S&P Global Inc. (SPGI) Earnings Call Transcript & Summary

Hello, everyone, and welcome to today's webinar. My name is David Harley, and I'm a Senior Product Manager and part of the Commodity Insights team where I manage the energy product team for S&P Global Market Intelligence. I'm pleased to moderate and speak at today's webinar, which will be focused around generation shortfalls and how they could potentially upend the energy transition. I'm very pleased to have everyone join on the call today and excited to jump in. We recognize that this topic is of great interest to those on today's call, and we want this to be an interactive session. So please feel free to submit questions throughout the presentation or during the Q&A session toward the end of the broadcast. Also check out the widgets at the bottom of your screen for any information. We want to highlight the related content widget, which includes links to our thought leadership resources, where you'll also find webinar replay portal to access this session in other webinars on-demand. Additionally, if you could please also take some time to fill out our short survey as we value your insight throughout all of these webinars. This webinar provides closed captioning in English. Please click on the CC icon on the media player just below to activate that. And then last but not least, to schedule a private meeting with our product specialist team, you can chat us directly by clicking on the icon at the bottom of your screen. And before I begin, please note that the activities of S&P Global Market Intelligence are independent and separate from S&P Global Ratings. S&P Global Ratings maintains a separation of analytical and commercial activities that are distinct from our own segments here. But nonetheless, thank you for joining us. I want to begin by introducing some of my colleagues who will be presenting on today's webinar, the first being Steve Piper. He's a Research Director here at Commodity Insights; followed by Tanya Peevey, a research analyst at Commodity Insights; Mark Ferguson, our Director of Metals & Research at Commodity Insights; and Monica Hlinka, a Research Analyst at Commodity Insights. Very excited to have them all on the call. So thank you, everyone, for joining us today, and thank you to our presenters. Let's go ahead and get started. We at S&P Global, we provide a 360-degree view of the global markets that really provide a comprehensive source of information, and we're really proud to be that respectable and reputable source of information throughout Commodity Insights, Market Intelligence, Ratings, the Dow Jones Indices, Mobility and our Engineering Solutions as well as Sustainable1, we're proud to represent a 360 view of those global markets. Specifically within energy, we really are focused on providing the essential intelligence to the energy community and to energy companies alike through marketing industry benchmarking, navigating regulatory risk, tracking key energy products and projects, evaluating credit risk, conducting plant valuations, managing the energy transition and analyzing pipeline operations. We're really proud to be that essential source for energy intelligence within the market. And I think this webinar will go quite a bit global ways to help aid within these different values that Commodity Insights has to strive for. So with that, I'm going to go ahead and pass it to our first presenter, Steve Piper, again, who's a Research Director at Commodity Insights, to begin the portion of the webinar. Thank you, everyone.

