Axios

PHOENIX — Arizona's power grid took more than 100 years to build. Now the state needs to double it in just four to five years, leaders said at an Axios Live event.

The big picture: Data centers, new residents and factories are pouring into Arizona — and the electric grid is struggling to keep up.

• "What took our utilities 100-plus years to build, need[s] to double that within the next four to five years," said Kevin Thompson, a member of the Arizona Corporation Commission, which oversees the state's utilities.
• Axios' Jessica Boehm, Jeremy Duda and Amy Harder moderated discussions with Thompson; Maren Mahoney, director of the Arizona Governor's Office of Resiliency; and Danny Seiden, president and CEO of the Arizona Chamber of Commerce and Industry. The June 16 event was sponsored by Shell.

By the numbers: Arizona's biggest utility, APS, runs about 8.3 gigawatts of power — enough to keep millions of homes and businesses running. But companies are already asking for nearly 17 gigawatts of new power. The other major utilities face the same problem, Thompson said.

• The rule Thompson's commission has set: Companies that need the power have to pay for it. Regular households won't foot the bill.
• Big tech companies are playing along, Thompson said. One deal in Tucson even required the company to post a $25 million guarantee in case the project fell through.

Between the lines: Data centers that were once seen as power and water guzzlers are now helping pay for the infrastructure they need.

• This is seen as a key factor in offsetting costs for everyday customers.

Yes, but: This growth is changing how and when Arizonans use electricity.

• More people are charging electric cars at night, which is pushing the state's busiest power hours later into the evening.
• Also, data centers that use less water end up using more electricity instead.

Context: Foreign investors used to ask Arizona, "Do you have the talent?" Seiden said. "Now it's energy" — and right behind it, water.

• Arizona's electrical grid is reliable, its water management is among the best in the country and Arizona State University is home to one of the nation's largest engineering programs, Seiden said. The ASU programs feed companies like TSMC, which is putting $165 billion into Arizona chip factories.
• To keep residents informed, the chamber is urging companies planning new data centers to hold community meetings before breaking ground, citing Intel in Chandler as the model.

The bottom line: Arizona has a strong case for why companies should establish data centers there, the panelists agreed. Whether it can build the power, water and trust to back it up is the real test.

• Mahoney said companies are looking for "fast power," which Arizona can provide if it can expand and "build out" the grid.

Content from the sponsor's segment:

In a View from the Top conversation, Shell's Mobility Americas senior vice president Barbara Stoyko talked about the company's push to build EV charging hubs across the country.

• "I thought permitting a gas station was hard. It turns out EV stations are even harder," she said — mostly because a single hub can pull as much electricity as 1,200 homes.
• In Houston, the surprise has been who's pulling up to charge: "Our No. 1 customer is Waymo," Stoyko said. "Who thought that we would be actually servicing a customer that's not even human?"

Intel shares surged 11% Thursday, continuing their meteoric rise after President Trump said that the company had secured a deal to supply chips to Apple.

Why it matters: Intel has been scrambling to reinvent itself as a chip foundry, making components for external customers — and its moment might've finally arrived in the form of a global shortage that's jolting device prices.

Iran's supreme leader, Mojtaba Khamenei, said Thursday he authorized direct talks with the U.S., but warned they do not signal agreement with Washington.

Why it matters: Khamenei's comments Thursday, in a written statement on his Telegram channel, were his first response to the signing of the U.S.-Iran memorandum of understanding (MOU).

Less than four weeks after being sworn in as chairman of the Federal Reserve, Kevin Warsh left no doubt that the way the central bank shapes its policies and communicates is now going to be very different from the last 15 years.

The big picture: Warsh is already executing on his longstanding view that the Fed has been over-explaining, over-signaling and overly focused on fine-tuning the economy for years. Investors will need to quickly wrap their heads around this new regime.

• Out: Forward guidance and detailed descriptions of how the central bank is interpreting incoming data.
• In: Simpler policy statements, tighter (and maybe fewer) press conferences, little guidance as to what comes next and task forces to rethink broader aspects of how the Fed works.

