
Yeah. So now, you could see roughly a hundred million tons a year of CO2, from those sources getting put into a CO2 pipeline and buried into a class six well. Then you've got processes where the CO2 fraction is a lot lower. To put it in perspective, a coal plant might be at 14, 15% and then you've got a natural gas plant that's probably at 8% of their exhaust is CO2. And then you've got chemical facilities and others that are somewhere in between. And so, there's an entire body of work there, around concentrating CO2 from exhaust and figuring out how to put it into a CO2 pipeline and then putting it into the ground.

And then you've got an entirely different class of folks who are basically just saying, "We're going to take CO2 out of the air and we're going to capture that and put it into the ground." And so, that's direct air capture. So from a technical standpoint, they've proven that they can actually do it. I think it started a few years ago at $1000 a ton for them to actually do it. And there are some approaches who are now saying that with some scale they can get to $300 a ton. And then the secretary has set an Earthshot, to be able to get that to $100 a ton by 2030. And when I talk to the private sector players, They believe that they will beat that goal by 2030.

And then, you have all sorts of other solutions where folks are using kelp and figuring out how to have the kelp capture CO2 and then have that sink to the bottom of the ocean and permanently store it and other types of ideas, all of which are welcome. And I don't know whether you want to call that nature based or some sort of biomimicry type approach. There's all sorts of labels, I find that they don't quite fit nicely into every single category. And then you've got some folks who are spraying a chemical in the air and then the chemical reacts with CO2 and then it creates chalk. And so, you've got mineralization technologies that happen that way. But I think the goal is for us to be able to reliably take gigatons of CO2 out of the air at less than $100 a ton.

Mike Toffel:
Okay. So, that's the goal. And then you're seeing probably hundreds of applications come across your desk, seeking these billions of dollars of funding that you have available in these loans. How do you sort through these? Do you try and have a portfolio targeting these different types of technologies? Do you look for the ones that are most promising or most scalable? What's the mental checklist that you go through as you review these applications?

Jigar Shah:
We have a fantastic partnership with the Office of Fossil Energy and Carbon Management. And so that's where the real action happens in terms of portfolio and making sure that we have all the tools necessary to be able to have a diversity of approaches that gets us to our goal. That is not my job at the Loan Programs office. And you wouldn't want me doing that job because I'm just not that smart. I'm really smart on finance. I don't know that I'm the person that you want to be running our carbon management strategy. So that's the fossil energy and carbon management group. And so what I do is say, okay, once someone actually has passed the demonstration phase of the technology curve, and so they're now in TRL seven firmly, maybe even in technology readiness level eight. They're going to have these big projects, billion dollar projects, $500 million projects, whatever it is.

And they go to a commercial bank and the commercial bank starts laughing out loud and not like a little one, like a guffaw, "There is no way we're going to help you. Why are you here?" And so, those people come to the Loan Programs Office. And if they actually meet the test of our statutory requirements, they're innovative. They're one of the first six deployments. They have commercial contracts. So, a project finance structure is, the technology works. It's, "I got a lab person who will tell me that it works." And then you've got feed stock, CO2 feed stock's pretty easy to come by these days. You've got off-take agreements where that is going to go into the ground and who's going to pay you. And then you've got an operating group that actually knows how to operate this thing.

If they meet that test, everyone gets a loan. So I'm not saying, "You get a loan and you don't get a loan because I like you better than you." If you meet that requirement list, you get a loan. And if we run out of money, then we go back to Congress and say, "We have another $50 billion worth of American entrepreneurs and innovators who want their technologies to get to gigaton scale, will you help us by giving us more loan authority?" And we make money for the federal government. So from their perspective, they're saying, "This doesn't actually cost money to the federal taxpayer." It's something that we're facilitating and it makes money. So, if you really truly have that much interest in your program that meets your pretty strict requirements because we're not easy to get through, then they're going to give us more resources.