David, thanks very much. And on behalf of S&P Global Commodity Insights, I want to join with David and our analyst team here today in welcoming you to our power forecast webinar, recapping results from our fourth quarter release. Our agenda today, as shown here, is to highlight major changes as we refine our view of the impact of the Inflation Reduction Act from last August, flag some regions in the country where tightness in available generation could develop and share some analysis and forecast on the growing battery storage segment. These will drive our view of regional markets to look at and also states to watch this upcoming summer both from a legislative and resource adequacy point of view. So if we go into the next slide, ahead of my remarks that we have a poll for the audience, just to kind of kick things off, following the thread of battery storage, and just take a few minutes here and get some opinions from the audience. How much installed grid scale battery storage do you expect in the U.S. by 2030? That's 7 years from now, if you will. Do you think it will be less than 40 gigawatts, industry just kind of getting its legs under; maybe a bit more than that, between 40 and 70; 70 to 100; or maybe feeling more on the optimistic side, more than 100 gigawatts of rated battery capacity installed in the U.S.? So let's go ahead and go to the next slide and kind of see what folks think up to this point. Real balance of responses actually across all the categories. I guess the plurality there between 40 and 70 gigawatts, I think that probably aligns with our view as we'll see shortly. But plenty of adherence to even more than that quarter if you even more than 100 gigawatts of storage, and then certainly, it's a possibility. So let's go ahead and recap on the next slide our quarter-over-quarter capacity change forecast. So this is basically summarizing between now and 2040 what the differences are between our first release Q3, taking into account the impacts of the Inflation Reduction Act, but also factoring in other elements of it. So we have a slower development pipeline seen in kind of reduced solar forecast, wind forecast as well for this year, 2023, right-hand side. And we've also started to revise some of the modeling for solar storage and hybrid resources that more fully optimized storage operations against the price curve within our forecast models. And that results in a more stronger forecast storage, especially in markets with greater renewables penetration where we forecast that to grow the fastest. And this tends to result in storage working more closely with solar builds either in hybrid mode or simply interacting with a market that has a lot of solar penetration. And so in this view of the market, we see greater expansion of solar as kind of a companion to that revised upward solar outlook and then relatedly deferring comparable amounts of wind generation. Actually, a bit more wind generation in the forecast. So if you kind of think of the overall effects of that, solar megawatt for megawatt produces fewer megawatt hours, and that reduced overall megawatt hours from deferred wind creates a little bit of generating headroom for peaking generation and combined cycle, kind of see those small slivers in our chart. Overall, our 0 carbon forecast generation eases from 76% in 2040 to closer to 72%, taking on the impact of reduced green megawatt hours with a more optimal mix of [ mend ], solar and storage. So with that, I'll just go ahead and go to the next slide. I'm going to talk a little bit about areas in which we're looking at the potential for generation shortfalls. And we're not talking about blackouts and brownouts but market events that could sort of increase the price power in some of these markets. And they'll look familiar to you in a lot of cases, most vividly in the Midwest, Midcontinent Independent System Operator, MISO footprint. We think that it's probably moving to a greater risk of generation shortfalls this summer with indicative reserve margin estimates on our side of maybe 2% to 3% against reserve targets in the 12% to 13% range. So running out of reserves, that's a function of retiring generation faster than reliable replacements have been ramped up. CAISO, that yellow line there in the middle, reserve margins are right at target levels amid fairly steady procurement mandates. And there's a lot of coordination between the ISO, the PUC and the California Energy Commission sort of to keep those procurements up, just want to flag the plan, the maintenance of reserve margins hinges to a certain degree on getting that [indiscernible] extension for Palo Verde, moving that retirement date out by 5 or 6 years. If for any reason that extension isn't appropriately received, timely received, CAISO could be in a scramble to replace those megawatt hours if ultimately Diablo Canyon retires. And we'll say a little bit more about that later on in the talk. ERCOT, so that kind of that top teal line there, why would we worry about ERCOT? It's got pretty high notional reserve margins. As the penetration of wind and solar gets stronger in the ERCOT market, our assessment of equilibrium reserve margins also moves higher. We've got it set now around 19%. So simply flagging here that, that surplus is not necessarily as strong as it may have looked in a world with more conventional generation and notional reserve margins in the 11% to 13% range, and we're starting to see that in higher forecast scarcity pricing which actually makes ERCOT look a little bit better. So if we move ahead now to Slide 8 and the impact of these potential generation shortfalls on notional forecast of resource adequacy, those prices start to really firm up in our assessment in these regions. The MISO North Zone, for those of you who follow the MISO market may have noted that it cleared at the net cost of new entry, a very high capacity price. And with reserve margins expected to be low this year, it's a little hard to imagine that there wouldn't be significant amount of support, and that's that purple line there, the MISO PRA line, stronger capacity prices moving forward. CAISO resource adequacy contracts kind of reflected in this yellow line here. We do expect those to move higher as kind of the procurement cost basis of battery technologies in particular starts to move that price higher, and that will firm things up. And then finally, ERCOT, we are here for kind of an apples-to-apples comparison, translating the ORDC payments we forecast into a capacity payment equivalent. And we do see those dip a little bit in this year and next, but firm over time as we approach those reserve margin targets that we discussed earlier. So each of these markets present growing opportunities for peaking generation, where that can move forward, increasingly including battery storage. So if we move now to the next slide, and I wanted to kind of turn and focus here on the prospects for storage, particularly post Inflation Reduction Act, where does this added forecast storage put us in terms of forecasting total future battery uptake? We're in the middle of last year pre-IRA. We forecast that the green optimization and the resource adequacy markets could drive battery additions ranging from 2 to 2.5 gigawatts per year. Over the next 20 years, now with the dedicated investment tax credit in place, those additions could surge to something like 7 gigawatts a year, nearly 3x forecast from the middle of the last year. And this is driven by both the increased penetration of 0 carbon wind and solar resources that creates a broader market for storage to optimize. And then obviously, the incentives and cost reductions for new storage projects that are increasingly making them competitive in many markets with conventional fossil peaking generation. So to kind of baseline the forecast, we estimate a battery fleet at the end of 2023 to be about 8.7 gigawatts. We think 1.5 gigawatt of noncarve-out batteries will be added and are in progress. So we're forecasting a bigger part in 2023 year-end with a storage fleet of nearly 16 gigawatts of big expansion, nearly double year-end 2022. And if we look at the forecast through 2040, it proceeds in 3 phases. The first phase, what I would call kind of the pent-up demand, which see significant additions this year and next. The next phase is kind of the consolidation phase as carve-outs were fulfilled and regions with resource adequacy needs get addressed, still adding 6 gigawatts per year during that phase. And then you can kind of see an inflection there after 2035. Potential acceleration has built in renewable and 0 carbon resources creates a greater demand for storage optimization. And then so if we go to the next slide, in terms of how much and how fast is where does all of this get built? And as this chart illustrates, the expansion of storage is going to be broad-based. Nearly everywhere in the country presents some kind of opportunity for storage to play a role in our forecast. This chart shows approximately the distribution of approximately 117 gigawatts of storage build-out between now and 2040. The West and the Northeast both have in common that they have a bit of a head start on storage development. So their existing fleets tend to kind of slow down the ultimate penetration. Still a lot of capacity added in those regions. But we think those will be the biggest markets over the next 5 years before tapering off. States in the PJM and MISO footprints. Our forecast kind of form the next wave and be the backbone of that consolidation phase I described earlier. And then finally, the Southeast is forecast still for a substantial amount of storage. But because it will lag other regions in the penetration of wind and solar energy, we expect it will develop a bit more slowly than other regional markets. And then I'll kind of flag that if long duration storage develops more rapidly, we could see that mid-continent region storage investment go even higher due to its ability, we think, to optimize the additional wind generation that is expected to predominate in the mid-continent. And then also if stronger net 0 legislation gets enacted in those states in the footprint, we could see storage accelerate even faster in those markets, something that Monica Hlinka will address a little bit later. So that concludes my prepared remarks. If we go to the next slide here, there will be a quick polling question, if you're interested in learning more information about these forecasts and other CI content. But to talk about storage operations in a bit more detail in some of these key markets, I'd like to introduce Dr. Tanya Peevey. Tanya?

