Powering The Digital Economy: LABC Sustainability Summit 2026
VX News publishes below the transcript of Powering the Digital Economy a panel held October 1 at the Los Angeles Business Council's 20th Annual Sustainability Summit. Moderated by Karen Skelton, founder and CEO of Skelton Strategies, the panel brought together Johnny Casana of Amazon Web Services, Rahul Kalaskar of AES, Ryan Pfaff of EDF power solutions North America, Jonathan Port of Permacity Foundation and Parag Soni of Prologis. They examined how California can capture data center investment under the seven data center bills Gov. Newsom signed September 21, including SB 886 and AB 2383 on cost allocation and SB 887 on CEQA review. The transcript appears courtesy of LABC and has been lightly edited for clarity. The full session is available on here.
Karen Skelton: Hello, everybody. First, I want to thank everybody who's here for this riveting conversation. I want to thank Mary Leslie, and I want to thank everybody for having the courage to have a conversation about the country's most controversial issue.
I look at data centers as the great unifying force in America right now. It's not necessarily unifying around the most positive ideas, but it is unifying. I've never in my career, especially in politics, seen an issue move as quickly along an arc as this one has. In just over nine months, we went from cities, towns and states in America begging data centers to come and incentivizing them to come, to pulling back a little, evaluating, then issuing moratoriums and having contests over who can stop them the fastest.
The polls on data centers that are out right now are very interesting because they're very pliable. You start out with almost 75% of the people polled saying they don't want them, and then you do some things and almost 70% want them. That's what we're going to talk about today: how do we get to "want them" as opposed to "don't want them"?
Of course, a lot of the issues around data centers aren't about data centers themselves. They're about AI and the reasonable and understandable fears around AI. But I think there is a lot of consensus, and I'm seeing things come around to the point of how we practically make these work, because they're not going away. Even last night, in the California governor's debate between Steve Hilton and Xavier Becerra, they agreed that in California data centers are going to have to pay their own way, protect consumers and be beneficial to the communities they're in. Even those two, who disagree on so many things, agreed on that.
So this panel is about the opportunities that this enormous increase in demand creates for us as investors, developers and power providers. It isn't just AI, although saying "just AI" is a little underwhelming. California is home to over 30 of the world's largest AI companies, out of maybe 50. Electrification is taking root everywhere: transportation, housing. Climate and weather are creating a need for resilience and reliability that we haven't seen before. All of this needs data centers to meet the demand.
One of the things we're going to do today is focus on California itself, which is a small piece of the puzzle when you think about data centers nationally. Along with the shift in public opinion, data center demand growth has been extraordinary: 30 gigawatts just last year, 40 gigawatts this year and a projected 66 gigawatts nationally next year. California is a tiny piece of that. We have about 1 gigawatt of data center demand right now, and it's projected to reach only about 5 gigawatts over the next seven or eight years.
So in some ways we have a huge advantage. As a policy person and a political person, I look at that sliver as a huge opportunity for us to be nimble and figure out how best to manage the growth of the data center industry here. So here we are: developers, investors, power providers and carbon managers, to discuss how California can best take advantage of the opportunities of increased demand in an AI-driven world. I'm going to turn to this esteemed panel and ask you to introduce yourselves briefly, and then we'll start with the first questions. Johnny.
Johnny Casana: What a pleasure to be here, and what a great organization. Thanks for that intro, Karen. I'm Johnny Casana with Amazon Web Services. I've spent about 20 years of my career in the power sector, much of it here in California, mostly in wind, solar, transmission and storage. I've had my hand in about 7 gigawatts of now-operational clean energy and spent a lot of time at the Legislature and the PUC advocating for some of the best policies we have, the ones that have turned California into a leader in climate and clean energy.
A few years ago I transitioned to the data center space, because I seek career opportunities that are measured in impact. Even when I went over, doubling or tripling the size of the U.S. grid based on data center demand seemed like a once-in-a-generation opportunity. My thinking was that the values that inform that grid investment are going to last for generations, and they ought to be based on California values. That's why I got into this space. Now I'm responsible for tens of gigawatts a year of energy contracts, a lot of it clean energy, and I try to integrate clean energy into prime power. I'm really excited to talk about what we could do here in California going forward.
Skelton: Thank you, Johnny.
Rahul Kalaskar: It's a pleasure to join this discussion. I'm senior director of regulatory affairs with AES. For those of you who don't know AES, we are a Fortune 500 global energy company. In the United States, we operate both as an independent power producer and as the parent of two utilities, in Ohio and Indiana. In California, AES has been an important part of the supply for decades. Since 1989, our wind, solar, battery storage and natural gas projects have provided reliable and affordable power across the state. Today AES has more than 140 projects in California, representing approximately 6.4 gigawatts in operation and more than 1 gigawatt under construction. The portfolio ranges from solar, wind and battery storage to the Alamitos Energy Center in Long Beach, which combines natural gas generation and battery storage. Thank you.
