TALKING NEW ENERGY

Virtual power plants (VPP) in Australia

Alice Lang, Head of Future Business & Operations, AGL
Alan Reid, Head of Operations, Reposit
Jon Slowe, Director, Delta-EE
Jenny Carson, Associate, Delta-EE

 [00:00:23.790] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition. Hello and welcome to the episode. Today we're going to the other side of the world all the way to Australia. Unfortunately, I'm not there myself, but my three guests all are. We'll be talking batteries and virtual power plants now photovoltaics is going like gangbusters in Australia.

[00:00:39.840] - Jon Slowe

Nearly 200,000 new PV installs per year. Adding to a base of 1 over 2 million systems across the country. So, that's an amazing average of one in four or one to five homes with rooftop solar. And it shows no sign of tailing off and on the back of this. The home battery market is growing really quickly. An estimated 25 to 30 thousand installs over the last year on a per capita basis. Australia is a residential battery capital of the world ahead of second place, Germany back here in Europe.

[00:01:15.420] - Jon Slowe

These batteries have been mostly deployed for straightforward self-consumption, maximising how much solar energy is used in the home rather than exported to the grid. But now that's started to change with a charge towards optimising these batteries for the wider electricity system. Virtual power plants is the terminology of choice in Australia, and it's the charge towards batteries of virtual power plants that we're exploring today. So, let me now introduce my three guests. First up, Alice Lang from one of the three big Australian utilities, AGL.

[00:01:51.540] - Jon Slowe

Hello, Alice.

[00:01:53.250] - Alice Lang

Hi.

[00:01:55.940] - Jon Slowe

Alice, you are the head of Future Business Strategy and Operations. And as you're in a forward-looking role. Can I ask you a short question to start with? How important is storage to AGL when you're looking at your future business strategy?

[00:02:12.270] - Alice Lang

Well, we see storage, as, you know, going to be very important component of energy infrastructure in the future. And we think that's going to be pivotal to providing that firming capacity as we shift between baseload power and renewables. This is something AGL has been working on for a little while and we can talk about that a bit later on. But we're already trying to figure out ways to build and develop flexible supply and storage. And as you pointed out, storage is seen such substantial growth in Australia alongside our feverish adoption of photovoltaics.

[00:02:46.440] - Alice Lang

So, it's been really important to keep pace with that and keep pace with what customers expect when it comes to being able to have batteries, for example, at their household. So, we see is quite fundamental to what happens going forward.

[00:03:03.250] - Jon Slowe

And how long would you say you felt that way? Has it been something that you've been engaged with over the last three, four, five years? Is it something that's growing quickly? And then you're working out over the last year or two how to play in this area?

[00:03:20.710] - Alice Lang

 More like what you said at the start, more three, four or five years.

[00:03:25.400] - Alice Lang

I think it was in 2016 that we launched our South Australian Virtual Power Plants or SA VPP. So, that has certainly been going for a little while now, reaching a thousand households with batteries. So, it's something that we've been engaged with for quite a while. And over the last couple of years, we've also increased our involvement with utility scale storage as well as household scales storage.

[00:03:52.310] - Jon Slowe

 Great, OK, well, we'll come back and learn more about what you've been doing shortly.

[00:03:56.450] - Jon Slowe

My second guest is Alan Reid, Head of Operation with Reposit Power, Virtual Power Plant Company. Hello, Alan.

[00:04:04.940] - Alan Reid

Hello, Jon. Thanks for having me.

[00:04:07.130] - Jon Slowe

Thanks for joining. Alan, can you give us an elevator pitch for Reposit please?

[00:04:12.980] - Alan Reid

Certainly can. Let me step in the elevator and push the button. So, basically, Reposit. What we are is a home energy management system for, that specialises in the control and optimization of residential scale PV generation of battery storage. So, we produce a product which does two things primarily. It's a device which is installed at the premises of the house where the consumer has PV on their roof and a battery on the side of their house. It plugs into those devices and it uses artificial intelligence and predictive algorithms to look at the balance of supply and demand within the household.

[00:04:48.290] - Alan Reid

So, it learns over time the way the consumer uses electricity inside the house. It understands the sources of energy to satisfy that demand for energy inside the house and knows the cost of all these sources of energy as well. So, it looks at grid tariffs and other things and then it performs real time calculations, optimisation calculations with the ultimate goal of lowering the fuel for the consumer. So, it's constantly working 24/7, controlling the flow of energy around the house to deliver the lowest possible bill for the consumer.

[00:05:19.760] - Alan Reid

Then the second thing it's doing is, is, as you said, operating as a virtual power plant. So, it in all its little reposit friends that are installed around Australia work together in aggregate. We can orchestrate them into a virtual power plant and they're continuously scanning the market for opportunities to sell energy as a commodity back into that market. And also energy as a service which is a new idea in the Australian market to help balance the grid and provide stability and resilience in the grid to earn the consumer who has the reposit boxes stored in their house and own these devices to earn the consumer a greater return on what is actually quite a large investment for those consumers.

[00:05:58.790] - Alan Reid

So, it's looking to lower the bill, but also earning the consumer, a little bit more money on top of that.

[00:06:04.830] - Jon Slowe

And are you doing this directly with customers yourself? Are you providing it as a service to maybe companies like AGL? Or are you doing both?

[00:06:13.730] - Alan Reid

Yeah, both. So, we sell the device directly to customers through our distribution network of solar apartments throughout Australia. So, the consumer will buy Reposit as part of the overall package when they get solar on their roof and a battery on the side of their house. And then we work with a great company like AGL and also the network service providers here in Australia. And also, you know, the likes of AEMO the Australian Energy Market Operator to kind of sell the capacity of the combined units installed right across Australia back to the grid, to the mutual benefit of the grid operators, the regulated energy regulators, and also the consumers themselves.

[00:06:54.190] - Jon Slowe

Okay.

[00:06:55.130] - Jon Slowe

And can you give us idea of scale that you've reached or how long you've been doing this?

[00:07:00.060] - Alan Reid

 Yeah so, Reposit has been around for about six years now, we've been selling the technology for probably about five of those six years we've got many thousands right across Australia, but the nice milestone, we've just reached in our home state the ACT here, which is where I am Canberra at the moment, our lovely capital territory. We have just surpassed 1,000 installs in this area and we only have 440,000 people in the ACT.

[00:07:25.730] - Alan Reid

So, that's quite a nice little milestone for us.

[00:07:28.140] - Jon Slowe

Well, congratulations. Well Alan, we'll come back and dig more into what you're doing shortly. My last guest today is Jenny Carson, an associate with Delta-EE. 

[00:07:39.780] - Jon Slowe

Hello, Jenny.

[00:07:41.010] - Jenny Carson

Hi Jon. Good Morning.

[00:07:44.190] - Jon Slowe

Jenny, you've very cleverly timed a move from our Edinburgh office out to Australia to get two consecutive summers and avoid a winter. Now, as you've been out there for a while. Can you help our listeners understand some of the similarities and differences between the Australian energy market and the European one?

[00:08:06.330] - Jenny Carson

Yes, certainly. So, the two main obvious differences that kind of immediately come to mind when comparing these two different markets, Australia to Europe would be population density and the weather and then the implications that these two factors have on the energy system. So firstly, although Australia and Europe, they have kind of similar size in terms of landmass, there's about 30 times fewer people in Australia. So, clearly that make it pretty challenging for the transmission and distribution network operators here to be able to connect such a vast space to this relatively small customer base, which then results in some, unsurprisingly, high network charges.

[00:08:55.800] - Jenny Carson

So, this proportion of the bill you know going towards supporting this network infrastructure. And then secondly, the weather. Well, it's very sunny here, the sun shines a lot. You mentioned that the solar PV market is going like gangbusters. You know, it's really taking off, it's really an incredibly attractive, no brainer sort of solution for consumers, to put into the homes, payback here is sort of three to five years. And we're even seeing systems that are being sized for a customer's winter peak demand.

[00:09:30.260] - Jon Slowe

Wow

[00:09:30.770] - Jenny Carson

So, you've got a situation when not only are the number of systems kind of increasing. We've also got the average size of the array shooting up. So, you've got this in Australia where the horses really, you know, it's really bolted in terms of distributed a residential generation. It's going to be an essential part of any future grid here. And with all this renewable penetration, it's really got eyes from across the world looking at the market here and wondering what's going to happen next?

[00:10:00.770] - Jenny Carson

How are we going to manage all of this?

[00:10:03.070] - Jon Slowe

OK. So, there's maybe a similarity in a competitive retail market, as in Europe and many other parts of the world. But the distribution network is more challenging with the transmission and distribution network.

[00:10:16.250] - Jon Slowe

And, yeah, a no brainer of a PV market.

[00:10:22.020] - Jon Slowe

Well with that context in mind, Alice going to come back to you now, and you mentioned that you've been active for a while with batteries and VPP's. Can you tell us a bit about the customer proposition? So, if I'm a householder in part of Australia where I can be an AGL customer, what can I get from your virtual power plant? What does the proposition look like to me?

[00:10:51.880] - Alice Lang

Of course. Yes. So, what we have at the moment, we've got a BYOB or bring your own battery product. So if  you've already purchased a battery, probably you already have solar on your house and you've purchased some storage to go along with that, then you can bring your own battery become if you're not already an AGL customer and become part of our virtual power plants system. So, that's one thing that we have in market. And the other thing is that if you don't already have storage, then it's possible to purchase storage through AGL so that that sale and install is included as you become part of the virtual power plant as well.

[00:11:34.970] - Jon Slowe

So, on the bring your own battery, I think some of our listeners will know that the US market offer bring your own thermostat demand response programs.

[00:11:44.120] - Jon Slowe

So, I can see a similarity with that.

[00:11:46.750] - Alice Lang

Yeah, less catchy though isn't it.

[00:11:47.820] - Jon Slowe

Yeah, bring your own thermostat. Hasn't quite got the same. I don't know what battery. What do I get as a customer?

[00:11:54.790] - Jon Slowe

Do I earn money? Do I save money? Is it reflected my tariff or my bill?

[00:12:00.860] - Alice Lang

Yes, so.

[00:12:02.180] - Alice Lang

Some of the things that can happen when you're part of that virtual power plant is, we've obviously also included in that the digital smarts that enable some management and control of that system. But we've been very much led by how what customers want to see in that. And some customers would like to see a lot of detail about how they use energy in their household. What is being stored, what they are using. Other customers would prefer to keep it a little bit more at arm's length.

[00:12:32.350] - Alice Lang

They're very satisfied to know that those batteries are being used as part of a coordinated effort to support the grid and enable different energy services. But they're less interested in knowing the ins and outs of that, which is fair enough. It's probably a pretty small proportion of us who are really curious to know the details of that on a day to day basis. So, those are some of the things that you can get. We will use some of those assets to support grid services.

[00:13:04.520] - Alice Lang

And customers are compensated for that in the way that their batteries used.

[00:13:10.070] - Alan Reid

 OK. Alan, is that similar to your proposition from Reposit or any differences?

[00:13:18.750] - Alan Reid

Yeah. That's really, really interesting Alice and as you were talking, I was thinking you can draw a lot of parallels to some other industries here as well. You know, telecoms are the first that springs to mind with sort of bring your own phone plants from telco providers. I think to my mind and what we found through the consumer value proposition, part of our business and figuring that out along the way is that there's no silver bullet, there's no one size fits all proposition for consumers that's going to capture you.

[00:13:44.810] - Alan Reid

A large part of the market, you know, all consumers are different, and they have different, different things. They want to get out of their system. We've done a lot of working in having a look at the different consumer types and trying to characterise them by what they motivators and drivers are in the purchasing decision to become part of the virtual power plant in the first instance. And it's really funny. I've got an example recently where we went out to customers with some comms.

[00:14:11.000] - Alan Reid

Blanket comms around to some new features we're introducing, and we put some detailed information in there about the features. And we got some customers that came back and said, oh, you know, that was a lot of information and I was kind of a little bit confused, you lost me a little bit there. So, we said, OK, you know, maybe we pare back a little bit. And we did recently another release some new features and we sort of pared it right back and made it a lot more readable and consumer friendly.

[00:14:36.830] - Alan Reid

And then we had a retired engineer who contacted us and I'm an engineer myself so I can make fun of engineers. So we had a retired engineer who contacted us, and he said, oh, there wasn't enough information in there.

[00:14:46.140] - Alan Reid

So, I'm not quite sure

[00:14:47.810]

{Laughing}

[00:14:48.300] - Alan Reid

It is really funny in terms of the customer value proposition, because I think there's no one size fits all solution, as I said. And to me, it's about, I think, making sure that you just hit those commonalities across all of those varying customer groups. And what we found is that consumers just want to. They want to feel comfortable inside their own home. They want to know that they're making an investment.

[00:15:13.130] - Alan Reid

As I said, this is a large investment for them. They want to make sure that that investment is using clean, green, reliable energy. And they also want to see return on their bill. They want to see their bill going down or they want to see their system working for them to get them to a financial position as well.

[00:15:31.910] - Alice Lang

I think that's really important to remember. I mean, virtual power plants are about customers. You know, if customers weren't interested in, if they hadn't been interested in probably in solar uptake to start with. And then in complementing that with storage next, we would just be putting in green scale assets. So it's pretty, it's critical to remember that the only reason this is even possible is because customers are interested. And quite reasonably, I think that households are principally interested to begin with at least in maximising their self-consumption from their photovoltaic system and achieving the bill savings that come from that.

[00:16:12.650] - Alice Lang

And that's you know, that's the start of the value proposition, is what customers can achieve in terms of managing their household energy costs. But I really appreciate your comment there, Alan, about the different audiences that you're trying to hit. And I think you've got a few engineers on the line today.

[00:16:29.900] - Alice Lang

So, we're probably all chuckling about, how detailed it gets. But it's reasonable I think that some people will have a preference for just being very outcomes focused in terms of what it does to the bottom line of their household expenses. And other people really want to get into the nuts and bolts is why a system is going to be set up the way it does, how that interacts with different energy systems and different support systems. But certainly, through the customer testing that we've done, we talked to a lot of our customers who are involved in our virtual power plant.

[00:17:03.170] - Alice Lang

And it's interesting to see what kinds of different information they want as part of this energy transition that we're all engaged in.

[00:17:13.830] - Jon Slowe

So, it's really interesting listening to this, because the energy sector is full of engineers, maybe even too many engineers, if I can say, and often not enough people with customer focus. So, I would characterise generally a big generalisation. There's a lot of technology push around these sorts of topics in many parts of the world.

[00:17:39.330] - Jon Slowe

So, I'm interested from both of you. How much in Australia and you as well Jenny, from your observations. How much did this start with technology push and how much would you say it's really now centred around what customers fundamentally want? You know whether it's peace of mind or lower bills or contributing to a more sustainable energy system?

