Episode 125: Michael Skelly, Horizon Wind Energy
Today's guest is Michael Skelly, Sr. Advisor at Lazard and formerly Co-Founder and Chief Development Officer of Horizon Wind Energy (now EDP Renewables).
A Houston-based renewable energy executive and former democratic candidate for Texas' seventh congressional district, Skelly served as the Chief Development Officer for Horizon Wind Energy from 1999 to 2008. The company was the third largest wind company in the United States. Skelly also co-founded and served as president of Clean Line Energy Partners, an independent developer of high voltage direct current long-hall transmission lines. Skelly is also the protagonist in Russell Gold's book, “Superpower: One Man's Quest to Transform American Energy.”
I was excited for this discussion as I have not had enough representation on the pod from Houston, and Skelly is a great one to break the ice with. We have a good discussion in this episode about clean energy (wind in particular), transmission, Skelly’s career and what has motivated his work in clean energy. We also talk about climate change, the oil and gas industry and their role in the transition. We had a great discussion, and I'm excited for you to hear it.
Enjoy the show!
You can find me on Twitter @jjacobs22 (me), @mcjpod (podcast) or @mcjcollective (company). You can reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
In today's episode, we cover:
Skelly’s background and journey as a renewable energy entrepreneur.
His formative experience in canopy tourism.
The reasons and motives that drove Skelly to get into wind energy.
His reflection on the Industrial Revolution.
What has changed in renewable energy since he first began working in it.
Texas’ experience with renewable energy.
Skelly’s thoughts on existing nuclear energy power plants.
The prospect of putting a price on carbon.
The importance of transmission line infrastructure and the current impediments.
Skelly’s experience running for Congress in Texas.
The Green New Deal and its viability.
The role of big fossil fuel companies in renewable energy.
Links to topics discussed in this episode:
HBS Profile (with mention of Skelly’s experience in canopy tourism)
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Jason Jacobs: Hello everyone. This is Jason Jacobs, and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change, and try to figure out how people like you and I can help.
Today's guest is Michael [Skelly 00:00:26], a Houston renewable energy executive and former democratic candidate for Texas' seventh congressional district. From 1999 to 2008 Skelly was the chief development officer for Horizon Wind Energy, the third largest wind company in the United States. He also co-founded and serve as president of Clean Line Energy Partners, an independent developer of high voltage direct current long hall transmission lines. Skelly is also the protagonist in Russell Gold's book, Superpower: One Man's Quest to Transform American Energy.
I was excited for this discussion. I, I have not had enough representation on the pod from Houston, and Skelly is a great one to break the ice with. We have a good discussion in this episode about clean energy, wind in particular, transmission, Skelly's career, his motivations along the way. We also talk about climate change, where that fits in, oil and gas, their role in the transition, Green New Deal, Skelly's run for congress, uh, it was kind of smattering of topics. The discussion did get cut a bit short, we had some technical glitches at the beginning so we were a little tight on time, but we did end up covering a fair bit of ground. At some point we might need to do a follow up thought, because I could have spent hours longer. But at any rate, great discussion, and I'm excited for you to hear it. Michael Skelly, welcome to the show.
Michael Skelly: Thank you, great to be on.
Jason Jacobs: Although I'm told that I should not call you Michael, I should call you Skelly, which feels weird because this is the, other than a brief phone conversation to set this up, this is the first time that we're getting to know each other.
Michael Skelly: Well, when I'm talking to myself I call myself Skelly, so you can do that too.
Jason Jacobs: Awesome. All right Skelly, well, it's a total honor to have you on the show, it's also humbling in the sense that, I mean, you've done so many interesting things I don't even know where to start. I mean, some Peace Corps type things, and some wind type things, and some transmission type things, with a run for congress in between, and I mean now you're working for a big bank so it's hard to keep up, but maybe, I don't know, maybe we should just kind of take it from the top. How do you describe... when you meet people for the first time and they ask, what do you do Skelly?