Ryan Pfaff: Good day, everyone. My name is Ryan Pfaff. I'm president of EDF power solutions North America, and it's a pleasure to be here with you again. I really enjoy coming to this event every year. We are one of the larger developer-owner-operators of clean power generation in North America, with a history of about 40 years. We operate about 15 gigawatts of projects across different technologies and have been active in California since the late 1980s.
Jonathan Port: I'm Jonathan Port, founder of Permacity Foundation. We're a community-based nonprofit, and we have one thing in mind: that California embrace this digital age, this data center age, and use it to finish out the renewables goal. Since data centers are neither a wholesale nor a retail customer, we have a very unique opportunity that we don't want to miss. It's an honor to be here with these giants who can actually make it all happen.
Parag Soni: Thank you for having us today. My name is Parag Soni, and I represent Prologis. Prologis is probably one of the largest companies you've never heard of. We're the leader in global industrial real estate and logistics, with about 1.3 billion square feet across 21 countries. It's a very large real estate portfolio, and we also have a very large energy presence. We've deployed about 1.5 gigawatts of solar on our rooftops, we're developing distributed and utility-scale storage, and we have a 6-gigawatt [data center] pipeline we're working on.
I've worked in the energy sector in California for over 30 years. It began with the California energy crisis, and I've watched California navigate the development of its energy policy from 2001 to the present. People look at today's achievements and how California got here, and it has not been a linear path. There have been a lot of bumps, and California has taken a lot of risks, but the north star has always been how we get to clean energy. In 2001, we weren't thinking about clean energy. We were thinking about keeping the lights on, getting through the energy crisis and how our state was being pillaged by some of the energy providers at the time. Today we're in a very different place because of the giants you saw on stage before us. They saw the vision of what California could become, and I'm happy to be here to talk about all of that.
Skelton: Great, thank you. Let me give you a thumbnail of why I'm sitting here. I haven't worked in the energy field as long as all of these gentlemen, but I served in the Biden administration as a senior adviser to Secretary of Energy Jennifer Granholm, helping develop and pass the Inflation Reduction Act. Then I went over to the White House and worked with John Podesta to deploy the $381 billion that came from that act, which unleashed the clean energy economy, or at least gave it a good kick out the door of Washington. Since I came back, I've been a fellow at the Doerr School of Sustainability at Stanford, another little private school up the road in Northern California, and I work very closely with Governor Gavin Newsom on his energy and climate portfolio, including a number of very important bills we'll talk about later, including this year's data center bills. That's why I'm here.
California's competitive advantage
Skelton: So let's get into it. Johnny, you mentioned California's competitive advantage. California is home to some of the world's leading technology companies, a highly skilled workforce and a growing clean energy industry. Yet much of the new data center development is happening elsewhere. In fact, California's entire projected data center growth through 2040 is less than one-third of Virginia's data center demand today. What does make California attractive from your perspective?
Casana: Happy to get into it. I look at markets all over the Americas, and California has most of the fundamentals you would need for a big, thriving data center construction and operations economy. It has the biggest, cleanest grid in the world, thanks to a lot of the work of people in this room. It has a talented workforce, plenty of laborers who know how to build things and get them done, ambition and creativity, and values that align with companies like ours: zero GHG, water positive. It has a strong fiber network, a strong transportation network and a strong communications network. It has beautiful places that customers want to live in.
In so many ways, California is a bastion of human civilization that by right ought to have the lion's share of this investment: the trillions of dollars going into the grid and infrastructure and creating millions of jobs across the country right now. We should also get it because we invented it. This is a generational moment of infrastructure investment, driven by technologies headquartered here. We have lots of the wealth and lots of the white-collar jobs, and basically none of the blue-collar jobs, none of the working-class uplift and none of the tax benefits that come with them.
A lot of that has to do with regulatory uncertainty on permitting and interconnection waits. When I look at a new region or market, if I don't get a gigawatt in 24 months, I don't even take the call, and ideally it's two to three times that within two or three years. Here we're talking four or five gigawatts in 12 years. It might as well be a thousand years.
Skelton: On that point, is it an advantage that data centers in California are so much smaller than the mega data centers elsewhere, at less than 100 megawatts?
Casana: That's by regulation. There's an effective cap of about 100 megawatts on how we can actually operate. There's a five-year permitting process through CEQA if you count litigation. There's a six- to eight-year waiting list to get through the interconnection queue.