[00:18:05.420]

Yeah, I think that's a really good question. I think originally in the early days of this marketplace, I think it was technology driven. So, you know, it was all about this emerging tech, which was kind of cool, kind of, you know, very futuristic. And it was all, you know, you're looking for those tech savvy, sort of retired engineer types who are really engaged and interested in the tech. And you're trying to leverage that as a motivator to get.

[00:18:29.240] - Alan Reid

I guess early adoption, really early adoption for this type of product in the marketplace. I think where we're at now and go back to your comments, Jon, at the beginning of this where, you know, batteries and solar are going gangbusters in Australia. The uptake is through the roof, distributed residential scale installation, and that's only set to grow. I think now we're on the cusp of getting into more mass market adoption rather than early adopter. And that brings with itself a whole bunch of new challenges and a whole bunch of new consumers who have different purchasing decisions.

[00:19:05.720]

{Crosstalk}

[00:19:05.870] - Jon Slowe

You've got to talk in quite a different way to customers if you're looking to go beyond those tech savvy people that you mentioned.

[00:19:12.050] - Alan Reid

Exactly right.

[00:19:12.830] - Alan Reid

Exactly right. And I think that's where the industry is starting to get a lot of information and learn and evolve and become better at what we do in selling this value proposition to consumers. It's no longer just about how cool is this tech. You know, you can't just sell to everyone by saying it’s really cool technology. You've got to now say, well, it lowers your bill. It makes you feel comfortable inside your house.

[00:19:34.670] - Alan Reid

It's more of those sorts of intrinsic motivators that electricity consumers are feeling. I mean, we've got to remember here, we're working in a backdrop in Australia where the power, the cost of power here, residential energy bills has doubled in almost ten years. So, there's been a lot of price sensitivity in this market. And a lot of consumers are looking to invest in technology which mitigates that risk for them and in any further increases in pricing around electricity. So, I think that's where the market is continuing to evolve in terms of its maturity in the value proposition for consumers.

[00:20:12.620] - Alice Lang

I think you're absolutely right, and particularly your point around the pressure that households are feeling, which is something that I think all of the companies involved in this industry are acutely aware of. I think as well that for some consumers at least, there's real interest in making sure that  the work that they've done, perhaps to invest in a photovoltaics system and contribute to that cleaner, greener energy system that they can make good use of that. I think people are also increasingly aware of the challenges of having a large or an increasing proportion of intimate resources on the grid.

[00:20:53.850] - Alice Lang

So, whether it's households who are choosing to complement solar systems with storage to enable better use of that, that photovoltaic system or other companies who are putting in big utility scale batteries. I think there's also an increasing awareness of how that helps the system as a whole. So there's both that household driver to manage the bills, but also the recognition for what it does for the system as a whole, which is important and I think can also be reflected in the way that we understand the value that customers are looking for.

[00:21:32.980] - Jon Slowe

Jenny, what's your observation? Because moving from the UK and researching the European market to Australia in terms of the customer awareness or prominence or amount of marketing around photovoltaics, batteries, virtual power plants, do you see some big differences or would you say it's broadly similar?

[00:21:53.760] - Jenny Carson

Yeah, that's really interesting. I was just thinking as Alan and Alice were talking, I couldn't help comparing it to the European market and in particular the German market. That's what we've seen obviously the most battery installs in Europe. And yeah, it's, I mean, there will be similarities and differences, I think the main kind of, one of the one of the key takeaways is that in Germany, we've seen a lot of attention around the energiewende, that they have their, the kind of national conversation around moving to more greener renewable type energy systems.

[00:22:29.350] - Jenny Carson

Also on the back of that, the distributed side of things. So, the kind of not the large scale. And that's really a lot of that has come from from a strongly kind of environmental social drivers. And that's really been a lot of the communication around those propositions and while that certainly is the case in Australia {illegible} consumers, it really has been more led as Alan and Alice have explained, around the kind of energy independence and financial conversation at the start.

[00:23:00.940] - Jenny Carson

And then you can add in, certainly supporting the system. It's been quite interesting to sort of look at the dynamic there between the starting points and how the conversation has evolved.

[00:23:12.570] - Jon Slowe

OK.

[00:23:15.450] - Jon Slowe

Yeah, so similarities, but some differences and I think that doubling of bills, must be really a big driver as well. It must push energy up people's minds in terms of costs and how to manage those costs. I'd like to speak briefly now about the use of batteries, not just for self-consumption, but for the wider electricity system. So, we have seen in different markets, batteries being used to balance the transmission system to solve congestion on distribution networks or to play in the wholesale energy markets.

[00:23:53.350] - Jon Slowe

Alice, maybe if you could start by telling us a bit about which of those values, you're most focused on or which of those are most accessible or attractive in Australia.

[00:24:04.210] - Alice Lang

Sure. So, it is hard, given how complicated this is, to make sure that customers can access that value. First and foremost, and then there are other ways as well that we try to make sure that we are really making good use of those distributed decentralised assets as they are installed. So, as you've mentioned that in the use of storage to self-consumption is critical to begin with. After that, there are obviously opportunities in the wholesale market to offer green services.

[00:24:38.380] - Alice Lang

It's only been quite recently and Alan is probably very much across this as well that retail batteries have been able to join contingency FCAS markets, those are the frequency control and ancillary services markets that we have to help manage the grid.

[00:24:56.710] - Alice Lang

And so, you know, there's a certain value pool associated with that. And we expect that there might also be potentially new markets for stability in terms of fast frequency response. The other thing that we've seen, and I think Alan touched on this a little bit earlier, is that we're encouraged by testing that shows that batteries can support the grid in ways that might otherwise be met by alternative network assets. So rather than upgrades to transmission networks or distribution networks, we're seeing that it might be possible to provide some of those services through the use of more distributed storage assets.

[00:25:38.650] - Alice Lang

So, that's sort of more of a nascent value pull given some of the timelines associated with those planning cycles. But we are quite encouraged by that as well.

[00:25:50.990] - Jon Slowe

So, if I surmise that then the wholesale energy markets are accessible to a certain degree, the ancillary services is opening up, the distribution networks is maybe more of a future market.

[00:26:04.020] - Alice Lang

That's right. Yes.

[00:26:07.820] - Jon Slowe

And if full openness and full access to all these values was 10 out of 10, maybe a difficult question. But where would you say roughly we are today if 0 out of 10 is you can't access these values at all, 10 out of 10 is you can access every bit of value there is there that a battery could provide. Alan or Alice anyone want to take a stab at roughly where on that scale we are?

[00:26:35.740] - Alan Reid

Well, I'll have a crack then. I think it depends on which market you're looking at. So, I agree with Alice there that they're sort of the three principal things you're looking at there's retail markets and there's different retail markets, there's the wholesale market on the east coast of Australia and then there's capacity markets over the west side. There are ancillary services which are you know, they're quite valuable markets, but I think they lower down on the spectrum.

[00:27:00.690] - Alan Reid

So, if we look at wholesale, I think they're probably quite accessible for VPP’s at the moment. So, I would say they're somewhere up around 7, 7 to 8.

[00:27:09.010] - Alan Reid

And the ancillary services ones where they're really, you know, the grids about to fall over and we need robust delivery. There's a lot more, I guess, requirements you have to meet to be able to access those markets. So, they're much less accessible. So, I take down to around 2/3 and then the DNSP markets, the network support market. So I think there's a really interesting one for us at Reposit. Principally what we've been focusing on is building network relationships with all the network service providers across Australia.

[00:27:41.430] - Alan Reid

I think we're facing a bit of a chicken and egg scenario with the network markets here in Australia in that we're talking, you know, thousands of customers. We're not into tens of thousands yet in terms of VPP, with thousands of customers, in the grand scheme of things, when you're looking at a distribution or transmission network, that's a drop in the ocean. So, it's not it doesn't provide material load balancing services yet. So a lot of the things that we're doing with networks are trial projects.

[00:28:11.430] - Alan Reid

As they're sort of dipping their toe in the water and testing these technologies out, testing these programs out. But at the moment, it's not a core part of how they operate their business. Now, I think we're going to see a transition.

[00:28:22.650] - Jon Slowe

The rightly conservative businesses, I guess. Alan, you know, they're not they're not paid to take risks with this sort of thing. So.

[00:28:28.700] - Alan Reid

Exactly.

[00:28:28.970] - Jon Slowe

You see that pattern elsewhere of learning, testing, trialling and building confidence.

[00:28:33.920] - Jon Slowe

But it does sound like there are there's a decent amount of value from those different parts of the electricity system. But there's a lot more to come in the future. And as you say, as it scales, that will be an easier to access. So, I'd like to just touch on scale before we...

[00:28:55.990] - Jon Slowe

Alice, when I ask you about scale if you've got anything to add on those different sources of value please add that in. But in terms of scale, you both mentioned sort of a thousand or so systems to date.

[00:29:06.440] - Jon Slowe

What's the biggest challenge, you think, to scale that to tens of thousands to start to get that materiality that you talked about Alan?

[00:29:17.660] - Alice Lang

Well, I think.

[00:29:18.700] - Jon Slowe

Alice do you want to go first?

[00:29:19.700] - Alice Lang

Sure. I mean, it's very much related to what Alan was describing there and what you summarised in terms of how accessible those different value pulls are. Because what we see at the moment is that the rules are just being developed. The standards are being developed right now. And it's not often in any industry, I think that you have the chance to be involved right at the forefront of that. And that is, that's very difficult, because it means that when we speak to customers, when we design products, when we think about what this might look like, the additional uncertainty is what might the most appropriate regulations be, how might this be managed in the market?

[00:30:02.390] - Alice Lang

So, I think that one of the challenges which the Australian energy industry really is very much working together on this collaboratively is to make sure that the right rules and standards are in place to do that. And we've seen some interesting developments quite recently with a DER registry recently launching, which I think is probably going to make some of the information more accessible and make some of these choices a little bit easier. But that's certainly one challenge that we see.

[00:30:36.770] - Alice Lang

And another is that the industry as a whole. So, taking into account the transmission and distribution networks as well as the retailers and the generators as well, are all trying to figure out how to integrate as much of these distributed energy resources as possible as well. At a small and a large scale, really. So, there's just so much that still needs to be figured out. So, I mean that's difficult, but also fantastic. You know, we're getting to do jobs that people haven't really done before in terms of figuring out how to make a system like this work.

[00:31:15.580]

{Cross talk}

[00:31:16.730] - Alice Lang

I would just say that with rooftop solar, I was looking at a graph last night that had predictions of how/what the uptake of solar systems would be for each of the 10 years prior to about 2015. And every year the projection went up and every year it undershot dramatically. You know, I think that in some ways the market was quite surprised by how rapid that uptake was. It seems as batteries, we don't really have that excuse. We've seen what happens as technology costs decline, as people become more comfortable with those technologies and as they add more and more value to the system overall.

[00:31:56.660] - Alice Lang

Hopefully we won't. And I say we very general sense, you know, the Australian energy industry at large. Hopefully we will be less surprised if and as storage becomes increasingly accessible and present in the system.

[00:32:13.590] - Jon Slowe

That sounds like a really exciting time, as you say, where you're getting to. Not massive numbers today, but meaningful numbers you're demonstrating demand, the values in the system are becoming more accessible. The rules are being written; confidence is being built. Alan if you had to pinpoint one challenge for scaling this, adding some extra zeroes on the end of those numbers, what would that the single biggest challenge be in your eyes?

[00:32:39.610] - Alan Reid

Yeah, certainly reiterate Alice's points there, I think on the regulatory side of things, there's some challenges. If I were to pick one, I think the biggest challenge facing this industry at the moment is education of the general population and education consumer who may be looking to install batteries. I think at the moment, you know, we're seeing of all the battery capacity that is being installed across Australia. You're probably looking at somewhere around 10, 20 per cent of those which are VPP capable based on the stats that we see in the battery installations.

[00:33:10.420] - Alan Reid

Now, that's a really bad outcome for everyone because, you know, if a battery isn't, VPP capable. It can be quite a dangerous thing for the electricity system. You know, it can swing, both ways it can charge a discharge. So, you know, if that's uncontrolled and it doesn't have visibility or interactivity with the grid, there can be times where the grid is under a lot of strain and those batteries are just wildly going and charging and discharging and actually exacerbating the problem.

[00:33:35.230] - Alan Reid

So, I think to me, the biggest problem or one of the biggest challenges facing this industry moving forward is how do we increase the education in what is already an incredibly complex and convoluted system. I mean, the electricity proposition for consumers in Australia is incredibly complex. We've got so many different tariffs and products on the market and it's really not well understood. It's coming a long way and it's got a lot better over the past 5-10 years, but it's still not very well understood by the general population.

[00:34:04.450] - Alan Reid

And what we're doing here is trying to add another layer of complexity for them to comprehend in a virtual power plant.

[00:34:09.040] - Jon Slowe

Yeah, and one thing that complexity is that can push back, and delay decision making and actually make people if they don't understand it, it's easier not to make a decision than make a decision. Jenny, I'd just like to bring in you for your observation on the biggest challenge in growing this market as well.

[00:34:27.770] - Jenny Carson

So, I'd thought about this just previously as you were all talking and actually, I was going to mention for the listeners a piece around customer perception talking to the customer that Alan just articulated there. But yeah, basically, you know, consumers, we're used to just paying a bill and then receiving however much energy you want, you know, whenever you want it, we don't have to think about anything more. So, we'd have to pay for anything else, you know, like generational storage.

[00:34:54.430] - Jenny Carson

That's a really foreign concept to have that in a home we have appliances that use energy. So, air conditioning, gas boilers, but having something that generates or stores it and then let alone actually actively interact with the wider, energy markets. That's really different. And batteries and VP you know, they change this. So, we really need to start thinking about how is communicated, which different customer motivations are articulated, to, you know, to really move beyond. I know we're getting quite excited with a meaningful number of batteries installed now, but we are still far away from, you know, mass market.

[00:35:30.980] - Jenny Carson

So,

[00:35:32.260] - Jon Slowe

 Yeah how can we get that to the tens or hundreds of thousands which have a material impact on the electricity system. So, it does sound like it's got a multi-dimensional, well, challenge or to put that a different way or opportunity because I'm more of a glass half full person. So, the market's gone, the values are opening up. Consumers are beginning to understand this. Companies like Reposit and AGL are learning more and more how to communicate this to customers. So, it's time now to bring out the Talking New Energy crystal ball.

[00:36:05.830] - Jon Slowe

It's on my desk in front of me. I'm afraid I couldn't send you one or three all the way to Australia. So, we'll have to use my one and we'll set the dial to 2025. And the question I'd like to ask each of you, and if you keep your answers brief in the interest of time in 2025, how big will the battery VPP business be in Australia from a current market size of four or five thousand or or that sort of scale?