Michael Skelly: Well I call myself a renewable energy entrepreneur, which I think captures a lot of it, even in my current role at Lazard it's pretty entrepreneurial. And I think of myself in sort of both my private business activities and the things that I do in the public sector as trying to work on interesting new problems, and I'm most interested at sort of the cutting edge of that. So for example, here in Houston I've been deeply involved for the last decade in building out a system of trails along our [inaudible 00:03:26], and you don't think of Houston as being a bicycle city, but it actually has really good weather eight months out of the year and its flat and there's lot of place to get around too. So I'm deeply involved with that and I got involved at a time when there was some skepticism as to whether or not people would get out and about as much as... It turns out that they are now getting out and about because all this cool new infrastructure that we've put in.
Jason Jacobs: How did you find your way into the renewables world? And what was it that first motivated you to head down that path?
Michael Skelly: So I've been interested in the field of wha- ... I guess what we now call impact investing, since I decided... I'd spent time in the Peace Corps as you pointed out, and then I went to business school because it was very clear in the late 80s that business was going to continue to be a dominant force in life in the late 20th and early 21st century, so I went to business school to sort of retool and then coming out I was really interested in trying to start companies that were doing something impactful. At the time we didn't call impact investing, I think we called it sort of social ventures, and that led me to starting a... we basically built a ski-lift in the rainforest in Costa Rica and in doing so managed to preserve thousands of acres, created a template that others might follow, introduced the world to the rainforest canopy which is actually not very well understood, but super interesting.
So we sort of vetted that mini category of ecotourism that we now call canopy tourism. And being involved in that project and getting it going and working with engineers and finance people and so on, it kind of made me realize that I loved projects and building things and that led me to hydro project development and then wind farm development, and so on. And in both of those areas you can build projects that are impactful in terms of clean energy and in terms of providing employment and taking advantage of natural resources to solve a big problem.
Jason Jacobs: And if you uncovered about yourself that you like to build things you could apply that to any number of different categories or industries, why categories like hydropower and wind initially?
Michael Skelly: It was building projects. And wind, I still have, and I think many people have sort of a child like fascination with wind and solar. I mean here's this resource, wind, it's blowing by, you put this machine up in the air and it turns it into electricity, which is an extremely useful product as we all now and life would not be what it is today if we didn't have electric power. And so being involved in an industry that provides, like, something so basic to what we do and how we live, there's a simplicity and maybe an elegance to that, that I think makes it both simultaneously interesting and important. Now, electricity is a commodity, I mean you don't see it, it's the most [inaudible 00:06:40] of all commodities because it travels around at the speed of light. So the product itself is valuable and interesting, it's a commodity at the end of the day. But everything that goes into building projects whether they be fossil fuel fired projects or renewable energy powered projects, all of the ingredients from the finance, the technical, the engineering, the regulatory, the markets, the network, all those pieces have to come together to create a successful project and that's what I think make project development so interesting.
Jason Jacobs: And when you first got into the wind world way back when, and I think I head your describe it as... and correct me if I'm misspeaking here, but a mix of hippies and accountants, is that what you said?
Michael Skelly: Yeah, that was kind of the wind world of the 1980s, which was before my time. By the late 90s when I got involved, and when you were beginning to see some bigger player's sort of nosing around the industry, a few years after I got involved GE invested and then [Siemens 00:07:42], utilities were starting. They weren't that excited about wind in the late 90s, early 2000s, but they said, "Okay, this isn't a total disaster, let's do some of this." But in the early days it really very much sort of tax driven and people doing projects that were super interesting, but the economics of them might have been a little bit challenging at times.
Jason Jacobs: And so when you first went down that path did you feel... 'Cause I remember you also said that were in the .com world that were making gobs of money at the time following that path, Uh, I mean, how much did capitalism play in a role in your decision making? Or did you think you were chasing something that was a strong business opportunity or was it coming from a different place when you first came in?
