Transcript: The Path Forward: Energy with Joe Dominguez, President & CEO, Constellation

July 16, 2024

MR. LYNCH: Hello, and welcome to Washington Post Live. I’m David J. Lynch, global economics correspondent here at The Post.

Today I'm joined by Joe Dominguez, CEO of Constellation Energy in Baltimore, to talk about the energy business, prospects for addressing climate change, and the challenges involved in producing carbon-free energy.

Joe, welcome to the program.

MR. DOMINGUEZ: Hi, Dave. Thanks for having me.

MR. LYNCH: So let's start with the news of the day. You came out this morning with a statement in favor of some new regulations that the Environmental Protection Agency is developing to further restrict emissions from fossil fuel plants, and you also criticized the Edison Energy Institute, an industry group, for its opposition to this move. So what would be the impact of these regulations, and would they provide Constellation with a competitive advantage since you folks are a leading producer already of carbon-free energy?

MR. DOMINGUEZ: You know, the main impact of the regulations is to provide a means for fossil plants, and I think we all believe that natural gas is going to be part of this energy transition. But it, for the first time, begins to put pressure on existing fossil plants to reduce their emissions, and it gives them a couple of different pathways to do that. One is to blend natural gas with clean hydrogen, and when you do that, you reduce emissions for that percentage that you're using hydrogen as the fuel, and the other means of doing it is to actually sequester the emissions. And we feel confident that EPA is on the right path, because we have really been at the forefront of developing some of the technologies that will allow existing natural gas-fired generation to comply with these rules.

As an example, Dave, most recently, we set an industry record, and we took a machine that was 15 years old, so not anything that is state-of-the-art, natural gas-fired technology. And with minor retrofits, we were able to blend a combination of nearly 40 percent hydrogen with 60 percent natural gas, and that would easily meet the new EPA requirements that are set in '32.

So right now, in 2023, we demonstrated that the technology that EPA relies upon for its new standards that will be in effect in the early part of the next decade. So we're confident we're going to be able to do that.

Likewise, we've developed technology. A company called NET Power just became public. It's a technology we've been working on for over a decade, and what it would do is burn natural gas in a new form of combustion called the Allam Cycle, and what gets emitted is pure CO2 that could easily be injected into the ground. And one of the things that the IRA did is create economic incentives for pipelines and the capability to inject CO2 into the ground. So we think where EPA is going makes a great deal of sense from a technology standpoint. As I said, we think that it's demonstrated technology even today. So that would be, we think, necessary in order to achieve the reductions that we're looking for to deal with the climate crisis and to do so in a manner that preserves electric reliability.

And while I haven't seen the Edison Institute's comments, they have been reported in several leaks, and if they really are going in the direction of saying, hey, we can't do any of this stuff, which is what it sounds like, boy, that would be disappointing for the leading industry group in America to do that.

MR. LYNCH: And why do you think they're going in that direction?

MR. DOMINGUEZ: You know, Dave, I think first things first. They're not monolithic. There are a great number of companies that are participating in energy power production of utilities that are strongly in favor of making quick progress in dealing with the climate crisis. They're dealing with the fires, the floods, the hurricanes, all the things that Americans are dealing with and, frankly, people all over the world are dealing with. They're hearing with the--what's coming, and they know what's coming, and so they're trying to get ahead of it.

But unfortunately, sometimes when you have a trade group, the comments tend to end up being kind of the lowest common denominator, and the folks who are most afraid of making changes have the dominant voice. And it's left to other companies to kind of file their individual comments.

When I was a part of a company that was part of EEI, that's the way it worked then, and unfortunately, it appears to be going down the same pathway now.

But the important point is there are a lot of folks in industry who understand this transition isn't a voluntary choice. We got to do things to save the planet, and if you're alive on the planet in 2023 and, in particular, just got through the month we just got through and don't understand that this isn't a choice, that this is something we have to do for humanity, then I just--I can't understand that.

MR. LYNCH: Now, we're going to talk about green hydrogen and also the IRA a little bit later in the show.

MR. DOMINGUEZ: Sure.

MR. LYNCH: But I'm also curious for your reaction to Siemens Energy's announcement today, a nearly $5 billion loss, about half of that they attribute to problems at their wind turbine subsidiary, and the way that the company has explained it is basically that in rushing to catch up with the demand for renewable power, they just went too fast. Quality problems ensued with some of the hardware, and now they've got to go back and do it over again at great expense. Are there lessons from this experience? Does this give us a window into what to expect going forward after dawdling for so long on the climate issue now, as we rush to catch up with this imperative that you've described? Is this going to be what we're likely to encounter with other projects?