Thanks, Steve. Hello, everyone. So yes, I'm going to expand upon the storage -- or the generation shortfall talk that just happened by looking at the power forecast hourly resource generation in the near term for a few specific ISOs. So if we could go to the next slide. The first area of interest is MISO. But before I dive into the details, let me orient everyone to these graphics here because they will be repeated for all 4 of my slides. So on the left, we have 2023, on the right, 2026. So that's near term. And we're looking at average generation and going from the bottom to the top. On the bottom, you have the nuclear generation in coal, combined cycles. There's some slivers of hydro, biomass and oils, these are fuel types. And then we get into the gas peaking and solars in the kind of yellow color, storage is brown and wind is in the blue green color. So if we look at MISO from 2023 to 2026, we see that there's a lot of wind and solar build-out, and that it more than doubles in the first few years, which reduces the coal contributions. And the added wind overnight increases storage charging. And then that allows for more discharge in the late evening hours in reducing the peaking generation that's needed. And then you have the additional solar generation that reduces the peaking generation in the early evening hours. And a lot of these forecast additions are in the northern MISO zones where we have the low reserve margins in our forecast. So getting back to what was discussed previously with the low reserve margins early in the forecast. And so if we go to the next slide, we're now going to touch on ERCOT, which has significant load growth in the forecast and has what we see as potentially shrinking reserve surplus. So again, looking at 2023 to 2026, I neglected to say this is looking at the July average, so the peak season for most of these ISOs. So for ERCOT, we have growth in wind and solar in the near term in those first 3 years and very small reductions in the coal contributions during overnight hours. We have overnight storage charging with additional wind resources overnight and a little bit of daytime charging, but we don't expect a lot because there's not a lot of solar generation. So there's really no significant storage build-out. And basically, all the renewables are built to cover this incremental growth in ERCOT. So the resource mix doesn't -- generation mix doesn't change a lot in the near term. So next, I would going to talk about CAISO. So CAISO is a little bit different than the previous 2 ISOs. So the storage shifts a little bit more toward the daytime hours with all those solar generation resources. So on CAISO, the capacity for solar and wind -- the capacity growth for solar and wind increases a lot between 2023 and 2026, but solar more than twice that of wind. And so the strong renewable penetration supports storage charging overnight with additional wind resources and then during the day with additional solar resources. So in the first 3 years, charging almost doubles. And then, of course, you have the discharging in the evening hours. And then that displaces the peaking generation needed or reduces the amount of peaking generation in those evening hours with the additional storage available. And so in the next slide, we wanted to talk about Diablo Canyon, right? So in our power forecast, it's set to retire in 2030 because that was the status of it at the time when our Q4 forecast went out. But the recent regulatory hurdles may reset that back to the original retirement date of those 2 units, which is 2024, 2025 rather than being extended. So here, I'm comparing 2026 on the left and 2036 on the right, so pre and post the retirement of Diablo Canyon in the power forecast. And the nukes is the purple sliver at the bottom. So you can see that reduced between those 2 years. So after the Diablo Canyon retirement, the storage shifts significantly -- storage charging shifts significantly to the daytime hours, taking advantage of that abundant solar generation and then adding to the discharging of storage in the early evening hours. And so the overnight storage charging decreases because that generation is needed because of the Diablo Canyon retiring. And then also, you have combined cycle plants have to compensate a little bit for this loss by increasing their generation in the overnight hours. So that's what we see in our forecast of how the retirement of Diablo Canyon could affect the resource mix if it occurs earlier than planned. And kind of fast, I guess, but that's it for my prepared talks. And next, Mark Ferguson is going to speak about the recent trends and outlook for battery and metals pricing. Take it away, Mark.

