The Exchanges

Q off grid data center, which has been much discussed, but not really done. Do you, what you're describing right now is grid connected, right? Um, Do you think that, that that's a stepping stone? Like ultimately this stuff should be off grid. Do you think there's a, ultimately that makes no sense whatsoever? Everything should always be grid connected. Is there some nuance to, to what the answer is situationally?

A I think it's all about if it makes sense for the grid in a lot of ways, right? Um, if the grid in that location has some excess energy and they want to share it with the data center from time to time, because, hey, you know, making money out of something that was otherwise making nothing is, uh, is, is Good for rate payers. Uh, or if they want to be in a position where, you know, potentially in an emergency, they can rely on the data center's battery capacity or dispatchable gas that's behind the meter, then, you know, grid connection makes all the sense in the world. But, uh, generally speaking, I think we're moving into an era where, um, grid connection is optional and should be optional. Um, and that, you know, we should be able to, you know, operate these things fully off grid if necessary. Now, I will tell you that a lot of customers, Still very much want the grid optionality, right? So they're gonna, they're gonna continue to, even if they go down the road of an offset off grid data center, try to pursue having the grid eventually come to that site just for insurance purposes. Um, but increasingly what we're developing for is an overlay with the gas grid as well as the, the power grid. So I'll give you an example. We've got two, uh, multi gigawatt scale data center sites in the panhandle of Texas. Uh, one of them's three gigawatts, one of them's over a gigawatt, um, singl…

AI assessment note: “I think we're moving into an era where, um, grid connection is optional”

Q from these data centers? The other thing that people talk about a lot, but I've seen no evidence of it actually in action of like, not basically operating the data center, anything other than 24 seven. Is there any interest in doing that? Whether for economic reasons, because you can offer lower, you know, electricity prices or emissions reasons, it doesn't really matter. Is anybody talking about actually doing that?

A So while power might be increasingly sort of sexy at cocktail parties because of AI, some things don't change. And, and, you know, one of those things is that we are still the, the tail of the dog, right? And, and, and, and we're not wagging anything. So when you think about the capacity factors, um, on the, the CapEx themselves, right? Like let's, let's just take a gigawatt data center and I'm going to round to like the nearest, you know, whatever, uh, Two and a half billion dollars, ok? So, um, let's just say you've got a gigawatt data center, like the one I described, that has wind, solar, batteries, some gas, um, and, and, you know, that generation, maybe five, six billion dollars of power assets, uh, you know, the, the data center itself, powered shell, maybe another two and a half billion, you know, built out, built to suit, takes you to ten billion on the data center, so that's ten billion dollar structure, Uh, five to six billion of renewable as our power assets, and then, you know, thirty billion dollars of chips. So, you know, every second you aren't running that at a hundred percent capacity factor is enormous amortized cost, right? So that it's just, it's one of those things where it's like, you'd be a fool to turn it down. You, you have to at some points because operationally, you know, there are things that you got to do for maintenance or, you know, changing the …

AI assessment note: “every second you aren't running that at a hundred percent capacity factor is enormous amortized cost”

Q talk about data centers indirectly in the sense that I want to talk about the broader Picture of what's going on in the solar and storage. Markets, which is partially a story of data centers anyway, but we'll, we'll attack it head on later. In the meantime, what, how would you characterize like the state of the market in the U S today for, for utility scale solar and storage?

A I mean, I think the state of the market is, is kind of this weird limbo where, you know, we have this sort of supply side policies of the Biden administration, which are driving growth, um, you know, growth in American manufacturing in particular growth in sort of American driven, uh, Uh, solar and battery storage, but then we've got this enormous demand side, you know, push coming from AI and, and not just AI, right? I mean, we're, we're talking about the convergence of some other trends, which we can talk about when we talk about data centers, but, but, you know, electrification, decarbonization, advanced manufacturing, all of these things are actually legitimate load drivers as well. So you've got this double dip of supply and demand. Uh, but then I would also say that at the same time, um, These massive macros that are pushing the industry are also both, both fraught with, you know, uncertainty at this moment. So it's a, it's a crazy time when we don't know whether our businesses will be 10 times as large or, you know, non-existent.