MR. DOMINGUEZ: Yeah, Dave. I think yes. The answer is yes, but that's also been true for natural gas-fired generation. There were tons of problems a couple of decades ago, when we were putting combined-cycle machines out there. It's certainly been part of the history of nuclear. It's been part of the history of solar, and all technologies as they're being developed, they're going to have these bumps in the road.

And that doesn't mean they're not good technologies or reliable. There's been--the wind industry over the last 20 years has done some remarkable things in this country and across the world, but there still will be bumps, and people need to figure some things out. And that's one of the reasons you kind of got to get started now. If you're trying to get to a net-zero economy by 2050, understanding how long it takes to develop and build key infrastructure, like the green energy economy, the hydrogen economy, all of that compels immediate action because there will inevitably be these moments in time where things get slowed up by technical or economic challenges.

MR. LYNCH: Now, another issue that affects many, if not all, energy projects, certainly in the renewable sector, is that of permitting reform, the red tape and process that goes along with any major endeavor. We've heard a lot about permitting reform this year in Washington, not a heck of a lot of action. I wonder what makes this--given the bipartisan attention to the issue, what makes it so difficult to really get traction? And can we achieve that net-zero goal by 2050 under our current permitting regime?

MR. DOMINGUEZ: Yeah. So let's kind of break this down to permitting issues that relate to, hey, people don't want something in their backyard, the kind of historic NIMBYism that exists without all energy resources, and then problems that we've caused through a policy approach or a deployment approach that didn't make a lot of sense from the beginning.

In terms of the kind of dealing with folks not wanting stuff in their backyard, I think permitting reform could get us there, and I think inevitably will get us there. But the bigger problem in our industry, Dave, is simply this. We had a bad design from the beginning, and let me spend a moment to talk about this, because I think it's something that's really poorly understood but yet fundamental for us to understand going forward. Our business, I like to call it an "anything, anywhere, anytime business." Anywhere you want to plug something into the grid, anything you want to plug in, it's got to work anytime. That's the promise we've made to American families and businesses 120 years ago, when we started this industry, and it's been part of that throughout the time that I've been in it for the last 25 years.

And as we're kind of tackling the green energy challenge, one of the things that we're going to deal with is the reality that if we cover our maximum demand during certain times of the year--for example, where we live, consumers use about 30 or 40 percent more electricity in the summertime than they do on an average spring or fall day. So as we endeavor to build out a system that is able to cover the peak demand in July and August, then by definition, you're going to have way too much power in April and October. That problem gets compounded if the resources you're adding or resources that operate disproportionately in the fall and the spring but don't produce necessary energy in the summertime. And that really does describe the wind energy that's been developed in the country, and what we have done is we have sited this in locations where we've massively oversupplied the grid in the fall and in the spring with resources that don't necessarily operate as well during July and August. And that's a problem we've created by effectively saying we want green energy whenever it happens as opposed to saying, hey, we want a predictable form of green energy that has to be combined with hydrogen fuel cells or storage or other technologies to be deployable when our customers need it to power anything, anytime, anywhere on the grid.

And so often your listeners probably hear a company say, look, we've got a factory that's running three shifts, and we are 100 percent clean. And your clip of me on the intro here is exactly what I was talking about. So you have a factory in New Jersey, and it claims to be 100 percent clean energy. But in reality, what it's doing is covering its July and August demand with a wind farm that maybe is located in Texas that isn't electrically interconnected to anything in New Jersey, and the wind production is actually occurring in the spring or the fall. And so you don't have either a geographic or time match to that energy production.

And a number of our policies rewarded that kind of behavior, which was important in the early days of dealing with the climate crisis. But if we're really going to get anywhere, we need resources that operate when we need them to operate and not put excess power onto the grid, frankly, when we don't need the power. And so the deployment of green energy and the fact that we haven't insisted as a policy matter and a corporate compliance matter that our energy production and consumption be time and geographic matched has created these problems throughout the country where so-called "interconnection queues," the people waiting to get permitted to deploy their power onto the grid, are so full that, in many instances, the people running the transmission grids have been saying we can't add any resources now and even for a number of years.

So as policymakers and customers, we have to start--members of the general public, we have to start recognizing this important time dimension that's been that's been present since the entire time of our industry, but right now we have these policies that don't necessarily tackle that as directly as possible.