[00:36:37.620] - Jon Slowe

So, Alice if we start with you. What would you see if you look into the crystal ball for five years’ time?

[00:36:44.780] - Alice Lang

Well, a really exciting energy industry. I think a very interesting one. Certainly overall, AGL would like to reach an outsize market share in storage consistent with the role that we already play in supporting a lot of customers in the Australian energy industry.

[00:37:06.360] - Jon Slowe

OK. Thanks, Alice. Alan how about you?

[00:37:09.840] - Alan Reid

I'm going to be bullish and say somewhere between 50 and 100 thousand, but I think it really depends on as we said, you know, everything we've spoken about today in terms of the customer value proposition, education, the skills of the workforce as well the installers in articulating the value proposition to those consumers.

[00:37:28.590] - Alan Reid

I think that's a really key and important piece. We're seeing a lot of subsidies come out of various local and national governments, which is really great to see to increase uptake. So I think all of these things are, you know, functions of the ultimately where we'll end up at the end of the day. But I think somewhere in that range is achievable so long as we get a few things right.

[00:37:50.960] - Jon Slowe

OK. Thanks, Alan and Jenny.

[00:37:55.550] - Jenny Carson

I think, well. So, thinking of maybe the sort of next 12 months or so, I think we're going to see big moves, we might sort of maybe reach the five figure mark, we might get to about 10,000 batteries. That would be pretty impressive, that kind of doubling the situation from now and then. But I think the momentum will keep going. But I think five years I'm going to go a little bit more conservative than Allan's and maybe go sort of 35-50 thousand.

[00:38:23.430] - Jenny Carson

But I appreciate that, you know.

[00:38:27.780] - Alan Reid

Come on Jenny you can do better than that.

[00:38:27.780]

{Laughing}

[00:38:31.950] - Jon Slowe

Well, I think the general consensus that it's going to be at least one zero on the end of where we are today or around one zero on the end.

[00:38:40.450] - Jon Slowe

Lots to get, right. A huge opportunity. And I think Australia will continue to power ahead as the residential storage capital of the world.

[00:38:50.730] - Jon Slowe

So, maybe we'll come back in a year or two, and have the same podcast with you three and see where we're at. So, we'll have to bring it to an end there. Times got the better of us. Thank you very much, Alan, for joining.

[00:39:06.180] - Alan Reid

Thank you very much for having me. It's been a pleasure.

[00:39:09.360] - Jon Slowe

Thank you, Alice.

[00:39:10.860] - Alan Reid

Thank you, Jon. It's been wonderful to be part of it.

[00:39:13.680] - Jon Slowe

And thank you, Jenny.

[00:39:15.730] - Jenny Carson

Thanks very much, it's good to join.

[00:39:18.960] - Jon Slowe

As always thank you to everyone listening. We hope you enjoyed our trip down under to the other side of the world. And our increasingly, international focus for Talking New Energy. And we look forward to welcoming you back next week. Goodbye.

[00:39:45.180] - Jon Slowe

If you're as passionate about the energy transition as we are, then please keep in touch. You can follow us and me on Twitter, LinkedIn or subscribe to the podcasts on your chosen podcast platform.

[00:40:01.650] - Jon Slowe

If you'd like the podcast and like sharing, then please to rate us and to listen to archived episodes, to read transcripts and to see the latest Delta-EE insights, then please visit www.delta-ee.com

Jo-Jo Hubbard, Co-Founder & CEO, Electron

Christopher Burgahn, Product & Partner Manager, Share&Charge

Jon Slowe, Director, Delta-EE

Neil Atterbury, New Energy Business Model Service Manager, Delta-EE

 [00:00:16.680] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition. Hello and welcome to the episode. Today we're talking about blockchain and energy. In 2017 we were in the midst of blockchain hype.

[00:00:31.190] - Jon Slowe

It hit the headlines, was set to be the next great thing. And there was definitely a fear of missing out in energy that led to a range of blockchain initiatives, projects and investments backed by utilities and venture capital money alike. As is often the case with hype, the market probably did get overexcited, but as is also the case with hype. There was definitely rationale and substance behind the hype. Blockchain has some very clear attractions. So, three years on from the 2017 spike of interest.

[00:01:04.270] - Jon Slowe

Where are we now? What have we learned? What role will blockchain play in the energy sector in the next years? These are the questions we're focusing on today. And as usual, I'm joined by three guests with excellent experiences and perspectives to help answer these questions. So, let's introduce them. My first guest is Christopher Burgahn, Product and Partner Manager at Company Share&Charge Foundation. Hello Christopher.

[00:01:33.380] - Christopher Burgahn

Hi nice to meet you,

[00:01:35.760] - Jon Slowe

Christopher, thanks for joining.

[00:01:37.320] - Jon Slowe

Can you give our listeners an elevator pitch for Share&Charge, who you are and what you do?

[00:01:45.900] - Christopher Burgahn

Sure. Thank you. Yeah, we were founded exactly during the hype of blockchain, I would say in 2017. And then we've started Share&Charge as the Airbnb of charging stations and which basically means that users, they could rent out their charging station to other users. I'm talking about electric vehicle charging stations and for that we use some smart contracts. And back then I at least to my knowledge, we were the first in production eMobility app on the public Ethereum main chain.

[00:02:18.750] - Christopher Burgahn

That's how we started.

[00:02:20.880] - Jon Slowe

And where are you at today in a nutshell. Are you on the market? Are you still in development? Are you alive? If I were to charge using your technology and find a charge point to use, can I do that?

[00:02:34.960] - Christopher Burgahn

Yes. We did a lot of piloting and innovation since then with a lot of big electric vehicle charging businesses.

[00:02:43.100] - Christopher Burgahn

And the original idea that we had with the Airbnb of charging stations, we didn't continue because there were just not enough electric vehicles on the street back then. So, the business model was not really viable. And that's what we, why we did a pivot and changed it to developing something called the open charging network, which is now solving the problem of interoperability in EV charging. And that is live since a week now, actually. And looking forward to future businesses taking that up.

[00:03:14.420] - Christopher Burgahn

Yeah,

[00:03:15.590] - Jon Slowe

And live in the German market to begin with?

[00:03:20.590] - Christopher Burgahn

 It's a digital solution available to the whole market in Europe, so we have players in various European countries playing around with it and they hopefully migrate also to the production version of it in the next month. So, it's Europe wide.

[00:03:36.970] - Jon Slowe

OK.

[00:03:38.110] - Jon Slowe

Thanks, Christopher. We'll come back to you shortly. My next guest is Jo-Jo Hubbard, Co-Founder and CEO at Electron. Hello Jo-Jo.

[00:03:47.800] - Jo-Jo Hubbard

Hi, Thanks very much for having me today.

[00:03:50.020] - Jon Slowe

Thanks for joining.

[00:03:51.290] - Jon Slowe

Likewise. Can you give us an elevator pitch for Electron, please?

[00:03:55.870] - Jo-Jo Hubbard

So, Electron builds digital infrastructure for distributed energy systems. And I describe it as digital infrastructure to try and draw the kind of parallel between the kind of new physical infrastructure, the kind of new pipes and wires and actually mainly just wires and transformers in order to bring all these new distributed electricity assets online. And we are essentially looking for the digital version of that. So, our platform brings together a distributed asset register where you can connect public and private data-sets that describe some of those assets and a marketplace platform where multiple third parties can launch and coordinate crucially some of these new markets that are evolving to cater to those assets.

[00:04:42.150] - Jon Slowe

So, as we're moving to a world with millions of assets in the energy system, you're providing the as you said the digital pipes and wires. So, the communication and coordination of those assets so they could work for customers of the whole electricity system.

[00:04:59.130] - Jo-Jo Hubbard

That's exactly it. And you asked earlier sort of where we are with that. And we're doing a top down project to build the kind of the whole asset register for the U.K. with National Grid U.K Power Networks and, Scottish Power Energy Networks. That's the kind of top down approach but on the bottom up approach. And these are the easy things to kind of start early. We launched our first local energy marketplaces in Scotland last week and the first trading is going to go live there in four or five weeks.

[00:05:29.370] - Jo-Jo Hubbard

I hope so that's exciting.

[00:05:32.290] - Jon Slowe

Yeah. Whereabouts in Scotland?

[00:05:35.240] - Jo-Jo Hubbard

In the Orkney Islands, which is a kind of vision of the UK system of the future because it is also an island. It's got 160 per cent renewable penetration and huge amount of that renewable is wind that is getting turned off. And this is also an island with no gas networks, you've got a lot of electric heat, you've got a couple of electric cars. There's a whole bunch of people who like very much for that clean local power not to be wasted.

[00:06:02.490] - Jo-Jo Hubbard

So, you do actually have a two-sided market, which means that you can build, something quite special.

[00:06:15.690] - Jon Slowe

OK. Thanks, Jo-Jo. We'll come back to you shortly as well.

[00:06:19.910] - Jon Slowe

My last guest is Neil Atterbury, manager of Delta's New Energy Business Model Service. Hello Neil.

[00:06:26.330] - Neil Atterbury

Hi there Jon, thanks for having me.

[00:06:29.140] - Jon Slowe

Thanks for joining. Neil, a couple of years ago, maybe just after that spike of interest in 2017, we Delta-EE looked at where we saw opportunities for blockchain in the energy sector. Can you tell us a bit about where we saw those opportunities and maybe more importantly, whether you still think that they're the right opportunities today?

[00:06:53.610] - Neil Atterbury

Yes, absolutely. So, when we looked at the market, for blockchain energy, a couple of years ago, we identified really three key opportunities.

[00:07:02.160] - Neil Atterbury

I think it would be fair to say, these remain among the most prominent use cases for it in energy nowadays as well. So, the first opportunity was around energy trading. So, initially this was focused on peer to peer and wholesale market trading. But we're now seeing examples of companies testing blockchain for use in flexibility and corporate PPA markets, too. The second opportunity was around EV charging. So, specifically using blockchain to facilitate more open public EV charging networks. And then the third key use case was and still is really establishing and verifying the origin of green energy.

[00:07:36.900] - Neil Atterbury

So here blockchain is being used to ensure that green kilowatt hours are double counted and that customers can be really confident that the power that they're buying really has originated from a renewable source. So, whilst these certainly aren't the only areas of application for blockchain and energy, they're the first three that we identified. And it would be fair to say that they remain among the more prominent opportunities today as well.

[00:08:00.680] - Jon Slowe

Well, I think the first to reflect the focus for the two companies that we've got on the podcast today.

[00:08:08.010] - Jo-Jo Hubbard

Actually, interestingly, and if I may on that, I think so the key thing that electrons using blockchain for essentially is this sense of identity. So, you've got lots of distributed assets trying to do lots of different things. And how can you tell who's been authorised to do what or verified for what?

[00:08:25.680] - Jo-Jo Hubbard

I think it's actually one level down below a lot of those, because all of those three use cases you mentioned are essentially transactive. And I think that there's kind of one level deeper it's that kind of digital infrastructure layer if I may.

[00:08:42.370] - Jon Slowe

Yeah OK so Jo-Jo, you would kind of separate out then the infrastructure and the transactions. I mean, separate them out, they're two different elements of potentially how blockchain could be used or applied.

[00:08:56.370] - Jo-Jo Hubbard

Yeah. And I think it is interesting to talk about that. I mean, actually, when we talk about transactions internally particularly amongst developers, we don't necessarily mean like transacting energy. We usually when we talk about important transactions, those are just important decisions. So, like who's authorised to do what? Who authorised that person to do that? And then you get this kind of concept of, for example, breach of trust and through that. So, it's not just the actual transactive energy, which is the kind of sexy bit that sits on the top.

[00:09:28.800] - Jo-Jo Hubbard

It's much more kind of fundamental to kind of platform governance and trying to mirror the fact that we're operating in a highly regulated industry. And for many good reasons. And that's not about to go anywhere.

[00:09:44.150] - Jon Slowe

 OK. Christopher, how do you see that because of Neil's three use cases, EV charging is bang in the middle of your business. How do you see Jo-Jo's point in terms of the infrastructure and the transactions and the, I guess, the coordinating system for all these very large numbers of assets?

[00:10:09.860] - Christopher Burgahn

Yeah, I very much agree on that part, a lot of what you're saying. In the end, in EV charging it's the same. You have the same issue. I would say that you have multiple actors, you have very much EV’s in the future that are accessing the energy grid in various places. And then again, we talk about access and the issue of access. You need to be authorised to charge somewhere and to put a certain stress on the grid in a certain area.

[00:10:40.390] - Christopher Burgahn

And that needs to be coordinated. And that's why I guess in EV charging there is this high potential for blockchain being a providing a registry of assets and helping to coordinate different offers and demands.

[00:10:58.470] - Jon Slowe

Okay, Neil. In terms of the, standing back and looking at the sector over the last few years what's it's an interesting perspective, I think, to take. You've not been immersed in the day to day blockchain industry or the companies working with blockchain.

[00:11:17.410] - Jon Slowe

What have been your main observations as you've stood back and looked at the last few years?

[00:11:23.700] - Neil Atterbury

Sure. So probably got two key points to make on that one, Jon, so the first point is that speaking to companies and to utilities as well. Really, I see blockchain being used less these days like a sort of a hammer looking for a nail. And now the focus shifting much more towards identifying nearer term problems in the energy industry that need to be solved and building a solution to these which then can use blockchain.

[00:11:48.410] - Neil Atterbury

So in a sense, the focus of what you might call blockchain energy start-ups, but they may not want to be called that as well, I suppose it's less, this is how we're using blockchain and we're going to disrupt energy with it and much more. This is a problem we're looking to solve; this is the proposition we're offering to customers and we happen to use blockchain to do all or even just part of that because we think it really adds value.

[00:12:09.300] - Neil Atterbury

And I think that's really been driven by increasing caution from investors and utilities around blockchain occurring as really a response to that explosion of hype that you mentioned in 2017.

[00:12:21.680] - Neil Atterbury

And then I suppose a second observation around how blockchain has been developed in the energy sector of the past few years is that really, I see more and more businesses looking to develop commercial models for their blockchain based solutions. And in that sense, seeing the development of a lot of what you call private or permission blockchains becoming the more dominant forum. So that means that either a single entity or a consortium of entities governs the blockchain network, so they validate transactions. They potentially approve new members and they can on occasion take responsibility for updates to the blockchain network as well.

[00:12:58.880] - Neil Atterbury

So that's different to traditional public applications of blockchain, things like Bitcoin and Ethereum.

