Part Three: Oil Wars, Nuclear, and AI—Can Texas Power America’s Future?

INTRO
Our last episode revealed that the AI boom is already straining Texas water and energy supplies, and the state has no reliable way to track the impact. Since then, the stakes have only gotten higher. The closure of the Strait of Hormuz has sent the world reaching for American oil and gas, much of it produced in Texas by an industry requiring substantial water and electricity.

In today’s episode, we look at the innovations Texas is pursuing to meet that challenge and what the rest of the country might learn from them.

DUKE REITER
Texas has always played a role in ensuring global energy security and US independence from foreign oil. Something Michael and I addressed given the backdrop of what’s happening in the Persian Gulf today. When you see what’s happening in the Gulf, is there a little bit of I can’t believe we haven’t gotten past this or been more prepared for this because we’ve seen this movie before.

It’s a little different this time. We were not the producer that we are today. Nevertheless, it just brings to the fore our dependency on fossil fuels and where they come from and the governments that organized that production. So what are you thinking with regard to this playing out yet again?

REED CLAY
The statement I always like is that history doesn’t repeat itself, but it rhymes. And I think that’s sort of relevant context for this. And what we wrote, by the way, 20 years ago wasn’t that controversial. It was the head of the Department of Defense ever since the 70s. The difference is, as you alluded to, is we’ve switched our mindset from being a massive importer and consumer to being a massive producer and exporter.

And so we might not care as much today as we thought 20 years ago, but the risks and conditions are the same. Even though we are a major producer, we’re still coupled to global markets. So we’ll feel the price spike.

DUKE REITER
But what does it tell you? Because this is a very ten across issue. We’ve built ten across to suggest that greater awareness is what’s needed to act on things that appear to be right in front of us. So when you write a report several decades ago that outlines precisely what’s happening today, what does it tell you about our ability to cause people to say, you know, we need to get even further ahead of these things? I mean.

DR. MICHAEL E. WEBBER
I think in the audience 20 years ago, as the Pentagon, they already kind of had a feeling this was an ongoing problem. It wasn’t news to them. It helped affirm some of the things they were worried about and thinking about. So if you’re in the Pentagon in 2005, 2006, you’re thinking, we need better batteries. We need to think about proliferation of fuels.
 

We need to think about getting better reliability. This is all free shale is the shale revolution really took off at to my right around like 2007, 2008. And before that, it hadn’t really occurred to us or the Pentagon or most analysts that unlocking share would be the answer.

DUKE REITER
In the early 2000, Texas energy companies mastered horizontal drilling and hydraulic fracturing methods in shale rock formations. This process, also known as fracking, boosted American oil and gas production and therefore its energy independence. After decades of high reliance on foreign imports. Today, with another war threatening global oil supplies, nations that lagged on the energy transition are racing to get ahead of it to shield against fossil fuel volatility.

China being the most aggressive in this regard despite repeated warnings from military planners and its own scientists. US policy on renewable energy has swung dramatically with each change of administration, making long term planning for utilities, investors and states difficult. There are some areas of exception. In 2025, Texas led the nation for utility scale solar, wind and battery additions.

Resources that have boosted grid reliability, held down costs, and are seen as critical to meeting the demands of the AI economy and oil fracking operations, as the state is hoping to maintain its stature in the global market. It’s implementing new technologies, reviving older ones, and looking to strike the right balance between competing interests and mutual benefits. To help us understand what those energy changes are.

We sat down with two people whose work is at the center of the story. You’ve already heard from Doctor Webber, the renowned author, professor and global energy consultant whom we’ve interviewed on the show before. We will also be hearing from Red Clay, President of the Texas Nuclear Alliance, who’s on a mission to Crown Texas, the nuclear power capital of the world.

Together, their perspectives will help us understand how Texas, a state so strongly associated with the fossil fuel industry, is engaging with the energy transition as it seeks greater grid reliability and capacity. At the conclusion of this episode, Mike and I examine how a wave of industrial growth in the state will likely change not only where energy comes from, but who builds it and who pays for it.