Thank you very much, Tanya. It's very good to be here, and certainly, raw material inputs are going to play a role in the rollout of various energy transition technologies, including those energy storage centered on battery materials cost. And that's where I'm going to just speak about a couple of trends across the metals and mining sector over the next couple of slides. If we go to the next slide, I think 1 thing that's important to recognize is that there is that broader energy transition narrative driving demand for metals, many different metals, not just those that are key to the energy storage space. And although energy storage, as you've seen in some of the slides, is expected to grow sharply over the coming decade plus, it's the passenger electric vehicle sales that are going to drive the majority of new demand for commodities like lithium, cobalt and nickel. On the left, this is our forecast for passenger electric vehicle sales out to 2027. And clearly, that 23% CAGR represents a very strong growth pattern across the various jurisdictions that are shown there. In particular, China has been and will continue to be a key driver for that EV-related demand. But we are anticipating that U.S. sales will certainly start to pick up, incentivized by the Inflation Reduction Act. On the right-hand side, this is where it's important for us from -- in order to understand the net demand for commodities, to understand where the various battery technologies are apt to go. And we certainly foresee an uptick in both nickel-intensive batteries as well as lithium iron phosphate batteries through to 2027 and beyond. This certainly started to gain traction in China initially with the production of iron phosphate batteries taking a much larger share as '22 progressed. And it's something we do anticipate to continue into -- through the forecast horizon shown here. So let's just go on to the next slide. I did mention the Inflation Reduction Act, and that is certainly going to stimulate EV sales domestically within the U.S. But there are elements of that IRA that are conditional upon certain critical mineral sourcing requirements and also battery component requirements. And some of the analysis that our supply side research can afford us is the challenges around meeting the demand for commodities such as lithium nickel, even copper, domestically or through countries that have a free trade agreement. And on the left, you can see that through 2029, there are rising requirements for each of those 2 components in order to meet -- to secure the EV tax credit of USD 7,500. And on the right, what you see is that the line reflects our demand for lithium from U.S. sales, growing, as shown on the previous slide, quite rapidly through 2027. But there really isn't that North American supply coming through the queue in the near term to help meet that $7,500 tax credit requirements. So this sort of speaks to some of the supply side challenges certainly on the lithium, but that also cascades across to other commodities, too, when we think about, say, nickel, where a lot of nickel comes from other countries. There is certainly some nickel production in Canada, very limited in the U.S. And so there's a suite of supply side challenges that are going to be difficult to meet when you think about the IRAs into this. If we go on to the next slide, and this, I think, is just touching upon the bigger-picture market trends for lithium and cobalt. On the left, you can see our balances for lithium, and it's pretty clear that, that growing passenger electric vehicle demand for lithium is going to push the lithium markets into deficit for quite some time. We anticipate there'll be a minor surplus this year as a suite of assets start to come online, but many of those assets are facing operational challenges to start production and ramp up production, whether it is equipment challenges, labor challenges, regulatory hurdles or just technical issues at the individual mine sites. What we expect is that really 2022 was sort of the peak year for lithium prices. And although we still have high prices currently, we are expecting some of that near-term supply to put downward pressure on lithium prices this year, perhaps into next year as well. But once we take a look at that overarching narrative of rising passenger electric vehicle sales and layer on top of that additional demand from energy storage efforts, there's definitely going to be a deficit certainly over this 5-year horizon. Beyond that, it becomes a little bit more challenging when you think about new technologies that could be incentivized by these high prices. Things like direct lithium extraction could start helping to meet some of that supply. But we don't anticipate that to really materialize until very late in the decade. On the right, I've also plotted the same chart for cobalt, and cobalt certainly is dominated by supply at the Democratic Republic of Congo. And there are certainly some copper cobalt mines there in that are going to continue to ramp up production in the near term. But again, reflecting that rapidly rising demand even for cobalt from batteries across the various end-use sectors, we're going to transition towards a deficit as early as 2026, and this should also support prices. So I guess in closing for this part of the talk, I think it's important to recognize that although prices are certainly apt to come down this year, reflecting some of the macroeconomic challenges, whether it's on lithium, cobalt, copper or nickel, we don't foresee prices for those commodities coming back to the low points of a couple of years ago. We just feel that the overall demand for those commodities is going to be sufficient, whether it's related to batteries in the passenger electric vehicles or storage or whether it's related to demand for commodities going into those -- the new wind developments or the transmission and grid-related copper demand. There is going to be a sustained period of higher metals prices due to that energy transition effort. And so with that, I'll just -- there's a short question there on your screen now. If you do want to find out more about some of what I've spoken about, much of this content is available to Capital IQ Pro subscribers. And what you've seen today mostly comes from our commodity briefing service reports, and we'd certainly be happy to walk you through some of that content, if so interested. And with that, I think we can pass it over to Monica.