[00:13:03.380] - Neil Atterbury

They don't have these permissions actors. Now, there's absolutely practical reasons to have those, to use that kind of blockchain in energy. The most important being that permission blockchain is a far more scalable. So in terms of the speed at which they can process transactions, but it also enables companies to develop business cases using their technology as well as to reconcile what's happening in the real world with what's happening digitally on the blockchain and ensure that they're complying with well in the energy market what are very strict rules.

[00:13:35.120] - Jon Slowe

So, Neil, there's two points then the less than the hammer looking for a nail. And the second one in energy, you've seen more admission based blockchain models. Jo-Jo and Christopher, any reactions or thoughts from your perspective on the points?

[00:13:52.820] - Christopher Burgahn

Yeah. Maybe pick up the first thought that you're having because we were founded in 2017. And in the end, our journey a little bit describes how this whole blockchain space also transitioned from hammer to nail to a more problem oriented or problem solution-oriented focus and. Yeah. That's kind of what we experienced, we benefited a lot, I guess, from 2017 and were hyped a lot Share&Charge is a name that is I think recognized all over the world.

[00:14:29.600] - Christopher Burgahn

But nowadays when I talk to people in the EV charging space, they unfortunately, some of them, they still have me in mind as the blockchain guy. I'm not the guy that can solve their problems. So, it's backfiring a little bit like I helped in the first place, but now it's backfiring.

[00:14:50.590] - Jon Slowe

It was a hard time for you to you to lose.

[00:14:59.120] - Jo-Jo Hubbard

If I may jump on that, so we, my co-founder and I rather came into this from the other side. I'd been working in trying to integrate more renewables for five or six years before this. I tried to start investing in batteries and had sort of launched the fund and had not been out to do anything about it because while the grid was ready for batteries.

[00:15:24.860] - Jo-Jo Hubbard

The marketplaces weren't and we were really looking for a solution on how to create this kind of shared identity system. And really this kind of market coordination problem, because every time a battery exports power, it's affecting national balancing, local constraint and someone's financial position. And that's just not the case for financial markets. You need like a much, much greater degree of coordination energy than almost like any other system I know of.

[00:15:49.830] - Jo-Jo Hubbard

And so when we kind of aligned on blockchain as the piece to kind of secure this single identity for a single asset, then I think that the press sort of took all of our stories away from us and we completely lost control of own narrative.

[00:16:06.230] - Jo-Jo Hubbard

And we're described as a peer to peer company for many years, despite the fact that we never did any of those kind of trials or use cases but we were always, always a kind of private company developing for a business model, you know, essentially trying to create returns for our shareholders. And we started on the kind of commission blockchain line. So, we just see where we are now as a sign of the maturation of the whole industry. And we're really thrilled behind it.

[00:16:35.900] - Jo-Jo Hubbard

I don't think I mean and certainly for many of the companies that sort of like then we started in 2015. The like a pivot. It was a genuine solution that was already, you know, that was already solving a real problem and we just kind of got thrown sideways for a couple of years by having to explain why we went to hammer.

[00:16:58.210] - Jon Slowe

So, you're labelled as a blockchain company even if that's not what you try to position yourself as. In the terms of the solutions? It's a question to both of you. Maybe Christopher first. Can you tell us a bit more about the I guess, the net also that the problem that you're focusing on and how much of your solution to that problem uses blockchain and how much it doesn't use blockchain? I think it be interesting for listeners to understand maybe that your solution company, not a blockchain company, to understand how you use other technologies.

[00:17:36.610] - Jon Slowe

Why and how we use blockchain in your solution.

[00:17:42.220] - Christopher Burgahn

Cool, so you're not giving me the stage of positioning myself as a solution provider, not a blockchain company, right? Okay. Yeah. I guess I need to expand a little bit on how EV charging works so that this number stands like what I'm talking about.

[00:17:59.400] - Christopher Burgahn

So, in EV charging you usually have the problem of accessing charging stations. So as an EV driver, so you want to have access to charging stations to recharge your electric vehicle. And the problem that we are trying to solve is a problem of interoperability. And maybe you remember the days when you had this hassle, when you're going to another country with your mobile phone, you had to change the SIM card because the networks, they were not interoperable.

[00:18:28.890] - Christopher Burgahn

And that issue, we have in EV charging as well. We have many charge point operators out there and they are very good at installing and operating charging infrastructure.

[00:18:46.370]

{Illegible}

[00:18:46.480] - Jon Slowe

Oh Christopher, you just went very loud there. So, could you just start that last bit again?

[00:18:54.040] - Christopher Burgahn

I do. Yeah.

[00:18:58.920] - Christopher Burgahn

So, we have many so-called touchpoint operators out there. They are good at like installing an operating charging infrastructure. And now if you buy an electric vehicle, for example, a Jaguar I-PACE you want to have access to charging stations of all these chargeable operators. And this is exactly what we want to enable. That EV driver has access to various ChargePoint, operators, networks and doesn't have the hassle of signing up to various networks and have various RFID cards and that kind of stuff.

[00:19:37.890] - Jon Slowe

Well, Christopher, my fellow director, really hopes to solve problem because he was driving his electric vehicle from southwest England back to Scotland and he was phoning help centres, call desks, I think almost physically attacking ChargePoint machines because he was so frustrated at its inability to charge his car driving back.

[00:20:00.850] - Christopher Burgahn

Oh no

[00:20:01.200] - Jon Slowe

OK.

[00:20:01.670] - Jon Slowe

And what about the on the solution and how you use blockchain and how you use other technologies?

[00:20:09.140] - Christopher Burgahn

Yeah, so there are currently, two solutions in the market. One is there are centralized platform operators they on the one hand, aggregate all these ChargePoint operators and the other side they aggregate all these eMobility service providers like Jaguar I-PACE charging solution. And that is one approach how the market is currently solving it. The other one is that all these ChargePoint operators and eMobility service providers, they connect peer-to-peer with each other.

[00:20:39.120] - Christopher Burgahn

But both of these solutions, they have downsides. The one being if you have one centralised platform in the middle that is yeah, aggregating all these players, then this player has a lot of market power and is creating lock in effects. And on the other hand, we have this peer-to-peer approach, which is I guess from a technical perspective, very complex. If you know, as a Jaguar I-PACE charging service operator, you need to integrate 100 API's of various ChargePoint operators’ networks and we combine those two approaches basically having a platform, a decentralised one.

[00:21:21.360] - Christopher Burgahn

And this is where the blockchain part kicks in that you connect once to this network. But the blockchain part enables you to have peer-to-peer connections to all these network operators.

[00:21:34.550] - Jon Slowe

Okay, so I guess you're trying to take the best parts of both and manage or mitigate the cons or the challenges that both of the two ways that you outlined.

[00:21:48.660] - Christopher Burgahn

Exactly.

[00:21:48.930] - Christopher Burgahn

And what blockchain provides there. In the end, we are registering all these players in a registry. And this allows us then to in the future automate a lot of things because we have these players and these charging stations than registered in a registry. And everybody can see that registry and intact with data that has provided there. And I think that's a way.

[00:22:19.510] - Jon Slowe

Jo-Jo can you tell us a bit about the, you outlined your problem quite clearly at the beginning that you're focusing on. Can you tell us a bit about the role of blockchain compared to other technologies that you're working with in trying to solve a problem?

[00:22:33.010] - Jo-Jo Hubbard

Yeah, absolutely.

[00:22:33.870] - Jo-Jo Hubbard

And I think it comes back to what Christopher saying about the role of the registry.

[00:22:38.590] - Jo-Jo Hubbard

So, we set blockchain sorry, we set Electron up because we had this quite clear view of what the...

[00:22:51.840]

[Cross talk}

[00:22:52.800] - Jo-Jo Hubbard

And we're going through a name change! We're not.

[00:22:57.680] - Jo-Jo Hubbard

We set Electron up because we had this really clear view of what the future energy system was going to look like.

[00:23:02.070] - Jo-Jo Hubbard

And I guess {illegible} Christopher's attitude on cars, ours is kind of going more well, more broadly than that. You know, in Q3, 2019 in the UK, you know there's more renewable energy than fossil fuels on the system.

[00:23:18.160] - Jo-Jo Hubbard

You go from a world of two hundred plants outputting power to one million houses, having solar on their roof and exporting and 25 million cars and 22 million electric heat pumps.

[00:23:32.380] - Jo-Jo Hubbard

And really none of those parties can essentially interact in an efficient way unless there is this view of kind of who's got what where from the top down, from the kind of, you know, National Grid bid or the DNO's you're kind of forecasting or network planning.

[00:23:50.230] - Jo-Jo Hubbard

And then from the bottom up, like you have to be seen to be counted, to be able to actually kind of self-optimise. So blockchain is a key piece of the tech stack. It's not all of the tech stack but it's a key piece of the tech stack on that kind of asset register piece. So, we bring together public and private data sets on the connected assets and we use blockchain is essentially the thin commissioning layer that sits over top of that, that says who is like what?

[00:24:19.270] - Jo-Jo Hubbard

What type of player those parties are, what roles they're allowed to play in the system, who is allowed to permission who to see which kind of data sets were basically logging all of those permissions which we call transacting all the important. But we're interacting with databases that are all held centralised by lots and lots of different central parties.

[00:24:43.870] - Jo-Jo Hubbard

So, we're not trying to decentralise it. Essentially, we're trying to coordinate across the various centralised approaches. And then we use technologies like or protocols like {illegible} to actually go and get the data.

[00:24:57.160] - Jo-Jo Hubbard

But we're essentially logging who's allowed to do what on the system, oh sorry   on the chain.

[00:25:03.250] - Jon Slowe

So, I think both of you have quite similar approaches and quite similar problems you are trying to solve.

[00:25:11.360] - Jon Slowe

If I could ask you to each for our listeners to identify one key thing about using blockchain as part of your solution. What is it about blockchain that makes it the right part of that solution for you? Christopher, how would you simplify it for our listeners as to the key advantage of blockchain?

[00:25:35.150] - Christopher Burgahn

Yeah, I guess we both talk now about these asset registries, and I want to stress a little bit more on that because this is where the blockchain part really kicks in for us.

[00:25:46.120] - Christopher Burgahn

If you could set up a registry also in a way without using a blockchain, for us it's where we are running on the energy web chain. And that means that it is an open blockchain that everybody can look into. And that is the piece that is very important for us because we are depending on a messaging paradigm in our system and everybody needs to have that data where this message or all these charging messages are sent to. And the blockchain, because everybody can run an own note, means that everybody has access to the data, and nobody can tamper with the data.

[00:26:28.280] - Christopher Burgahn

On the other hand, and only if you allow to change the registry entry of your solve, then everybody gets updated about this, this change.

[00:26:39.640] - Jon Slowe

OK, so it's the simplest, best, most effective way to do that job.

[00:26:46.610] - Christopher Burgahn

Exactly, yeah.

[00:26:48.370] - Jon Slowe

Jo-Jo, how would you, would you say the same or frame it slightly differently?

[00:26:52.190] - Jo-Jo Hubbard

Oh, we're out there to create the best single version of truth on connected assets there is. And as Christopher said, there are many kinds of centralised companies who are also trying to create the best, single version of truth. But ultimately, it's the asset controllers who had the best data on this. And it's the asset operators who have better data on this and the asset manufacturers have better data on this.

[00:27:16.260] - Jo-Jo Hubbard

So, we profoundly believe that by putting together all these data sets in a way that works for everyone and essentially incentives everyone to kind of bring the data together to do more with assets. That's how you get to the best single version of truth of connected assets.

[00:27:32.100] - Jon Slowe

OK, well, I think, really helpful for me and I hope all the listeners as well to understand how you are using blockchain. What the problem is, how we are using blockchain and why are we using blockchain in particular.

[00:27:47.050] - Jon Slowe

Looking forward now. What's the biggest challenge as you go forward and grow your businesses and activities? Christopher again, let's keep to the orderly going and start with you in terms of your biggest challenge for Share&Charge going forward.

[00:28:09.080] - Christopher Burgahn

As I said already, it's like people don't recognise me as a blockchain guy, but as a solution guy.

[00:28:18.410] - Christopher Burgahn

I think, yeah. Having the, using technology for building trust. Something pretty new to all businesses out there, because usually you enforce trust with like contracts, you sign a contract with another business and then you do business with them. But now relying on a technology, providing that, that is a paradigm shift that a lot of people where we have to educate people about. And I think that is the biggest part for us, educating people that. Yeah, if you trust in that solution, in that technology, you get clear benefits out of it like cost reduction and all that kind of stuff.

[00:29:00.600] - Jon Slowe

So, that not only have to see, understand it, believe it, but they have to have enough trust to use it and enough knowledge. Jo-Jo, how about yourself?

[00:29:14.840] - Jo-Jo Hubbard

So, I guess one of the interesting things about blockchain is, is it really is this like enabling technology that all sorts of future kind of business cases can sit on top of these registries and of these like agreed or verified sets of information or what have you. So, it's a different market, on either of platforms.

[00:29:35.120] - Jo-Jo Hubbard

But I think it's that kind of getting the balance of top down and bottom up right has always been a kind of like key focus for Electron.

[00:29:44.510] - Jo-Jo Hubbard

So, and we're lucky enough to be able to work with some of the big network operators on kind of structuring that top down asset register for how they're holding, for example, data, it's called the system wide resource register, for example, in the UK. How are they holding data about distributed assets? But then actually going and getting some of those private data sets integrated really means you have to go into that kind of bottom up marketplace view.

[00:30:10.940] - Jo-Jo Hubbard

And for us, as we launch this, as we take this curtailment market live in a few weeks, it's giving us really, really good resolution on a really restricted area of the network, you know, where there's a huge amount of value. So, I think we’ve been kind of funding ourselves so far with a mixture of kind of private capital and some really kind of generous, helpful grant funding to go and kind of get those projects started really understand what we want to build.

[00:30:41.330] - Jo-Jo Hubbard

But we're kind of really kicking into deep commercial mode now. And now we need to go and grow those markets. And we're not competing as a blockchain company. You know, we're competing as a solution provider, as a marketplace company.

[00:30:54.650] - Jo-Jo Hubbard

And just getting people comfortable with the tech stack when there's any part of the word blockchain in it is an extra hurdle. But it's an exciting one, because the magic of the marketplace is the fact that you can build other marketplaces on top and it all comes down for us over and over and over again to this like what is the best single version of truth possible?

[00:31:17.030] - Jon Slowe

So, yeah moving from some pilot’s demonstrations, getting traction, and then, similar to Christopher building up trust, understanding and confidence.

[00:31:27.710] - Jo-Jo Hubbard

Yeah. I think, I mean, in a way even more so because it's not even more so. In a way, I'd like to kind of lean into that like the marketplace that we're launching on Orkney is a physical market, right. People actually trading out of curtailment like you really got to like not blow anything up while you're doing that, like you've really, really got to prove.