Michael Skelly: I'd say it's actually kind of a pretty different place. I mean, I think if I were building my career in the 1930s I'd work for WPA or Bonneville, or TDA, or one of those folks. That was where it was happening back then, today we [inaudible 00:08:46] in electric power, we rely on the private sector to build all these projects. And so I guess the capitalism piece of it is sort of a means to an end, so I got to build this really interesting rainforest [inaudible 00:09:00] project in Costa Rica, and build a bunch of projects around the US. And the way to get money to do those things, and most everything that we do in the US today or a lot of things that we do, it's you have to identify opportunities, come up with ways for them to be profitable and that's how you get the money to build these things.
Jason Jacobs: And I read in the book, and I didn't have a chance to read the whole book, but I did read a fair bit of it and plan to read the rest, but in the book it talked about how you like to hire young people that were ambitious and climate motivated. How much did climate play a role in your decision to enter this domain, if at all?
Michael Skelly: So climate's been a big deal certainly for the length of my career, from the 80s on, not as front and center as it is today, but I'd say it was more sort of general environmental. Let's come up with ways to create electricity by harnessing these natural phenomena. And there's lot of benefits to that, assets it produced power for a long time, it's capital investment, it has climate benefits, but it was certainly more important that the time horizon that comes with energy projects, they last a really long time and they produce benefits for a really long time. So climate was definitely a factor, but maybe not the number one.
Jason Jacobs: So now that you are further along in your career, you've accomplished so much you have this both kind of depth and breath of experience working in energy from so many different aspects, looking backwards, how do you reflect on the Industrial Revolution? Was it all good? Have there been downsides it? How are you feeling about this era that we've been in that maybe we're potentially transitioning out of, if we are?
Michael Skelly: You mean, like, the Industrial Revolution beginning in the 1700s, you mean?
Jason Jacobs: So all the building and development we've done, it took energy, and energy brought so much good because it lifted us all up in so many different ways, but as it relates to the planet that we rely on to sustain life, both human and otherwise, it seems like we're now in a pretty serious pickle because of that same period that we just went through that picked so many of us up. So I know I wrestle as a long time... I mean, my whole career... and I mean, I'm earlier in my career than you, but I mean I've been capitalist essentially my whole life, and I'm a big believe in innovation, but I am trying to reconcile the GDP growth and if we're not growing than it's not progress and some of the collateral damage along the way, which then will inform what the right path is as we look forward. So I'm just curious how you think about that if that's something you wrestle with at all.
Michael Skelly: I don't even wrestle with that question, and I sort of [laughs] found the voice, maybe my own voice, in a book that... actually I found it, somebody else's voice, called Factfulness and the book addresses the improvements of quality of life across the planet over the last... Not... Forget about the Industrial Revolution, we're talking about the last 30 or 40 years, and by every metric that we think about in terms of how we think about quality of life, from life expectancy, to infant mortality, to maternal mortality, to nutritional wellbeing, to educational [inaudible 00:12:26]. I mean, you name it, we are dramatically better off today, not just since the 1700s, but, like, in the last 30 years since have gotten dramatically better.
Now the one note that he ends book on, which is sort of where you left off, which is okay yeah, that's great, but what about climate, and that is obviously the hardest part of this whole equation, but I think... I don't know, I'm fundamentally an optimist and I think we can sort of work our way through this. It is a challenge like no other in terms of its global dimensions and need for global action, but we are making a lot of progress in terms of how we come up with energy, and President Trump and others not withstanding in terms of the awareness of the problem. So I'm kind of optimistic that we'll... it won't be easy, and there will be bad things that happen along the way, but I am optimistic we'll find our way through this.
Jason Jacobs: I feel like a lot of listeners, especially the ones who come from industry, are going want me to then go into talking about transmission, above ground versus underground versus nimbyism and everything else, but I kinda wanna [laughs] take it a different way, which is to your point about being an optimist. Do you feel like we're on the path that we need to be on today?
Michael Skelly: Yeah. We have solved some really big problems. We now know how to produce vast amounts of electricity at an extremely low cost. It used to be the case that to get a lot of electric power you'd have to dig rocks out of the ground and burn them. Today we have wind, and solar, and other technologies coming down the pike that can take these natural phenomena, turn them into electricity. And there's come carbon involved in that for sure, but the carbon required for that production is very, very low. That's kind of an astonishing development. Now, now, the sort of global share of energy is still pretty small, but we're on a path, and the path is accelerated in terms of renewable energy employment, that I think it's cost [inaudible 00:14:36]. And what else can that lead to? That can also lead to other exciting things.