What strikes me as a solvable problem here is that in most places in the country, even if you solve the regulatory issues, there aren't the resources, the talent pool and the grid to land in. Here we have all the baseline infrastructure and all the capacity. We could have 20 or 30 gigawatts in the next four or five years if we played our cards right. That could be $2 trillion or $3 trillion of investment and hundreds of billions of dollars of economic uplift. That's the kind of stimulus you need to solve a housing crisis or a health care crisis, and we could be attracting it if we play our regulatory and legislative cards right.
Skelton: So you see the regulation—
Casana: I can't take a meeting for 100 megawatts in five years. I just wouldn't.
Skelton: Parag, when you're trying to decide where to develop a project, what do you think about California?
Soni: We have a six-gigawatt data center pipeline, and we're developing projects all over the country. As you said, we are not developing large projects in California, for a variety of reasons. But we look at what can be developed here. For good, bad or indifferent, California has set guardrails, and those guardrails mean you're going to develop a project of 100 megawatts or less in the state. As long as you understand those guardrails, developing projects here can be a process. And California has a lot of elements going for it.
Number one, its north star is clean energy. Circa 2024, many of the tech companies said they were all in on clean energy. Somehow that's changed a little since 2024. But that's the first premise, and what's incredible about California is that it will go to any means necessary to hit that north star.
Number two, both of the state's IOUs, Southern California Edison and PG&E, have come out and said they believe data centers lower rates for their ratepayers. They've publicly gone on record encouraging data centers. Both have groups facilitating data center development and identifying substations with the capacity to do this. As was mentioned, the infrastructure is all here. A large part of the challenge in other parts of the country is that utilities are not on board with providing the power. Here you have utilities advocating for this and encouraging you to develop.
So the elements are there to create a successful data center pipeline, and we are certainly exploring and exploiting that in all parts of the state as we develop our pipeline. Later on we'll talk about how modular data centers may make sense here in California.
Skelton: Great. Ryan, I'm going to have you close out this conversation about California's competitive advantages as you see them.
Pfaff: As was mentioned, the state has been executing on clean energy in a big way for more than 15 years. We know how to build it, we know how to site it, and the load-serving entities know how to buy it. We run into a lot of the issues mentioned earlier in our development business throughout the U.S.
I think almost all of the data center interest is outside California, and we would like to see it come to California. For example, we've had small data centers show up on-site at operating merchant projects and start buying power behind the meter during curtailment and negative pricing. That could be useful in California during midday solar curtailment, for example. So the fact that the generation fleet and the resources are already here is helpful. But I think timeline and size are challenges.
The new regulatory framework and load flexibility
Skelton: I'm going to move to another topic now. One thing I didn't hear anyone say, although Johnny, you did talk about the regulatory certainty that's lacking here, or that it's certain to take too long, is the regulatory framework, and there is some breaking news on this in California. This session, the governor signed seven bills related in one way or another to data centers. There they are on the screen. I'll summarize the three major things I think came out of them, and you may have other ideas.
One was a bill, SB 886, that protects consumers from cost shifts. It requires data centers to pay all the costs it takes to interconnect, and if the grid has to be modernized in any way, those costs are borne by the developer. I don't want to put it all on the developer, but not on the ratepayer. Second, another bill, SB 887, creates an opt-in provision: if you meet certain climate-friendly benchmarks, you're eligible for a shot clock on the amount of time you can be in CEQA litigation. That's an incentive, not a mandate, around green development. And lastly, AB 2383 established a new tariff, which still has to be developed, that would set electricity rate requirements for data centers.
These are starting to be the scaffolding for how data centers will be developed and used in California. So I want to turn to all of you to talk about how that influences the kind of work you're going to do here. Rahul, I'll start with you, and we'll move all the way down the line toward Johnny.
Kalaskar: Let me start with the principle, and I think it's the right one: all new large loads should pay the cost to serve them. From AES's perspective this is not theoretical. We have two utilities in our portfolio, and we see this issue from both sides. We know what it takes to serve large customers, and we know our obligation is to make sure households and small businesses are not impacted by this growth. That's why we, along with many others, signed the ratepayer protection pledge. We believe growth and affordability have to go hand in hand, and companies have to commit to investing where they reap the benefits.
Let me point to three things we think are important. First, clarity and predictability. Developers and utilities are making multibillion-dollar, multidecade decisions. If cost rules are clear up front, including defined financial commitments, collateral and prepayment, capital can move with confidence. Getting that certainty is important.
Second, fairness without being punitive. Rates should reflect the cost of the new generation, transmission and distribution needed to serve new customers. The goal is to make sure new load pays for it, which will make California very competitive. That's where the rest of the country is going.
Third is flexibility. We know that inherently in California things move slower. There are two ways to think about that. We continue to advocate for removing the barriers, but the other question is how you play within the rules. Load flexibility is a tool that's going to be talked about a lot, especially in California, where it's going to take time to build the transmission and get everything interconnected. If we can develop rules for connecting flexible load, that will go a long way toward bringing in new investment. And it has to be done the right way, with everyone at the table, knowing what works for large data centers and what doesn't, and making sure they're involved in that discussion. So, two things: ratepayer protection is really important, and long-term certainty on the rules will go a long way.