Before he was president of the Texas Nuclear Alliance, Red Clay was a litigator with the US Department of Justice. He then returned to Texas to serve as a top appointee under Greg Abbott. During his terms as attorney general and then governor, Reed was a government affairs consultant to the energy industry. When Winter Storm Uri in 2021 disrupted the Texas grid, and with it a common belief that the energy capital of the world was immune to resource scarcity.

[NEWS CLIPS
Every source of power the state of Texas has has been compromised.
More than 4 million were without power in Texas on a Tuesday after a rare deep freeze forced the state’s electrical grid operator to impose rotating blackouts.

DUKE REITER
It’s worth noting here that the Energy Reliability Council of Texas, known as Ercot, keeps the state’s electrical grid largely self-contained, making the import of electricity from outside grids during emergencies nearly impossible. In the immediate aftermath, Reed found himself drawn into the state’s efforts to understand the grid failures and to ensure that they could never happen again.

 REED CLAY
Winter Storm Uri made me interested in getting more immersed in the power issues in Ercot and, you know, kind of everything that may have ended up causing that or contributing to that. I mean, ultimately, you know, if you asked me, I would tell you that I think the primary cause of that was Mother Nature. We had 254 counties in the state of Texas, all of which were under a very deep freeze warning for multiple days, which is, you know, very rare.

But there was a lot of, you know, finger pointing about different types of energy production. You know, wind and solar versus natural gas.

DUKE REITER
In a moment, we’ll get into the solution. We came to and how this shaped his career. But with years of experience inside the Texas government, Reed had a front row seat to the political debate that followed the storm and the conclusions many state lawmakers drew from it.

REED CLAY
One of the things that it did allow us to do was to look under the hood of a record. I think for many years we had been enjoying a very reliable and very low price environment, and a lot of ways to do regulated market in Texas was, in its glory days, low prices, high reliability. But one of the things that you you started to notice in 21 and 22, right after Uri, was that all the net new generation in Ercot had really been coming from one source of energy, and that was wind, and it had gone from, you know, really no part of our generation mix to a very significant part of our generation mix.

And I think what Uri allowed us to do is kind of realize that we needed to be careful about how we curated our energy mix in the state of Texas. You know, everyone knows that wind is, you know, an intermittent resource. It has one of the lowest capacity factors. And, you know, we were slowly becoming a grid that was becoming more and more relied on wind to cover our peak demand periods.

DUKE REITER
It’s true that wind intermittency is an issue that grid operators are working to resolve with increased battery storage capacity. But federal and peer reviewed academic studies found additional causes for the outages. All power plants struggled to operate in the cold. But given that natural gas made up 50% of the state’s generation mix at the time, the blackouts were mostly attributed to interruptions at these facilities.

Researchers at the University of Texas at Austin recorded an 85% drop in gas production and outages across two thirds of processing plants in the Permian Basin. The Federal Energy Regulatory Commission, or Ferc, arrived at a similar conclusion. The severity of the storm and the stress it placed on every part of the grid gave observers an unusually clear picture of where each energy resource held up and where it didn’t.

From that came the understanding that greater capacity, plant weatherization, and reducing dependance on any single source were all key to navigating disaster scenarios like an extended freeze or heat wave. Here’s Michael.

DR. MICHAEL E. WEBBER
We built a lot of stuff in Texas since the storm five years ago, especially solar batteries, but also some wind, some gas, and we’ve also built some demand response. We weatherize for the power plants. We’ve taken a variety of steps. So the system is in much better condition now than before. We also haven’t tested it. We’ve had three freezers since then, all of which were small or not very cold, or not as long lasting or not as widespread as Winter Storm Uri in 2021.

So we haven’t had the full test, but the system’s better. We built a lot of things in solar, and batteries are particularly interesting because those are so cheap and easy to build. They got a lot of capacity online quickly, and that really helps us with the intraday variation from morning to evening. Batteries don’t really solve the five day problem or the seven day problem.

If you have a cloudy, windless weather pattern for a week. Batteries can help you for one day of it, but it wouldn’t help for all that. That’s where gas and nuclear are. Some of the other things we have are pretty handy.

DUKE REITER
Companies like Tesla are building out large scale battery facilities across the state to improve renewable energy storage and transmission. The results are remarkable. Texas has gone from 500MW of battery capacity at the time of winter Storm Uri to nearly 15,000MW today, enough storage to provide power to millions of homes. The state also poured millions into plant weatherization and natural gas expansions, and federal subsidies largely supported new solar and wind construction until this year.