Hi, everyone. Thank you for having me on today. We're going to start things off with a quick polling question. So on policies related to green and clean energy, do you expect the U.S. state legislatures to be more active than last year, less active than last year or about the same as last year? So I'll give it a few moments. Okay. So I mean, yes, a lot of -- majority of us you said more active than last year. And that is what we're seeing at the moment, and I'll get into that a little bit later. But go to the next slide. But before I want to dive into the legislative overview, I just wanted to take a step back and briefly explain our regulatory research group and the regulated utility business model for those that may not be familiar with this piece of the energy business. So since they are monopolies, utilities require regulatory approval before they can pass on expenses to customers or earn a return on their investments. This oversight is done on a state level by public utility commissions. PUCs are -- were created to regulate the rates charged by the utilities. And together with the utilities, investors and customers, this compromises what is known as the regulatory compact. Within our department, we evaluate how favorable the various regulatory climates are for utilities from an investor viewpoint. And from here, I spearheaded our analysis on legislative actions that impact regulations and how the different states handle similar energy issues. So state legislatures, they play a very significant role in implementing energy policies whether through their own volition or at the behest of interest groups or the governor. The legislature's primary function is to draft and pass certain legislation. And in recent years, state policymakers, along with the utilities and stakeholders, have sought to address disruptors that challenge the traditional energy framework. So I want to start off by giving a brief overview of the results of the most recent general election just to kind of paint a picture. So if you go back a little bit. So the material election cycle has always been the most active in terms of how many governor seats are opening, state legislative seats are on the ballot, utility commissioners and various other state offices such as lieutenant governors, attorneys generals and state chargers. In 2022, we saw 36 governors, the mayor of the District of Columbia, 88 legislative chambers, 15 utility commissioners, 31 lieutenant governors, 31 attorneys generals, and 20 treasurers on the ballot, which is quite a mouthful to say. And as you can tell, it was a pretty busy year. So Democrats were able to flip control of the governor's office in 3 of those states, in Arizona, Maryland and Massachusetts; while Republicans flipped control of the governorship in Nevada. It was also a really good year for incumbent governors. So in 8 states, the incumbent wasn't eligible to seek reelection, and in the 28 states where incumbents did run, aside from Nevada, all incumbents secured an additional term. With that, partisan control of the state governor's office is almost evenly split, with Republicans in control of 26 states, and Democrats, 24 states, as well as the mayoral office of the District of Columbia. Which brings us to our next slide on government trifectas, which is when a single political party controls both chambers of the state legislatures and the governor's office. So as a result of the 2022 general election, Democrats were able to pick up several legislative chambers and increased their majority control to 40 chambers, while Republicans have the majority in 57. Alaska state legislature is governed by bipartisan coalition, which has kind of been the norm for the state in recent years. And at the start of 2023, there are 18 Democrat trifectas, 22 Republican trifectas and 11 divided governments. So in theory, state governments controlled by a single political party, they have the potential to work well together, providing clear direction and have more certainty concerning energy and regulatory policy. It's also typically easier for the governor to implement key policy initiatives, energy-focused or not, when the governor and the legislature are of the same political party. And we have already started to witness that in 2023. So in Minnesota, Democrats were successful in flipping control of the state senate by winning a slim majority while also maintaining control of the house representatives and the governor's office. Legislatures did not pause for a single second and dove right in and passed the measure requiring the state's electric utilities to generate or procure 100% of electricity from carbon-free technology by 2040. Governor Tim Walz recently signed that bill, officially [ clarifying ] a goal he had initially announced during his first term as governor. Now this wasn't Minnesota's first attempt to passing such legislation. In recent years, the Democrat-controlled house had tried to pass a 100% renewable and clean energy standard twice. But the Republican-controlled Senate failed to clear a path for the legislation at both times. And in this case, the measure had passed the legislature along party lines in both chambers. In another state, which has solidified trifecta status, Massachusetts Governor Maura Healey's first executive office was the creation of the office of climate innovation and resilience, which is tasked with working across all levels of government to meet the state's clean energy goals or climate goals. And Governor Healey also has reiterated campaign promises during her inauguration speech to include doubling the state's offshore wind and solar targets and quadrupling energy storage development. So Democrat trifecta states have tended to actively push for advancements in renewable energy and climate mitigation policies while decreasing reliance on fossil fuels and reducing carbon emissions. On the other hand, Republican trifecta states have supported the use of fossil fuels in an all-of-the-above energy strategy, viewing renewable energy more as an addition to the energy mix. Looking at the next slide, legislative activity impacting utility, regulatory and energy issues have been pretty robust in recent years. As you can see, clean energy policies are currently taking legislative [ peers ] by storm. What we can expect to see over the coming months and years are states looking to accelerate ambitious renewable energy policies to help this transition from fossil fuels. This can also include enacting measures related to electric vehicles on and offshore wind, biomass, hydrogen, energy storage and by removing barriers to solar adoption. Over 18 states, measures related to electric vehicles are before lawmakers. As a way to help bridge decarbonization goals, states are looking at policies related to electric vehicles and the broader adoption of updated and efficient interconnection infrastructure. With California and New York actually recently announcing that all new vehicle purchases in the state would need to be 0 emission by beginning in 2035, other jurisdictions may soon follow. I mean just yesterday, New Jersey Governor Phil Murphy announced that the state will start a stakeholder process to adopt California's Advanced Clean Cars II rule, which not only requires all new cars to be zero-emission vehicles, but also light-duty trucks. And almost half of the state legislatures across the