China is killing the US on energy. Does that mean they’ll win AGI? - Casey Handmer

Today I'm interviewing Casey Hanmer.

Casey has worked on a bunch of cool things.

Caltech PhD on some gravitational wave black hole gimmick stuff.

Then Hyperloop, then the Jet Propulsion Laboratory at NASA.

And now he's founder and CEO of Terraform Industries.

Casey, welcome.

Thank you.

It's great to be here finally.

Big fat question I'm interested in.

To the extent that AI just ends up being this big industrial race, who can build the most solar panels, who can build the most batteries, who can build the most GPUs and

transmission lines and transformers and et cetera, et cetera?

This is not what the U.S.

is known for, at least in recent decades.

This is exactly what China is known for, right?

Where they have like 20x the amount of yearly solar manufacturing the U.S.

has.

Obviously, we have X-work controls right now, but over time, SMIC will catch up to TSMC's leading edge.

So what is the story exactly of how the United States wins this?

Like, why does China just not win by default?

Do you think that China is better at capital allocation than the United States?

Do you think the Chinese business environment is better for business than in the United States?

I think it made these first rings of this argument about these other industries where they're killing it, but like it doesn't seem to have hampered BYD.

Well, people say, well, look, they're so much better at building high-speed trains than the United States.

I would never hold up a flag saying I'm really good at building high-speed trains.

That is just a sign that you're really bad at capital allocation.

Why would you devote in 2025 so much industrial effort and money, right?

They're devoting a lot to solar overcapacity, which, in your opinion is the key to future industrial growth accidentally correct they call it the most important thing correct right which account for something well they're in a similar situation to europe but unlike the united states so the united states is is the luckiest goddamn country on earth because it's surrounded on two sides by oceans and on the other two sides by like friendly allies right china's surrounded by 15 countries who are mostly hostile to it right with no good like mountain ranges or rivers or anything to really separate them.

And then they get all their oil, almost all their oil from the Middle East, right?

In countries that they don't control, don't have strong diplomatic relationships with, on fleets of oil tankers that they can't defend because their navy doesn't have the ability to operate effectively in the Indian Ocean.

But you're working on this, right?

If you get synthetic fuels working at Terra Force.

Personally, yes.

Doesn't that asymmetrically help China?

Which might be fine.

It does.

It absolutely asymmetrically helps China.

We're not currently working with China.

We don't plan to, but the physics is very obvious.

And synthetic fuels have been around for 100 years.

There are projects in China right now working on synthetic fuels.

It would not surprise me if they were thinking pretty seriously about this.

Just to spell out for the audience, if China has all this electricity production, and the bottleneck is that only a third of final energy use in a modern economy comes from electricity.

The rest, you need gas and whatever to transport things.

Coal.

They use a lot of coal in general.

Right.

And what KC is inventing is a technology to turn that electricity, which only can supply a third of end uses right now, into synthetic fuels, which can supply 100% of the electricity your civilization needs.

So then China's energy advantage then becomes overwhelming.

This technology levels the playing field.

It levels the playing field a lot.

Right.

But at the end of the day, China still contains the poorest Chinese people anywhere on earth.

Never underestimate the capacity for an autocratic dictatorship to shoot itself in the foot.

I don't know.

Whenever I agree that they've obviously made bad decisions, but even if you have the poorest Chinese people anywhere in the world, they can still be quite rich.

Like Singapore is rich or whatever.

Also, there's parts of China which actually contain quite rich Chinese people.

Oh, yeah.

So you had to compare not all of China against the U.S., but Shanghai and Guangdong against the United States.

So you can have a part of China that is as big as America and as wealthy as America and as innovative as America.

Like the Indian middle class is larger than the US middle class.

But also it's not, it's not nowhere near as wealthy.

Whereas there are parts of China which are humongous, which are actually as wealthy as the United States and in many cases as innovative, et cetera.

Yeah.

No, I'm saying don't underestimate it, but at the same time, like, you know, we want to find the truth here, right?

And the truth is, like, we should not count the United States out of the battle and just give up.

We're very much still in the race now, provided we don't, you know, take extra effort to shoot ourselves in the foot.

So right now,

we are export controlling chips for the purpose of we wanted to keep our AI lead or stay in the lead in AI.

And we recognize this is a key input in our ability to compete in AI.

So we are going to export control China's ability to have these chips.

Energy is also a key input in this AI race.

And if China wanted to do the converse of what we're doing to them with these cheap imports, what they would do to us is to export control solar and batteries.

It would be asymmetrical.

It would hurt them worse than us.

If they did it tears?

Yeah, well, China obviously depends upon the US export market for its economic dynamism.

Right, right.

And the United States...

It's going to hurt both parties to sever that link.

But if you sever the link completely, China's ability to make advanced chips right now is basically not there, whereas the United States can make them.

And the United States' ability to make solar rays is embryonic, but it's actually not that far behind China's, right?

It's maybe five years behind.

If we decided we want to produce 100 gigawatts of solar capacity every single year, we're already on track to do that.

Okay.

Is it going to be as cheap as it is to do in China?

My views on this are somewhat different from the mainstream, which is great because this is a podcast.

So the mainstream view would say, well, China has cheaper labor, which is no longer true, because they're compared to Mexico, and it's got lower environmental regulations, which is true, and that it is more business friendly, which is absolutely crazy.

I've never heard like, there's no way you could justify it that like your company having to have a like an inspector from the CCP on its board who like harasses you by Xi Jinping every day, like helps you do your business.

And also like the rule of law is not great.

So like you're constantly having to pay bribes to people in order to stay in business, right?

The idea that the United States cannot compete against that with like mostly your fully automated solar panel manufacturing in the United States, which has cheaper natural gas by far, abundant oil, abundant human resources, great financial capacity, you know, world-leading automation, et cetera, et cetera.

It's crazy.

Like we could literally copy paste solar manufacturing factories.

How much additional solar power capacity do you think we could be putting on that's manufactured in the US by 2028?

This is a good question.

When Russia invaded Ukraine, I thought, ah, finally, the Europeans will see sense and they'll pull the trigger on like we need to localize production of solar panels from dirt to the finished module, which is like a roughly a four-stage process.

They didn't.

So they're still paying Russia like a billion dollars a day for the privilege of being invaded.

But at the time, I thought they could probably do that in about two years.

And I think the United States could probably do that in two years or less if you started today.

Like

it's currently 11 o'clock.

So like we're going to start cutting checks by noon.

And yeah, I think you could ramp up pretty quickly.

A lot of technology already exists here.

It's not like it has to be invented from scratch.

It's mostly a case of like putting in phone calls to all the different manufacturers here in Germany and so on and saying, we need you to 10 exercise to your factory.

Starting today, blank check, go.

I guess a lot of your predictions seem to be not predictions, but more like if we had World War II levels of motivation, if we had Manhattan level project level intensity around being of a specific thing, how fast could we do it?

Which is like an Elon, like if Elon was running the government, how fast could it happen?

Versus

for a brief period of time.

Maybe then we should put it like if Elon ran the government like he ran SpaceX, as opposed to the question of like, okay, what is actually practically likely to happen given that we are not treating it with World War II level intensity?

So if you look at XAI, which Elon is involved in, obviously, what are they actually focusing on right now?

They're focused on the chips, right?

Because they understand the key bottleneck is the chips, not the solar power.

Because even if Trump puts in a 200% tariff on Chinese solar and we're not able to bypass it via Vietnam or something, it's still a bargain.

It doesn't matter.

Like if you if you need solar to run your data center, it doesn't hurt in terms of the overall cost picture.

It doesn't matter at all.

What matters is having the chips, like competitive capabilities per chip and enough of them installed in your PCBs, in your data centers, hooked up to your liquid cooling, ready to go.