But what about nuclear? Texas has only two nuclear reactors, the last of which was constructed over 30 years ago. Combined, they provide about 7% of the state’s electricity. Nuclear also has a reliability advantage over natural gas, which Uri made painfully obvious. Natural gas plants run at full capacity only 55% of the time. Nuclear reactors, by contrast, run at full capacity more than 92% of the time and require refueling only once every 18 months to two years, making them more immune to short term supply chain shocks, the likes of which crippled Texas gas generation during the storm.

Despite the reliability benefits, Red Clay says nuclear power has been an undervalued resource in Texas. A gap is now looking to close.

REED CLAY
You know, four years ago, we were focused on natural gas. Given the vast amount of natural gas deposits that we have, it’s been an easy source to pull from because natural gas prices have been very low. I think we may be taking that a little bit for granted right now. Company behind it, I think, is nuclear, and that is where the lack of building nuclear over the last 20 years really spurred me to think, going forward, if we want to continue the Texas miracle and continue to serve the businesses, the large industrial loads and increasingly the data centers that are coming to Texas.

Nuclear really needed to be a much bigger piece of our generation mix. And so for me, that became a kind of a, you know, where is the industry voice? You know, we had some voices against the industry, and we had no real voice for the industry in Texas. And that kind of spurred me, my, my wife calls it my midlife crisis, but kind of spurred me to create the alliance 4 or 5 years ago ahead.

DUKE REITER
Can the Alliance help Texas overcome nuclear stubborn engineering, legal and financing challenges?

The case for nuclear energy is hard to argue with. And yet for decades, the United States has struggled to build it. Fear of what can go wrong, including meltdowns, radiation and waste forms that can have a half life longer than human civilization, has proven more powerful than the engineering case for what goes right. The result? In the last 30 years, the US has completed just three new reactors.

Michael summed up the opportunities and challenges with nuclear energy. This way.

DR. MICHAEL E. WEBBER
I’m an engineer, so I like nuclear. Most engineers like nuclear engineers look at nuclear as clean, safe, reliable baseload power. Right. So that’s kind of our view of it in lawyers. And look at it as a liability waiting to happen. So nukes got risks of weapons proliferation as risks of public safety, risks of meltdown or radiation leak. It’s got a waste handling problem as a cost problem.

And if you could solve those then it’s really a great solution and we can solve them. They’re all solvable problems. They have been solved in other countries in another ways. And so I think we can solve this as well if we want to.

DUKE REITER
Nuclear advocates like Reed believe the safety record with waste management is there, and the demand today is so undeniable that the cost of delay could soon exceed the cost to build.

REED CLAY
There’s not an energy source that doesn’t have waste. That’s true of solar. It’s true of wind is, you know, certainly true of natural gas. And certainly nuclear waste gets a lot more visibility. What I would say on the waste issue is that the history of the industry is a testament to how we have treated it. You know, there’s lots of fanciful stories.

There’s lots of ideas about what might happen with the waste. But in a 75 year history of producing it, none of it has ever happened. And it’s very hard to point to another industry that has a safety record, particularly with respect to the waste that nuclear does. And that’s because it’s extremely highly regulated. There’s no byproduct or waste that is regulated to the degree that nuclear waste is.

I mean, they can point to every single atom of spent nuclear fuel that has been produced, tell you where it was produced and where it is.

DUKE REITER
Though the first nuclear reactor was constructed in 1953. It wasn’t until 1982 that the federal government developed a framework for storing and disposing of radioactive waste. Five years after that, Yucca mountain in Nevada was selected as the first site for nuclear waste burial. The state fought this fiercely until President Obama officially killed the multi-billion dollar project in 2010.

Today, there are approximately 95,000 metric tons of spent nuclear fuel sitting in 79 temporary storage sites across the US. As nuclear power is seeing a revival, energy leaders and specialists are reopening the issue of waste and hoping the US can move towards more sustainable practices such as recycling.