The Biden administration, I give them great kudos. The first thing they did when they came into office is the president issued an administrative order, an Executive Order, that requires the federal government to time and geographic match its green energy consumption to cover the times it's actually using energy, and we're delighted to have been able to do the first commercial contract with Microsoft a few weeks ago. They are recognized as one of the world's leading sustainability leaders, and they're doing a time-match contract. And that's critically important, I think, going forward.

Share this articleShare

MR. LYNCH: Yeah.

MR. DOMINGUEZ: That will address the permitting issue.

MR. LYNCH: Yeah. Let's talk briefly about nuclear power and its future. Broader use of nuclear reactors would obviously help on the emissions side, but politically, it's still unpopular, rightly or wrongly, safety concerns and issues with disposal of nuclear waste. You've got nuclear in your fleet. Are you betting on an expansion of that nationally? And do you think the Biden administration has the right approach with its so-called "advanced nuclear technology"? Is that the right way to go?

MR. DOMINGUEZ: Yeah. I'm not sure that I use the word "bet" in this area. The reality is we have to deal with the climate crisis. The reality is we need technologies that are dispatchable; that is, that we could hit the on and off switch and they operate, don't use a lot of land, could be put anywhere. And nuclear meets that that, those set of requirements, very easily. So I don't think it's a bet. I think, frankly, it's a reality here and across the world that technologies like advanced nuclear are going to need to be deployed if we're going to get to the finish line in dealing with the climate crisis.

As to whether or not the Biden administration is approaching this the right way, I think for the first time, we see an administration that is committed to developing and deploying the technology. The key here, Dave--and you talked about this with the wind industry. The reason the wind industry has overcome the problems that Siemens has talked about is the persistent federal commitment to ensuring that the industry gets going from 1992 till now. So we've seen over 30 years of commitment. If we see the same level of commitment for advanced nuclear, you don't need to bet on it. You can put your head on the pillow tonight and be absolutely assured that we will develop the technology.

Unlike other technologies that we're kind of gambling on, sequestration and other things that may or may not work at scale, we've been doing this with nuclear for over 50 years. We know how it works. We know how to deploy it.

And as to the waste issue, unlike any other technology out there, whether it's component parts for windmills and solar farms or the emissions that come out of fossil fuel generation and in our atmosphere, our lakes, in our children's lungs, we know exactly where every bit of the waste material for nuclear is today. It's stored on-site, and if you amassed all of it across the entire industry, since Eisenhower made his famous Atoms for Peace speech back in the '50s to now, you could put it on-site at a super Walmart. That's how much land it covers. So we're quite proud of that. I understand the politics have been challenged, but they've never been better than they are today.

MR. LYNCH: So--

MR. DOMINGUEZ: Over 60 percent of Democrats support it.

MR. LYNCH: Great. So let's go to an audience question from a viewer, Nancy in Virginia. She asks, "What role do you see green hydrogen playing in the transition to a clean energy economy?" And perhaps, Joe, you could start by just briefly explaining to folks what we mean when we say green hydrogen.

MR. DOMINGUEZ: Sure. Folks, normally, hydrogen is made through derivatives of natural gas. So you take natural gas. You break it down into its component parts, and you could strip out hydrogen. We call that "gray hydrogen." It's made with fossil fuels, and it releases CO2 when you make it.

Green hydrogen is hydrogen made with electricity that doesn't produce any carbon. So nuclear, hydro, geothermal, wind, and solar all would fit into the category of electricity sources that do not produce any carbon emissions. When we use that electricity, we put it through a device called an electrolyzer, and that separates water into oxygen and clean hydrogen.

As to Nancy's question, Nancy, I think you've touched on probably the most fundamental piece of our energy strategy that we've just got to get right. As I mentioned earlier, as we deploy green technologies to cover our peak demand in July and August and December and January and February, we're going to have abundant excess green energy in the shoulder months. Many days now in the spring and the fall--this isn't a future problem. Many days now in the spring or the fall, we turn down nuclear plants, wind resources, and other resources because they're producing more than enough energy. But what if we could take that energy and we can make hydrogen with it, and we could save it and store it much like we save natural gas today and then burn it through a blend with natural gas in the beginning and eventually all hydrogen machines so that we could effectively re-create the flexibility we have with fossil fuels today, but instead of natural gas or instead of coal, we're using hydrogen that is produced with excess power during certain times of the year? That's a future that we see coming, and we also see hydrogen being used as a component part of steelmaking, cement manufacturing, agricultural applications in the way of fertilizer and what are being called "sustainable fossil fuels"; that is, fossil fuels that are created with green hydrogen and don't have the same emissions profile of existing oil and gas, because as much as we like the electric vehicle movement, batteries and all of that stuff, it's not going to necessarily work with big trucks, trains, ships, and airplanes, given the weight and the amount of energy that's required. Green hydrogen fills that niche, and many people believe--and I count myself among them as folks who think that this is the key to unlocking so much of what we have in front of us in terms of challenges.