And that's actually something that Elon and his companies are great at.

It's like figuring out this mass production, semi-automated mass production.

They've got this facility in Texas, which is making the Starlink receivers completely automated.

But at what point does, oh, we don't have a solar panel factory become on the critical path, right?

I very much doubt it's ever going to be on the critical path.

There's dozens and dozens of manufacturers of solar panels worldwide that are all competing against each other.

So you're a big solar bull.

Right now, the hyperscalers are making decisions about with the data centers that they're building that are going to be one gigawatt, two gigawatts, in Meta's case, five gigawatts, how they're going to be actually powered.

And the people with actual money on the line are choosing natural gas.

And it's not like they can't see the learning rate and the, I mean, they are building things which will be online in 28 or 30 or something.

So, why are they wrong?

And you're right.

I mean, it's their job.

They probably know more about it than I do.

But no, in all seriousness, if you're like XAI right now trying to build Colossus one data center in downtown Memphis, right?

You want to get it done super fast.

So you're like, what are all the different things we need?

What are the factors of production to build this?

We need a building.

Well, we don't have time to build a building.

We'll buy a building.

Okay.

And we'll adapt it.

We need power.

We need thermal.

cooling.

That stuff you can deliver on a truck.

So that's what they did.

They need access to gas.

They had access to gas there.

They could tap into a local gas line.

And actually, if you can tap into a gas line, generally speaking, you can get enough power.

Like the energy transmission capacity of like your regular gas delivery pipelines is way, way higher than electricity overhead lines and it's easy to upgrade or whatever.

And so if you're in this situation right now, you say, well, you know, are we constrained by our ability to go and rent gas turbines?

And no, they're not, because there was enough available once, maybe twice, right?

But at a certain point, you realize, well,

as you grow, you start to touch all these additional constraints.

And some of those constraints include gas availability.

So there's a lot of chat about doing this in Pennsylvania, for example, where there's quite a lot of stranded gas in parts of Texas.

But at the same time, the United States is gearing up in its ability to export natural gas overseas.

So the price will not be infinitely low forever.

You start to run into constraints around turbine manufacturing rate, around

transformer production rate, around grid capacity, and also kind of running into problems where the AIs and the humans who depend on like kind of legacy electricity production and delivery utilities are kind of competing with each other.

We just saw this recent Ford auction in PJM result in

like kind of very high, like unsustainably high prices for consumers who depend on cheap electricity to heat and cool their houses and have general prosperity.

So

if you kind of look far enough in the future, you say, well,

you can just turn up the dial arbitrarily high.

You can say, well, we're going to put in a gigawatt a year.

Well, we can meet that constraint with gas turbines, right?

We're not going to run out of natural gas at one gigawatt per year indefinitely.

Okay, what if we're doing five gigawatts per year?

What if we're doing 50 gigawatts per year?

What if we're doing 100 gigawatts per year?

Like,

you can just break the situation.

Does that make sense?

Not to reach prematurely for analogies, but like Henry Kaiser set up the shipyard in Richmond, just down the road here, in San Francisco, over near Berkeley,

and

initially making ships for the British.

And then by the end of the war, four separate shipyards operating in parallel to the point where like he was bottlenecked on his supply of steel, because steel was rare enough in the war, because everyone was using it for different things.

Kaiser Industries went off and built not only a steel mill, but also a steel mine.

They went and started digging digging rocks out of the ground to turn into ships.

And it's the same sort of situation you have here where these massive industrial verticals.

And here I'm quite bullish on XAI in particular because the Elon Cinematic universe has just done so much industrial stuff compared to the Googles or Metas of this world, can kind of reach all the way through down into primary material supply if they need to.

The reason that these current plans are being done based on natural gas is that this is a sort of like PGM has all kinds of different sources of power, right?

They have nuclear as well.

They have gas, they have coal, all kinds of stuff.

And actually, this price here is probably driven more by the delivery cost growth than by the generation cost growth, if that makes sense.

So when you pay your utility bill, the cost is sometimes broken down by like a delivery cost and a generation cost, sometimes importation costs and things.

And so the delivery cost is the cost of basically what it costs the utility to build and maintain all the power lines that connect all the houses to all the power plants in some gigantic area divided by your marginal usage with all kinds of other complicated rules designed to make it fairer.

And the problem that we see, and the reason that PG ⁇ E here in California, for example, is perpetually on the brink of bankruptcy is that even though the cost of an additional solar panel or additional wind turbine or additional gas turbine or whatever is relatively cheap, getting that power to your house is actually really expensive.

Why?

Because you've got

generally

unionized labor that has to build and maintain power lines in areas that already have built-up infrastructure.

So you have like multiple collisions, whether this is like a power pole on your own street or like building a new transmission line, which requires you to like eminent domain land.

So you're in court for like years and years and years, spending public money litigating against other people who are also spending public money to litigate against you on behalf of other interest groups and so on and so forth.

And then you've got wildfires and it's just

like it's like the poster child for barmawka stees.

So one of the reasons that like we're going to see large-scale pruning of these grids is that we just can't afford under our current regulatory regime to maintain.

When you say pruning, are you just like everything will just go off-grid?

Well, I mean, it's fairly clear to me that for really large captive loads like our data centers or

aluminum refineries or whatever, you're going to have to build your own power plant for them, which is how it used to work.

If you had an aluminum plant back in the day, you would be building your own power plant for it as well.

It seems inefficient to have redundant power plants at every single

industrial.

Let me paint a grand vision for you.

It would seem inefficient, but actually, if you are sensitive to the cost of power expressed, maybe in supply elasticity or something like that, you just have to do it.

There's no two ways about it.

Is it inefficient for the XAA Colossus data center to have its own captive power plant, which it does, right?

On the backs of a bunch of trucks in their parking lot.

No, it's not inefficient.

It's the cheapest way for them to get power.

Okay, but big picture question: across different kinds of ISOs, like from Texas to Pennsylvania to whatever,

people are building data centers which will not be online for many years, and they're choosing natural gas.

What's going on?

Well, I think they, you know, we haven't completely exhausted the supply of turbines relative to GPUs.

And do you have some estimate of when we'll run out of because we can also make more

everything before about 2030 are spoken for at this point?

Yeah, you could make more turbines.

The funny thing is, like, it's actually relatively expensive, I think, to spool up additional production of these turbines, for example.

So actually, here's one thing you have to grapple with sooner or later.

Conventional power generation is a steam engine.

So you have

some kind of chemical that you find inside the Earth that is out of chemical equilibrium with the atmosphere, and you burn it and makes heat.

It could be coal, could be gas, oil, water.

You're going to be the true birds and bees here.

Yeah, exactly.

And it makes heat, and you boil water, and the water goes through some kind of mechanical contrivance that creates motion, and then that motion twists the magnet and generates an electrical field, which then pushes electrons down wires, which then push electrons through a series of gates that then approximate, thinking it's kind of complicated.

But the key, the key step in this, which is converting heat into electricity, in the most efficient, most common, this is the same if it's a nuclear plant or a gas plant, combined cycle plant, or a coal plant or whatever, is what's called a Brayton cycle.

A jet engine on an aircraft is a Brayton cycle as well.

And just anytime you have a Brayton cycle with like a bunch of in-canals spinning at high speed, it's just going to cost you like a bunch of money.

Sorry, because it's inherently inefficient or what?

It's just inherently expensive to build.

Okay.

What is the cost of so

like GE makes these 100 megawatt gas turbines, right?

Yeah, I guess, yeah.

I don't actually know what the retail price is.

I would suspect that if their price is

flexible, it would have gone up a lot.

But if I recall correctly, it's like $35 a megawatt hour is just the flag four cost for

$35 a megawatt hour just for just for the Brayton cycle, right?