Skelton: I want to go off script for a second and quickly ask a yes-or-no question on flexibility. Do you agree with what Rahul just said, that flexibility is an important part of data center interconnection to the grid?
Panelist: I'm sorry, do you mean flexibility in the rules about how you can get connected?
Skelton: Flexibility in the sense that, in an emergency, you can either connect to the grid or be told to get off the grid, depending on what you bring.
Casana: Well, this is the first four minutes of every conversation I have with every utility.
Skelton: Remember, this is a yes or no.
Casana: Sometimes.
Skelton: Sometimes. Okay.
Panelists: Yes. / Absolutely. / Yes. / Yes.
Skelton: Great. I'll just note, as a point of interest, that in negotiating SB 886, that provision was taken out. It was in all the way to the end, and then it was taken out because of the utilities' preference. So we have a lot of work to do together on this, which I think is a huge opportunity.
Casana: If I could have 10 seconds: those provisions often don't attract the kind of customers that bring the kind of capital that sponsors the investment.
Skelton: That's a very good point. Ryan, let's go to you on this new regulatory framework and whether and how you think it affects your work here.
Pfaff: It's definitely going to be helpful in attracting hyperscaler investment. As you went through the list—I hadn't realized so many bills had passed—it made me wonder. We're really slow off the starting blocks, because in other states infrastructure is being built out with fewer or no requirements and no opposition. Things get built before people even realize what's happened. Even though we're slower, and your projections for the buildout were very modest, maybe if we spend enough time at the beginning preparing, laying the groundwork and setting all the rules so we're doing it the right way, we could accelerate later in the game. That was my reaction when I saw the list of bills.
Skelton: Interesting. Jonathan, where do you come out on this?
Port: It seems like in California we know what we don't want. We don't want to run on fossil fuels. We don't want ratepayers to pay. We want flexibility. But I don't think we've clearly come together, as the fourth-largest economy, and defined what we want. We do want Amazon's gigawatts. We do want the big development. We do want it to happen in a way that lowers our rates. We do want to increase our storage and our network with it. What we haven't seen is the community getting together with the giants of the data center industry, who have the finances to solve two problems at once. I think we've laid the groundwork in California. The next thing is to really come together, like other great projects that have made this state great. That's the challenge, and we need to solve it fast so we don't get left behind.
Soni: On a principle basis, all of the data center developers are looking to pay their fair share. I'll just say that at the beginning. The challenge is that every state is writing this legislation and these tariffs and trying to figure its way through, and nobody has done this before. We've never seen these types of loads with this load profile in our history. So every state is trying to figure it out, and they're going to make mistakes, as you do the first time you write legislation and tariffs.
The challenge for data center developers is this: you've got initial legislation that lays out the rules of the road. But what happens when you see another state making other changes? "Shoot, we should have incorporated that provision, or added that cost we didn't think about." Then it becomes a moving target, and the regulation changes year to year or every five years. Meanwhile, you're committed to building data centers. You're making long-term capital decisions about where to deploy capital based on the rules defined at that time, and if those rules change constantly, that gets very difficult from a developer's perspective.
Skelton: Johnny, do you have any thoughts on this?
Casana: Again, I think the values are aligned. Amazon has raised its hand and signed the pledge: no cost shift. Any time you think you're seeing a cost shift from us to another rate class, we want to see it, because it's not permissible under FERC rules and it's not aligned with our values. We are ratepayer protection advocates. "Pay your fair share" is our mantra. Sometimes people dispute what's fair and how it gets measured, and that's reasonable; people can disagree. But no cost shift to others; we pay our own way.
I don't know which companies you think have gone back on their climate pledges, but not us. Amazon has not gone back. Zero GHG by 2040, water positive by 2040, period. No change there. Coming from the clean energy sector, I do a lot of work in my day job to make sure we hit those targets, and they're aligned with California values.
One of the challenges, though, is that reaching certainty in California often takes longer than the pace of development anywhere else. I've seen reports that say we have 60-some gigawatts in the ground nationwide now, and it could be 400 in three years. We might not have a tariff until the middle of 2028. So we could miss out on maybe 200 gigawatts of investment, again $10 trillion or $15 trillion of steel in the ground, that we could be attracting now if we wanted to move fast.
The other thing I worry about is that this is a very steep and unprecedented curve. You're right: no utility since electricity was invented 120 years ago has ever had to deal with a New York-sized deployment in two or three years. No one is built for this, and no laws anticipate it. This is a new world, and those that figure it out are going to win, and that's where the continued investment will go. But I don't think this steep incline lasts forever. There's a moment where tens or hundreds of gigawatts in a two- or three-year period goes away and we hit a more manageable pace of growth. Do we in California want to be the place that seized the moment and got those tens of gigawatts in the next three to four years, or do we want to be playing catch-up in 2035?