If you start to... I know hydrogen is the fuel of tomorrow and all this [inaudible 00:14:45] the fuel of tomorrow, and so on, it's like US soccer, but what do you need for hydrogen? You need cheep power and you need low capital costs for electrolyzers. We've already solved the cheap power part of it, now we're gonna figure out the electrolyzer part of it. That's kind of exciting, and that was not the case even eight years ago.
Jason Jacobs: So did you watch Michael Moore's film?
Michael Skelly: I didn't. I really need to, but th- ... read about it, so I can't comment that much, but I understand that he went after palm oil, which I think that sort of makes sense to go after palm oil. Every analysis that I've ever read about the carbon intensity of what it takes to make a wind turbine or a solar panel says that they pay for themselves in terms carbon within months, not years.
Jason Jacobs: I'm gonna start speaking over my head technically, but from what I can gather doesn't the overall carbon footprint of renewables depend a lot on the base flow [inaudible 00:15:45] power and/or what powers the grid in... during times of intermittency, when there's no wind blowing or sun shining?
Michael Skelly: So right now I live in Texas, we have a great grid called ERCOT. We're very independent minded here in Texas, so we have our own grid that's not connected to the rest of the country. And we're sort of running this experiment, and we have many hours of the year where 50, 60 percent of our electric power is coming from wind and the number of hours, if you think about it, sort of a duration curb, the number of hours in which a high percentage of our electricity comes from low or zero carbon sources, it increases every single year and the grid keeps going and emissions are going down. Why is that? You may still have combined cycle units or peaking units, or whatever out there, they're not gonna run and if they're just sitting there they don't omit carbon, if they're running they do omit carbon. So the fact that we're putting so much renewable power on the grid is indeed reducing carbon mission.
Jason Jacobs: And again I'm kinda... I'm saying this next thing, it's a statement but really it's a question because I'm still trying to learn about this stuff. But if you want to tackle that and improve the footprint it seems like, as you said, you, you have to have wind and solar running for a higher percentage of time and/or you have a place to put it, so longer duration storage for seasonality and things like that, or you have base load power that's cleaner, whether it's nuclear or I don't know. I mean, I guess natural gas is better than coal, but it's still pretty bad, right?
Michael Skelly: Storage is certainly an interesting part of the solution and I'm actually on the board of a company called Form Energy and we do longterm energy storage, and we have a chemistry that we think will reduce costs to really a fraction of what they are today. There are other people working on longterm storage solutions that, that likely hold some promise, and every time we come up with more storage on the grid that can replace some of the hydrocarbons that we would ordinarily be burning. In terms of nukes, nuclear power is so expensive I just don't see us building a lot more nukes in this country because A, it's a... a company has to bat itself, the projects are so big that there's sort of a disconnect between project size and market cap, and under our current and likely ongoing regulatory construct the risks around building new nuclear power plants will have to be born by one of two parties, either shareholders, and they're scared to death of these, or rate payers, and public utility commissions are likely afraid of saddling their rate payers with new nukes because of the undetermined cost and because they see that there are other zero carbon solutions out there that are just more cost effective.
Now, current operating nukes, I think it makes sense to keep those running because it's a very [inaudible 00:18:39] source of our zero carbon electricity in the United States, and if there's still some useful life in them we oughta be able to figure out how to keep them going.
Jason Jacobs: So, if you look at where we are in terms of renewable penetration and where we need to get to, what are the biggest barriers in your mind that are holding us back from getting there today?
Michael Skelly: Obviously transmission's a big barrier and we're making some progress with transmission. Some of the projects that we worked on in Clean Line continue on. The other big barrier is storage, and there are lots of advances taking place there. We can do a lot more renewables with the grid as it is and with storage. One area in the grid that I think we should be spending a lot more time on and very little capital cost, but a little bit more brain power, is using technologies like dynamic line rating or smart grid technology to get more bang for the buck out of the existing grid. And today... if I can just nerd out for a second on the grid, today the way we run the grid is we run the whole system so that any single component can fail without bringing the whole grid down, and we also run the grid assuming the worst possible climactic conditions.