country, measures related to solar energy have been introduced. While every measure is different, some states are looking to modify certain tax provisions related to solar infrastructure, and a handful of states are contemplating their net meter and policies. On and offshore wind measures have also spreaded up in several states with the majority looking at citing requirements and tax provisions. Kind of going back to Massachusetts Governor Healey's policy goals, legislation is currently being drafted in the state that would increase and accelerate the state's offshore wind targets from 5,600 megawatts by June 30 of 2027 to 8,000 megawatts by June 30 of 2026. New York legislators introduced a measure that would require the New York Public Service Commission to create a pilot program to promote the use of community wind energy. The state will retain ownership of the system and then all the energy generated would then be sold back to investor-owned utilities. Now not every state is looking to advance these types of renewable policies. West Virginia lawmakers had introduced legislation limiting the number of permits issued for wind-generating facilities to no more than 2 project approvals per year. The measure goes on to say that the energy sources such as wind and solar are not adequate to meet the state's needs and that "planned learning West Virginia coal" is the only reliable energy source for the state. Another possible course of action to see states advancing policies is innovation in carbon capture utilization and storage as well as nuclear energy technology. Right now, roughly 19 states have introduced legislation related to nuclear energy. However, not every measure is in favor of advancing the energy source. Some policies having [ fleeting ] support for advanced nuclear and small modular reactors, and some are also for lifting the prohibition of new nuclear construction. In other cases, there have been measures that have been introduced that complete -- that have the complete phaseout of nuclear generation. For example, Virginia lawmakers are currently debating a measure that would create a small modular nuclear reactors pilot program, which would be administrated by the Virginia State Corporation Commission. The program would allow for the approval of 3 sites and would require any participating entity to apply for a certificate of public convenience and necessity to complete site permitting, construction and operation. In Missouri, a measure was introduced that would modify the current construction work in progress statutes and allow electric utilities to recover costs associated with the planning and construction of nuclear power plant prior to those plants becoming operational. And going back to the complete phaseout of nuclear generation, a proposed measure in New York is looking to completely phase out nuclear power in the state by 2032. The bill includes that a plan must be developed by 2029 for the phaseout, and it also must include a plan to replace those plants with various sources of renewable energy. Now this measure also includes a whole host of other clean energy provision such as setting a 100% clean energy goal by 2032, requiring all vehicle purchases to be 0 emissions or electric by 2029, and all new building construction must be net 0 structures starting in 2026. This brings us to my last point. Looking at the map, you can see that a handful of states are also looking to increase their renewable portfolio standards or implement 100% carbon-free standards. You can see that 100% clean energy standards have been predominantly enacted in Democrat-controlled states. And while many of the introduced bill this year are in blue states, we're also seeing some legislators in Republican-controlled states, specifically Georgia, Missouri and Texas, that have introduced these types of measures. Georgia lawmakers recently introduced a bill that will require the state's Public Service Commission to adopt regulations to reduce carbon emissions from every electric utility beginning in 2025 until 2050. The measure also requires that beginning in 2050, 100% of the electricity provided in the state would need to be generated from clean energy sources. Now Georgia doesn't have a renewable portfolio standard. However, the commission have begun requiring Georgia Power to install a notable amount of solar in 2013 through the company's integrated resource planning proceedings. Also, around 8 local governments in Georgia have enacted 100% clean and renewable energy goals. So it comes as no surprise that the movement has finally made its way to the state house. There's also currently a measure in the Missouri House of Representative that would modify the definition of renewable energy sources. And it would also increase the state's RPS, gradually increasing over the years until it reaches 100% by 2050. Now whether that bill goes anywhere remains up in the air as it doesn't currently have a hearing date in the House. Texas lawmakers are also looking to make some changes to the state's RPS requirement. Currently, the state required renewable resource capacity to reach 5,880 megawatts by 2050, with the Texas Public Utility Commission establishing rules that call for the utilities to achieve a target of 10,000 megawatts of installed renewable capacity by January 1 of 2025. Now the proposed bill had modified the language and require that 50% of installed-generating capacity -- as a cell capacity would need to come from renewable energy technology by 2030, increasing to 100% by 2050. And again, just yesterday, New Jersey Governor Phil Murphy signed an executive order accelerating the state's 100% clean energy goal by 15 years to 2035, while also stating that he would support a clean energy standard. Currently, there is a measure before the New Jersey legislature that would set the state's RPS requirement to 100% renewable energy. However, the target year right now is set for 2045 in that proposed bill. Overall, around 10 states have either introduced, enacted or are planning to introduce legislation that would require electric utilities to generate or procure 100% of their electricity from clean, renewable or carbon-free sources, which shows us that there's a continued shift in house states adopting their clean energy standards. More and more lawmakers are focusing on the development of clean energy sources to including carbon-free sources rather than just solely focusing on renewable energy. Additionally, policies and legislations regarding carbon emission reductions are also being introduced, which are working in conjunction with the state's ambitious energy standards. That said, the passage of federal legislation such as the Infrastructure Investment and Jobs Act and the Inflation Reduction Act had many states anticipating leveraging federal funding to build out infrastructure and invest in alternative energy sources. In many cases, measures requesting certain committees, working groups and state agencies to conduct studies on a wide range of topics, including hydrogen, energy storage, micro-grids, hydropower, carbon capture, anything, really, you can name it, those have been introduced in the majority of states. So there's very little doubt in my mind that 2023 is going to be a busy year for state lawmakers. And with that, I will wrap it up there and send it back to David and the remainder of the time on the Q&A.