So we're not talking about the fuel, we're not talking about the heat exchangers, we're not talking about the cooling ponds or

anything like that.

Just the amortized cost of the high-speed, high-temperature spinning components is 35 bucks a megawatt hour.

Do you think the hyperscalers are being irrational or do they have some reason?

Oh, to be clear, they don't care about cost.

For cost of power, this seems extremely like this is very counterintuitive.

So for like grandma Kettle in Pennsylvania, she's very sensitive to electricity cost and we don't really want her to like suffer in her retirement from unaffordable electricity costs and having to sit there shivering.

That's not the image that we want.

At the same time,

what is the economic value to you of using, I don't know, Claude or Grok or whatever you use, like on a monthly basis?

But it's obviously much more than the subscription.

But is it like 10 times more than the subscription, maybe?

Yeah.

Okay, let's say.

So let's say the subscription is on the order of 10 bucks.

The value is on the order of 100 bucks.

No, actually, probably like 100 and 1,000.

How much does it cost XAI or Anthropic or whatever to serve?

The variable cost of serving it.

And electricity is less than than 10% of the actual cost of

well, their cost of serving it is like maybe a buck per million tokens or something like that.

And the cost of electricity is about 10% of that.

So it's like 10 cents of electricity is generating $1,000 worth of economic value.

So it's very obvious that Anthropic could be like, oh, our electricity cost basis has increased by a factor of $100.

And now instead of paying $0.10 on your $100 bill for power, you're paying $10.

So we're putting

your subscription up to $110 for an electricity capacity charge.

And then they could go out and buy turbines for prices that would make your eyes water.

Okay, so then why are we going to get the solar future?

Like in 2032, we're going to have hundreds of gigawatts of extra demand for data centers.

And at that point, most of it's coming from solar.

And why is that?

Well, you just, there aren't enough turbines being manufactured.

Right.

But also, I think in the early 2000s,

we can probably overrelay the graph of how many turbines are being manufactured.

Like right now, we're at historical.

They've ramped up basically to the early 2000s right again.

But I don't know.

You got to make more solar panels as well right like there will be uh supply elasticities for both solar and natural gas is there some reason to think that it's worse for the supply chain involved than having a natural gas power data center than a solar pair i do um the learning rate for for natural gas is nowhere near as steep as solar which just tells you that it's easy to make solar panels much easier to make solar panels there are actually very few manufactured products which are easier to make like the learning the learning the uh the right slow coefficient is 43 percent so every time we double communal production we get a 43 perduction in cost and what is the basis of

why are we finding 43% worth of things that can be made cheaper or more efficient every single year?

Well, I mean, roughly speaking, there's like 10,000 manufacturing process engineers working on this full-time.

Right.

That could be true of any process, right?

But no other process sees the kinds of learning.

That's simply true that Solar is saying.

Yeah.

So in order to sustain this over a long period of time, you obviously need to have demand elasticity that exceeds your learning rate.

So otherwise, you would, after a couple of booms, you would saturate your market at the current price and you'd have no additional growth.

But in this case, like, you know, every roughly every two years, we're doubling production, two or two, two and a half years doubling production.

The price is coming down by a factor of 40 odd percent.

So like roughly 20%, 15, 20% per year.

And then just as a result of that price reduction, demand skyrockets by like probably six times more than that additional marginal capacity, like production capacity increase.

And this is one point where I'll say, actually, the pros, so-called pros, are definitely wrong.

Conventional wisdom is like, oh, solar demand is going to saturate this week.

It's going to saturate.

We've got a graph here somewhere that's like, this year is it.

It's never going to grow anymore.

And instead, it's just like blasting out the top of the graph.

And

this conventional wisdom is wrong.

It is not only the case that solar adoption production price decreases are continuing, they're accelerating, and the rate that they're accelerating is still accelerating, right?

Wait, sorry.

The rate that it's accelerating is accelerating?

Yes.

As measured in the total fraction of energy that's coming from solar?

In the sense that its fitness for the markets that it is being produced for is increasing over time.

So it is still extremely early.

We're still at like the Apple II computer era.

Backing up, the story is that the reason solar is getting cheaper is because there's a lot of demand for more solar and that demand can sustain economies of skill or whatever is going on.

Yes.

I'm going to go on Limb here and agree with Elon Musk on this.

Then shouldn't that also be true of

gas turbines and transformers and power stations and whatever else that's required for the non-solar future.

Because even there, we're expecting AI to drive up demand for power regardless of the source.

So to the extent the story for solar becoming cheaper over time is just that like, well, demand will go up and that will drive efficiencies.

Why isn't that true for?

Well, let's say you're a bank and you're trying to decide whether to lend, I don't know, like gee, a bunch of money to like expand production of their gas turbines.

Yeah.

You can write them the checks today and then they'll start scaling up their factories and then they'll, you know, they'll start start to see the benefits that in three or four or five years.

You don't know if the AI bubble will have burst by then.

You don't know if China will have invaded Taiwan by then.

You don't know if Siemens or Phillips or someone will have out-competed you.

You don't know if GE's major looming structural problems will cause it to be unable to compete as it has in the past.

You also don't know, like in order to make that money back, you have to then operate that plant at that capacity for 20 years.

And if I was looking at the same charts as they're looking at right now, I'd say, well, what are the odds that in 25 years time we can produce gas turbines at a price that is relevant in a world where solar is already at its current price?

Right.

And batteries are at a price where they're already.

You cannot win.

I feel like there was actually a similar discussion a couple of years back or a year back

when AI people were like, no, AI is real.

This is going to happen.

And then SK HighNX, Samsung, et cetera, were like, we're not ramping up HBM production because like, oh, HBM is used largely for AI workloads.

And if this demand doesn't continue, then our manufacturing, additional manufacturing capacity for HBM will not have been worth it.

And then there was another bottleneck with co-ops.

What happened after that?

Did they end up indeed ramping up their production?

I think so.

Well, so when someone says we can't do it, we won't do it nowhere, no hope.

I mean, not in the US.

What they're saying is, write me a check.

Right.

Right.

And they did.

And now Samsung's coming on board in the States to build T6 with XAI, I think.

So like they all got there in the end.

Maybe it's worth going into the numbers, right?

So right now, 43% of U.S.

data center power consumption is from natural gas.

And basically, you think asymptotically that will be like 100% solar if you go to like 2040.

Yeah, so I mean, obviously, like legacy production coal and stuff's going to retire over time.

Right.

And if a gas plant is still making money, people will keep operating it.

But at a certain point, it is the case right now that operating a coal plant costs more than building a new solar plant.

So it's just cheaper to

I want to know what the

and obviously capacity is going to increase a lot.

So that helps to dilute the existing production.

And also the

amount of use is going to increase a bunch, right?

Like the amount of data center use of energy will just be exponentially higher.

So the new stock matters a lot as compared to the existing stocks.

Anyway, so I want to know 2027, what fraction is natural gas?

2030, what fraction is natural gas versus solar?

For new load or for

the new load.

For new load?

2035, et cetera.

Basically, like, okay, if eventually you're right, that we'll pave the earth in solar panels to sustain our quadrillions of AI souls,

what is the pace of that?

Well, I think the question to ask is like,

what is the major constraint on that ramp up?

Right.

And then everything else will just drop in behind.

And I suspect that the hardest thing to make will always be the silicon, like the GPUs.

So the question is really,

how quickly does TSMC ramp up its production of GPUs?

And that's a question for you, not for me.

I'll just use some numbers that AI 2027 used for their compute forecast, which even if you don't buy their singularity thing, I think they did a reasonably good job with crunching crunching the numbers on their compute forecast.

And I think they said there's on the order of 10 million H100 equivalents in the world today.