So, if you had a line in Western Oklahoma the wind is blowing 30 miles an hour and its 70 degrees out, that line can hold a lot more power because today that line is dispatched as if it were 100 degrees with no wind. And with some simple metering and throwing some technology at this, we can very cost effectively get much more bang for the buck out of the existing grid. But that scenario that hopefully we'll see some renewed focus on both out of FERC, which is spending a little bit of time on this, and as we continue to bate these topics over the next couple years. But that's a super low cost solution that pays a lot of benefits and we could get a lot more renewables on the grid if we just deployed a little bit more of these technologies.
Jason Jacobs: And so the first two that you mentioned were storage and transmission, so I'd love to double click on each one of those. So with storage for example, you mentioned you're on the Form Board, uh, Form Energy, but what is holding back storage specifically from getting to where it needs to go?
Michael Skelly: We're not a science project, we have working cells, but there's more work to do in terms of getting all the bugs out and so on. And we don't actually say what the technology is, but I think with the passage of time we'll see some pretty exciting things happen there.
Jason Jacobs: But you think it's technology breakthroughs that are missing? And so it's not a policy thing, it's not a cost thing, it's a technology thing, is what I'm hearing.
Michael Skelly: Technology thing. Then obviously one wants to think about what can we do as a country, or a society, or whatever, to sort of accelerate innovation with those technologies. And we typically do technology innovation funding in a couple ways in the US, one is we have a tax code, which is sort of fairly inefficient, the other is through sort of artificial demand mechanism like renewable portfolio standards and so on. So we may want to be thinking about things like that to incentivize long term storage.
Jason Jacobs: And when you say tax code, I mean, are you talking about a price on carbon in some form or something different?
Michael Skelly: Well, if we could do a price on carbon that would be, I think, many peoples dream because then you can rely on markets to sort all these things out. And right now we do have sort of carbon policies in this country, but it's such a hodgepodge of things from renewable portfolio standards, to tax credits, to accelerated depreciation, to individual mandate, et cetera, et cetera. It's super complicated and it's not as efficient as it should be. Why should it be efficient? Because we want to reduce carbon in the most cost effective way. It is not those things today and I would trade all that stuff for a price on carbon.
Jason Jacobs: And then what about that same conversation about transmission? Given that I don't come from industry, I can gather that you produce the energy in one place and then the better the transmission is the more effective and the more cost effective, then the easier it is to move it and to move it over longer distances so that it can utilized elsewhere that maybe doesn't have conditions as optimal. That's about as far as I've gotten, so can you kind of f- fill in some gaps in terms of why transmission is so important, where we are today, and what's holding it back?
Michael Skelly: We know what works on transmission 'cause we've done it in many parts of the country. We've done it in the Upper Midwest, we've done it in the center of the country with something called the [inaudible 00:23:25], we've done it here in Texas with something called ERCOT, and the CREZ program. So with CREZ, basically we had a political alignment in the mid-2000s where rural interests said, "Hey, we like all this renewable energy development out in these rural areas." Cities said, "We want a cleaner energy mix." The renewable energy industry obviously wanted to build more projects. So a pact was come up with, the grid operator ordered the creation of basically six and a half, seven billion dollars of new transmission lines out to around the country. Guess what happened then? What happened then was people went and built projects in those areas.
And so with this seven billion dollar investment in transmission the people who pay for that transmission, IE the consumers and cities like Houston where I live, what do they get out of this? They got 10s of billions of dollars of investment in new cheep generation, and these transmission investments allowed this cheap power to come to market. We ended up with a much more efficient energy market. So the electric power market is like any market, if you've got good infrastructure to move goods around you'll have better liquidity, and more buyers and sellers, and so we got that as well. And so we got more investment, lower cost electricity, and economic development out in parts of the state that might not have seen the development that they saw.