[00:31:47.850] - Jo-Jo Hubbard

Like someone is allowed to do this. And so if it's not getting trust in the kind of like abstract and the kind of technology, it's like actually like getting real trust so your allowed to talk to someone's active network management system and, you know, millions of pounds of equipment, you know.

[00:32:03.990] - Jon Slowe

So, I guess metaphorically you could keep the {illegible} and see it working.

[00:32:08.410] - Jo-Jo Hubbard

Yeah, exactly.

[00:32:10.920] - Jon Slowe

Neil, from your perspective, what do you see as big challenges? You've looked back at the last few years. When you think about how that sector as a whole company is working across the space to forward. What stands out to you?

[00:32:26.660] - Neil Atterbury

So, for me, the key challenge is really going to be around demonstrating standout use cases and customer experiences. I think it's unlikely the majority of customers, whether they be end users, companies, networks, are ever going to have a truly deep understanding of the underlying technology.

[00:32:45.900] - Neil Atterbury

And it's important to remember the companies using blockchain aren't just competing with other companies using blockchain, but with others using alternative, often more established technologies. So, really, blockchain needs to prove it's not just as good as but even better than these alternatives from a customer perspective. So, that could be like Christopher and Jo-Jo mentioned, cheaper and faster, more secure. And if that can be achieved, then perhaps shared blockchain could play a really key role in enabling a greener, more decentralised energy system.

[00:33:18.210] - Jon Slowe

I'm thinking if Share&Charge can help to solve my fellow directors’ problem in a way that he has a really good experience driving back up to Scotland or I've just installed a heat pump in my home.

[00:33:33.300] - Jon Slowe

 Jo-Jo, your marketplace can enable my heat pump to provide flexibility to energy markets.

[00:33:41.230] - Jo-Jo Hubbard

Cool

[00:33:41.630] - Jon Slowe

Fantastic

[00:33:42.200] - Jo-Jo Hubbard

Are you in Scotland?

[00:33:44.070] - Jon Slowe

I am not in the Orkney's though. 

[00:33:48.520] - Jo-Jo Hubbard

OK, well we'll be coming to you very soon.

[00:33:49.520] - Jon Slowe

If you come to Glasgow let me know. Now it's crystal ball time.

[00:33:55.590] - Jon Slowe

So, the time when we bring out the Talking New Energy crystal ball and you might think with a topic like blockchain, I'm going to set the dial far forward to 2030. I'm actually going to turn it to 2023. Just three years ahead. And my question for each of you is, in 2023, how many companies will there be offering true commercial solutions that use blockchain in some form or other in the energy sector or the EV sector? Christopher, so of beyond pilots and demonstrations, commercial solutions that are provided on a well, a truly commercial basis.

[00:34:39.360] - Jon Slowe

So, are we going to be talking about a handful of companies, several companies, tens of companies, many tens of companies? Brief answers please as we're getting close on time. Christopher what do you think? How prevalent will companies using blockchain be?

[00:34:57.580] - Christopher Burgahn

Yeah, I think it's a tough question. For me, it's quite important what you would define as a blockchain solution or a solution based on blockchain technology. Because I guess as we both Jo-Jo and I stress is that only a small part of our solution is blockchain. So, if that is for you is a blockchain solution, I'm very confident that it will be hundreds even because we launched last week and we have clear business benefits like cost reduction, security, etc.

[00:35:34.200] - Christopher Burgahn

And I believe, of course, in ourselves and in Jo-Jo and yeah. So, it will be hundreds.

[00:35:42.240] - Jon Slowe

Hundreds, OK. Jo-Jo how about you?

[00:35:45.790] - Jo-Jo Hubbard

I really like Christopher's kind of framing there. And and I guess the important thing to add to it is that's going to depend on the efficacy of the infrastructure. Basically, if companies like us can set this infrastructure up as we're on track to and as is scaling, then all sorts of other solutions can be offered on the back of that. You know, instead of taking your utility bills to your lawyer to prove you live somewhere, you can keep your ID.

[00:36:16.940] - Jo-Jo Hubbard

You know, I think there's so many things in and out of the energy market that can be built on top of that. And if you're going to define that as a blockchain company, then say hundred's not like potentially even thousands, but not in a sense of them being blockchain companies. But in a sense of them being able to interact with these kinds of confirmed sets of data in kind of governable ways such that we can kind of let this kind of distributed energy market rip.

[00:36:48.360] - Jon Slowe

Okay.

[00:36:48.620] - Jon Slowe

I see both answer the question in about interesting way, which is once you get the infrastructure that then you unlock huge potential for companies to interact over that infrastructure.

[00:36:58.790] - Jo-Jo Hubbard

 Yeah.

[00:36:59.840] - Jon Slowe

Neil, last but not least, how about yourself?

[00:37:03.370] - Neil Atterbury

So, this is a tough question to put a firm number on if we're thinking in the next few years. And companies that are truly commercial and widespread commercial than their application I'd probably wouldn't go as highs as hundreds.

[00:37:18.750] - Neil Atterbury

So, I'd probably be staying in the tens. There are, I think, as we discussed, still several challenges to be overcome around understanding, around proving and developing trust and around the type of blockchain being implemented, but I'd also add that I think the energy transition itself has a way to go perhaps before we see widespread commercialisation of some of blockchains, key use cases or things like peer-to-peer trading, EV charging as well, perhaps to some extent. And that's not necessarily a blockchain issue, but it's more a wider issue with the speed of the energy transition.

[00:37:51.820] - Neil Atterbury

And that's another factor which could slow uptake of the technology.

[00:37:57.190] - Jon Slowe

Okay. Well, I think it's clear that in the energy transition, we're going to need coordination and infrastructure for these millions of assets that we will see across Europe and beyond. It's been fascinating talking with all of you today about how that role is blockchain as part of that infrastructure and as part of the solutions.

[00:38:21.760] - Jon Slowe

So, thanks very much to all of you.

[00:38:24.480] - Jon Slowe

Thank you, Christopher,

[00:38:26.460] - Christopher Burgahn

Thanks for having me.

[00:38:26.560] - Jon Slowe

Thank you, Jo-Jo, 

[00:38:29.680] - Jo-Jo Hubbard

Thanks very much Jon.

[00:38:30.130] - Jon Slowe

And thank you Neil.

[00:38:33.760] - Neil Atterbury

Thanks Jon.

[00:38:34.780] - Jon Slowe

 Well, I hope you found that episode interesting. And thank you for listening. And we look forward to welcoming you back next week.

[00:38:53.980] - Jon Slowe

If you're as passionate about the energy transition as we are, then please keep in touch. You can follow us and me on Twitter, LinkedIn or subscribe to the podcasts on your chosen podcast platform.

[00:39:10.440] - Jon Slowe

If you'd like the podcast and like sharing, then please to rate us and to listen to archived episodes, to read transcripts and to see the latest Delta-EE insights, then please visit www.delta-ee.com

What can Europe learn from Japan, and what can Japan learn from Europe?

Hideo Yamamoto -  Director - Abeam Consulting Ltd

Leon Gielen - Head of Business Development Asia - Delta-EE

Jon Slowe - Director - Delta-EE

 [00:00:25.870] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition.  Hello and welcome to the episode.  Today, I'm recording this episode in Tokyo, Japan, where we've just held a summit with our partner company in Japan around New Energy. And we thought it was a great opportunity to talk about how new energy is emerging in Japan and what Japanese companies’ interests are in the European transition from old to new energy.

[00:00:48.530] - Jon Slowe

So, let me welcome my guests. First of all, I'd like to welcome Hideo Yamamoto. Hello Hideo.

[00:00:55.230] - Hideo Yamamoto

Hello. Thank you for joining this good opportunity in Japan.

[00:01:01.340] - Jon Slowe

It's a pleasure. Now for the listeners, Hideo is working with Delta as our Partner Company in Japan, ABeam Consulting. My second guest is Leon Gielen.  Hello, Leon.

[00:01:14.750] - Leon Gielen

Hello. Hello, Jon.

[00:01:18.020] - Jon Slowe

Leon, will you tell our listeners about what you do here at Delta-EE?

[00:01:21.800] - Leon Gielen

OK.

[00:01:22.100] - Leon Gielen

I'm head of business development here in Asia. So, I help our customers here to understand our services and our business. So, we help them to succeed in new energy, to learn from Europe and to apply that in Japan.

[00:01:39.710] - Jon Slowe

Great. So, I'm ready to have a really good discussion about Japan, which is a long way away from many of the listeners I know. But a fascinating market.

[00:01:51.560] - Jon Slowe

In the summit yesterday, I characterised how we can define the energy transition. So, I'll just run through that now because I think that's a helpful context for the questions we'll discuss. We're in a transition from old energy to new energy. And there, think two levels of old energy, old energy 1.0, which was monopoly businesses regulated, old Energy 2.0, which is competition around the central generation and the commodity and then new energy being the third level. And I'd characterise Japan as having moved in the last five years or so from old Energy 1.0 to old Energy 2.0.

[00:02:33.710] - Jon Slowe

So, we're now in an environment with intense retail competition from existing utilities and new entrants. Hideo, that competition is seeing prices fall quite a lot in the market. What are the margins looking like? Is there still a profit in the retail market here? Or is it all gone? Or is it going on?

[00:02:55.650] - Hideo Yamamoto

So, the competition's every year is more very hard. So, the margin is gradually decreasing for every retail company.

[00:03:08.120] - Jon Slowe

Okay. And is that causing a lot of pain at the moment?

[00:03:11.690] - Jon Slowe

Is that worrying companies?

 [00:03:15.790] - Hideo Yamamoto

So, gradually, so every company, so they have a big impact on the reducing the profit.

[00:03:27.270] - Jon Slowe

And presumably, that's not sustainable, they can't carry on down this path forever. Okay. Now, before we dive into exploring some of these details and how Japanese companies are responding, let's take a quick look at the key differences between Europe and Japan. Leon, you’re travelling quite regularly, racking up the air miles between Europe and Japan, do you want to bring out a couple of the differences that you see?

[00:03:55.880] - Leon Gielen

Yeah, well, the whole living situation is completely different. So, you see that the houses are much smaller than in Europe and the energy bills are lower because you only have some air conditioning, some cooking appliances so it's much smaller, the prices are lower. And one of the biggest differences I see is that the way into the house, which in Europe was heat because it was the second biggest bill you had each month. You saw of the energy companies use that to advise customers to, for example, smart thermostats to advise them to get lower energy bills.

[00:04:38.360] - Leon Gielen

You see, that doesn't work here. So, they need to find it differently to enter that house. And that's the big challenge. How can you find a way into the house, with these tiny energy bills?

[00:04:50.660] - Jon Slowe

Yeah, and are they at the beginning of that journey? Have they discovered it? Where would you say the market is at?

[00:04:57.050] - Leon Gielen

 They're really at the beginning of that.

[00:04:58.640] - Leon Gielen

So, the beginning of becoming more customer-centric, customer focus.

[00:05:03.940] - Jon Slowe

Okay. And what about the trust that people have with their utilities? In Europe, it's a bit varied in some countries, utilities are still regarded very highly. But in other markets, I think that trust has fallen away over the last 10, 20 years. What's the situation in Japan do people love their utilities, or hate them?

[00:05:23.990] - Hideo Yamamoto

So, in the Japanese market the outage is very few, and also their energy bills are very accurate. So, this means most of the Japanese people trust the utility company.

[00:05:40.020] - Hideo Yamamoto

Very normal in that they trust the utility attitude.

 

[00:05:45.930] - Jon Slowe

So, if they're switching to another supplier, it's really a price driven switch is not due to distrust of the utilities.

[00:05:54.460] - Hideo Yamamoto

So, basically the current situation is that the price competition has just started stated, that based on the price, some of the customers are switching to new companies.

[00:06:08.050] - Jon Slowe

Okay. And can you give us a feel for what levels of switching are going on? Are we seeing 5 per cent of customers switch every year? 20 per cent of customers switch every year?

[00:06:19.230] - Hideo Yamamoto

So, since 2016 currently it is more than 20 per cent of customers have just changed to switch to another new company.

[00:06:32.440] - Jon Slowe

Okay, 20 per cent over a four-year period. Okay.

[00:06:35.460] - Jon Slowe

And is that switching rate increasing, or stable?

[00:06:40.530] - Hideo Yamamoto

Gradually increasing so not rapidly. Yeah. Not rapid.

[00:06:44.840] - Jon Slowe

Okay.

[00:06:46.350] - Jon Slowe

So, you're not quite at the levels of some European countries, but certainly moving in that direction. The last difference we've seen here, I think, is around the involvement of telecoms companies in the energy sector. Leon, to give a couple of comments on that.

[00:07:03.110] - Leon Gielen

Well yeah, you see indeed that there are lot of newcomers in this market. And I'm not sure {illegible}. How many new entrants in the Japan market?

[00:07:15.060] - Hideo Yamamoto

Maybe more than 500.

[00:07:18.620] - Leon Gielen

So, more than 500 new entrants.

[00:07:20.850] - Leon Gielen

And, of course, some of them fail some of them will succeed. But as Jon said, there are the telecom companies are very strong as a new entrant and they do start that new business and we see that they become profitable at the moment. And it's really quick actually.

[00:07:35.370] - Jon Slowe

And, that's quiet, I guess in Europe we've seen some telcos active in some countries, but definitely it's not a big trend we see across Europe. But the telco companies here, have you any thoughts on why they've chosen to enter the market or why they're being quite successful here?

[00:07:59.460] - Leon Gielen

I think they have the relationship with the customer and with their mobile phones. Mobile phones are really big here and you see everyone the whole time playing with that thing, so, they have really good insight into customers, and I think that as their strengths.

[00:08:15.520] - Leon Gielen

So, they know what customers want. They know how they can reach them. They have an immense amount of data about them. So, I think that it could be really good match here in the Japanese market.

[00:08:28.030] - Jon Slowe

OK.

[00:08:28.320] - Jon Slowe

So, they're definitely ahead in being more customer centric.

[00:08:31.880] - Hideo Yamamoto

Yeah. Yeah. And also, in the Japanese telecom company, they have already provided a very simple bill plan, compared with the utility companies, a very fixed price, a fixed rate for the customer.

[00:08:50.670] - Jon Slowe

OK.

[00:08:51.020] - Hideo Yamamoto

It's easy to understand. Yeah.

[00:08:53.030] - Jon Slowe

Because that's what they've had to do for years, make complex things easy to understand.

[00:08:57.310] - Hideo Yamamoto

Yeah.

[00:08:58.330] - Jon Slowe

Okay.

[00:08:59.230] - Jon Slowe

Let's now look at some of the hot topics in Japan. So, Hideo, would you like to pick out one of the hot topics you see in working with a utility market here in Japan?