And I think they said by 2028, there would be 100 million.

So basically 10x more H100 equivalents in the world.

About a kilowatt each, something like that.

Yeah.

Yeah.

Yeah.

Okay.

So it's like 100 gigawatts.

Right.

Okay.

And that's, that's, yeah, I mean, that sounds roughly right.

Um, you're not the first person to give me a call and ask me about this.

I'll put it that way.

I'm not going to name names, but like pretty much all the names you've heard of have given me a call and said, like, we know that you're a minority voice on the paper that came out recently with Scale Microgrids talking about how you could do 90% solar, 10% gas.

And I said, You can go the way 100% solar.

I wrote a blog post about it.

And so they always call me up and say, What about this?

And they're all talking like five gigawatts in the next few years.

So, and that's just like 90 plus percent solar for just those.

So, I think within a few years, we'll probably see that like the majority of new DCs that are going in will be mostly solar.

Within sorry, how long?

Let's say by, let's see, what's it 20?

2027, majority of new DCs going in at that point would be mostly solar.

as in groundbreaking at that point.

But if you're groundbreaking in 27, you're probably like planning it now, right?

Oh, that's why they're calling me.

Yeah.

My consulting fees are extremely affordable.

But really, I don't have deep visibility because I'm not in the same room with like with the meta people as to like when we're going to hit the wall on Transformers and when we're going to hit the wall on like just how much like municipal like peak peak load can we shave off, which is the latest thing that's been doing around, which it turns out, like there's a handful of places in the United States, and by handful, I mean like literally a handful,

where like there might have used to be an aluminum smelter.

So there's a bunch of like latent capacity in the grid, and there's also a bunch of generators on the grid that are notionally turned down and they're like operate at say 40-50% capacity factor.

But they max out at about 80% capacity factor because you've got to bring them down for maintenance pretty often, right?

Especially if they're old.

And so they're saying, well, you know, we could pay you just to like operate this old coal plant or something at higher capacity.

It'll go down this power line to this place where the smelter used to be.

We'll set up there.

And then we promise to like curtail when you need the power, which basically means they just have like a massive captive battery planned as well, which is fine.

You just buy that and arrives on a truck.

The major advantage to doing that over the pure solar play is that the power is already there.

So there's no risk there.

There's no, and then you don't need a massive amount of land.

Like the problem with the solar approach is that there's no two ways about it.

It's just it's a farming operation.

You need a huge amount of land.

The total amount of land that you're using, less than 1% is under batteries, under roads, under data center structures, et cetera, et cetera.

It's mostly solar.

Right.

Okay.

So

let's get into what this,

if you've got a five gigawatt plant you want to build.

Yes.

Break down the numbers for me in how much land in terms of solar you need to farm this out.

And especially, I was talking to somebody in this space and they said, look, the big problem is not, obviously, cost for the cost of energy for these data centers is a small fraction of the total cost.

Most of the cost is going towards chips.

So then the issue is just

can you make the energy available?

And they were saying, even though solar panels themselves, you can acquire, the issue is getting that much contiguous land and getting the permitting to interconnect it or whatever the word is is like apparently a big hassle.

Yep.

It's kind of a nightmare.

Yeah.

And so they're like, well, at that point, is it actually easier than just getting on the grid?

But yeah, what's your, like, if you need tens of thousands of acres of solar, where can you do that without and get like basically in Texas?

I mean or like there's this very popular misconception that like there's not enough land to do solar right right this is garbage if you've ever flown in an aircraft in the united states and you've ever looked out the window you'd be like oh wow look there's a lot of land you could put solar on especially west of like 110.

yeah right does it need to be flat or no no

doesn't matter

um like do trees grow on mountain slopes

so it doesn't matter right um and the total amount of land so just for reference nevada is something like 80 million acres or something like that so just Nevada, which is like 90% federal land, is 80 million acres.

And

I would never say that we should sacrifice Nevada to the AI and pave the entirety of Nevada from one wall to the other.

But I just saw a bunch of things in my feed the last couple of days that like, you know, Vegas is falling apart.

And

well, like no one, the boomers are retiring.

No one goes there anymore.

People would go to see like the

100 million acres of solar.

Yeah, okay.

So five gigawatt plant.

So even if you did it in Nevada.

We can do it anywhere.

You can do it anywhere you can find the land.

People say, well, you can't do this in Europe because Europe doesn't have solar power.

Europe has solar power.

I've been to Europe in summer.

It's like sunny for like 20 hours of the day.

It's a bit seasonal, right?

But that's not a big deal.

Well, I mean, it is because

energy is a small fraction of the cost, you care more about making sure the ships are running all the time, right?

Yeah.

So in practice, what happens is, let's say Europe hypothetically awakens from its slumber and decides it wants to participate in AI.

Okay, I hope it does.

They say, well, we're going to have to put 100 gigawatts down of solar at some point to build these data centers.

It'll most likely be in southern Europe.

Spain is not particularly heavily populated.

That's a great place to start.

So we put in 100 gigawatts of

solar data center in Spain.

And then in order to achieve, you know, basically, if you're spending like AI hyperscaling money on your GPUs, you want to have like four nines of uptime in order to maximize your like tokens per dollar spent.

Okay.

Tokens per dollar spent on the entire project, not just on that.

This is a very subtle point.

I can go into vast detail on it later on, maybe.

But let's just say you need four nines of uptime.

In order to to achieve four nine's uptime in like the middle of winter, you need to have a lot of solar overbuilt.

Is solar overbuilt a bad thing?

No.

Is the fact that we produce 40% more food than we need a bad thing?

No.

It's much better than producing 40% less than we need.

And it just means that effectively you have a giant captive power plant attached to a data center that

99.9% of the time produces more power than it needs, and 99% of the time produces much more power than it needs, and that can now actually be the source of power that the local utility, instead of being like, naughty, naughty data center, you must disconnect when we tell you to, they say, hey, data center, I notice you've got like a bunch of power you're not using 360 days of the year.

Would you mind ever so much if we threw a power cable over the wall and we powered our entire town off your spare power at like essentially zero marginal cost, plus whatever residential batteries that we need in addition to local power supply?

Brian Potter had a good analogy in his blog post about this where he's like, I don't know, my MacBook has a terabyte of storage

and I use like 100 gigabytes.

And I just got the terabyte version because it's cheap enough and I might need it at some point that it's worth it.

And so you're saying solar gets so cheap that it's the way we'll treat hard drive space.

Just like get a bunch of excess.

Yeah, but also like the

market will be made

at the

place like the new the new marginal like consumption and production, right?

So like

All the people who are working in the space right now are like, oh, I'm in the business of delivering power or storing power.

I'm going to serve the AI market because that's where all the growth is occurring.

That's where all of US GDP growth is occurring right now.

I guess you didn't answer the question of, yes, theoretically we could do this, but is it going to be possible to get the permitting to have tens of thousands of acres of contiguous it doesn't need to be contiguous.

Well, I mean, it helps if it's contiguous, but it doesn't need to be convex.

So this is, you know, you can have a bit over here and a bit over there, and you can wire them together relatively easily.

In fact,

in the limit, you have fields upon fields fields of solar arrays with tell me your dream case.

Okay.

Fields upon solar arrays as far as I can see.

And then within the solar arrays, roughly in the middle of them, you have your batteries and your.

I play Factorio.

I remember this.

I remember this optimal layout of like batteries and

your batteries and you've got your data centers.

So in terms of ground floor area, it's roughly, let's say, 10%

racks, 10% access to the racks,

maybe like

50% batteries stacked up on top of each other and rest is cooling, something like that, in terms of what sits in

the centralized node, right?

And that could be 100 megawatts or it could be 10 gigawatts, depending on how you want to scale this.

But then all you need to connect that to the outside world is like an optical fiber, right?