Great. Thank you for that. To all the speakers, it was both informative and honestly excellent, so thank you very much. And yes, we will be opening up the floor now to questions. As a reminder, please use the Q&A widget on the council to submit your questions. Just a brief heads-up, we won't be able to get through them all live today, but we'll go through the most common and frequently asked ones. And if we don't get to your questions directly today in the webinar, we'll follow up with you directly within the next 24 hours. So thank you again for submitting those. The first question that we have sent in is, how much of the projected gaps -- how much of the projected storage growth is hybrid versus stand-alone storage?

Great, David. Thanks. Yes, good question. The hybrid configurations are very popular, mainly solar and storage, but often storage co-located with other generation types. But primarily as a means of accessing the investment tax credits that were available to solar and wind under the kind of the pre-Inflation Reduction Act regime. Now that the inflation Reduction Act has created a dedicated tax credit, we expect stand-alone storage to become much more common. Still a role for hybrid storage plus other facilities, perhaps constituting about 15% of the market going forward, but we think stand-alone will be the preferred option overall.

Great. Thanks, Steve. And another question that came in is, how does the hourly generation mix change for MISO in, say, the winter versus a different earnings season?

Thanks. That's a good question. I'll go with that one. So in MISO in the winter, you have the peak generation in the mid-day flattened out a bit. And so you don't need as much peaking generation during the day because of that and also because of the additional wind generation because it's just a windier time of the year. You have more overnight charging during the day -- or no, overnight charging that then can be used at ramp up in the morning and discharge at that time and in the late evening hours. So you have 1 charging period and 2 discharging periods compared to the summer where you have 1 charging and 1 discharging period. And so that's also 1 of the main differences between the summer and winter hourly mix profile.