[00:09:12.030] - Hideo Yamamoto

Currently, we find several hot topics, especially in this stage of VPP and the flexibility which are very interesting points in the Japanese market.

[00:09:27.950] - Jon Slowe

Okay, so virtual power plants and flexibility in the concept of behind the meter flexibility or all sorts of flexibility?

[00:09:38.870] - Hideo Yamamoto

Especially in the behind of the meter flexibility.

[00:09:41.500] - Hideo Yamamoto

Yeah,

[00:09:42.420] - Jon Slowe

And it's a hot topic, is that translating into a lot of activity yet? Or is it still at the very early stage of trying to work out how to develop this market?

[00:09:55.630] - Hideo Yamamoto

There are VPP projects based on government subsidy, but so not much yet at this stage in Japan.

[00:10:09.300] - Jon Slowe

Okay.

[00:10:09.730] - Jon Slowe

And how quickly do you think that will change when in the next years will it move from projects to a real market?

[00:10:18.970] - Hideo Yamamoto

 Since 2021, the Japanese governments will start flexibility market in all of the Japanese market, so a very limited product in at this stage. So, maybe 2024/2025 all of the products will start in the principal market in Japan.

[00:10:44.300] - Jon Slowe

Okay, so starting step by step.

[00:10:46.030] - Hideo Yamamoto

Step by step.

[00:10:46.840] - Jon Slowe

And I guess there's a little less urgency because here in Japan you don't have quite the same volatility in the wholesale market that we have in Europe.

[00:10:57.400] - Jon Slowe

Maybe that will grow as photovoltaics grows and even offshore wind might develop here. So, I guess the drivers will increase and the market structure and the regulations will allow this to grow.

[00:11:12.240] - Jon Slowe

Leon, how about yourself? Your flitting between Europe and Japan? What other hot topics do you see in the market?

[00:11:20.780] - Leon Gielen

So, I think that the hot topics are for example, business models and the way into the house of the customer.  So, what kind of services can they offer? What kind of products can they bundle? So that is one of the big challenges. And I think with that becoming more customer centric, what does that customer want? How can we give them what we want? That's a big change from Energy 1.0. So, you're in the transition phase here.

[00:11:52.720] - Jon Slowe

It was interesting at the summit yesterday. There are quite a few questions about services, energy as a service. I think that's probably a buzz word around much of the globe at the moment about energy and about other industries. How real or tangible do you think people here understand that, or are they developing service-based business models already? Or are we just at the very beginning of, again, trying to work out what those service-based business models might look like?

[00:12:25.160] - Leon Gielen

At this moment,

[00:12:26.410] - Leon Gielen

I see that a lot of services built around technologies. So, it's not a real customer centric model. It's often it's a technical solution for something.

[00:12:37.060] - Jon Slowe

Technical push more than customer.

[00:12:38.820] - Leon Gielen

Exactly. And you could see, for example, there's batteries, like financing solutions {pause}. They do try to solve a problem and that's a upfront cost. But I don't see a lot of business models at the moment. Or energy as a service models where they really look at the customer.

[00:13:04.560] - Leon Gielen

How can we make that customer happy? And how can we change our business?

[00:13:11.340] - Jon Slowe

 Hideo, do you see it similarly or any other thoughts on that?

[00:13:15.280] - Hideo Yamamoto

So, currently there is some similar energy as a service in Japan, only just recent. And to do the maintenance service or the product. But as mentioned by Leon, before they're not customer centric business models.

[00:13:38.270] - Jon Slowe

Yeah. And that's really just a first step of energy services. The other step, they would bundle in, maybe the performance risk, potentially the energy price risk, to then deliver an outcome. At the moment it feels just like another way of selling a product.

[00:13:54.360] - Hideo Yamamoto

Yeah, yeah.

[00:13:55.150] - Leon Gielen

Yeah, exactly.

[00:13:56.920] - Jon Slowe

Okay.

[00:13:57.930] - Jon Slowe

The last of the hot topics we're going to briefly talk about is smart meter data. And Hideo, you said bills tend to be very accurate here in Japan. So presumably there's a lot of data that utility companies have.

[00:14:14.070] - Jon Slowe

I think everywhere around the world, again, it's a trend that data is the new oil. How are companies here thinking about using that smart meter data? Are they really digging into this? Have they found ways to use it? Or again, is it just at the beginning of that process?

[00:14:31.810] - Hideo Yamamoto

Yes.

[00:14:31.980] - Hideo Yamamoto

Yeah so, in the Japanese markets in 2024, almost the meter will have changed to the smart meter. But now all of the utility company have just started to, how to use this smart meter data. So, our current situation is not that easy to utilise this smart meter data because if they utilise these data, they have to be integrated their legacy system. They are marketing the system and the CIS {illegible} legacy system.

[00:15:11.220] - Hideo Yamamoto

They have to integrate these data.

[00:15:14.730] - Jon Slowe

Yeah.

[00:15:15.790] - Jon Slowe

Leon, that's a very familiar challenge to European companies. You've worked in one of them.

[00:15:19.890] - Jon Slowe

Is it taking legacy systems?

[00:15:22.480] - Leon Gielen

Yes.

[00:15:23.750] - Jon Slowe

So, nothing new there. In Europe, we see energy insights really starting to gather some momentum now. So, some research we just completed, around 15 to 20 per cent of customers are using some form of energy insights. Do you see the same opportunity here Hideo?

[00:15:41.340] - Hideo Yamamoto

I think so, yeah.

[00:15:44.110] - Leon Gielen

But for my feeling, it has to be combined in a different way. So, it's, if you look at, for example, Europe, you give advice for reducing your bill or that kind of thing. And that's not so relevant here. And so, I think the challenge will be to combine it with something what works in Japan. And I'm thinking of maybe gamification things or to do that kind of typical Japanese things where you combine things.

[00:16:17.330] - Jon Slowe

Yeah. Okay. So, taking that same data science capability, but coming back to being customer centric. Working out what value you can actually create for your customers.

[00:16:28.540] - Jon Slowe

Okay.

[00:16:28.890] - Jon Slowe

In the final part of the discussion today, we're going to look at how Japanese companies are looking at the European market and we're going to break it into three types of Japanese companies, utilities, trading companies, which we will come to and explain a bit about in a minute. And technology companies. But if we start with utilities, Leon, can you tell us what you see about the Japanese, the big Japanese utilities, the medium ones as well, maybe, and their interest in the European market?

[00:17:00.250] - Leon Gielen

Well, they're all very interested in that, especially the flexibility market and the business models and how companies are dealing in this competitive environment in Europe. And you see that a lot of these Japanese companies invest in European start-up energy companies. The bigger ones. And they just want to get their feet wet in an active market.

[00:17:24.080] - Jon Slowe

And do you think looking to get their feet wet in that market to learn and take activities back to Japan or to grow businesses and grow new revenue and profits in Europe, or both?

[00:17:35.290] - Leon Gielen

It's both, so definitely interested in what happens in the future in Japan if this market is more liberalised and more active and then so they can learn from these business models. The big challenge will be how to Japanise them. So, because, you know, in Europe, the drives are different. So, you need to adjust them to the Japanese market. And that's will be their challenge.

[00:17:58.870] - Jon Slowe

A couple of examples for our listeners who might be unfamiliar with utility, Japanese utility investments in Europe.

[00:18:06.060] - Leon Gielen

So, for example, lately Osaka Gas invested in Igloo, UK.

[00:18:11.700] - Jon Slowe

 And they're a small but growing energy supplier in the UK.

[00:18:15.870] - Leon Gielen

Yes. And Chubu electric is one of the investors in Eneco, together with Mitsubishi Corporations.

[00:18:26.790] - Jon Slowe

So, I suspect we'll see more of that in the future. So, yeah, be interesting to see how the utilities in Japan here pick out the right companies to invest in in Europe. The second category is trading companies.

[00:18:46.290] - Jon Slowe

Now, this term, I don't know how familiar it will be with people listening.

[00:18:50.660] - Jon Slowe

Leon or Hideo would you just describe briefly what a trading company is and some names that our listeners might have heard of?

[00:18:58.340] - Hideo Yamamoto

So, some of the big trading companies that have already entered the European market in the Mitsubishi investing many kinds of these sort of company. Yeah.

[00:19:16.580] - Jon Slowe

Okay.

[00:19:16.710] - Jon Slowe

So, these trading company Mitsubishi, I think most listeners will have heard of Mitsubishi. This is Mitsubishi Corporation.

[00:19:21.150] - Hideo Yamamoto

Mitsubishi Corporation, yeah.

[00:19:24.780] - Jon Slowe

And they, some listeners may be aware they've invested in Ovo Energy in the UK. They're one of the investors along with Chubu in Eneco in the Netherlands. And what about other trading companies that might be a bit less well known than the famous Mitsubishi name?

[00:19:44.280] - Hideo Yamamoto

The other is Mitsui, Mitsui, is very active in this area.

[00:19:52.350] - Jon Slowe

And they've invested in another small but growing UK supplier called Tonik and a German company active in the eMobility sector and the intersection of eMobility and electricity called the Mobility House. Another one is Marubeni, again name some of our listeners may have heard of, and they founded SmartestEnergy in the UK, which is a very forward-thinking energy retailer and aggregator active in the industrial commercial market.

[00:20:24.660] - Jon Slowe

So, these trading companies, I think, again, are very they've been invested in the European old energy sector for many, many years and we now see them actively getting invested in the new energy sector. The last group is technology companies, so brands like Daikin and Mitsubishi, Panasonic, Toyota.

[00:20:47.710] - Jon Slowe

There is no shortage of great Japanese technology companies. Leon, can you give us a feel for, I mean they're active in Europe at the moment, selling many products, but can you give us a feel generalising how you see them thinking about the new energy transition in Europe?

[00:21:05.300] - Leon Gielen

I think it's really exciting about that. And they see, a lot of opportunities, especially if you look at a product as a service. So, they want to become a kind of service provider in this market. So, they used to be {illegible} for many years. And that means that you always in a kind of bad position because you're dependent on your partners. And you see that they now see everything as a service. What we discussed yesterday; you see there are many ways.

[00:21:35.380] - Leon Gielen

How you can sell products now, without being too dependent on that, getting squeezed out as a manufacturer.

[00:21:43.700] - Jon Slowe

Well, I think it's going to be fascinating to see how this trend to services emerges. It's well, it started, but it's in its early days. But yeah, the whole energy sector here seems to really have latched onto that as the way forward.

[00:22:01.220] - Jon Slowe

So, we'll now move on to the last part of the podcast where you'll be very pleased to hear listeners that I've taken my talking new energy crystal ball in my suitcase all the way here to Japan.

[00:22:13.400] - Jon Slowe

So, let's put it out on the table. Here we are. And we'll set the dial to 2030. And I'll ask Leon and Hideo where they think the energy transition in Japan will have got to by 2030? And what we might see along that journey. So, Leon, let’s start with you, looking 10 years ahead, where do you think we'll be here in Japan?

[00:22:35.450] - Leon Gielen

I think we will have a very full liberalised market. Lots of flexibility, all kinds of resources, huge amounts of data, connected devices, home energy management systems, eMobility, I see a full dynamic market in ten years. It will take some time, but they will get there.

[00:22:59.780] - Jon Slowe

And I guess in Europe we'd probably say the same thing. What would give you the confidence that in Japan that will be the case here in 10 years’ time?

[00:23:15.000] - Leon Gielen

I think Japan has been proven with many technologies, for example, like fuel cells, that they can take these challenges and make it successful. And I think the issue of pollution and more renewables, etc. are the drivers to get to that market and become more customer centric. So, I think they really can do it.

[00:23:41.000] - Jon Slowe

And I guess that's one thing that stood out to me and working with Japanese companies is a strategic commitment. We identify that as one of the keyways to succeed in new energy is that robust strategic commitment. And from what I've seen, Japanese companies often take quite a long-term view and then really work consistently over a number of years to achieve that. Hideo, how do you see the next 10 years unfolding here in Japan?

[00:24:07.500] - Hideo Yamamoto

So, I think, it will also the change a lot in the Japanese market, but so very change speed is very slow, I think.

[00:24:18.110] - Jon Slowe

So, evolution rather than revolution, maybe.

[00:24:21.170] - Hideo Yamamoto

That's right. And so outside of Japan the energy market is rapidly changing in Europe and the US. But in Japanese market it is gradually changing, but so the speed is very slow. There is a mini gap in the between other countries in the Japanese market in the next 10 years.

[00:24:49.580] - Jon Slowe

 And that speeds slower because regulation and market structures or just some of the differences that we identified earlier in the discussion.

[00:24:59.550] - Jon Slowe

What would make the speed be slower here, do you think?

[00:25:02.760] - Hideo Yamamoto

The one point is regulation is a regulation, regulation change is very slow. And also, the decision-making in the utility company is not rapid yet. So, this means so the market is not rapidly changing.

[00:25:24.550] - Jon Slowe

Okay. So maybe the flip side of that robust strategic commitment is it takes companies a bit of time to develop those strategies and the confidence.

[00:25:33.180] - Hideo Yamamoto

That's right. Yeah.

 [00:25:35.130] - Jon Slowe

Okay. Well, that brings us to the end of the podcast today. Thank you very much, Hideo, for joining me. Thank you very much, Leon.

[00:25:43.550] - Leon Gielen

You're welcome.

[00:25:45.300] - Jon Slowe

 And thank you, listeners. I'll be back next week. Back in Europe. Hopefully over my jet lag for the next episode of Talking New Energy.

[00:25:54.000] - Jon Slowe

And I hope you can join us then. Thank you and goodbye.

[00:26:09.540] - Jon Slowe

If you're as passionate about the energy transition as we are, then please keep in touch. You can follow us and me on Twitter, LinkedIn or subscribe to the podcasts on your chosen podcast platform.

[00:26:26.030] - Jon Slowe

If you'd like the podcast and like sharing, then please to rate us and to listen to archived episodes, to read transcripts and to see the latest Delta-EE insights, then please visit www.delta-ee.com

P2P Business Models in the energy sector

Christian Chudoba - Lumenaza - CEO

Lars Falch - Powerpeers - Co-founder & MD

Jon Slowe - Director - Delta-EE

Nigel Timperley - Associate - Delta-EE

[00:00:24.040] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition.  Hello and welcome to the episode.  Today we're looking at peer-to-peer business models in the energy sector. In the shift from old energy to new energy, we're moving from a paradigm of tens of large power plants in a country to thousands, tens of thousands, maybe millions of energy producers or prosumers, as they're often called.