An optical fiber cable, which you can string up on poles, you can run it underground.

You could even use microwave links if you really wanted to.

You could use Starlink if you really wanted to.

I don't know what the Starlink would be fast enough.

I'm not sure if it's like capacity is high enough.

You could use Laserlinks if you really needed to.

And that's it.

It's like this completely self-contained world of like...

Because it's off-grid.

Yeah, of computation that occurs off-grid, like on private land, somewhere in the backwoods of Texas, where no one lives and no one will ever live because it's completely inhospitable to humans.

In terms of the ratios,

one trend that was impressed upon me is that the power density of racks is increasing a lot.

Yes.

As the flops for GPU are increasing.

It's like a megawatt per rack is what they're heading to now, which just seems bananas to me.

I think it was even

more than that.

But yeah, yeah, yeah.

So let's, let's get concrete here for a second.

Let's say you got one rack and that's one megawatt, and I'll leave the cooling to like someone who specializes in air conditioners, but it's basically throw air conditioners that the problem.

And then you have batteries.

So in order to get four nines of uptime on this, you need, in South Texas, you actually need less than this, but let's just say 24 hours worth of battery storage, right?

Because that means it'll get you through

two bad nights in a row, basically.

And actually, it turns out that you can significantly decrease power consumption with a very small reduction in overall compute.

So if you've got like three really bad days in a row or something, you can actually just like you can dial back your power usage quite a lot without compromising your inference or

training.

Okay, so you've got, say, a Tesla power wall, something like four megawatt hours.

So one megawatt rack, and then six Tesla mega packs, each of which is roughly one truckload worth of stuff.

So you've got like one truckload worth of rack, and then like six truckloads worth of batteries.

And then in order to operate this at an average power of one megawatt, your solar arrays in Texas would be something like 25% utilization.

So on average,

if the sun came up every day and the day was the same length all the time, you would need four megawatts of solar arrays, which is about four acres of land.

But in practice, because you're owing for four nines instead of like one nine, you need an overbuild about two and a half X.

So you've got about 10 acres of solar.

So 10 acres of solar, six truckloads of batteries, one truckload of data center and some cooling stuff.

And

for how big of a

one megawatt.

That's just a one megawatt.

So 10 acres, one megawatt

kind of situation at four nines.

Yeah, so if you want five gigawatts, then that's 5,000 times

times 10.

So 50,000 acres.

And actually at larger scale,

you can probably cut all those numbers down by 10, 20%, but like on that order.

And like 50,000 acres sounds like a lot.

It does sound like a lot.

The amount of land put aside for Oak Ridge was 100,000 acres.

The amount of land put aside for Hanford was about 100,000 acres.

Was Hanford?

Hanford was where they made the plutonium in the Manhattan Project.

But I don't know how big that was.

It was about 100,000 acres.

Okay.

Was it like, oh, this is so small?

And then you're like, oh, but it's 100,000 acres.

Well, so the reason they, and it's still largely unpopulated now because it's a national laboratory.

But the reason they did that was they thought, oh, we're going to need four piles to produce plutonium.

These are not nuclear reactors that produce exothermal energy.

So you can't actually make nuclear power with them, but you're making plutonium with them.

And then in the end, they only needed two, I think, and they wanted them spaced out because they thought they might just spontaneously explode.

And a bunch of other facilities and plants and and stuff as well.

Austin Vernon had an interesting blog post where he said that if

you allow for, if you have like diesel generators or something, which can

take over

the generation for like 10% of the generation during these, you know, with the winner or something,

then you can have a 60% reduction in the amount of solar panels you need to install because you don't need to have, you don't need to plan for that contingency.

Yeah.

Yeah.

So I mean, basically there's a balance here.

So this is not a very complicated optimization problem.

Like for people who do optimization problems for fun, this is how you do it.

You start off with a bunch of NREL data on what your solar abundance is in this particular part of the world.

And then you just start throwing solar panels and batteries at it over like the course of a one-year simulation until you hit the number of nines you want.

And then you, to an extent, you can trade the amount of panels and the amount of batteries you've got back and forth.

And there's like a very, very broad optimum.

Right.

Right.

Or you can throw in a third thing like a diesel backup or a gas turbine or whatever.

The issue here is: look, if these, if Meta or Microsoft or whoever just wants to get something off the off the ground,

this might be low OpEx to have this huge solar farm, but high CapEx

where you need to hire like 30,000 people to go out in the middle of a desert and install 50,000 acres worth of solar panels.

And they're like, why would I not just buy like 50 gas turbines and stuff like that?

Why don't you outbid like Microsoft or Meta outbids Google or something for the last gas turbine that's available that year?

Yeah, I mean, totally.

The thing that I think Meta has realized is like, it's like Zuck is running out of time to spend his money to win.

The CapEx is not crazy high, just to be clear, the CapEx is still dominated by just the GPUs.

So how much does five gigawatts worth of GPUs cost?

I don't know if my numbers will be wrong, but like $250 billion or something?

Yeah, $250 billion.

Sounds about right.

Yeah.

Okay.

So

is 50,000 acres going to cost $250 billion?

in Texas?

That's so much money.

Wait,

I did the mathematical money.

That's a lot lot of money.

Maybe hundreds of millions of dollars, something like that.

It's like literally 0.1% of the cost is land, right?

How much does a megawatt of solar cost?

Well, if you go and ask the usual suspects, they'll $20 million.

But this is one of the things that breaks my brain at Terraform, which is my day job, which is that the modules themselves,

without tariffs, would be like $0.8 cents a watt.

So that's like $80,000.

Eight cents a watt?

Yeah.

But they're like $1 a watt, including installation and everything.

Including installation and everything.

But

the panels are the magic part.

They're the thing that turns sunlight into pure electrical energy at 25% efficiency.

Everything else should be less than that.

That's what we're...

If you want to work on that project, come and work with us at Terraform because we're very cost-sensitive.

We'll give you an opportunity to chill, don't worry.

Constantly.

But no, but in all seriousness,

the central takeaway

is that the hyperscalers are not power cost.

sensitive, they are power availability sensitive.

And for all these things, you just run into this like supply elasticity wall at the sort of rates of increase that we're talking about.

And solar is by far the best option for like fire hosing energy at a given problem.

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All right, back to Casey.

Between the fact that the

maybe solar prices will go down and the fact that demand is going to go up.

Do you think electricity prices are likely to rise?

Yes.

But electricity prices at this point are a reflection of a regulatory irrationality, right?

And it's the same situation in Europe and Australia for that matter.

Like, your prices will rise until you've had enough.

And you say, no, we demand that you allow us to take advantage of power technology that's been invented.

in the last 50 years.

In terms of things that are causing us to lose to China, tariffs are neither here nor there because, as we've discussed, we're not sensitive to cost on power, but the environmental regulations that are actively preventing us from deploying renewable energy in the United States, like this is the reason Texas is winning.

Texas is out deploying California 10 to 1.

The regulatory environment around solar is just insane.

It's insane.

The regulatory environment.

Okay, so in the United States, part of the reason that solar has not been deployed at massive scale yet is that a bunch of laws went into action in the early 1970s that were intended to protect our environment.

And that makes a lot of sense.

And our environment is a great thing we should protect our environment.

I mean, I think people will be familiar with NEPA and whatever, but how is it especially impacting solar?

Well, let's say you've got a bunch of private land out in the middle of nowhere, right?

And you want to build solar on it.

You'll probably end up triggering NEPA, right?

At which point you now have to do what is not in the law, but considered necessary under current regulations, which is like your four-year environmental impact review, which generates like so much paper that just the environmental impact of producing the report, because you have to cut down trees to make paper, is more than the environmental impact of just deploying the solar.