Great. Thanks, Tanya. Another one that came through, a decade from now, do you expect that the batteries will be primarily lithium-ion as they are today? And do you see any real progress with sodium, for example?

I can certainly start on that one. We're seeing on the kind of the edge of a lot of technological diversification around storage technologies. And we're going to continue to watch that space, form energy, long-duration storage, starting to maybe take orders, getting more insight into the trade-offs between duration and cost and seeing some of the additional cost parameters. That said, I think kind of Mark's talk lays out, there's just an enormous amount of momentum and a huge sort of incumbency edge for electricity storage systems in lithium-ion, and that's likely to keep them predominant in the mix for the foreseeable future. Things can change. New technologies can advance. But when you look at it from today's standpoint, it's going to be hard to dislodge lithium-ion. And then, Mark, not to put you on the spot, but I don't know if you had any additional thoughts on that.

Yes, yes. Thanks, Steve. I definitely agree, the economies of scale of the lithium sectors just -- lithium-ion battery sector is just exploding so quickly that it's going to be hard to supplant that. I mean there might be opportunities for sodium-ion batteries, too, in certain situations. I've heard of talk of maybe them being tied together with some lithium-ion batteries. And software helps drive that, particularly in colder climates, but nothing on the near term. And we certainly have that effectively built into the 5-year forecast that I was showing. Just at this point in time, we don't see any other battery technology really offsetting either the nickel-intensive battery chemistries or the lithium iron phosphates.

Thanks, Mark. It was actually a nice answer to actually a second question we had received in regards to potential substitutes coming into the market, but thanks for addressing that as well. Another question that we have here, so kind of a different track is, how can storage mitigate storages? Wouldn't we need excess electricity to fuel storage? So that would require excess, not storage?

Shortage, I think, and a good question. It certainly deserves clarification. When we talk about generation shortfalls, we're referring to those times of system peak. And if we're thinking about the winter markets, times of kind of the lowest generator availability when we talk about generation shortfalls. So storage help with that, right, because they can optimize the excess. And then I think you've seen a couple of other questions related to this. The excess of green energy that occurs at certain hours where their generation is most prominent at day for solar, overnight for wind. So as I think Dr. Peevey's talk indicated, we're taking that excess generation in during the overnight period and the mid-day period, depending on the market, and making it available for those periods where generation shortfalls might otherwise develop the morning ramp and the evening ramp. So it's a little bit of question of terminology.

Thanks for clearing that up. Another one we have that came in is in regards to some costs. Earlier this year, there was an article stating that solar costs jumped roughly 30% and wind costs jumped roughly 37% from Q3 2021 to Q3 2022. How does that influence our forecast of new solar and wind?

No, that's a great question. As highlighted, a lot of materials' input costs are going up, whether for battery storage, whether for renewables, kind of across the board. But it impacts these technologies more generally. And our forecast reflects a structurally higher long-term cost for some of these technologies, roughly 5% to 6%. The observed price increases are certainly impacting current projects, potentially causing deferral of those projects or a restructuring of the economics. We've especially seen that in offshore wind where they are the most heavily impacted by these materials costs. But we don't see that 30% increase as an enduring phenomenon. We're actually already starting to see some of those PPA prices ease as a function of the spot price of a lot of these materials coming down a little bit. So while we do think there will be some structural increase in the long term, that's going to be mitigated, obviously, by both tax subsidies. And the market demand is going to stay there as a function of renewable portfolio standards, both existing as they ramp up and some of the new ones that Monica highlighted for us today.

Great. Thank you again, Steve. And unfortunately, I think we're pretty close to time here, so I don't know that we have any remaining time to address any other questions. But please note that we will be responding to each of the questions directly within the very near future. So I do appreciate all the speakers' time, and we did cover a lot today. So if you have any other follow-up questions, please continue to use that Q&A widget, and we'll be glad to assist and answer them as we can. For those who want to review anything we've covered today, this session has been recorded, and you will receive a replay link tomorrow to access it on-demand at your convenience. When we close out this webinar, you'll be routed to our webinar evaluation form. We'd love to hear your feedback, so if you can, please take a few moments to complete it. We also have a separate diversity, equity and inclusion survey that can be found on the menu dock below, and we would love to hear from you on that topic as well. Our vision is to create an environment that encourages inclusion and a deep sense of belonging where people feel empowered to contribute their unique insights. So by completing this survey or providing us with that valuable insight, we need to make purposeful decisions. Please note that all of the responses are anonymous and completely optional. So with that said, all that's left to say is thank you to Steve, Tanya, Mark and Monica for presenting today, and thank you all for taking the time to attend today's session. We look forward to you joining us again soon. So thank you very much. That concludes today's webinar. Cheers.