REED CLAY
I will say this if we had buried all of that waste in Yucca mountain, you know, 30 years ago, it would be buried and unable to be reused. One thing that is a misnomer about spent nuclear fuel is that is truly spent. And so, at least in this point in time, I’m glad that we haven’t, like, buried that waste and disposed of it forever and ever.

Because to me, I view it as an asset to help us to continue to power our nuclear fleet in the United States.

DUKE REITER
Given his background as the former Chief science and technology officer at energy, a global energy company based in France with a significant nuclear portfolio, I asked Michael about the differences between how spent fuel has been managed in the US and elsewhere.

DR. MICHAEL E. WEBBER
Why France handles it is different the way we handle the United States, the other states. We don’t reprocess the waste, we just store it in temporary casks and pools on site at the nuclear power plants. And we really should either reprocess it or variant or both. And if we reprocess it, a lot of the waste is still hot.

We can use again. And so if we reprocess it, you reduce the amount of waste by about an order of magnitude. So you have now 10% the volume. And that waste that’s left over that’s already really spent has a half life. I can’t remember exactly like a thousand years as opposed to 100,000 years. So the waste you’re left with after reprocessing is much smaller in volume and much less dangerous in terms of duration.

And this is good. And that’s what France and Belgium and Switzerland, Japan do.

DUKE REITER
There’s remarkable policy alignment between the Texas governor’s office and the current white House, where the energy economy is concerned. Shortly after the Texas Nuclear Alliance began lobbying, the governor created a Texas Advanced nuclear office and passed the largest state level commitment to nuclear energy in US history, $350 million for the Texas Nuclear Development Fund. Reed says this money will go towards making large scale reactors and advanced nuclear startups cost effective.

REED CLAY
Right now, the unit economics don’t make a lot of sense for us to build these things. And so what we’re trying to do on the front end of this, what we think will be nuclear boom, is that the government is going to step in and push it down the cost curve. Eventually it’s going to be 100% industry driven.

And that’s that’s how it should be.

DUKE REITER
Texas has clear advantages in the race to build nuclear power in the US, given the number of companies in the state with appropriate capital and the necessary demand, it’s already seeing results. Dow Chemical and Energy are permitting a first of its kind, small modular nuclear reactor that will be built on site at Dow’s facility in Cedar of Texas.

But by far the most ambitious nuclear project in the state is Fermi America’s Project Matador. An 11 gigawatt AI data campus planned for Amarillo and co-founded by former Texas Governor and U.S. Energy Secretary Rick Perry. The project is planned to run on four full scale nuclear reactors backed by battery storage, natural gas and solar.

REED CLAY
One thing that Texas does really well is that we’re builders. I mean, I think a lot of this comes from the oil and gas ethos, and I think that nuclear has suffered from constant ideation, constant conceptualization. Lots of academia and all that stuff is necessary. And it’s been very good for the industry. But we’re at a critical moment for the industry where it’s time to build.

DUKE REITER
This brings us to our third and final observation as Texas pushes all of these energy systems oil and gas, wind and solar, and increasingly nuclear towards the future, is today’s intense industrial competition for energy aiding or undermining progress?

In his 2019 book Power Trip. Michael Weber wrote about the relationship between energy and human progress. Like this, energy innovation is used as a time standard that defines our eras. Energy conversion systems like the steam engine created the Industrial Revolution. The turbine engine enabled the jet age and the electrical transistor enabled the information age. That these human errors are marked by energy advances makes perfect sense because energy drives individual metabolisms and living creatures, and the urban metabolism of modern civilizations.

Building on Michael’s framework, the massive processing power of microchips has made the new era of artificial intelligence possible. Along with all of the opportunities and complexities it represents. This includes an enormous appetite for energy and the urgency for innovation in this sector. For example, the Stargate Data campus in Abilene, which we examined in our last episode, will run on 1.2GW of energy once completed.

That’s roughly the same power demand as the entire city of Austin. Many in the energy industry view this as a critical moment for the development of utility scale and small modular reactors, also referred to as smokers. Companies are even hoping to construct reactors directly on site of the data centers. Here’s Reed again.