AI assessment note: “I think the state of the market is, is kind of this weird limbo”

Q And that's not to mention... Like, the complexity of things like tariffs, which are super dynamic in general, but I'd say particularly so in solar and storage, because it's not just the latest, like, what Trump took office and wants to introduce tariffs on X, Y, and Z, which is definitely happening. There was, like, already an ongoing complexity around tariffs in solar, I guess, especially, right?

A Yeah, yeah. I mean, I think, you know, for Intersect, we've been the sort of, you know, cheerleaders. I've got the pom-poms to show it for, uh, for, you know, American manufacturing for, uh, for some time. And so, uh, we have less risk in this regard. Um, but, you know, I've, I've often talked about how it's not just tariffs. It's, it's, it's sort of multiple agencies and parts of the federal government. You know, you've got the, the, the commerce and trade. You've got DOD and national defense, um, you know, all kind of coming at, in particular, the Chinese sourced equipment for renewable energy. So, uh, that's been happening for a while. I don't anticipate it to get any better under Donald Trump. To be quite honest, I've been quite shocked that it hasn't already gotten much worse with some of the day one threats, uh, against China. Um, you know, I think, um, and as someone who has, you know, uh, a Pretty robust, um, almost entirely American supply chain. I guess, whereas under Biden, we would otherwise have gotten the, the bonus, uh, credits in the IRA. Um, I guess I'd be fine with falling back to just having the IRA being, you know, um, focused on American made equipment. Um, and I think that's probably where it's headed. So, uh, I, you know, my, my, my hope is that for our company in particular, we won't be that affected, but for the industry at large, it's going to be a big…

AI assessment note: “it's not just tariffs. It's, it's, it's sort of multiple agencies”

Q time, you know, averaged out across days, you're, the data center is pulling from the grid. Like, what, what do you think it looks like? What's the optimal, I mean, it's a question really, it's an economic question, right? Like, you could overbuild to infinity on the solar and wind and storage side, and then, of course, you have enough energy, but sort of an optimal economic question, I guess.

A Yeah, I mean, I think that's what a lot of the folks that are sort of making this holy war between, you know, gas, renewables, nuclear, don't understand, is that there is a baseload solution that's like, you know, a little bit of a gassy renewable solution, if you will, where it's like, you know, you can go into the panhandle of Texas, which is where these monster projects that we have are, and you can find yourself spots where you've got, you know, high 70% capacity Actors of renewables. So, you know, 75 to 80% of the hours of the year, we can run fully carbon free with, you know, wind, solar, and batteries all on the same site. And then, you know, 20%, maybe a little over 20% of the time, we need to have some gas or we need to use the grid. Um, that is, you know, the interesting thing about that is that is probably akin to the cleanest possible, you know, mix of renewables, maybe anywhere in the country other than California and Hawaii. Right. So, so you're talking about, um, you know, when people say, oh, these data centers are bringing back coal or whatever, like there are opportunities to actually make these data centers, some of the most, you know, sort of clean powered industrial loads in the country. Um, and to do it at costs that are actually probably the most competitive. Um, if you go build a CCGT right now for 2000 dollars KW and, you know, like you can't even find …

AI assessment note: “75 to 80% of the hours of the year, we can run fully carbon free”

Q to be a little higher. They have gone higher since then, but that's been coincident with higher interest rates, which raises the cost of capital on projects anyway. So, I guess I'm interested in your, your updated view. Are we in a, a good steady state for where PPA prices are today? Do they need to go higher? Do they need to go lower? Like, what's healthy for the market?