Mike Toffel:
And what's the portfolio of applications coming your way? If you think about using the categories we described earlier of high concentration streams or low concentration streams or ambient air source or some of these other technologies, is it roughly distributed across all four of those? Or is one of those the dominant space these days?

Jigar Shah:
So for high concentration streams, they don't really need a loan from us to capture the CO2. That's a pretty simple process and frankly low dollar numbers. And so, what they need a loan from us for is the CO2 trunk line. Today, if you want to do that, you sort of have to be responsible for all of it yourself. You're like, "Well, I'm in the ethanol business and now I have to become a PhD in CO2 capture and storage," and stuff like that. They don't want to do that. They want to sign a contract with somebody who actually does it all for them.

And there's some revenue sharing that they agreed to on the 45Q. And so, we're funding the CO2 trunk lines and then there might be some sort of tariff that comes in place where we drive a standard offer so that folks aren't independently negotiating every single transport contract, because that would just become unwieldy. So we just say, "You guys all agree to charge $18 a ton to transport your CO2 from this thing to that thing and do that." And we might actually fund the class six wells as well because those are pretty expensive undertakings. On the low concentration piece, we might fund all of it. So, you might fund the capture because there's technology there, as well as the transport, as well as the storage. On the direct air capture piece, sometimes there's existing CO2 pipelines that they're building on top of, because technically you could put direct air capture anywhere.

So, then we're really probably just funding the direct air capture facility and then they're probably putting it on top of a CO2 pipeline so that they don't have to separately pay for that cost. That's probably where the bulk of our loan applications are in. And we probably got about, I don't know, probably six or $8 billion worth of loan applications that have come in already for those categories. The last thing I'd say is there are a lot of blue technologies as the rainbow would be called. And so, they’re technologies where someone would say, "Look, I've got an approach to making this petrochemical product, but it actually features an easy to concentrate CO2 stream so that I can concentrate it, stick that in the ground, and then sell my product as low carbon or clean or whatever it is. So, there's a lot of applications that are coming that look like that.

Mike Toffel:
What's an example of that?

Jigar Shah:
Well, one that's public, was the Lake Charles Methanol Project. So the Lake Charles Methanol Project was taking a feedstock, turning it into methanol, capturing the CO2 off the methanol, a process which is pretty pure and then burying it in a class six well. So, there are a lot of chemical manufacturing and petrochemicals processors, that are looking at that. As well as hydrogen. There're folks who are looking to create hydrogen where they capture the CO2 off the process and bury that underground.

Mike Toffel:
Great. So, I wanted to step back a moment and talk about some of the jargon in the space. So, we've talked about technology readiness seven or eight. Can you just give us a brief primer on what scale we're talking about here?

Jigar Shah:
Technology readiness level one through three, is really the concept phase. Drawing it up, PhD dissertations, believing that a concept would work, writing it up in a Leonard DaVinci style sort of drawing. And then from three to six you're really testing it, figuring out exactly whether it'll work, mocking it up, doing all the things you're supposed to do. At seven, there's a demonstration that probably occurs and you've demonstrated it. It actually works, 100 hours continuously or whatever it is. And sometimes that demonstration's a million dollar demonstrations and a lot of times that demonstration is a $100 million demonstration.

In the case of let's say sustainable aviation fuel, it might be a billion dollar demonstration. And then you've got eight and nine where it's really more about commercialization. And so, in commercialization, what you're trying to do is cross the bridge to bankability. So, there's a first of a kind deployment on the commercial side. So, you're actually doing scale. Scale up risk is real and sometimes even though you can prove it at one 10th scale, you can't make it work at 10X scale. And so, that's first of a kind risk. And then for projects two through six, you're basically trying to get engineering excellence.

the engineering companies come in and actually say, "We actually feel so comfortable about our design, we'll wrap it and we'll warranty it." So, that's what that second milestone is. that third phase, which is like, "Okay, we've proven it now and now we've engineered it, but it's still $800 a ton to get the CO2 out of the air. Now, we got to get the cost down to 100 bucks." And that involves manufacturing expertise, scale up, all that stuff. But it also includes a lot of incremental innovation, which DOE does.