State patchwork vs. a federal framework
Skelton: This conversation makes me put my federal hat on for a second. As you were talking, Parag, I was thinking: does this cry out for federal regulation, as opposed to the patchwork of regulation we have across the country? If so, we have an election coming up, and we may have a change in Congress; people would predict that in at least one of the houses. Can you imagine advocating for a national framework for data center development?
Soni: I'll tackle that. We're in a constant struggle in this country between federal rights, what the federal government should be involved in, and states' rights. Historically, we've had a preference for leaving that power to the states. Obviously, this federal government has asserted more federal power than past administrations, so we struggle as a country over where that line should be.
But there are certain things the federal government is in the best position to deal with. The way a transmission line is built, its cost is put on the ratepayers of that particular jurisdiction. When you start crossing state lines and building transmission or distribution lines out to specific resources, should those ratepayers be responsible? The way our resources are allocated in this country, our wind resources are in the middle of the country and our population centers are on the two coasts. How do you incorporate that? Is that a role for the federal government? I certainly think the federal government has a role to play. Whether data centers are one of those roles, I'm not sure, because of community opposition: the federal government would be telling communities what the rules are, but the facility goes in their community and they have to live with it. That's the struggle I think we have with the federal government.
Skelton: I want to come back to that critical issue, which is really the nucleus of much of this conversation. But before I do, does anyone have other opinions on whether a federal framework might be appropriate here versus leaving it to the states?
Pfaff: I have a hard time seeing it fly in California, or California accepting it from the federal government. I can imagine that if this were enacted, the state would be suing, appealing and fighting, and it wouldn't actually accomplish anything in certain states. Certain states might play along, but I don't think California would. That's just a personal opinion.
Skelton: It's interesting you say that, because the president of the United States and the governor of California actually agree on this. So maybe. I don't know. Go ahead, Johnny.
Casana: Maybe they agree on what's important, rather than on having the federal government impose something. I think there could be a role for federal-state cooperation here, and maybe cross-aisle cooperation, but maybe not a framework, because that feels like it would take a long time.
Here's a different idea. A couple of years ago, Mark and his team at CAISO put out a 20-year transmission plan. Maybe we accelerate that. We know where the routes are in the West. We have a day-ahead market that just went live. There's a huge amount of resources, and this has always been California's plan to decarbonize: bring the rest of the West with us. It's one physical grid. We have incredible wind and solar resources farther afield and transmission that brings them in. You heard Mariela talk about a great independent transmission line, not state-sponsored or utility-sponsored. It was a big success. Mark's team identified five or six others like it, and a lot of them need a federal permit.
That could be the place. Similar to figuring out how to move specific projects quickly through the California system, you might in tandem go to the administration and say, "We need BLM and NEPA to move fast on getting these done in the name of energy dominance." I think you could get something done there that's mostly about a specific list of sites that would actually get gigawatts into the ground. But I don't know that it's a good use of time to get D.C. and Sacramento to put a framework together in 2029 so we can start thinking about a 2037 data center. There's no kumbaya happening. I don't know. Anybody else?
Port: From our community perspective, it's more of a local and regional issue, because it's local communities and regions that are going to benefit or be harmed. In this case, this whole group here has everything needed to solve that at a local and regional level, so why waste the opportunity? Like I said, the foundation of what we don't want has been laid. Now the next step is probably laying the foundation of what we want and getting all the major players together to solve it with local and regional support.
Social license and community benefits
Skelton: Let's turn to that, because I think it's a key feature here. Somebody reminded me that legality is granted by agencies, but legitimacy is granted by neighbors. That really underlies some of the questions about data centers. You can have a project that satisfies every permit, every tariff and every environmental requirement and still fail.
So let's talk about social license, or how you get these projects into communities. At the beginning I talked about the negative polls and how they can turn. In the questions on those polls, the 10%, 15%, 20% shifts toward acceptance of data centers have to do with community benefits, and specific ones. Jonathan, I'm going to start with you. What is Permacity's initiative, and how is it advancing efforts to structure data center development so everyone can agree on it?
Port: Our foundation thinks there's an opportunity to get people together, and California sits on many nodes of opportunity. Are we going to build noisy—I call them elevated basements—that consume resources, or are we going to build things that reinforce the community? It's a very simple message. We have the technology, the nodes, the transmission, the renewables, the money and the players. Can we get our communities involved, like you're saying, to see it in a positive way, map it out and get developers to build things that aren't noisy elevated basements, so to speak?
