00:14:12 · Jeremie Eliahou Ontiveros
I think capitalism is gonna solve part of the problem where these guys should be able to pay materially, let's say, just cut less incentives and so pay much more to the local community, contribute much more, it's such a small percentage of project value. So it makes total sense. The other thing is, as you add more and more of these data centers, that's mostly on the electricity side. But as they connect to the grid, they can create a systemic risk, which is in Texas, what the grid is worried about. It's kind of the opposite scenario of what we've seen in Spain a few years ago with renewables on the generation side, where if they're unreliable and they're sort of a fault, it can trigger a cascading effect where everything trips out and the grid goes dark for a few days. You can have the same thing on the low side. It's nearly happened in Virginia already, where because of a voltage dip on the grid, every single data center that triggered their UPS system, they all disconnected at once from the grid, you had one and a half gigawatts of load disappearing. That scale, that fast, that can trigger a blackout for the grid. So there's actually a lot of things that are very legit, which kind of makes sense and sort of justifies why this is bipartisan. And so all of this, I think, is understandable. There's a transition period where, yes, now you have to add equipment that's gonna add a bit of cost to handle these sort of grid issues and make sure you're a, let's call it a good grid citizen. As people like to say, water. Of course, now you realize that if you're taking water and there's five other projects, then obviously there's not gonna be enough for for everyone. So you gotta be more water efficient. Everyone is doing that. And so my my... Actually, my expectations is gonna sound crazy, I think things could get better because everyone is sort of realizing, okay, yeah, it makes sense the way we sort of designed before was for a smaller scale. And as we have so many of these data centers at the same time, we need to adapt the way we do it so it makes sense for for the country. Right? So, yeah, I I think data centers are gonna become much better neighbors, and that should hopefully make the build out better. But I I would say that that heavily justifies why this is a bipartisan issue. There are very legit concerns that data center developers need to adapt to.
00:16:30 · Wayne Ma
[00:16:30] S3: Yeah. I just wanna add, one of the things that surprised me was Ohio. So Ohio had these incentives that they thought would cost them maybe 136,000,000 a year to bring data centers into the state. And last year, those incentives cost them... Or two years ago, those incentives mushroomed to 555,000,000. Last year, it was 1,600,000,000. So they were leaving, like, that... You know, they couldn't conceive that they would be leaving 1,600,000,000 on the table with these incentives. And that's why one of the things is a lot of these candidates, you know, are running to roll back all these incentives regardless if they're Democratic or Republican.
00:17:04 · Jeremie Eliahou Ontiveros
[00:17:04] S0: I mean, just to caveat this a little bit, I think it's pretty common to... When you wanna host, like, very large scale industrial projects, because again, like a one gigawatt data center as we know is a $50,000,000,000 project, just an insane amount of money. It is pretty common to offer tax breaks, tax advantages. So it's not like data centers were there by the guys and this was like something crazy. No, I think it's pretty common. So one way to look at it is to say like, hey, could have gotten that much more money. Another way to look at it is to say like, this is actually the normal way, but because we're in times of supply constraints, now we can actually like have these guys contribute materially more and increase the welfare of everyone around, which I think makes sense. Everyone wants to build in The US. It's one of the world's best countries to build data centers, and so it makes sense to also make sure they can you know, support the local folks. And, you know, I think we're starting to see more and more of that and a lot of data center developers are spending or not accepting tax breaks anymore or are just contributing more locally.
00:18:04 · Jordan Nanos
[00:18:04] S1: Yeah. But I guess one thing that I'm hearing you guys say is kind of converting a single governor's race into the policy across the whole state. And in practice, Maya, I think you've educated me many times that, like, this depends on city councils, county boards, board of supervisors, utility commissions, like local issues rather than stuff that's statewide. So, let's say one of the states goes one direction or the other, how does that actually flow through to every single project when there could be so many across the whole state, across so many different counties?
00:18:41 · Maya Barkin
[00:18:41] S2: So, local government approvals do matter, but it's gonna be project by... On a project by project basis that will look at whether a local government is pro data centers or not. And they're also very responding to the local community. Whereas at the state level, it's gonna depend on different factors. And here, ahead of the midterms, this is why we're looking at what's happening at the state level. And governors have a lot of power here because they can move really fast. They can direct agencies to stop issuing permits, like Abbott in Texas or also in Oregon, Codex Environmental Permit Hold. Whereas legislatures, we also looked at... They can set the tax breaks. They can pass law, but they're slower to move. We haven't seen any moratoriums being adopted at the legislative level yet, and we don't see this as a significant risk for the time being. So, yeah, in Texas, going back also to what Jeremie said, I personally think that... Well, first of all, Governor Abbott is the favored candidate. So he's expected to win a fourth term, although the race has somewhat tightened. And I think this is part of the reason why he's kind of changed his rhetoric to being very pro data centers to just in the past few months issuing all of those directives and being clear on his stance on how developers should pay their own way, should respect the communities, etcetera. But I think that after... Once he gets elected, after the midterms, the most likely scenario is that the restrictions will ease. And one meaningful tell here is that all of those directives that he issued will just expire on their own. He doesn't have to reverse them. So it's quite easy for him to to let them slip on their own. And the permitting can then move forward in December or at the beginning of next year.
00:21:35 · Jordan Nanos, Maya Barkin
[00:21:35] S1: Maybe the other thing to dig into more is, functionally how it works. You said all of these different directives. And I was lumping all of this stuff in when I was reading the initial thing. It was just like either pause or conditions, but there's actually a whole bunch of different political positions that can impact the data center. You guys go through like a temporary pause or moratorium conditions, but also candidates can favor, you know, a political position where you force people to pay their own grid costs or protect ratepayers. They can end tax exempt. They can have a position on water limits or reporting of water usage. Bring your own on-site power force there. Community benefits, transparency or bans on the NDA, local control over state decisions. Like, I just listed off all of the different rows on this table here. Is there a coherent position that cuts across all of these, or is it just like a total mess across all of the different states? Like, is there anything everybody's in favor of or everybody's against? Or like, what's the way to think of this? [00:22:40] S2: I would say that Democrats tend to lean towards a temporary pause, but it doesn't mean that if you're a Democrat, you're gonna advocate for a moratorium. As you can see from graph, it's quite bipartisan even for the moratoriums. It's actually very interesting to see how popular these new conditions, whether it's a pay your own grid, end tax incentives, bring your own power, are popular across the political spectrum.