So in the case of solar, we invented all those technologies with our friends at the University of New South Wales in Australia that get you from 12% efficiency to 19% efficiency for the solar cells. So, there was a lot of cost reduction just from China scale up from 100 megawatt manufacturing facilities to gigawatt manufacturing facilities. But a lot of it also came from going from 12% to 19% efficiencies. And that was all DOE technology. So, there's a lot of innovative technologies that come in that learning curve phase. And then you get Wall Street securitization, which is my bailiwick, which is figuring out how you actually get Wall Street interested. So it's not just these one off financings with high net worth offices or infrastructure investors, but you start to bring in all the liquidity instruments like insurance companies and pension funds and others. And that's how you get the cost of capital from 7% down to 3%.

Mike Toffel:
Is there an example you can share that's non-confidential about that transition from a 7% to a 3% cost of capital? Where DOE was helpful to get a technology scaled in a way that Wall Street enters and all of a sudden, boom.

Jigar Shah:
I'll give you an example and how we might be more helpful in the future. So the Loan Programs Office provided roughly $5 billion worth of loans for the first 500 megawatt plus utility scale solar projects that were built in the United States. And that was from 2009 to 2011. Those projects didn't really get built until 2012, 2013. Even with our guarantees, you could not find equity to build those projects. And so, all of those projects are basically owned by Berkshire Hathaway and you and I both know that Warren Buffet got a good deal. He didn't give us cheap money. So in 2013, 2014, which is not that long ago, you were still getting ridiculously high rates of return on equity on these solar projects. And so, the collapsed cost of capital there was probably in that 9% range.

And if you remember when that happened, Warren Buffet bought those projects and then immediately securitized the debt because of the federal guarantee and got 3.5% interest debt on those projects. And so, he knows what he's doing. And then it wasn't until like 2015, 2016 that you started to see a lot more infrastructure funds come into the space and they were like, "Well, we're actually fine at 7.5%, or we're fine at 7%. Or we're fine at 6.5." And then I would say Wall Street securitization probably didn't happen until that same 2015, 2016 timeframe. If you remember, we had all these yieldcos. So that was like SunEdison's yieldco, NRG had a yieldco, NextEra did a yieldco. And so, basically that was them saying, "Wall Street refuses to help us, so screw Wall Street. We're going to just go public as a real estate investment trust equivalent and we're going to bypass Wall Street." And for SunEdison it didn't work out because they didn't show discipline. So they went bankrupt.

And then I think Brookfield bought the carcass of that project, and then NRG yieldco, and I think NextEra yieldco, has done well. And then Wall Street finally said, "You're right, actually, we should be doing these securitizations ourself." But that was not until 2017, 2018 that they started doing it. And so, when you think about all of the utility scale projects that went in place, we built the first one in the United States in 2007 at Alamosa, Colorado when I was at SunEdison. And then you had a bunch that were built in Germany and Spain, other places. It took until 2019 for Wall Street to be like, "Yeah, this is actually something we should do." And so, I think a lot of what we're doing now at the Loan Programs office is getting Wall Street involved earlier and saying, "I think you like making fees. Why are you waiting until basically you were embarrassed by this yieldco thing before you came in? Why don't you actually proactively figure out how to do this in a shorter period of time?" And they're interested in learning, which is good.

Mike Toffel :

One of the critiques of carbon removal has been that this distracts us from mitigation and there's some environmental justice concerns about where these plants are operating and who faces the burden. How do you think about those critiques and where's the DOE and where are you landing on that?