We know that building transmission is super cost effective and we just gotta get out of our own way and get it done.
Jason Jacobs: I was going to ask a leading question and say, and what's lacking there, federal leadership. But maybe I should ask it a different way and say, what is lacking there.
Michael Skelly: Going back to the ingredients of the mid-2000s in Texas. It was really a bipartisan consensus because as you know Texas is a red state, this was not some democratic dead of the night slipped it into some bill somewhere, this was a well thought out policy. And we had agreement on the goals that I outline in terms of cheep energy and economic development. So if we can kind of come back to those basics, there's something in this for everybody. And at the time Governor Perry was actually quite supportive of transmission and we had some leadership. And I think, we'll see how things go in November, but there's a possibility that we get some leadership that pays attention to things like this, because it does require that and voters clearly want the things that I outline in terms of economic development and cleaner energy, so I... there's a possibility of a consensus around this.
Jason Jacobs: And getting to that federal level, there's a bunch of things I wanna cover there in terms of where we are now, but before we go there I'm interested to talk a bit about your decision to run for congress back in the day, because you ran against a republican incumbent, as you said in a red state. So I guess talk to me a little bit about your decision to run and also what some of the key learnings were coming out of there from that campaign that you think are relevant today as we look at the current political landscape.
Michael Skelly: First learning was, I was 10 years ahead of my time because this is 2008. That district actually flipped to democratic control in 2018, that was the first lesson. The other lesson was... and part of the reason I did it [crosstalk 00:26:46]-
Jason Jacobs: Timing matters, so the first lesson is timing matters.
Michael Skelly: Timing is very important.
Jason Jacobs: [laughs]
Michael Skelly: And sometimes I've gotten timing right on a few ventures in life, and other times I haven't gotten it right. So that's lesson number one. Second is, people should run for office it's a fantastic experience. You just learn a ton unique, all kinds of people that you would never meet before. It exposes you to... I don't know, just a whole different world of folks that you just wouldn't run across. Particularly in a... If you're running in like a heated primary I think on either side you're gonna meet people that are more extreme on one side of it, but if you're running in a general election typically you gotta run to the middle and that will force you to go meet a bunch of people that you might not ordinarily meet and that's a great experience and it has, uh, probably a moderating influence on just about anybody.
And the other part of it is, I think that if you run for office you'll get better at some of the things that will likely serve you in other things that you do. So I think in my experience you gotta call people and ask them for money, well that's pretty relevant for business, you gotta publicly, that's also very relevant, you gotta string sensible thoughts together, you have to know how to talk in sound bites. There's a whole bunch of things that you just have to hone under very intense scrutiny that are useful in other endeavors in life. So even if you take a chance on a tough race and don't win it's okay, it's actually fairly rare to meet somebody who ran for office and lost and said, "Oh my god, I wish I had never done that." You rarely meet people like that.
Jason Jacobs: So coming back around to the current political landscape and the clean energy transmission that we need to go through, and how in the current state of our democracy in terms of the polarized landscape that we find ourselves in, what do you think of the approach advocated by those on the progressive side with the Green New Deal, and a national mobilization, and kind of dreaming of a better world, aspirational story, all hands on deck, versus kind of not trying to be too controversial, not trying to trigger any partisan allergic reactions and just kind of getting things done one small step at a time in an unbundled way?
Michael Skelly: Within the Green New Deal there's a lot of pieces to it, but the energy piece it has very ambitious goals in terms of renewable energy by 2030. I don't think that we can get there that quickly, but we can get a pretty good start so we should get after that as quickly as possible. There's a whole bunch of other pieces together in the Green New Deal. I think if you look at the experience from Washington state where they did tie together, like, a whole series of other programs along with climate, it didn't pass and I think there's a lesson there that we may not tackle every societal problem in one piece of legislation. So, I would be inclined to sort of, let's share what our biggest problem and let's chunk it out and get after [inaudible 00:30:01]. And I would argue that climate is at the top of the list.