REED CLAY
The amount of large loads moving to Texas is enormous. And you know most of those loads. And this is certainly true for AI, but it’s also true for other types of loads. They’re well-suited to co-location either behind the meter or, you know, some sort of co-located on grid, combination. And SMAs are extremely well suited to meet that.

They’re also well suited to follow the phasing of data centers. And so I think SMEs are likely to be a huge resolution to the datacenter problem. And that’s true in Texas and anywhere else they go in my mind.

DUKE REITER
Despite a wave of public and private investment, the first commercial SMR in Texas isn’t expected to come online until the early 2030s. But the race for AI dominance isn’t waiting. Developers are securing power however they can, including onsite natural gas and diesel generators that are raising real concerns about air quality, noise and strain on local water supplies in communities that never signed up to host an industrial power facility.

According to the market intelligence platform Clean View, Texas has more data center proposals that would circumvent the grid than any other state, leading us to ask, how are Texas utilities going to strike the right balance between serving industrial interests and fast, flexible power hookups, while at the same time increasing resilience across the entire grid? Michael and I reflected on whether the AI buildout should be considered a moment of crisis or opportunity for Ercot and the other grids in the US.

DR. MICHAEL E. WEBBER

I have mixed feelings and mixed thoughts about bring your own generation, because that might be a dirty generation. I don’t mind it as a short term race to power or bridging power decision, or behind the meter while you’re waiting for a utility hookup. But I actually like the idea of these data centers connecting to the grid, because it’s good for all of us to have a rich customer who has the money to invest in making the grid better.

So it’s probably in all of our interests as consumers, people who benefit from a reliable grid. There’s people who breathe air that we want these data centers to be connected to the grid. So that they don’t run gas around the clock for 40 years. So bring your own generation, but please connect to the grid as soon as you can and do your part to be a flexible, good neighbor and the system has a very different outcome than don’t invest in upgrading grid or hurt the reliability of the grid by taking all the power.

There are a lot of ways to do it that are bad, but I think if we do it the right way, it will actually more wind.

DUKE REITER
Well, two ways you could be a good citizen. One is what’s been called the rate player pledge, meaning don’t burden the ratepayers for the grid. And do you think that’s feasible? And you can understand why people would get behind such things if you’re in politics?

DR. MICHAEL E. WEBBER
Oh, totally. I mean, so in Texas, we have Lieutenant Governor Dan Patrick, who’s very conservative, who saying, basically, I don’t want data center and AI companies to get rich on the back of grandmothers and retirees. And Senator Elizabeth Warren, who’s very liberal, has said essentially the same thing. So there is political consensus that it would be bad for us if we all had to pay higher rates to make rich companies richer in a way that consolidates data and information.

So that’s why you get these ratepayer protection pledges, which is pretty non-controversial in many ways. And I’m convinced if we do it the right way, where these new rich customers improve the grid for all of us, and they’ve all they’ve basically said they’ll pay to make the grid better. We all benefit. Like it doesn’t have to be worse.

It could be be better. And I don’t think they want to be purely behind the meter because it’d be expensive for them to get the same level of reliability if they had to do it all themselves.

DUKE REITER
And one of your secondary concerns, besides ratepayers was what you already vocalized. I’m not sure about the quality of that choice of energy and thus pollutants and other things. But Texas, I think you’ve said this is known for somewhat lax environmental laws and the fed. So the EPA, I’ve also been suggesting, yeah, maybe we need to lighten up on some of the restrictions.

What do you make of the way that government at either the state or the federal level needs to weigh in on your concern there?

DR. MICHAEL E. WEBBER
It’s really a in Texas because there’s zero consensus about the science of climate change. And in fact, there is open hostility to that science. But there is attention to water quality of water quantity as well as air pollution. So air pollution is taken seriously because you can see it, you can smell it, you feel it in your lungs.

And so we tend to take air pollution much more seriously than, say, greenhouse gas emissions. And as a consequence, you don’t see Texas pushing to build a bunch of coal. The gas is seen as a cleaner alternative when a solar receives clean air as well. And despite the rhetoric in the speeches, when it’s already quite well in Texas alongside natural gas and others.

So I think there is environmental concern. It’s just not the same environmental concerns that other people have. There has been recent sort of easing of restrictions on mercury emissions on coal plants from the Trump administration. It’s not something Texas has called for. Mercury is considered to be bad across the political spectrum. Like just I don’t know who the stakeholder is saying, please, we want more mercury in our air.