Jigar Shah:
Well, look, I mean I think that the history of infrastructure in this country gives people a lot of pause. We were not kind, in the way in which we cited that infrastructure, in the way in which we doled out the wealth from that boom. I mean, in terms of where we sourced workers from, where we were able to do things, there was redlining that occurred in the past. And look, there's a lot of things that were done wrong when we built out the highway system, when we did a lot of the infrastructure that we did decades ago. This time around, we're going to deploy $10 trillion of new infrastructure. That is how this works. You don't reduce carbon emissions unless you rebuild the country. That's how this works. And it's time to rebuild the country because stuff's old.

Our average coal plant's over 50-years-old, our average natural gas plants at the end of life. Our average nuclear plants running on 60 years. And so, when you think about our infrastructure, it is time for it to be replaced. And so, now the question becomes how do we best meet what the science tells us we need to meet? Which the President's National Climate Plan says that we need to sequester 1.5 gigatons of CO2 every year starting in 2050. And so, those tools have to be ready by 2050 for us to do that. Now, the question is How do we do first of a kind deployment? How do we do engineering excellence, the Earthshot learning curve section, and then Wall Street securitization?

And we're all going to have to come together as a community to figure that out. So I can totally understand why people on the Gulf Coast are saying, "We have had all of these emissions that we've had to live with for decades and we don't want CO2 to happen here first." Fine. But if CO2 capture doesn't occur there, then all of those facilities are going to move to Alabama, Mississippi, and then they're going to be done there. Or they're going to move to Arkansas and Kansas. These facilities are going to get cleaned up because we're going to make them be cleaned up. And so the question is, "Do you want those jobs to be in the Gulf Coast in Louisiana?" And these are high paying jobs that have pensions associated with it and all that stuff.

Or, "Do you want them to move to another place?" But America will do big things again. And we are going to reshore and onshore all of our manufacturing again. And so, we have all of these competing interests and we have $10 trillion to invest, right? 400 billion or so coming from the Inflation Reduction Act. And so, we have to have these conversations. It can't be that we can't build anything, right? That is off the table. So now it's about where we're going to build it, who gets the jobs, where does the wealth creation occur, and how do we site the industries of the future? And so, I don't have all the answers to those questions, but I do know what the process has to look like and how to make it inclusive. And then, we have to actually come up with timelines by which we actually meet those timelines because the climate's not going to wait for us.

Mike Toffel:
Now, you talk about the upside of carbon capture installations being jobs. Are there downsides as well, that folks need to be concerned about?

Jigar Shah:
Well, in all things that we do, there has to be permits and NEPA and all sorts of things that we do. I mean, whether it's solar panels, where the reflection could in the morning go straight into your house, I've seen that. Or whether it's wind turbines where your viewshed is affected at 80 meters and when we move to 120 meters, you'll have even more viewshed issues. Or whether it's CO2 where you have to make sure you're doing things safely and making sure that leaks, that there're sufficient sensors that are put in place and all that stuff. Everything we do, at seven to 8 billion population scale, requires safety, right? Health, safety in the environment. It all requires it. So, I don't think that CO2 pipelines are particularly risky versus other infrastructure that we're building, but it does have to be done carefully. It has to meet best practices. And we have to make sure that we're enforcing all the rules that have already been put in place.

Mike Toffel:
So, you've said in other interviews when you were a CEO that you didn't talk to the government, but now that you're in government, you see the need for better public private collaboration. So, can you explain your transition and view on that and how are you trying to get this message out to current CEOs?

Jigar Shah:
Well, a couple things have happened. I think one is that, look, I mean, I stand by that, which is that we made very large investments in renewable natural gas, very large investments in battery storage. And frankly, it would've made sense for us to pick up the phone and call the experts at the National Labs and get their take on what we were doing before we did it and-

Mike Toffel:
This is back when you were a private sector CEO?