Skelton: Just a metaphor. And noise is something you're addressing in communities, along with the look of the structure. Who else—what else are you doing?
Soni: At Prologis we're at the front end of these community discussions, because we're responsible for entitlement and getting all the permits. So we're in lots of these community meetings. Aside from noise, water usage and all the other issues, community members are basically petrified of AI. They come in saying, "I don't want to support AI. AI is going to take my job away. It's going to kill me in the future." There's an underlying fear of AI, and for whatever reason that genie has come out of the bottle, and I don't know how we put it back in.
Last week at New York Climate Week we were talking about all the different community options available. But there's still a fundamental question: data centers don't create large numbers of jobs. A power plant like Diablo Canyon has 1,100 jobs. That's 1,100 people calling the Legislature and saying, "Don't close this facility down." With a data center, who's calling to say, "Please build this thing, because it will create jobs"?
Skelton: But isn't that the point of investing communities in the benefits of these projects? They're billion-dollar projects. Why don't you create in them an interest to call the governor's office by partnering with them on these projects?
Soni: Part of the challenge, and part of this is on developers, is that communities don't have line of sight into what those benefits are to them. How much is it going to be, over how long? How does it compare to the revenues the developer is making? That's the challenge for communities.
Skelton: I know plenty of consultants you could call to get that information. Johnny, do you have something?
Casana: I'd love to chime in. At the 100-megawatt scale, I think that's true. But at the sites we prefer, 1 gigawatt, 2 gigawatts, 3 gigawatts, in many communities we're the largest employer. We consider ourselves a long-term neighbor. We show up early, we make connections, we speak to people, because we're going to be there for 15, 20, 25 years. There are different studies and estimates, but at the gigawatt scale it's closer to $50 billion of investment, not $1 billion. I've seen numbers reported of 45,000 temporary jobs and 5,000 to 6,000 permanent jobs per gigawatt. So when we're talking about only one or two gigawatts in California, that's why you're not getting the phone calls. But if we were talking about 20 or 30 gigawatts, that's an entire constituency: millions of temporary jobs and tens of thousands of permanent ones.
Port: So all of a sudden, at these nodes where you can actually build such a large data center and get what's needed in line with our policies, that represents a significant number of jobs for those communities. By focusing on that, we can succeed. But if we go to other areas, it just really doesn't make—
Casana: [Oregon,] Nevada and Arizona, our three neighbors, are getting 10 to 15 gigawatts between them in the next two or three years. Our neighbors are figuring this out. In Oregon, where we have a very large presence, there's often a discrepancy between the east side and the west side of the state. The east side, in the rural areas, is where most of the investment is going. In Salem, the state capital, there's often this sense of "We're terrified of AI." And the folks I know, or who talk to me out in the places where we're investing, say, "Those guys from Portland don't represent us. We like the jobs."
Soni: I'll add one other example. Loudoun County is the largest data center market in the world; I think it's larger than the next six markets combined. The economic development benefits have been incredible. You now have a cluster of data centers there.
Skelton: For taxes?
Soni: For taxes. They've lowered property taxes by a third for every resident in Loudoun County.
Skelton: That's right.
Soni: The county gets almost a billion dollars in revenue, and 80% of that comes from data centers. So they have certainly seen the benefits of a cluster of data centers coming into their market.
Port: I think property taxes on $50 billion is like $700 million or $800 million a year. So in those nodal communities we're talking about, the ones that can actually host it, that could be a game changer.
Casana: That's a game changer, and that's only about 17 gigawatts, for whatever it's worth.
Port: So how does California attract 20? If we get that, then we're in the game.
Skelton: So what's missing when we don't let Amazon get its 10 or 20 gigawatts here?
Casana: It's not missing. It's going somewhere else.
Port: It's going somewhere else. And the communities that could have had it, that it could have uplifted, will completely miss out, because we can transmit data across the country. That's our concern.
Casana: And there's a broader uplift. All of those jobs pay taxes as well, and secondary and tertiary economies come out of this. Again, there are different studies. One just came out about Oregon a week or two ago: about $2.5 billion per gigawatt in net economic uplift, based on all the jobs and all of the secondary and tertiary economies.
Skelton: I'd love to have that study.
Casana: I'll send it to you afterward. It just came out a couple of weeks ago. Different studies make different assumptions, and you can quibble with the inputs, but the scale is quite large.
Skelton: That's the thing about this question. Rahul and Ryan, I want you to weigh in if you have something here. But one comment I want to make, from my experience: I've never seen an economic opportunity for communities as big as this. As I said, I was working on deploying the Inflation Reduction Act's resources, and we were in coal communities and other communities trying to create capacity so they could access the funding and helping people imagine what could happen. I don't think people are thinking big enough about this. I don't think communities are thinking about the generational wealth that can come. We're not talking about schoolbooks in a library. We're talking about investments in projects that can grow economic stability in communities across the country, as long as they have some control and are at the table early.