Like this is bonkers.

It is crazy town.

The thing that drives me particularly crazy in Southern California is that just because solar is kind of new and off-grid solar is very new,

unless you're very, very careful, you end up getting regulated as though you're trying to build a chemical plant, even though it's a solar array.

And the impact of solar array on desert is arguably positive because it shades the ground and improves soil moisture retention.

If you wanted to reverse desertification, you would basically just deploy solar panels on it and that would pay for the process.

But you end up having to go through a more stringent environmental review process than if you just wanted to grade the whole thing and cover it in concrete or grade it and then park a bunch of like old rusting cars that are dropping oil into the aquifer, right?

Which, in many cases, you don't need a permit for at all, right?

But to build the solar, you have to go through this whole process.

And if there's one thing that anyone listening to this can do, it would be like have a category exemption for solar deployment, or just like if I put money in escrow account that says, like, if after 20 years we have to pull this out, like, we'll pull all the solar out out of the desert and it goes back to being desert, right?

I will do that in a heartbeat.

But if I have to hire another biologist for $10,000 to be like, well, on that 40-acre plot, we found a tuft of grass, which we believe might be a critical, one of the 20 species that this particular species of bee sometimes eats.

And this species of bee is not technically endangered, but it might be at some point in the future.

Therefore, you can't deploy there, even though it's like zoned, unrestricted industrial, and it's sandwiched between a rocket test stand and like a chemical plant, for example, in an industrial part of the desert.

I will like, I'm going to become the Joker.

It is insane.

It is like, I just think we need to be a bit balanced about this.

It's like,

I don't want it to like drive species into extinction, but like the meta problem here is if we don't move our industrial stack off fossil fuels in 10 or 20 years, first of all, we'll get poor the same way UK did, right?

Because they ran out of coal, basically.

And the second thing is, we'll get poor because we'll flood our coastal cities in Florida underneath climate change.

We need solar synthetics for that part.

We also need to do sulfur injection and a couple of things.

People will point out that transmission line growth has been stuck in a rut for decades and we have all these bottlenecks and stuff in terms of substations and

transformers, et cetera, et cetera.

Why will this not hamper this

abundant solar future?

That's a really great question.

So actually, you and I had a conversation along these lines almost two years ago when we first met.

And

it caused me to go and write a blog post.

So this is a good way of thinking about it.

I think there's another blog post you wrote, though, which was also our conversation we had, which is how to feed the AIs.

That's much more recent.

Yeah.

That was after a dinner, I think.

Yeah.

And to be fair, like, I usually am fairly clear in my blog posts if I'm posting or if I'm serious.

But this one, actually, I'm dead serious on.

It's actually the one where I'm.

It's like the most out of the money bet as well.

Like everyone else that I consider to be like a respectable forecaster in this area disagrees with me on it.

So that's one side.

Well, so the grid, we know where the grid is expensive.

It's a lot of wires strung up in like hard to reach places that are hard to maintain, especially as the workforce ages and regulations and all the rest and eminent domain and so on and so forth.

So grid's not going to get cheaper anytime soon or easier to build.

And if you look at the projections of like how much grid

DOE would have us needing to build in the next 10 years versus how much actually being built, it's like, it's not even in the same order of magnitude.

So you say, well, are we totally screwed?

The answer is no, we're not totally screwed because batteries actually do the same job that the grid does.

But this is kind of weird to hear me out.

The grid transports power from one place to another.

It transports almost instantaneously at the speed of light.

So it's actually performing a spatial arbitrage.

So the idea being that right outside the local nuclear power plant, power is really cheap because they make a lot of it.

And in your house, power is really expensive because you don't have a power plant in your house.

And you pay the intermediator a small fee and they allow this trade to take place.

And that's basically how the grid works.

And until quite recently, the only way we had of meaningfully storing energy, like storing electricity on the grid was pumped hydro.

And that only works in a handful of places and

limited capacity.

And it doesn't work all that well either.

The efficiency is not great.

Now we have batteries.

Batteries store power at one time of day, and they release it at another time of day.

So batteries are performing a temporal arbitrage, an arbitrage over time.

But they can be local or they can be more remote.

I think we'll end up seeing batteries next to the solar rays and batteries in in the middle of the grid at substations and batteries on the sites of existing power plants that get turned off and batteries in your house and batteries everywhere in between.

One way of thinking of this is what is your per capita allocation of batteries in kilograms per head?

And like when you and I were much younger, you know, the lithium-ion battery was in a cell phone, say, so you're like, I don't know 10 grams per person or something.

And nowadays, half the people in this town drive Teslas.

So your per capita allocation of lithium-ion battery is 100 kilograms or something like that.

So we're talking like four or five ooms of increase of total battery per person.

That trend is only going to continue.

And then you say, well, okay, we've got batteries that are performing this temporal arbitrage and the sun comes up every day, right?

So like the the power swing from like midday you're otherwise curtailing the solar array to dusk when everyone's watching T V and cooking dinner or running the air conditioners to cool off in the evening is very predictable, right?

Whereas like, oh, we had like really bad weather, so we had to use the power line that runs to the power extra power plants over by hoover dam or something doesn't get used nearly as much or like it's its peak utilization has happened almost never which means that the utilization of the batteries is on average like let's say 300 days a year and the utilization of your most expensive grid most highest voltage grid assets is much much lower and that includes like the transfer the substations and transformers and stuff that serve that that's really bad position to be in if you're a grid operator right because you've got this this aging

existing thing that the batteries are cannibalizing.

The batteries are being installed behind the meter.

You don't have a say in whether they're being installed, how they're being used.

All you know is that

your utilization of your asset where you get to charge top dollar for it is just dropping year after year after year after year, as the same time as your operating costs are increasing year after year after year.

So it's just very clear that the average distance the electron is going to travel between generation and consumption is going to decrease in the future pretty radically.

Yeah, I guess the it's already decreasing.

It's going to continue to decrease.

The difference is that,

I mean, it's especially helpful for solar, but like solar is the one that's most intermittent.

You can predict the amount of solar power you're going to get in three days pretty accurately because of weather prediction.

But you can't like buy more battery.

You can't change the amount of batteries you have.

Well, actually, in the limit, you can, because you can put them on trucks and drive them around.

Right.

So there could be a capacity market for batteries where you drive them around to people who need them in a pitch.

In practice, it's going to be cheaper just to double size your battery

because batteries are going to continue to get cheaper and cheaper and cheaper and cheaper.

But what it does mean is you can say, well, I know that I'm going to have

three low days.

So I will start curtailing now by 5%.

So I don't have to curtail by 50% in three days.

And then overall for the whole year, I'll only curtail

five hours.

So I'm still at four nines instead of having to curtail 24 hours because I can't predict the weather.

Okay, so let's assume you're right.

And then, I mean, I think at some point you will be right.

Like maybe we disagree about.

Sorry, I'm not qualified to disagree.

Maybe you and some other person might disagree about what year it happens, but I think it's hard to deny that in the asymptote,

our civilization is headed towards lots of energy used for AI and a lot of that coming from solar.

In that asymptote, I've just like, I want to get like the crazy nerd sci-fi, like, what does our civilization look like?

What is happening in this, you know?

Scottish level one.

Yeah, let's wait till get to turning the entire earth into an AI factory, but more like, I don't know, the 2030s,

where you've gotten multiple people who are building on the order of five gigawatt or 10 gigawatt sites.

The value of the hardware is dependent on its complement, which is the software, right?

Like right now, AI models are fine.

And so the hardware they're running on, the economic value they can generate is sort of bottlenecked by how good the software is.

But if you actually had HEI, if you had like a human-level intelligence or maybe even better, ideally better, yeah.

Yeah.

Running on an H100, that H100 is worth a lot, right?