Jigar Shah:
Yeah. And so, I stand by that. And I think that the private sector should work with the government more closely on that. I'm not sure that we make it easy for them to do that, but I think that could be fixed. I'd say that the other big thing that's changed though is that the secretary has realigned the Department of Energy into this office of science and then the office of Infrastructure. And so, DOE has a more secure role in commercialization, which was not true just 10 years ago. I mean, 10 years ago, Congress would pass the budget for DOE and say explicitly, "You're not allowed to work on commercialization in certain sectors."

So now, that we are explicitly supposed to work on commercialization and Congress gave us $62 billion in the Bipartisan Infrastructure Law and another $30 billion in the IRA to work on that, then the question really becomes what is the American approach to commercialization? And to me, the American approach to commercialization is private sector led, government enabled. And so, if the private sector has no interest in something that we keep saying is ready to go, well then it doesn't take off. I mean, the government in the United States doesn't make something happen. We say, "Here's how we're enabling it to happen." And if the private sector doesn't find it compelling, then it doesn't take off.

And so, I think that to get that dynamic right, we do need a lot more feedback from the growth companies and the infrastructure investors to say, "Of all the things that we could do with these tools, what do you think would be the most helpful to de-risk your investments? In the past, the DOE might have said, "Oh, we'll just give it out as 50-50 cost share." Whereas, when I talk to some of the entrepreneurs, they've said, "Actually, 50-50 cost share is not what I need. What I need is a floor price on green hydrogen or a floor price on CO2 so that I don't get screwed by the commodity markets in the future," or whatever else. And DOE has the ability to do that through our other transactions authorities that we've never really used. I think we've used it maybe five or six times, but NASA uses it 100 times a year.

Mike Toffel:
So as I hear it, what you're saying is both companies need to keep their eyes open for opportunities to learn from government expertise, to avail themselves of these programs. But also to provide feedback to the government to help the government design these programs more optimally for the needs the private sector actually has, rather than guessing what de-risking strategies might be best.

Jigar Shah:
Yeah, I think that's right. And the other thing I would say is that if that dynamic improved, you would see a lot more enthusiasm from venture capitalists for hard tech investments. The reason they don't love hard tech investments is they're saying, "What's your commercialization strategy? Let's say it works. Let's say exactly what you suggested and you're pitching me works. Aren't you going to hit this valley of death, where I'm never going to be able to get an exit out of you?" Well, if they thought that the federal government was actually there to help them through that valley of death and make that valley of death far shallower, well then they might be more enthusiastic about investing in the first place.

Mike Toffel:
Got it. All right. Before we conclude, I wanted to ask you a question for those listeners who are thinking about dedicating their careers to business, focusing on climate change. What are the biggest opportunities you see for those folks and what advice do you have for them?

Jigar Shah:
Well, look. I mean, I do think that at this point there is wide recognition that all of the wealth creation that happens in the world over the next 30 to 40 years will be dominated by solutions to climate change. So even if you're just a capitalist, this is the sector you're going to choose to go into. Separately though, if you're interested in national security, you're also coming into this sector. I think as the US military has suggested for 20 years, this is where all future conflict will come from. And when you think about whether it's around water and drought shortages, or whether it's around wildfires.

Or whether it's about figuring out how to heat people's homes in Europe this winter, there's a lot of people coming in. And as you know, people have very large checkbooks when national security is on the line. And so, I think that it doesn't really matter what field you want to go into, whether it's marketing or comms or engineering or finance or strategy. To me, this is where the most interesting stuff is happening. And so, we're seeing a huge amount of people flocking to this sector. And the Loan Programs Office is hiring another 100 people between now and the end of the year. And so, we're getting a lot of resumes in. If you're interested, feel free to come in. But when you think about, we have to put between 20 and $60 billion out the door every year. We need a lot of great people to do that.

Mike Toffel:
Great. Well thank you so much. It's been a wonderful opportunity to speak with you and learn from you. So thanks so much for spending time with us on Climate Rising.

Jigar Shah:
My pleasure.