MR. LYNCH: Now, the Treasury Department, as I understand it, is getting ready to issue its rules that would govern the tax credits that would apply to green hydrogen. I think you've begun producing hydrogen at one of your nuclear reactors up in New York.

MR. DOMINGUEZ: That's right.

MR. LYNCH: But I understand there are some concerns or some analysts have raised a question about whether in the short term, we might end up effectively with dirty production of the electricity needed to produce this green hydrogen and, thus, in trying to produce it, a cleaner fuel, end up encouraging, at least in the short run, a greater use of dirty power sources. How do you see that playing out?

MR. DOMINGUEZ: Yeah, Dave. So remember earlier, I had talked about this situation of time matching and geographic matching. Imagine it wasn't a generic factory in New Jersey but a hydrogen-producing factory in New Jersey, and it wasn't really using clean energy that was locally produced at the same time but instead counting on these renewable energy certificates, some accounting rule that allowed it to use Texas wind that was generated months earlier and isn't around in Jersey. That would be a real problem for hydrogen production because then that facility would claim that it was using clean energy, but in effect, it would be using natural gas and other forms of dirty energy to make hydrogen.

So the network of NGOs, environmental NGOs, the Sierra Clubs, the NRDCs, many others out there have said that before we institute this tax credit policy, the folks who are making hydrogen have to demonstrate that it is being produced with clean energy that's right there at the source and is made at the same time it's being consumed. And Constellation is a strong advocate for that.

In fairness, many of those parties would also say that you should only make clean hydrogen with new green energy deployment. That is new nuclear wind, solar, geothermal, or hydro. We think that'll take way too long to make the amount of hydrogen needed and doesn't fundamentally address the oversupply problem that I've talked about in the fall and the spring and that we're already seeing. The language of the statute in this regard is very clear that existing forms of clean energy, like nuclear, are allowed to be used to make hydrogen. So I would be surprised if that's the direction that the regulations go, but we just don't know yet.

So I've been quite vocal that we've suspended the deployment of clean hydrogen technology pending the outcome of the rules but wildly enthusiastic about the time match and the geographic match. Folks, if you take anything from this program, time and geographic matching has to be part of the policy going forward or we're going to blow this chance.

MR. LYNCH: I'm also interested in your thoughts about the intersection of our climate goals and our supply chain concerns vis-a-vis China. This has already been an area--or been a concern in solar panels, well, where China leads with low-cost production. But how do you see this more broadly? Is there a way for the U.S. to benefit from China's low-cost manufacturing model, or will our concerns about forced labor and geopolitics get in the way of that?

MR. DOMINGUEZ: Well, you know, I think it's not just in the energy sector, right? It's really across all aspects of the economy, and those are the choices we need to make. It would increase the cost of compliance if we're not able to use cheaper product coming from China, but at the end of the day, Dave, I think this is also an opportunity to create jobs and economic opportunity in the United States where folks haven't seen a lot of that.

Anybody who tells you that this energy transition is going to be cheap or easy is full of soup in my view. It's not going to be cheap. It's going to require the expenditure of hundreds of billions of dollars. We're already seeing that in the IRA. It's a necessary endeavor, from my perspective. So we've got to do it, but why not do it and also return manufacturing back to U.S. shores?

The battery facilities that are going up all over to support electric vehicles are a great illustration, in my view, of how you can do that and also create great jobs, high-paying jobs in the United States, frankly, in parts of the country that have been devastated over the last 50 years from the loss of industry. This is a way to reverse that and also address the geopolitical and other issues that people a lot smarter than me in those issues are better able to cover.

MR. LYNCH: So perhaps on a related point, another audience question from Nathan in Kansas, who asks when will customers' energy bills actually decline thanks to this clean energy transition? Is that at all in the cards?

MR. DOMINGUEZ: Nathan, I think you've already seen a bit of decline in different places, and the reason for that isn't necessarily that it's been free but that a lot of the manufacturing costs have been covered in tax policy as opposed to your utility bills. So, in a sense, every American taxpayer pays for it because the tax credits are supported by every American taxpayer.

