Today we had the pleasure of hosting Isaac Orr, Vice President of Research at Always On Energy Research and Co-Author of the Energy Bad Boys substack. Isaac specializes in energy modeling, electricity policy, environmental regulations, and natural resource development, with a particular focus on the cost and reliability implications of energy policies. He has evaluated the impacts of energy policies in more than a dozen states and modeled the effects of federal regulations on electricity markets, including MISO and SPP. As you’ll hear, Isaac grew up on a dairy farm in Wisconsin and brings a unique perspective to the intersection of energy, economics, and rural America. We were delighted to hear Isaac’s insights on the evolving U.S. power landscape and the outlook for energy policy.
In our conversation, Isaac shares his approach to evaluating electricity markets, emphasizing reliability, affordability, and the total cost of serving electricity demand, including transmission, storage, and backup generation. We discuss rising capital costs for wind, solar, and natural gas generation, the impact of higher interest rates and supply chain constraints, and insights from utility integrated resource plans. Isaac also highlights the disconnect between wholesale and retail electricity prices, how state energy policies influence customer bills, and the challenges of balancing affordability, reliability, and environmental objectives.
We explore the rapid growth of AI and data centers and the implications for electricity demand, grid reliability, and infrastructure investment. Isaac shares his perspective on whether the U.S. faces a genuine power shortage or whether regulatory and infrastructure constraints are limiting development. We examine growing bipartisan opposition to data centers, particularly in rural communities, and the importance of local economic benefits, transparency, and community engagement. Isaac discusses how recent election results could reshape state energy policies and influence future data center development. We also explore behind-the-meter generation as a potential solution to growing demand while limiting costs for existing ratepayers. Isaac emphasizes that the impact of data centers on electricity prices ultimately depends on existing grid capacity and the infrastructure needed to accommodate new demand.
We examine the outlook for natural gas, nuclear power, and other generation technologies as the U.S. works to meet rising electricity demand. Isaac highlights natural gas as a key source of future generation, rising turbine costs, and the potential for expanded manufacturing capacity to improve project economics. On nuclear, we explore opportunities for uprates at existing facilities, the financing challenges of new construction, and the potential role of technology companies and federal support. Isaac also discusses electric cooperatives, federal permitting reform, transmission cost allocation, and renewable energy subsidies. We close by examining the states best positioned to attract future data center and industrial investment, the importance of access to domestic energy resources and regulatory certainty, and whether projected AI demand materializes and generation equipment costs decline over the next five years. We greatly enjoyed the discussion!
Mike Bradley opened the discussion by highlighting that the 10-year U.S. Treasury yield surged roughly 13 basis points to 5.0% following a hotter-than-expected CPI report, reinforcing concerns about persistent inflation. Investors will be closely watching tomorrow’s PPI report for further signals on inflation and Federal Reserve policy. Futures markets are now pricing in a 100% probability of at least a 25-basis-point rate hike and a 50% probability of a 50-basis-point increase at the December FOMC meeting.
Turning to oil markets, Mike noted that WTI crude declined roughly $1/bbl. on the day and $5/bbl. over the past week to settle near $86/bbl., driven largely by optimism surrounding a potential diplomatic breakthrough with Iran. Regardless of how negotiations unfold, he emphasized that oil markets are likely to remain highly volatile. In broader equity markets, the DJIA fell roughly 300 points, while the S&P 500 and Nasdaq also finished lower. Weakness remained concentrated in Technology, particularly AI-related names, with Nvidia declining another 6%. Nvidia has now shed roughly $0.5 trillion in market capitalization this week and $1.7 trillion over the past month. On a positive note, investors appear to be rotating capital into other S&P sectors rather than exiting equities altogether.
Turning to energy equities, Mike highlighted that the Energy sector was modestly higher on the day but remains down roughly 7% over the past week, largely reflecting weaker oil prices. Despite the pullback, M&A activity remains active, with Diamondback Energy and KKR agreeing to jointly acquire a 70% interest in Deep Blue for just over $2 billion, giving the partners full control of a major water infrastructure platform in the Midland Basin. Finally, in power markets, Mike noted that the S&P Utility Index declined roughly 50 basis points following the sharp rise in Treasury yields. He also highlighted a significant development in Washington, where the Senate voted 75–25 to invoke cloture and advance permitting reform legislation to the Senate floor for debate. While the bill has not yet become law, he characterized the vote as an important and constructive step forward.