[00:00:44.540] - Jon Slowe

So, going forward, will customers continue to buy electricity from traditional electricity retailers? Or will businesses that connect buyers and sellers be the future? Connecting these hundreds of thousands, millions of customers together, our peer to peer models aren't, of course, unique to the energy sector. It's a macro trend affecting many industries. Just think of Airbnb connecting people with rooms to rent and people that want to rent rooms. How will this model, this concept, develop in the energy sector?

[00:01:16.250] - Jon Slowe

Well, these models already are developing. And today we'll hear from two companies at the forefront of the sector in Europe together, as always, with a Delta-EE colleague who's led recent research on this fast-growing topic. So now I'll introduce my guests. First Lars Falch, Hello Lars. 

[00:01:36.970] - Lars Falch

Good morning.

[00:01:39.260] - Jon Slowe

Lars, can you give me an elevator pitch for your company Powerpeers that you founded and run?

[00:01:46.130] - Jon Slowe

What does Powerpeers do in a nutshell?

[00:01:50.680] - Lars Falch

Powerpeers lets, energy retailers, households and businesses to create their own marketplaces for renewable energy. Like you said, the market is moving towards more distributed energy and the ownership of the distributed renewable assets are not anymore, only with the energy suppliers and energy companies, but they are really scattered amongst, let's say, the whole world. And what we tend to do is to offer them the platform to allocate electricity, to be part of that movement, to join and to also to optimise their own energy production and consumption.

[00:02:27.490] - Lars Falch

And we make it very personal. So, it's not. Yeah.

[00:02:32.760] - Jon Slowe

So, Lars, would you describe yourselves as an Airbnb of energy or is that analogy not quite work or what would the differences be to help others?

[00:02:41.940] - Lars Falch

Well, I see that logic and quite some journalists see that it's an Airbnb meets WhatsApp of the energy market. People can also create their own communities, via these kinds of platform so that the let's say the WhatsApp kind of element towards that.

[00:03:00.970] - Jon Slowe

Okay.

[00:03:01.960] - Jon Slowe

And how long have you been going? Can you give us a sense of where you've got to today?

[00:03:07.450] - Lars Falch

We started about five years ago. And I can also remember that we also met and visited Christian who's also on this podcast back then in Berlin. We have started first an energy retailer ourselves in the Netherlands. We launched it in 2016. We were still managing that. It's a great test that, with real customers. And we have later on developed the platform as a sort of a wide label or SaaS product for other energy retailers. So, we are in the market for about four or five years now.

[00:03:44.220] - Jon Slowe

Okay, great.

[00:03:46.850] - Jon Slowe

Thanks Lars, we'll come back to you shortly. So, my second guest is Christian Chudoba of Lumenaza. Christian, welcome to the podcast.

[00:03:56.340] - Christian Chudoba

Yeah, hello. Good morning.

[00:03:59.420] - Jon Slowe

Christian, like Lars, you founded your company and continue to run it. Can you give us an elevator pitch for Lumenaza?

[00:04:08.180] - Christian Chudoba

So Lumenaza focuses on developing powerful software to connect producers and consumers of clean distributed energy. And the idea behind us is by doing so, you provide everyone access to the energy market. If you look back, we founded the company in 2013 looking at a scale, we are now active/ we have customers in four countries. We still like the Netherlands and like Lars mentioned, we met in 2014 or 2015. Unfortunately, the Netherlands is not yet on our radar.

[00:04:44.470] - Jon Slowe

So you're a SaaS business, so you're providing the platform, the software, the capability that would enable others to market these sorts of concepts to customers.

[00:04:56.630] - Christian Chudoba

Yep. Predominantly we have also very small B2C business which we use as a showcase to innovate and test new things. I will talk about it a little bit later.

[00:05:10.690] - Jon Slowe

Last but not least, my colleague Nigel Timperley.

[00:05:14.710] - Jon Slowe

Hello Nigel.

[00:05:14.880] - Nigel Timperley

 Hi Jon, nice to be here.

[00:05:17.950] - Jon Slowe

Yeah. Thanks for joining us.

[00:05:19.750] - Jon Slowe

So, Nigel, on one hand, peer-to-peer is a really simple concept. I think everyone can get the model at the conceptual level. But once you start unpacking it and delving into it, I think it can be fiendishly complex. So, can you help us bring a bit of clarity, how to break down peer to peer, as we unpack it, what would the different dimensions be to think about in peer-to-peer?

[00:05:49.780] - Nigel Timperley

Yeah. The peer-to-peer movement, if you like, is essentially a virtual. But it's defined by two dimensions currently. So, we're seeing the emergence of local peer-to-peer models, which often are very much focused on particular community. Somebody like Energy Local in Wales, for instance, or Solshare in Bangladesh, who are looking at trying to empower local communities to share power between them. All the way up to national level models like Powerpeers or Vandebron or Sonnen where they're not constrained by local geography.

[00:06:40.120] - Nigel Timperley

And then there's another dimension. If you'll think about mentally that's a y axis. On on the x axis, we've got the range of benefits and they range from financial benefits, if you like, at the left-hand end, where companies like Sonnen will reward customers with the benefits of trading and all the way to emotional benefits such as those emphasised by Powerpeers where customers are participating in the new energy transformation. And there is in that case, even a social dimension to the trade.

[00:07:18.810] - Jon Slowe

Okay. And that's, I guess, tapping into the growing macro trend of ethical consumption and people wanting to know more about what they're buying, where they're buying it from, and the value attached with it.

[00:07:31.560] - Nigel Timperley

Absolutely.

[00:07:32.200] - Nigel Timperley

 So, there might even be an ethical driver there for some of those customers who want to feel they're participating in the growth of renewables in their community. Even if that can be a virtual community at times.

[00:07:48.570] - Jon Slowe

Okay. So, we've got a local versus national dimension. We've got a dimension around the different values and benefits. As you said, it's often virtual, but on a very local basis with a micro-grid, it could be more physically matching buyers and sellers. The last question for now, Lars talked about the B2C business, they have and Christian alluded to a small B2C business they have. Christian's main business is a SaaS business so providing the capability, which Powerpeers and Lars also have. Are they the two main roles so directly taking the proposition to customers and the SaaS capability that you see companies taking?

[00:08:31.480] - Nigel Timperley

We see three main roles, but yes, they're two. So, some are effectively energy supplies in disguise where a company establishes a peer-to-peer matching service, where demand and supply are attributed to each other and matched off. But the supplier in the background is still ensuring that the role of the balancing responsible party is played and that the supply demand balance is achieved. Then the second model is software development SaaS model, which is Lumenaza represented on the call.

[00:09:10.030] - Nigel Timperley

Absolutely, so somebody can call off that service that peer-to-peer service by just making a call into the cloud. And there is a third, which is what we call facilitation, where the provider of the service isn't really actually operating that service and isn't even involved in a day to day way. Somebody like mentioned Solshare, another one in the grid might provide administrative or organisational advice. Solshare provide a sort of a peer-to-peer in a box that is a physical thing.

[00:09:43.120] - Nigel Timperley

They install it and leave and observe a facilitation role to enable these communities to happen.

[00:09:49.230] - Jon Slowe

OK. Well Nigel thanks for breaking that down. Let's take that structure and try and maintain those mental maps in your heads. Lars, let's come back to Powerpeers and your business.

[00:10:02.830] - Jon Slowe

You talked a little bit very briefly about the customer proposition, but can you tell us a bit more about as a customer, what I see from Powerpeers or what the proposition is, if I'm the householder in the Netherlands, for example.

[00:10:17.440] - Lars Falch

Yeah. So just to be clear that we have indeed two kind of companies. One is an energy supplier and the other one is a SaaS service provider. And the energy buyer in the Netherlands is a great test, right. So we learned the hard way, what works and what doesn't work. It built an energy supplier, including this peer-to-peer part from scratch. And very often I felt this would be a great idea. And customers are brutally honest.

[00:10:45.770] - Lars Falch

Right, so we learned a lot. So, in the Netherlands, we see the proposition that a prosumer so customers households with their own rooftop solar, they can easily access their solar power, including providing their own promotional pay to set set to fire the platform. And consumers, well consume and can select the different sources at the same time and then make their own, with the solar here perhaps a large-scale offshore spec so they can create their own sources and they like to have that interaction.

[00:11:31.290] - Lars Falch

They also like to have the interaction inviting others, their friends to join as well. So there's also great...

[00:11:39.680] - Jon Slowe

Okay, Lars, is that something you've learned over the years then, that customers actually want more interaction? They want to feel involved. They want to be part of it.

[00:11:49.860] - Lars Falch

Yeah, so we see that energy is becoming more personal now. So, if I get the electricity from [illegible], it feels quite different. And then perhaps I would not turn to another energy supplier because I know you.

[00:12:03.570] - Lars Falch

It's like I've been friends with you. You see the {illegible} social media. So, the ties are quite strong. And you can also by that it is also an interesting business model for energy retailers because their customers will be more sticky and there will be a way to grow virally, since a lot of people would like to invite their friends and family to join us, well, so they do the acquisition for you. They can do it a lot better than you as an energy supplier.

[00:12:40.170] - Jon Slowe

Energy is energy interesting enough for enough people? Because I often

[00:12:47.450] - Lars Falch

No, no

[00:12:47.510] - Jon Slowe

I get very passionate about energy and everything that's going on in the energy transition.

[00:12:52.470] - Jon Slowe

But for most people, it's a very minor thing, tiny thing in their lives. So how many people do you think want to engage in the way or could engage in this way?

[00:13:05.350] - Lars Falch

So, what we've noticed, is sort of natural desire of people to connect to each other. Right. And they're not interested in energy as such, but they do want to know more and more where the electricity is coming from. They don't like the green washing that you sell green electricity certificates for more way, whatever, and sell it.

[00:13:28.530] - Lars Falch

They want to know where things work from. You see, it's in other foods or in clothes. You see it's a lot of other industries as well. And if they know {illegible} can we guarantee that electricity comes from that specific source. And it can also be a source like a stadium. We see an ice-skating stadium, and they sometimes have an oversupply of green electricity. And they invite their ice-skating members to join as well. So, the elements that these kind of marketplaces to what the energy market is more impersonal, traceable freedom of choice.

[00:14:06.380] - Lars Falch

You can make your own choices. And otherwise, the software can for you. So did gives them a totally different angle towards electricity.

[00:14:15.780] - Jon Slowe

OK, so you're really trying to tap into this innate human desire to connect with other people and bring that to the energy sector.

[00:14:24.580] - Lars Falch

Correct.

[00:14:26.890] - Jon Slowe

Lars, last question for now. The software that sits behind all of this. What would you, how could you help our listeners understand, what the clever stuff is in that software? Or, what's a real big challenge to build a software platform or assess offerings that has this capability?

[00:14:51.390] - Lars Falch

The most challenging part is to let it seem very seamlessly natural and not complex. That's the big, let's say, lessons we've learned to make it very logical. People are using the software. They always said this is so logical, why is not everyone offering these kinds of services in the market? People understand it instantly. But in order to do that, to have a quite intelligent user interface design, a lot of learning the algorithms that can be difficult, but more people can do that.

[00:15:34.660] - Lars Falch

But how you bring that alive, how you interact with the market, that is something that's more challenging. And of course, there are elements like if you don't have the right meter readings, how do you allocate, what you show to your customers? Because they are now expecting to get instant, the latest offer of the energy supply and demand.

[00:16:00.840] - Lars Falch

So, there are some things that are more challenging, of course, but

[00:16:06.760] - Jon Slowe

You've got to keep it really simple, keeping it really simple and seamless for the customers

[00:16:12.710] - Lars Falch

Exactly, so that it all {illegible} and we are not there yet.

[00:16:15.090] - Lars Falch

And you're improving, of course, every day. But that's an interesting challenge that we see.

[00:16:22.250] - Jon Slowe

Okay, thanks Lars.

[00:16:23.440] - Jon Slowe

Christian let's come back to you now and Lumenaza, I talked about the B2C in the SaaS business, your focus more on the as a service model. Can you tell me a bit about some of the partners you're working with and how they in partnership with are you taking peer-to-peer forward? What sort of customer proposition? Or can you bring it to life a little bit?

[00:16:50.670] - Christian Chudoba

Sure. Absolutely. Before doing that, maybe two comments or just picking up two things that Lars was saying. What I absolutely can confirm is all the comments about the stickiness customers. And if I look at the churn rate of all of our customers and our B2B customer, of course, all the P2P projects, or the 17, that we now run.

[00:17:19.830] - Christian Chudoba

It's 2.5 percent annually. And that compares to a monthly churn rate of 2-3 percent in the industry. So, it's an order of magnitude actually better. And so, I fully can confirm from all the different countries and the markets we are in.

[00:17:36.360] - Christian Chudoba

What Lars was saying about the Netherlands.

[00:17:39.600] - Jon Slowe

And I guess that's that demonstrates that they're happy customers. They like what they're getting.

[00:17:45.260] - Christian Chudoba

Which I think the motivation is also pretty universal.

[00:17:49.020] - Christian Chudoba

It's very close to the whole [illegible] like Lars explained. So, I really completely also looking at the complexity behind what Lars was saying. Making complex things look simply. And when it comes to the end customer. And that's also what we are striving towards, building customer centric solutions. And that ranges from India and very small communities that are more like our private wire tenant electricity case were mentioned form starting from 10-20 people in the community {illegible} that share electricity on the PV.

[00:18:30.820] - Christian Chudoba

and typically, compact {illegible}.

[00:18:37.400] - Christian Chudoba

More detail approaches where you have local energy providing energy to 100 to 200 thousand people living there. Nationwide, consumer models like we be hybrid for the biggest residential battery supplier of {illegible} in Germany.

[00:18:57.640] - Christian Chudoba

But there's a full range. The idea is always the same to connect people into background, but it happens on different ranges.

[00:19:05.010] - Jon Slowe

And take those very small communities of 10-20 to 200. What sort of organisations are you working withthere are these concepts to customers? Or what's the range of organisations.

[00:19:21.670] - Christian Chudoba

Actually, they typically it's a local utility {illegible}. We like to call them in Germany. And we have like 800 of them, they are, distributed all over the country.

[00:19:35.590] - Christian Chudoba

And they set up the communities for local owners of such buildings or compounds, absorber or software.

[00:19:48.760] - Jon Slowe

And would you say most of your partners or most of the interest is coming from within the energy sector? Or are you seeing many companies coming from outside of the energy sector or new companies who are working with you to develop these peer-to-peer businesses?

[00:20:07.660] - Christian Chudoba

If we look at our current customer base, it's about 50/50.

[00:20:13.080] - Christian Chudoba

Half of them are coming more from the traditional energy space or let's call it the traditional retail space.