Like, that’s kind of crazy. Tightening up on mercury emissions is actually good for the things that Texas produces, which is when silver in gas. So in some ways, Texas is a fan of the air pollution restrictions because it’s good for our business and people breathe. So that that is so it’s easy. But it’d be hard to build a coal plant in Texas today.
In fact, our coal plants are shutting down.

DUKE REITER
Based on our conversations with both Michael and Reed. It appears that Texas stands at a crossroads, and the direction it chooses arguably may shape the energy future of the entire country a war disrupting the world’s most critical oil corridor, combined with the accelerated power demands of artificial intelligence, are but two of the issues putting pressure on energy availability.
 
Natural gas production will almost certainly surge to meet the moment. That’s good for Texas profits, good for energy security, and good for the industries driving the AI economy. But it comes with a cost to the air, to the climate and to the communities living in the shadow of that growth. On top of this, questions about reliability persist years after Winter Storm Uri, and they’ll remain relevant as the state is racing to serve historic low growth and an influx of population.
 
How this actually plays out on the grid, in the legislature and within the state’s energy generation mix remains to be seen, but the potential for innovation is obviously ripe.

We’ll end with a reflection from Michael, who has dedicated his career to reminding us that it is possible to have it all. A strong grid, strong economy and a healthy and stable planet. Not only is it possible, but these issues are inseparable, and if the appropriate industrial demands, momentum around renewables and public will can align, Texas can be the blueprint for the nation.

So let’s bring this back full circle. The purpose of this discussion was the exponential growth of data centers, advanced manufacturing, and other draws on the energy grid and how you are going to satisfy that in Texas. You have said you think it’s possible for Texas to work towards zero emissions. So given the increased growth, how do you reconcile that goal, which is a great one with the exponential demand of the past few years?

DR. MICHAEL E. WEBBER
So it’s just to say we did a study that we released in 2022. So on the four year anniversary of it was around Earth 2022. Looking at is it possible to get the Texas economy, the Texas grid and everything else that happens in it to net zero by some future date 2050? And the answer is yes. And not only can we get it to net zero by 2050, but there are many pathways to net zero and all of them are economically beneficial, which is kind of fascinating.

And it’s in particular all of them are more economically beneficial than not getting to net zero. So these are pretty important conclusions. And this was before policy supports from the Inflation Reduction Act of 2022 came out later that year. This is before some other breakthroughs that have happened on small modular reactors or geothermal. There’s so many things we didn’t even include that are even more exciting technologies or more beneficial policies, and that would only make it better.

Now, if you double the demand and the grid, in some ways this actually accelerates the path to net zero because the grid is pretty easy to clean up. We have a lot of clean options between nuclear, wind and solar, geothermal, hydro, wave energy, blah blah blah, as well as things that are not that dirty like natural gas. The real problem in the grid is coal, and our coal plants are mostly old and mostly shutting down.

And so doubling of the grid might delay the shutdown of coal by a year or two, but doesn’t change the fundamentals of the market as we electrify not only where we serve, the load from artificial intelligence will serve the load for oil and gas. Oil and gas will be cleaner. If it’s operated electrically, then if it’s using oil and gas to operate itself.

And then as we create natural gas that we would provide export around the world, that will help shut down coal plants in China or Germany. And then if we use that electricity to operate our car, it will displace gasoline. So there, like all these things where the doubling of the grid sounds kind of scary and might lead to new emissions from a new gas right here or there, but overall should lead to lower emissions.

And this is the part that’s really nuanced and non-obvious. But I’m like, yeah, actually accelerating the power sector’s growth only helps us get there sooner than we thought. Even if that’s not your goal.

DUKE REITER
Well, Michael, I think your message that the increase of demand, whether it’s AI or other things, will actually potentially cause good things to happen to the way we generate energy and how we move it around and how we use it is refreshing. I think it’s a great goal. I think Texas being net zero as a leader is a great goal.

So I appreciate your optimism and trying to alert people as to how we get there.

DR. MICHAEL E. WEBBER
Thank you very much. I appreciate it.