Like we're paying a lot for humans to do work.

Right now, I don't think AI is that valuable.

Like the models themselves aren't super, super valuable in terms of just pure economic value, right?

Open AI is generating on the order of 10 billion ARR or some, you know, 20 billion ARR.

And that sucks, it's terrible.

How can they sleep at night?

I know.

But like for context, McDonald's and Kohl's generate more yearly revenue than that.

But I think the promise of AGI

is to automate human labor.

Human labor generates on the order of $60 trillion of economic value.

Or that's how much is paid out in wages to labor around the world, right?

So that's what AGI gi can do and even if you curtail it to just white-collar work that's still tens of trillions of dollars of value so once we have models which are actually human level

they will be worth at least that um pending the fact that you can build them well i don't think we should constrain ourselves to being like oh well maybe that'll be some fraction of current payroll right because like that that's kind of a very contingent on like humans being humans thing yeah no i think that's a lower bound to be clear Oh, yeah, lower bound for sure.

But like, if you think about like

someone trying to like estimate the upper bound for the market value, the market cap of like Caterpillar, right?

Based on like, well, it takes, you know, this many men and like burrows and wheelbarrows to like dig a trench.

And so, you know, it couldn't be more than that, right?

But actually,

you know, one way to think about the industrial revolutions is every time you figure out industrial revolution, what you're doing is you're finding some way of like bypassing a constraint or bypassing a bottleneck.

And the bottleneck prior to what we call the industrial revolution was metabolism, right?

It's just like how much like oats can a human or a horse physically digest and then convert into useful mechanical output for

their peasant overlord or whatever.

And nowadays, we would giggle to think that, oh, the amount of food we produce is meaningful in the context of the economic power of a particular country.

Because 99% of the energy that we consume routes around our guts,

through the gas tanks of our cars and through our aircraft and in our grids and stuff like that.

And so right now, the AI revolution is about routing around cognitive constraints that in some ways writing, you know, like writing printing press, computers, the internet have already allowed us to do to some extent.

Credit card is a good example of something that routes around a cognitive constraint of like building up network of trust, right?

It's decentralized trust.

Yeah, that's interesting.

It's also really interesting something that came up, and I want to credit James Bradbury and Gwern with making this interesting point when I was talking with them a couple of days ago, is if you measured by GDP, AI's outputs might be underwhelming, right?

One of of the complaints that economists have about the internet is that it's hard to measure the consumer surplus that's created by the internet because

a lot of the goods and services that are made available,

you pay zero for them.

And so they don't show up in GDP.

Well, it's the same with oil.

Yeah, in that sense that it's only 1% of energy is like 1% GDP.

Oil is like $8 trillion a year or something, right?

But

if you said, well, one day we're going to consume 100 times more energy in the form of oil than in the form of food, and the per dual cost of food is whatever it is, the cost of a Big Mac, then then oil should be like $800 trillion

a year.

It's 100 times like per unit energy, oil, like gasoline is 100 times cheaper than the cheapest food that humans can digest.

So

like, does that mean that we've like shot ourselves in the foot by using oil to run our economy?

Right.

Because it's so cheap?

Like, no.

Right, right.

And also the amount of the its fraction of GDP also doesn't correspond to how important it is.

For example, oil is like 1% of GDP or something, but

if you don't have oil, then you have these oil shocks, which cause double-digit decreases in GDP.

So the elasticity of demand often matters more than it's like raw fraction contribution to GDP.

But anyways, on the original point about AI, so

you're going to have this huge deflation of,

so Gordon put it this way.

He's like, if

you imagine Dario's data center of geniuses, how is that showing up in GDP?

Well, it would be the inputs, which are the chips, the energy, et cetera, and the outputs, which are are just the tokens.

And neither of those is going to be that astronomical in comparison to the value that data center of geniuses is producing.

So in terms of GDP numbers, like

if that data center of geniuses automates a bunch of,

or at least complements a bunch of human work, et cetera, it might actually cause a nominal decrease in GDP while at the same time contributing massively to

what we might think of as the valuable stuff humanity or human civilization can produce.

And so in the long run,

it might make more sense to think of the size of our economy or the size of our civilization as the raw energy use that we do rather than GDP.

Because again, GDP will see this huge deflation because the variable cost of running AI

will just be pretty cheap as compared to like paying humans wages, et cetera.

I think

we're at the point where you've got a mixed economy with

an AI doing my job and also also a human doing my job.

I love how this is the new way we use the phrase mixed economy.

Yeah.

Then obviously like I still have some pricing power relative to humans and the AI thus has pricing power.

But if it was the case that like a new

a new kind of job emerges that AI is really well adapted to,

because it's not competing against humans for most of those roles, it'd be competing against the other labs.

And so you'd actually see like the cost pushed down to you know a small multiple of whatever the marginal production cost of those tokens is.

That would be my guess.

So I think it might be a mistake to assume that like, well, if we're going to pay a top AI researcher

$200,000 a year, lol, let's say the sort of AI researcher that I could be, $200,000 a year, that if an AI comes along that's as good as me at that, even taking into account the fact that realistically speaking, I only get maybe 10 hours of really top cognitive work done a week, that it would also...

be worth $200,000.

Obviously,

it'd be worth much more than that in the sense of like you can copy paste its output and much less than that in the sense that you know whatever the marginal additional cost of of spooling up H100s is

and so if some if some kind of role comes along that like the AIs are really well specialized at and out-compete the humans quickly then we'd also expect to see that there

both the the cost of providing that service to drop drastically at the same time as the overall value generated in the economy by that service would increase a lot yeah exactly if we think that the value of cognition is going to be unbounded and the way to derive cognition you can just to the extent you think solar will eventually win, you can just, you can derive it from how much land it takes to power an H100 using solar panels.

That is a very interesting derivation that, like, okay, well, this is, at a minimum, we're going to just fill up all the land.

I mean, at some point, you might have like declining marginal value of cognition or something, but we kind of discussed this earlier, but if you have like a megawatt of

10 acres of land feeding one megawatt H100 or something, that's generating like, let's say, a megawatt megawatt is a thousand humans.

So one acre is a thousand humans worth of cognition.

The implicit land value there is a lot higher than it is as like undeveloped desert.

It's also a lot higher than it is as like the most productive farmland that humanity has ever had.

And current hardware efficiencies.

I don't know if it's worth spelling out.

Basically, H100 has the same amount of flops as a human brain, but also uses way more energy than a human brain.

Yes.

It uses like 50x more energy.

Was that right?

So 20 watts versus versus 1,000 watts?

Human brain.

Like 20 watts, yeah, it could be.

We know hardware can be at least as efficient as the human brain.

And the human brain can generate this many flops on 20 watts.

So if you do that calculation,

then that's 50x, 1,000, so 50,000

AI souls off of and it could easily be much more than that because neurons are much slower than transistors, obviously.

So

probably 10 years ago, one of my friends reminded me,

you know, like the way your phone saves power is it goes to sleep between you like tapping out hello.

Right.

Like H.

It takes a nap for like 10,000 cycles.

You know,

it's kind of nuts.

So just that like humans, I think Elon's talked about this in the context of self-driving cars as well, which is like anything humans do is like glacially slow from the perspective of a computer.

Let's actually go back to the original point of like, I was explaining why I think it's plausible that there could be more than hundreds of gigawatts of extra demand from AI in the 2030s.

I want to understand what that looks like in the real world.

Like at that point, it's become basically this industrial problem of can you generate enough solar panels and solar modules and batteries and not to mention the chips themselves.

So that's the industrial point and then there's a cultural point as well, which like

the industrial point.

So I want to know what the year 2035 looks like if we've got AGI and we're just bottlenecked by the ability to deploy it.