A Yeah, I mean, I think when we, when we have talked in the past, you know, we've got Four billion dollars of assets that are running right now that are probably less contracted than, you know, than the average in the marketplace. Uh, we've got some open positions in ERCOT. We've got open positions in California. Uh, those cut across different power products from energy to capacity to, you know, the wrecks themselves. So, um, we're pretty sophisticated in terms of how we trade and risk manage for an organization of our size. Um, you know, I, I think that, um, Right now, we've seen an evolution to longer-term contracts because of these price points, right? So, you know, the prices are increasingly in a position where I think they are commensurate with the risk that people are taking. They are rewarding, you know, the entire value chain for what they're doing. Um, I think a lot of why they've gone up, honestly, is because, uh, as you say, the input prices. So, you haven't seen, say, developer margins blowing out, right? Um, I think developer margins are probably You know, more stable than they were before. Uh, you know, we can talk a little bit about what developers were taking and what that has resulted in, in terms of like, there's a, you know, for a lot of developers in the marketplace, there's a lot of chaos going on right now. We can talk a little bit about that. Um, but a lot…

AI assessment note: “prices are increasingly in a position where I think they are commensurate with the risk”

Q TPG and Google that you announced a couple months ago. Um, to co-locate solar and storage with data centers. So I guess that I have a whole bunch of questions about this, but the first one is why co-locate? Like, is it, is it about Um, getting clean power to site? Is it about time to power? Is it about the interconnection woes? Like, what is the reason to co-locate?

A I mean, the, the story of, of what is necessary in the market, uh, for data centers and for all kind of digital and advanced manufacturing loads that are now growing so fast is a story of speed and scale. You know, that's something that at Intersect, we've probably been, uh, One of the few providers in the market that's been really rapidly focused on those two things, right? Where can we provide really scalable, 500 meg, gigawatts scale, uh, you know, plants, uh, quickly, and not sort of this kind of, you know, and then a miracle occurs development, right? Where you go in, you plant a seed, you sit on it for 10 years while you wait for a transmission line to get built. That's great. That's, that's, that's, if you have the patience and capital to do that, By all means, you know, I think there have been some great success stories there, but I'm not sure that as we move into this next era of power development, that that's really the solution set that, that a lot of these new loads need. So, you know, just maybe backing up to kind of the 50,000 foot view, it's not just data centers, right? We have these kind of three mega trends, um, you know, really digitalization. We all know, you know, we can read every single newspaper about AI and e-commerce and, and everything that is driving data center demand. I, the one that's been intriguing me lately is really electrification, and the el…

AI assessment note: “grow so fast is a story of speed and scale”

Q paid in a different way. Yeah. Has there been, so we're, we're recording this, what, like three weeks past the public market meltdown of DeepSeek. Has there been any, have you felt any impact whatsoever on market demand for large scale centralized companies? Data centers since then, or was it a, you know, a brief public market overreaction? Jevon's paradox immediately took hold, and we're right back where we were.

A Yeah, I mean, it, it kind of amazes me how little, um, sort of critical thinking there is in the flow of, you know, hundreds of billions of dollars in, in our economy, right? I mean, like, it's, uh, the first question I had was, like, is this even real, right? And turns out it kind of isn't, like, well, I mean, yeah, DeepSeek, I mean, it's a distilled model, right? I mean, like, So great, you can make an energy efficient model as long as the totally not energy inefficient version of it came before. Like, so, like, distillation is a real thing. I'm not an engineer in AI, but, like, you know, the whole, the whole strategy of Apple, for instance, when I've sat with folks from Apple on the AI side, is basically distillation. We'll take very powerful models, we'll distill them down by sort of, like, effectively kind of, you know, Generalizing the nodes to make them almost as intelligent, but not quite. And then we'll just do inference locally. And, and that's kind of how, how we'll play the game on lower, lower power equipment. Uh, and, and like, so there's that first, right? I think people, people have to understand that a model is not a model. It's not a model. Again, I'm not an engineer, but the engineers I've talked to since the deep seek announcement have, have made that pretty clear to me. Um, secondly, like, Here's, here's China, right? China is, uh, an economy that is locked…

AI assessment note: “you can make an energy efficient model as long as the totally not energy inefficient version”