But we have seen, as you would expect, when you introduce supply into a market, that from a supply-demand perspective, you could actually reduce prices. And so I'll give you an example of this. Back, oh, I'd say 2004, 2005 when I was negotiating long-term power contracts in Illinois, it wasn't surprising to see prices that were in the mid-$50 or $60. Today those prices sit at $40, and that's the result of a lot of supply getting introduced. It's also a result of natural gas fracking and our ability to run the nuclear plants much better than ever before.

So I would argue that in terms of the supply side of the business, we've already seen cost reductions, and we would continue to see them. But you got to remember, Nathan, that at the same time we're making this change on the generation side, we're also having to harden the grids against all of these different storms.

Again, I'll use Illinois as an example. A few years ago, I was running one of the largest grids out there, and we had 17 tornadoes hit around Chicago on the very same day. That would have been unheard of 20 or 30 years ago. The hurricanes are more ferocious. The wildfires, the mudslides, all of the things folks are dealing with out in California and the inevitable sea rise and the intensity of the storms, all of those things we're going to have to harden the electric grid to deal with.

So in the long term, will your electric bill be lower? Maybe eventually, but, look, I just--I think we have to be real here. We're dealing with a worldwide problem that threatens the lives of hundreds of millions of people and the lifestyles of billions of people, including many in this country, and that's not going to be easy or cost-free.

MR. LYNCH: So earlier you mentioned the IRA, the Inflation Reduction Act that President Biden got through Congress. I'm curious as to how much of a game changer you see that legislation as being, and how--to the extent that it represents progress, how vulnerable is that progress to a potential change of party in the White House come 2025?

MR. DOMINGUEZ: Yeah. Look, I know the rhetoric, Dave. There's kind of extreme fringes on both sides, and there's at least one fringe that would describe the whole climate movement as kind of this woke stuff that isn't real. But I think the vast majority of people understand the severity of the problem we're dealing with, and I'm very confident that Republican leaders and Congress aren't going to interrupt the progress that we've made. I think with each passing day and certainly each passing year, we recognize that this isn't something we could run and hide from. They may have different ideas on how to do it, maybe more of a use of natural gas than others on the left would tolerate, but I don't think this is going away.

But the IRA was a transformative event. It was the first big investment in clean energy that wasn't specific to any one technology but took an across-the-board approach. So you're in the same breath talking about things like clean hydrogen, wind, solar, advanced nuclear, offshore wind, other deployments of clean energy that frankly wouldn't have occurred without the--without the leadership of the Biden administration and members of Congress on this. And I think--you know, I think it's a great start. It doesn't end it, but I think people are going to be reluctant to tamper with that. Folks hear the fire alarms and the tornado warnings and the hurricane warnings. They watch the news. They get how important this is to get right, and we all have kids and grandkids that we're going to have to give this world to after we're done with. And we're going to want to leave it in a way that allows them to enjoy the life that we've been able to enjoy.

MR. LYNCH: Great. I've just got about 20 seconds left for a quick final question about a long-term possibility, reports out of Lawrence Livermore National Lab about scientists there replicating a fusion reaction. If extrapolated into the future, it offers the possibility of limitless supplies of zero-emissions power. Is this at all on the radar of somebody who's got to run an energy business day-to-day? Is somebody my age going to live to see fusion power come into being, or is that for my kids and grandkids? Just very briefly.

MR. DOMINGUEZ: Dave, you look pretty good, so I'm not betting against you on the lifespan question, but I think it's a 2050-and-beyond commercial deployment technology. I started out as an engineer dreaming to become a fusion engineer, and that didn't work out for me, but the consolation prizes weren't too bad.

MR. LYNCH: Fair enough.

MR. DOMINGUEZ: But I think these developments that we've seen recently could really work. It's going to take time.

MR. LYNCH: That's great.

Well, this has been a great conversation, Joe. Thanks very much for joining us today.

MR. DOMINGUEZ: Hey, so nice of you to have me.

MR. LYNCH: And thanks to all of you for watching. To get a sense of what we have coming up with future programs, please go over to WashingtonPostLive.com.

I'm David J. Lynch. Thanks for watching.

[End recorded session]

ncG1vNJzZmivp6x7uK3SoaCnn6Sku7G70q1lnKedZMSiv8eipaCsn6N6sbvSrWSloaaafHN8kWxmaXBfZYRwwNGapaybop69tXnPmquhZZakv7it0Z1knqaVp7S6edaiq6FlmqSybrDOpqCnn6Wax2680Z6qopyVo8Fur8SoZJynnqjBprjLmquip55k