Yeah, so you can ask a question like, what do you need in order to run

like what is the minimum amount of matter that you need in order to perform these calculations?

So right now we're talking about like air racking and grid and transmission and a bunch of like ISOs and all that rest.

You don't need any of that stuff, right?

And like obviously XA is on top of this because the first thing that Elon will always ask is like delete anything you don't absolutely need.

So what you actually need is a big slab of relatively cheap silicon to make the power and then a small slab of relatively expensive silicon to do the thinking.

And if it's in space, that's all you need.

right because it's in the sun all the time so you don't need a battery right but if you're on the earth you need a battery as well so you need some interconnects.

And you don't need a transformer, right?

You don't even need a DC-TC converter.

You can actually make it with buck converter or with relays or whatever to basically match the current output of your solar array with the charge state of your batteries and the power consumption of

your

GPU or something.

But a solar array about the size of this desk, for example, will generate about 500 watts in full sun.

So you could actually imagine aliens who have different silicon technology stack building their systems as an integrated solar array with

a bit of

computranium in the middle, for example,

on the same wafer.

But that's basically all you need.

On the same wafer, because it's all silicon.

It's all silicon.

It's all silicon all the way down.

What's silicon made of?

Well, it's an element.

It's chemically in the crust.

There's no shortage of it.

This is a great prompt for a sci-fi exercise, because especially in space, you don't need batteries.

So you just like...

The prompt is

the future TSMC just manufactures integrated solar.

And they can fly rapidly, right?

They're solar sails.

And they're relatively dense, so they don't fly crazy fast.

They don't need to because they're...

Is this what the Dyson Serial will be up, Casey?

Is it just going to be computeronium at the center of a solar system?

They can fly closer to the sun to get more power, right?

Up to the thermal limit.

And they can fly further from the sun to go and explore or like fly to other planets or something.

And they can adjust the orientation of the solar sail with LCD panels so that it can be integrated into

the wafer itself.

I mean, that's actually, if you say, what's the post-human state?

That's it.

We will eventually...

A solar sail with with a silicon die in the middle for

one human's worth of computation, one human brain can be simulated, and roughly a square meter of silicon floating in space.

How much are you?

One square meter of silicon, like the thickness of a sheet of paper floating in space.

Yeah,

that's the future human form.

That's my final form.

That's the attractor state.

That's assuming a little bit of software improvement, but I don't think that's.

All that's assuming is software improvement.

The Dyson Sphere, that's all it needs.

A little bit of software, a little bit of speaking on the other side.

I mean, if the software, like

the area area of the panel is kind of the variable there.

So you can ask, well, what do you need in order to make the silicon making

solar arrays making chips?

It's a kind of multi-stage process.

But basically, you start off with

silicates, which are rocks, ideally in a relatively pure form.

You chemically reduce them.

It's a couple of different processes that can do that.

And then purify them into ideally like six nines of purity for solar array, maybe nine nines for like really nice computers, silicon purity, and grow crystals, cut wafers, et cetera, et cetera.

So then then the constraint is like, well, how quickly can you convert the crust into enough silicon to support silicon thought?

What does the silicon ecosystem look like?

Any thoughts?

Well, it's pretty quick, right?

Like if you like, if you're like one kilowatt per square meter and then you use that just to like rip oxygens off the underlying dirt, you know, it doesn't take all that long to, you only need about 20 microns of silicon to make a solar PVRA.

So

like from dirt, as you mean like actual dirt?

Yeah, actual dirt has plenty of silicon in it.

So for example, setting up a brand new silicon refinery takes about 18 months.

Right.

But that's just with the current technology.

I actually think

we may find ways.

So one of the nice things is if you have infinite free solar power, approximately free solar power, you can revisit a bunch of legacy industrial processes that have been optimized for efficiency and say, well, what if we just use twice as much power and we just want to do them faster and cheaper?

Less capex, less lead time, more power.

Well, you can start solving problems.

It turns out that if you want to chemically reduce silicon, you can do it electrolytically, like with less efficiency and a bunch, like under a hydrogen rich atmosphere or something.

And then so one of the ways that silicon can be refined is by turning it into silane, which is a silicon tetrahydride.

I'm not really a chemist, but I think that's right.

So SiH4, which is a gas.

It's actually like methane, but one down on the periodic table.

And don't breathe it, though.

And yeah, and then once it's a gas, you can...

filter it from all the contaminants, which don't form gases or can be separated by density,

much like how uranium is sometimes enriched, but much, much less difficult, and then heated up to separate it back into pure silicon, where you can then precipitate out a lot.

I mean, the reason I think this is interesting is because

whenever people who are talking about the AI singularity, often their expertise is not in energy or physics or whatever.

So they focus only on the cognitive elements of the singularity, which is like, how much faster can we make AI smarter, et cetera?

I think this is really interesting because if we have unbounded cognition, which sets up both the ability to supply and to demand more energy, I'm very curious, what does the energy singularity look like?

Where

we're just trying to saturate as much energy that the Earth receives and turn it into cognition.

I haven't thought about that before, but there's this idea that evolution resulted in this continual ramification and complexification of the thermodynamic gradient, right?

So you start with very simple RNA-based organisms and then you get this industrial economy.

But it may be the case, and I don't have a strong reason to suspect one way or the other, that like what we're seeing is like the beginning stages of a collapse back towards the simplest possible

thermodynamic to cognition stack, which is

we have fusion in stars and the inky blackness of space, and that provides our temperature gradient.

And then the most efficient way to convert that into usable cognition is silicon

like literally electrons being pushed across the Fermi gap in a solar array and then taking the return path through some like set of gates,

making decisions about things and then like beaming lasers to their friends saying, hey, I just made up a new meme.

That is an interesting concept that for four billion years, we've been increasing the sort of like variance and complexity

of creatures, and then you might see like this big collapse.

Should I give you the opportunity to plug why

people should work for Terraform?

Yeah.

So actually, just to give you an introduction, Terraform is my day job.

It's a company I founded almost four years ago.

We are making synthetic natural gas from sunlight and air.

We are also working on other core primary materials stuff.

We also have a methanol process, methanol and methane together,

precursors to every hydrocarbon you could possibly want.

Another chemical, ammonia process, steel, desalination, and we can also make cement and a few other things.

So basically, everything that the

primary industry does except for glass and paper.

We are hiring.

Our jobs are available on TerraformIndustries.com.

Yes, the website's meant to look like that because we're very cool.

We are

very special people.

You know, I know a lot of smart people and I'm privileged to work with some of the smartest people I know.

We are mostly mechanical engineers.

I will never hire anyone who can't do math.

I will never have the problem at astronomer because we don't have a head of HR.

I'm sure.

And also the CEO is not having an affair.

Yeah, I mean, like step one.

I think that was a more crucial issue, Casey.

But like heads of HR can get into trouble.

I'm just saying, everyone does math.

Terraform, it's very important to me that Terraform is the the place that ambitious hardware people go to become the best they can be.

Right.

That is really important.

It's not here to like check in and get your paycheck and like optimize some shiny widget.

It's still a small team.

It's still like one project per person kind of situation.

And I will level you up.

Like maybe not quite like Jensen taught you into greatness kind of situation, but like at times it's going to feel that way.

And you'll get to work with the best people that there are, at least on the west coast of the United States, on this sort of thing.

And it's also a unique company.

I thought years ago, like, by now, I'll have competition.

We don't.

No one else is doing this except for a small startup in the UK.

And so, you know, you get in on the ground floor and it's going to be super cool technology.

And

eventually we could go and build it all on Mars as well and help our robot overlords make more of themselves out of dirt.

It's pretty cool.

Nice.

Come work for us.

Casey, thank you so much for coming on the podcast.

Oh, thank you for having us.

It was fun.

Yeah.

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