Now, as we tackle climate we need to make sure that everything we do has a positive impact on some of the other issues that we're addressing. So for example, if we do a cap and dividend plan then the dividend, because it would be on a per capita basis, would actually accrue more to lower income folks because their carbon emissions are going to be lower than somebody who's flying around in their private jet. If you're flying around in a private jet you're gonna pay for a lot of carbon and the benefits of that are gonna be distributed on a per capita basis so that has a much more favorable distributive impact than simply a price on carbon.
Jason Jacobs: Why is it do you think that the issue of climate change, which there is such consensus around, in the overwhelming majority of the scientific community has become so partisan in nature?
Michael Skelly: I mean, I think that there's a political party that saw an opening there and decided to go after this and they were reinforced by certain interests, which probably have a little bit of regret by what they did because now they look and they see well this really is a problem and they've painted themselves into a bit of a corner. And I think there's certainly amongst a lot of repub- ... a lot of republican friends of mine are like, "Yeah, this is a real issue we gotta solve it." But we have a primary system and so on that makes these problems really, really, intractable and that's not happening at all. I mean just to dwell on that a second, so the combination of gerrymander districts creates lots of uncompetitive elections and so that leads to a situation where you have basically minority control over lots of different political processes and that don't allow moderate solutions to emerge. And then we have the US Senate which is actually dominated by small states and that makes it hard to solve problems as well.
Jason Jacobs: So before we even get to, like, what the general public can do to help address this, put aside any one stakeholder, general public, or the government, or a CEO, or a corporation, or an academic institution, or, uh, [BlackRock 00:32:21], or whoever, but just as a society if we aren't equipped with our current structure to solve the problems that are critically important that we solve what do? How do we change it? I mean do we just let it happen? Like watch a train crash in slow motion?
Michael Skelly: No, no, no, look, the problems are always hard to solve, I was just pointing one [laughs] some of the complexities in solving the problem, which is not to say that they can't be solved. But it's always hard to solve any problem and there's always competing interests and so on. So, first of all, like I think about this for the city of Houston, so this is a hydrocarbon city and we have... if anybody has challenges in this area it's us. And taking this sort of full circle, what created Houston was we found hydrocarbons at Spindletop and we figured out how to process them into gasoline and we went on to win WWII and it's powered this amazing prosperity of this country, the existence of hydrocarbons, and we've got a whole city sort of build largely around that and it's a fantastic city.
The paradox of this abundance of low cost energy is it... You know, we have this terrible negative [inaudible 00:33:29], so think about Houston, how do we solve this problem? And I almost divide it into sort of three levels, one is at a personal level you gotta do everything that you can and that has two features to it. Well, there are several components to that, one you're probably gonna save money, two you'll probably be, be more fit 'cause you'll walk or you'll ride your bike or you'll do other things besides just sit in your car, and you'll think about... anytime you think about your life from a different perspective that inquisitiveness I think leads to better things. So at a personal level this is important.
At a business level, I don't care what business you're in you should think about this because the experience shows that in any business if you look at the business from a new perspective, whether it be how you recruit people, or how your operations affect the environment, or how you interact with your customers. Anytime you look at your business in a new light you'll come up with new ideas and this is one new microscope with which to look at your business, and you're likely to save money and reduce your impact on the environment.
And then it's sort of at a governmental level, we're gonna come back the city of Houston, we as a city we should do everything we possibly can to sort of send a signal that we care about climate. The city of Houston just came out with a great climate plan, it's got a lot of details, a lot of implementation. If we do that we'll be sending the signal to a whole host of companies here in town that this is a business opportunity that things can happen, it's within our capabilities. And then you sort of take the analysis to the state level and so on. So the state, federal, global, et cetera. But like, start at home and then kind of work your way up.
Jason Jacobs: And so given the type of transition that needs to occur, how do you think about the role of the oil majors in that transition? Is it the same crew that's been in the leadership pack in this generation and gonna... you know, essential to lead the way f- ... in the next generation as well? How do you think about them?