The key issue is control. Communities have had enough experiences with people coming in and telling them that this solar project is going to make everything different, or with highways coming through their communities, or pick your favorite industrial advancement of the last hundred years in America. This is different, and bigger. We've learned, or should have learned, from past experience that if you bring the community in early and give them some control at the table to partner on what happens with the benefits we're outlining, things could be different. Okay, I'll be quiet. Ryan?
Pfaff: I think it's natural for people to be worried. You look at the size of the facilities we're talking about. You hear about noise, you hear about water, you hear about AI taking jobs, and people won't necessarily understand that whether or not this data center happens isn't going to change whether that happens. That's an interesting conversation to have. People also read stories about chips becoming outdated. Is this going to be built and abandoned? Is it a long-term thing? We're saying it is, but how do they know that?
If I go back to the local playbook from developing wind and solar, it won't sound very complicated: go in early, make yourself local and find a local champion. People coming from a big metro area to talk about how great this is for you is completely the wrong recipe. And take input and modify your plans based on it. That goes a long way on the control element. People say, "They didn't give us everything we asked for, but they gave us six out of 10, they really took the input, tried to change it and left a lot of money in the community."
Skelton: I didn't realize, until you mentioned it, the size of the property tax you'd be talking about on these. That is transformational. Communities may still not want it when you talk to them about it, because it's such a change in their local environment. But lead by taking their input, then go to: this will change the future for everybody in this area. And be patient. Don't come in like a big-city person and say, "We need this now, now, now, or we're going somewhere else," because I think you'll hit a wall.
Kalaskar: I couldn't agree more with Ryan. We saw the same story during the solar boom, and we have the same issue with storage, with the question of whether storage is safe enough. You have to do a lot of community work early. Somebody on the previous panel said it's not about what the impact is, it's about what people feel the impact is going to be, and those are two different things. Addressing how people feel about something takes time, and that runs counter to what we've been talking about: speed, speed.
On the other hand, this country is built on individual values, on what I feel comfortable with. It's very rare that everybody aligns behind a direction from the federal government, but that's the value of the country, and that's what it's built on. If we realize that's how things get done better, it's more about messaging, messaging early and then being patient. If you try to shove something through too fast, you're going to get twice the pushback. So there's a balance here. We want speed, but at the same time we want to build something, and we have to find the right balance.
Skelton: Parag said something about the idea that data centers are, in some way, an avatar for AI, and you have to cut through that. It's very legitimate and very reasonable for families, parents and people to be thinking about this and about how all of our lives are changing. But underneath that is this huge opportunity. So I think this is tricky but very solvable.
Casana: I think that's absolutely right. The fear around AI is a different issue from whether I want infrastructure investment in my community. These guys are totally right: show up early, be transparent, be communicative, hire local, stay local. In the gubernatorial debate last night, they asked about data centers, and the response was about what kids are doing with AI. That's actually irrelevant to where the infrastructure gets built. Neither of them said anything about jobs—steel, concrete, rebar, operations jobs. If you do this right and work with the community, there's strong local benefit and also statewide benefit. How are we going to solve the housing crisis? Well, a hundred billion dollars of added revenue would probably go a long way toward helping with those other critical issues. This is a moment when we could invite that kind of investment to the state to try to solve the other issues we have and create prosperity for generations.
Soni: Last week I was at a dinner where we were talking about this exact issue, and there was a gentleman from Southeast Asia. He said, "I find this all very interesting. We don't have these same concerns or problems in Southeast Asia, because we have nothing to lose. We're willing to try anything and everything." They're looking to build a super grid across Asian countries, and they're willing to do anything on AI, because economic development and jobs are not where they want them to be. So they're willing to take any and all risks. The AI debate we're having in the U.S. is different from the one in Southeast Asia.
Skelton: The opportunities are so not understood, like the Loudoun County numbers and the revenue numbers you're talking about, Johnny. I'm sure you all have good examples of places where community benefits are laudable and should be better known. Maybe that's something Mary Leslie wants to take on as a follow-up: communicating more around this issue. I think this has been a good conversation. The opportunity is enormous, and I continue to believe that people are not understanding it or thinking big enough about the possibilities.
Lightning round and close
Skelton: We've got about seven minutes left, and I want to do a lightning round, though not too lightning. What do you think is the single biggest thing California needs to get right to capture the opportunity from data center growth we've been talking about? I'm going to start with you, Johnny, and we'll move straight down.
Casana: Solve for speed. Speed and certainty: solve those, and everything else lines up. If I could cross my arms and ask the genie, it would be: pick four or five spots statewide, put 5 gigawatts at each, and wield the levers of government to say, "Here's how we're going to make it happen." Make companies like us bid for the opportunity to fund the infrastructure we need to build in those places.