State of play: In new projections released alongside yesterday's policy statement, 9 out of 18 top Fed officials indicated that at least one interest rate increase would be appropriate this year. That was enough to drive stocks down and bond yields up.

• Warsh, consistent with his long critique of that forecasting exercise, didn't submit one of his own.
• In his news conference, he also declined to spell out what the likelihood is of a rate hike this year, how he interprets incoming inflation data or what economic developments would prompt a rate increase.

Zoom in: In characterizing how the FOMC is thinking about rate hike prospects, Warsh said that "there's a range of views" on inflation dynamics.

• "No resolution or conviction, but we'll be meeting again in six weeks. I think we're going to know more then. And I think that my colleagues are very attentive to incoming developments between now and then."

Between the lines: Warsh is aiming to bring the Fed back to something closer to a Greenspan-era policy framework, in which the central bank aims to say more by speaking less often.

• It implies that the Fed will more often act without the kind of long, gradual buildup of press conference hints, formal projections and set-piece speeches that have been the norm since the early 2010s — and embraced by other leading central banks.
• That, in Warsh's view, will make the central bank more nimble and focused on delivering appropriate policy, rather than getting locked into its own pre-commitments.

Yes, but: It also implies more days when financial markets are whipsawed.

• Traders will have less to go on to map each week's economic developments to the direction of interest rate policy, which implies more surprises.
• It's not just that Warsh declined to provide a projection for policy in the coming months. He also didn't offer much to go on in terms of "if X happens, we would take Y policy action."

Reality check: It's not in the Fed's mandate to worry about financial market volatility.

• And there is reason to think that the more expansive apparatus of central bank communications that built up in the aftermath of the 2008 financial crisis is less constructive in non-crisis moments.
• Most significantly, the Fed was likely late to combat the 2021-2022 inflation outburst because it had become so locked in on forward guidance anticipating low rates far into the future.

What they're saying: "Although it's complicated times, these are normal times," former Philadelphia Fed president Patrick Harker tells Axios. "We're not in a crisis. The question becomes, when '08-'09 happens, or a pandemic hits, are you going to keep the language that short? That's what the test is."

• In light of the uncertainty over the direction of inflation resulting from the Iran war, "at this point the Fed can't give a lot of forward guidance," Harker adds. "This I agree with Warsh on. When there's this much uncertainty, you can't do it."

The bottom line: Don't count on the Warsh Fed to deliver the same kind of step-by-step guide to the direction of its policies. It will instead favor big-picture statements and quicker, more decisive moves.

Sen. Bernie Sanders (I-Vt.) on Thursday unveiled his plan for the U.S. government to take 50% equity stakes in large AI companies.

Why it matters: This is a supercharged version of what members of President Trump's administration already are discussing — all of which would be unprecedented — and a tacit acknowledgment that AI may eventually cause major labor disruptions.

U.S. Sen. Josh Hawley (R-Mo.) blasted AI giants — including Amazon — and touted his support for key union priorities in a speech Tuesday at the closed-door Teamsters national convention in Las Vegas, Axios has learned.

Why it matters: A Republican featured as a speaker at a Teamsters event serves as a stark illustration of how the political lines are blurring for Big Labor, once a dependable political ally for the left.

Stocks fell and bond yields spiked on new Fed chairman Kevin Warsh's policy committee debut Wednesday afternoon.

Why it matters: Investors read the vibe as surprisingly hawkish — the yield on the two-year Treasury note rose after the Fed released its policy statement at 2pm, a sign that the market is pricing in rate hikes.

We can't speak for the rockets, but the SpaceX IPO has been a masterpiece of engineering.

Why it matters: The offering was structured in a way that deftly manages the mechanisms of supply and demand that markets rely on to determine a company's true value.

The U.S. national average gas price has dropped back below $4 a gallon, per AAA, a sign of Americans' pain at the pump easing after months of war in Iran.

The big picture: Iran's squeeze on oil traffic through the Strait of Hormuz battered the global economy. But crude prices in June fell to their lowest levels in over three months on news of an extended ceasefire agreement between the U.S. and Iran.