Michael Skelly: I think it comes down to sort of one's natural competitive advantages. So we're seeing signs of this, so the oil companies haven't played a big role onshore wind, but they're starting to play a role in offshore wind. They're not playing a role in solar power, but some of them are using solar power to power their pipelines or their rigs or whatever, so they're going at de-carbonization through electrification and then renewable energy to power their operations. And Chevron's doing work in that area, Shell is, et cetera. And then in some areas it's gonna be harder, the transition is more difficult.
I mean it's hard for any business anywhere, it's hard to go from, like, you know, making billions of dollars over here now I wanna go make billions of dollars over there, that's difficult. But when they do the second step of, like, how do I decarbonize my oil and gas operations along the way, I think they'll find that advantageous. And living in Houston I see a lot of that and [inaudible 00:36:27] spend time with oil and gas companies that are trying to solve this riddle.
Jason Jacobs: There's one kind of school of thought out there that says that no matter their expertise, no matter how big their pocket books, as long as they exist they're gonna be obstructionists and they're gonna kick and fight to the death to protect the core business that got them to where they are, and if we really wanna make progress we need to get them out of the way. So it sounds like that's a view point that you do not agree with.
Michael Skelly: Well I don't know what get them out of the way means. I mean, this 90 some percent of primary energy in the US comes from fossil fuels, so this transition is gonna take a time. I mean, you can't just go okay we're done, we're not using anymore fossil fuels. So that's not a very practical solution. But I think that relying on market based mechanisms like the carbon stuff that we talked about makes sense. I think that enlisting them in areas where they're... they have real talent and real expertise makes a lot of sense. I don't think it's so much a challenge of their sort of political attitude, I think it might actually help to start with a recognition of like, hey we get it you guys are providing 90 percent of the energy, you need to come this other direction. That approach might make more sense because we do need to acknowledge that.
And I'll tell you one of the advantages of being in Houston is you look down the ship channel and you see this immense, immense petrol chemical complex and you go, "Okay, we're gonna replicate that with renewable energy that's gonna be hard." So we need to acknowledge the role that these other types of energy are playing now and that they are 100 percent likely to play in years to come. And not acknowledging that is a little bit...
Jason Jacobs: So if I'm hearing right, I mean, it, it sound it's to acknowledge the good they've done and ask them nicely and hope that they go in a direction that's against their financial interest.
Michael Skelly: No, I don't think it's like asking them nicely, but it's not... Again, there's political advantages to kicking them around and so on, but that doesn't exactly promote a dialogue and maybe to win races you gotta do that, but enlisting them... Like, ExxonMobil says they support a price on carbon, okay great, let's do it, lets go, put your dollars behind that, et cetera. But just to say that these companies are gonna go away, that's not gonna happen.
Jason Jacobs: Will a price on carbon ever happen? I mean would they ever let a reasonable price on carbon cross the finish line? It doesn't seem like it.
Michael Skelly: Most major oil and gas companies are on record saying they support a price on carbon.
Jason Jacobs: So why isn't it getting done?
Michael Skelly: I think it goes back to the structural challenges of our political system and primaries and so on.
Jason Jacobs: Okay. I know we're just about out of time here Skelly, but anything I didn't ask you that I should have? Or any parting words for listeners?
Michael Skelly: I guess my parting word is that we need to be really humble about the challenge ahead. We're talking about like tectonic changes in our economy and where we get energy, and there's gonna be a lot of different solutions along the way, there may be some unlikely allies. It's important to be, like, [inaudible 00:39:32] committed to the cause, but we shouldn't allow our passion on this topic to keep us from learning and listening and... 'Cause I think if we sort of learn and you're dialed in and you're a little bit humble about the whole task you'll have a better appreciation of the challenge and will do better at coming up with solutions.
Jason Jacobs: Okay. Well thank you so much for making the time and sharing your perspective with us. I easily could have talked to you for three hours more. I'm bummed we gotta cut it a bit short, but I'm really grateful that we had the time that we did.
Michael Skelly: Hey, delighted to be on the podcast and thank you so much for asking me to participate.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey you can visit us at myclimatejourney.co, no that is .co, not .com. Someday we'll get the .com, but right now .co. You can also find me on Twitter at JJacobs22 where I would encourage you to share your feedback on the episode, or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