CAISO has 500 gigawatts of generators in the queue lining up to serve new load, and it has tools to streamline in certain instances. You could run a reverse auction: how much would a data center company like to buy, and how much supply would generators like to send them? And use the levers of government we have. We have CAISO, CalPERS for investment, DWR, and DWP can do a lot of amazing things. If we had leadership pointing toward specific actions, and maybe something like a ballot initiative to change a couple of laws to move some projects through quickly—there's a model for this. When California wants to get out of its own way and do something it likes, it changes a couple of laws, gets some certainty and gets investment to happen. You know who got that done? The football stadiums. Seriously. The government said, "We like football, so we're going to make it happen, but we're going to let the people vote on it."
I think if you put this all together in a package and said, "California, yes or no: do you want $2 trillion of investment? Here's a ballot initiative that does all of the things at once, and here's how we're going to use the funds to solve housing," ask them and see what they say. I'm shooting from the hip here; this is not a formal Amazon position. But this is the kind of thing you might do if you were serious about attracting 20 to 30 gigawatts in the next three to five years and $2 trillion or $3 trillion of investment here, in the place where we invented the tech that's driving the revolution.
Skelton: Great.
Casana: I don't know. Just—
Kalaskar: I was going to say ditto and I'm done, but a few things. To solve this, I think permitting is the biggest challenge, and we've seen that with building transmission, interconnection, anything. If we can fast-track permitting—the state has already committed to clean energy goals, and I think there's nowhere but California that could reach 100% clean energy. I know a few other states have committed to 100% clean by 2040 or 2045, but I think California can get it done. The infrastructure and know-how are already in place. In my mind, solving the permitting challenge is the biggest thing, and I couldn't agree more with everything else Johnny said.
Skelton: Ryan?
Pfaff: Johnny talked a lot about attracting the data center investment itself. Along with that, you need generation buildout. Data centers can't come if we don't have new generation, so we need to speed that up as well. We have an opportunity we'll miss shortly if we can't bring a lot of generation online before the tax credits go away, to have lower-cost generation than we'll have for maybe the next five to 10 years after that.
Permitting is a constraint, but I feel that being able to interconnect ahead of the completion of transmission upgrades, through some other type of service, like an interim transmission arrangement, would allow these projects to come online earlier. So would allowing energy-only projects that don't have RA or deliverability today to connect. There are a lot of projects that can't come online until 2034, 2035 or 2036 because of upgrades. Accelerate those and bring them in at lower cost. We're missing something in the toolkit to enable that.
Skelton: Great, thank you. Jonathan?
Port: I really liked Johnny's idea. Basically, it's a statewide and local pre-check, so there's 100% certainty that it can be done. I think that certainty would give us the quality we want and would dramatically lower the cost of delivering that quality. So it's essential, now that the tools have been laid, that we get a statewide pre-check that could be adopted locally. I think that would be amazing.
Skelton: Great. Parag?
Soni: The International Energy Agency dubbed this the Age of Electricity, because electricity is at the forefront of every part of our economic activity, from the digital economy to advanced manufacturing to the electrification of transportation. Virtually every part of our economy now depends on electricity. So the question is how we bring that electricity faster. It's not only speed to power; it's access to power. You heard the utilities on the previous panel talk about the work they're doing. LADWP said they're improving their new interconnection process and their business development, and you heard the same from Southern California Edison.
At Prologis, we have 900 buildings across California, and power is critical to our tenants' operations—Amazon, Home Depot and all of these entities. Their demand for power has increased exponentially. Before, it was lights and air conditioning. Now it's robotics and advanced manufacturing. If California wants to be at the forefront of these activities, it has to find ways to get power online more quickly to all of the businesses trying to set up shop here. So we have a near and present challenge in front of us if we want to capture all of these different economies. At one point California was the leading manufacturing state. We've lost some of that because of the cost of power and the difficulty of permitting. All of the advantages we once had have dissipated over time. How do we recapture that in California? That's the challenge.
Skelton: Well, if that's not inspiring, I don't know what is. Thank you so much. I'll close by saying that I started by calling this a huge unifying issue, sometimes for the negative. But the opportunity here is enormous. We are the world's leaders in the clean energy economy for the United States, and we can build on that. We are the innovators; we're the pioneers. This is our home. AI is from here. It's not going anywhere—except when it escapes, but usually it's not going anywhere.
Panelist: Don't let it escape.
Skelton: And we're going to have to power it. So let's take advantage of the opportunities we know we can seize and make this the moment that generational change occurs in our communities. And Johnny, I love the idea you put out there of a contest among the companies to take advantage of opportunities the government could put out there for them, with all of your help. Thank you all.
Panelists: Thank you.