[00:20:21.000] - Christian Chudoba

And like I mentioned, for example, we see examples like battery supplier. Building up their own communities to get in a constant interaction with their customers, to build recurring revenues and to build new business models around the energy assets, if you were to say so. They are selling to their customers and actually looking forward.

[00:20:45.920] - Christian Chudoba

We believe those players are moving much faster and putting a real threat to the traditional retailer.

[00:20:56.770] - Christian Chudoba

They're looking very specifically now where we see mobility is really pulling a new element into the market.

[00:21:09.320] - Jon Slowe

Yeah, Lars interested in your views on that because as you've mentioned, you've got your two businesses. The B2C and the SaaS business. When you are talking with companies about your SaaS offerings, so companies, you can enable to do this. Where do you see the interest coming from yourself in terms of that split from within the energy sector or that the energy sector?

[00:21:33.420] - Lars Falch

It's quite similar to what Christian mentioned. So, we've seen them from the traditional energy companies.

[00:21:39.180] - Lars Falch

They're always interested they are not moving that much, although they think they have a lot to gain and or to protect. But from the smaller energy retailers, the Green Championship, etc. we see a lot more demand. On the other hand, we see also other companies. So, a lot of companies, they move into the electricity space like the automotive because the cars more electrified, etc. So, you see those kinds of parties joining the model.

[00:22:15.190] - Lars Falch

What we see in peer-to-peer is that it is not only peer-to-peer, it is very much about allocating time based in electricity production and consumption that this a little bit under the hood. What we are doing and that is not only applicable for building, but it's also applicable for cars. So, you can run a specific electrical car with a specific renewable source or for specific car manufacturer, which you can also do that with washing machines or other electrical equipment that can be sold together with guaranteed green electricity supply.

[00:22:58.530] - Lars Falch

So, the market is moving if these kinds of models, not only to a household or a business and an electrical meter but moving towards devices as well. And now, we see those kinds of companies being more interested also based on their sustainability ambitions to offer their products included with guaranteed green electricity.

[00:23:28.260] - Jon Slowe

And to do that, you need a sort of capability that yourself and Christian have developed in your businesses. Nigel, from your perspective, you've looked at this step broadly across Europe. How do you see it growing in terms of that split of, I guess, within the energy sector or outside of the energy sector? Or what observations do you have about how it's developing.

[00:24:00.480] - Nigel Timperley

The way I see it is that there is a growing interest in developing communities, virtual communities.

[00:24:09.560] - Nigel Timperley

Whether your storage provider an EV charge point provider, a HEM company. There's a lot of interest in developing communities that are allowing them to operate together as a unit. Those [illegible] community will be interested in this type of product and therefore a challenger supplier or a battery supplier or as I say an EV charge point company allowing you to exploit three smart charging the power of your PV panels. All of those may be in a situation where they've got power to share and probably a shared value set with other customers, which makes the community quite cohesive.

[00:25:01.920] - Nigel Timperley

So, this idea of creating communities, creating togetherness, bringing people together to act together [illegible] reasons but not solely from that point of view. Will be a driver and both the show on the longer term, I think.

[00:25:19.270] - Jon Slowe

Okay. And I'd like to explore that aspect of value. So, where's the value in these models? And we've touched on a few points. Nigel, you broke down earlier the sort of financial and then the social and environmental motivation, with the connected people together value. Christian and Lars, you both talked about the value of connections, Nigel you've talked about communities. I know some people would think outside the energy sector. Will think simplistically if I've got photovoltaics on my roofs, I can sell it to my neighbour, and I can give my neighbour away a better price than an electricity retailer.

[00:25:55.980] - Jon Slowe

But of course, we all know there's lots of other costs in the electricity system that need to be accounted for.

[00:26:01.290] - Jon Slowe

So, if we think of the value that the buckets of financial, social, environmental, if they're the right buckets? Christine, and Lars, where do you see the biggest sources of value for customers in this?

[00:26:15.610] - Christian Chudoba

Maybe if I could start Lars, I would say there are two elements, one element of this is the clear original energy which is one value by itself and connecting to people. If you are looking now more on the tangible financial components.

[00:26:35.950] - Christian Chudoba

I think that's what you're looking after, then from our point the energy cost itself or just the energy part of the energy costs. It's comparable to other sources or however you can. Of course, if you own a very local environment like in the compound, you save on transport costs, cut usage fees which all countries as a quite substantial, 20-30 percent of the total cost. So, if you can save on them because you don't need as much of the transport capacity, it is a huge financial benefit.

[00:27:20.810] - Jon Slowe

And

[00:27:21.100] - Christian Chudoba

Please

[00:27:21.300] - Jon Slowe

Sorry Christian.

[00:27:22.360] - Jon Slowe

That pushes you. Well, not pushes you, but that exploits the benefit of balancing supply and demand more locally. Therefore, you don't need all the rest. You need some of the rest of the energy system, but not maybe all the rest of the energy system.

[00:27:36.850] - Christian Chudoba

Absolutely. And that we had evaluated quite significantly and the other element in general is about using the flexibility that the community could provide. And that's particularly interesting. If there is flexibility, like in the case of batteries being mobile or not.

[00:27:59.020] - Jon Slowe

Yeah, okay. And that enables you more flexibility around that.

[00:28:05.010]

{Cross talk}

[00:28:06.070] - Christian Chudoba

You can use them to trade at better times or to or use some other service markets. That, of course, don't. But in general, these are two different pockets. And we just launched emobility tariff that actually takes quite advantage of some of the tools could use such fees. In the end, it's 20-25 percent less cost for car owners in Germany.

[00:28:32.080] - Jon Slowe

Okay, so there is financial value there based on locally matching and based on the timing and matching the timing of generation and demand. Lars, how do you see the financial values or are they, do you think? Actually, it's a social, environmental or the other values we talked about that are more important or some combination?

[00:28:52.640] - Lars Falch

 Well, the combination also what Christian just mentioned as well. Perhaps I can add an element towards that since it is possible that the people could invest in rooftop solar, but perhaps not are able to have the rooftop solar on their own rooftop.

[00:29:13.440] - Lars Falch

Because they are living in an apartment building in the city area. These kinds of platforms make it possible to invest in renewables remotely or not, but perhaps on your own rooftop, or perhaps if you are living in an apartment building that jointly. Currently in the financial model, it's not possible that based on the PV the marketplace software that that is now available in the market. The European Union also mentions that they want to change that. They want to have a non-discriminatory way that everyone can participate.

[00:29:48.080] - Lars Falch

So, if you are now in an apartment building, to pay full price, if the solar on your rooftop would go first to the grid and then to you as an apartment building owner. But I think in 2021, that will change. So, then you only pay for the investment, perhaps the {illegible} fee, but not anymore. The full price because you will have invested in solar yourself already. So, that makes not only a more financial model available for all households, but every household can join. And even better.

[00:30:25.280] - Lars Falch

There will be a lot more renewables in full. I think that if you are not having the possibility to have, let's say, and whose the old rooftop solar and since solar is becoming more cheap, that is really of late and no value for Europe as well to use the carbon footprint.

[00:30:49.670] - Jon Slowe

So, I think with seeing the, we've touched on a lot of the different variations of peer-to-peer, different dimensions that Nigel you mapped out in the beginning. And whilst, as I said at the beginning, it's a simple concept in one way. There are a lot of different ways that this concept might be taken forward the actual business models can be quite varied. That's subject to regulation, market structures which sometimes lag where the market's going, which can be a bit frustrating at times.

[00:31:21.560] - Jon Slowe

But I think as energy gets more decentralised, more distributed, we're bound to see a big growth in these types of models. Which brings us to the last part of the podcast, which, as regular listeners will know, is where we take out the Talking New Energy crystal ball.

[00:31:40.100] - Jon Slowe

So, here it is, and I've set the dial this week to 2025. And we'll look forward to whether peer-to-peer sector will be in, five years’ time. When we've looked at the market, we can see today many companies have got thousands some have got tens of thousands of customers on the peer-to-peer or on some kind of peer-to-peer business model. So, it's a meaningful market, but still in the overall scheme of things in Europe, it's a very small market.

[00:32:16.110] - Jon Slowe

I'd like to ask each of my guests where they think the peer-to-peer sector will be in five years’ time. And there are many ways you might want to express this by percentage or number of customers or some other metric you choose. So, if I ask you each in term way you think the market will be in five years, and if you keep your answers relatively brief in the interest of time. Christian, I'll start with you if that's okay?

[00:32:40.390] - Christian Chudoba

I think we are {illegible} for a couple of hundred thousand or for P2P users across Europe at the moment.

[00:32:47.720] - Christian Chudoba

And I think it will grow tremendously. We will have a couple of 10 million in five years.

[00:32:55.210] - Jon Slowe

OK. So, become a really significant part of the market. Lars, how about yourself?

[00:33:03.810] - Lars Falch

 Well, I think the market will grow a lot faster than the uptake of electrical cars and electric cars let's say, started 10 years ago and peer-to-peer perhaps three, four, five years ago. Because it's software, right? And I tend to express that this peer-to-peer seems very much a one household delivering solar power to another household.

[00:33:30.090] - Lars Falch

But underneath these kinds of companies do allocate time-based production and consumption. And we see a lot of questions now and demand from business customers. They want to go into the corporate PPA's. And they would like to have the proof that emphasis is really coming from that source. And it can be a large source or small source. But I think that is also driving the market. It's really about education, giving freedom of choice to select specific renewable sources, create communities.

[00:34:06.600] - Lars Falch

So, I see the market peer-to-peer a little bit broader than only households delivering to other households.

[00:34:13.010] - Jon Slowe

Sure.

[00:34:13.290] - Jon Slowe

Okay. So, there's the allocation and attribution of where your electricity is coming from. Both on the household level and the large level. Nigel how about yourself, as you've looked at the sector, where do you see? Where do you see it in five years?

[00:34:31.960] - Nigel Timperley

Well I am inclined to agree with well, both those points. I think we will see rapid growth because this is software. I think there was a segment, quite a large middle segment. If you think of a continuum from the left-hand end of inactive, disengaged customers and over at the right-hand then very engaged customers with EV and PV and batteries. I think that there is a middle segment of passive customers who are very interested in doing something that might get a smart thermostat, or a smart meter or 100 percent renewable energy tariff, but they won't spend a lot of money.

[00:35:05.550] - Nigel Timperley

Those people will be very attracted to this. They don't have to get PV, but they want traceability of that renewable energy. They want to feel they're participating. They want to be part of the gang and they want it on their phone. And the easier it is, the more accessible it is. And the fact it's software I could click, and sign-in then basically forget about it and just become social. I think that's a very, very attractive model for a lot of people in that middle ground.

[00:35:36.580]

{Cross talk}

[00:35:37.590] - Jon Slowe

There's a lot of people in that middle part of the market you described.

[00:35:41.960] - Nigel Timperley

Yes.

[00:35:43.870] - Jon Slowe

Okay. Well, I think everyone on the podcast today is aligned in the direction that the market's going. Lars and Christian wishing you success in your businesses and congratulations on reaching where you have got to. And wishing you a great success in the next years as you tap into this opportunity further. Thank you, Lars, Christian and Nigel for joining.

[00:36:08.310] - Christian Chudoba

Thank you.

[00:36:10.200] - Lars Falch

Thank you.

[00:36:10.210] - Nigel Timperley

Thank you

[00:36:12.240] - Jon Slowe

 And as always, thanks to the listeners who have listened to this episode. We hope you found it interesting and made you curious maybe to go and look who

[00:36:22.820] - Jon Slowe

You could buy your electricity from apart from a traditional retailer. So thanks for listening. And look forward to welcoming you back to the next episode. Goodbye.

[00:36:45.740] - Jon Slowe

If you're as passionate about the energy transition as we are, then please keep in touch. You can follow us and me on Twitter, LinkedIn or subscribe to the podcasts on your chosen podcast platform.

[00:37:02.200] - Jon Slowe

If you'd like the podcast and like sharing, then please to rate us and to listen to archived episodes, to read transcripts and to see the latest Delta-EE insights, then please visit www.delta-ee.com

Energy insights: where’s the commercial value?

Stephen Galsworthy, Chief Data Officer at Quby
Gilles Corby – Former Energy Insights Product Manager at British Gas
Jon Slowe – Director – Delta-EE
David Trevithick – Energy Insights + Product Manager – Delta-EE

[00:00:24.680] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition.  Hello and welcome to the episode.  Today we're looking at the topic of energy insights. This is quite a broad term that some of you might know by other terminology, such as demand desegregation or even non-intrusive load monitoring. A very catchy term.

[00:00:39.830] - Jon Slowe

It's a interesting topic and a fantastic topic for data scientists because smart meters and connected devices are throwing up huge amounts of data that can be analysed to see when fridges are coming on and off and lots more.

[00:00:54.140] - Jon Slowe

But today we'll be focusing on the value and the commercial aspect of energy insights. Energy retailers are working hard to look at how they can take energy insights forward, how they can offer them to customers, and importantly, where the value is, where the value is for customers and where the value is for energy retailers.

[00:01:16.370] - Jon Slowe

So, I've got three fantastic guests here today to help me pick apart this topic and explore those values.

[00:01:24.830] - Jon Slowe

So, first of all, Stephen Galsworthy, CDO of Quby, part of Eneco. Hello, Stephen.

[00:01:32.810] - Stephen Galsworthy

Hi, nice to speak to you, Jon.

[00:01:35.110] - Jon Slowe

Stephen, can you give us a quick bit of background on what you do at Quby and your work around energy insights?

[00:01:43.360] - Jon Slowe

In a nutshell,

[00:01:45.240] - Stephen Galsworthy

Certainly. Well, the whole basis of Quby is we're focusing where we want to make a world where life without wasting natural resources is easy for, particularly in the residential sector. So, what we do at Quby, we partner with a number of large utilities, water companies, insurance providers and banks and provide a number of technology solutions to help them engage with their own customers and to offer additional services. We’re most well-known for offering a smart thermostat that is white labelled as a Toon branded with Eneco in the Netherlands and Repsol in Spain.

[00:02:30.200] - Jon Slowe

Some of the listeners remember a colleague of yours speaking on the very first episode of Talking New Energy.

[00:02:35.340] - Stephen Galsworthy

Exactly. So, I'm proud to say that this is Quby's second appearance on this podcast and we were very honoured to be returning.

[00:02:45.000] - Jon Slowe

But you were speaking less about the smart thermostat and product side and more around how Quby is working with energy insights.

[00:02:52.160] - Stephen Galsworthy

Yeah. So having studied from a basis of having our smart thermostat, of which there's around 400,000 hardware devices installed across Europe, we've really taken on like how can we take that data to offer insights and services derive from that that can be beneficial for our end users. And our partners.

[00:03:13.480] - Jon Slowe

Great. Thanks, Stephen.

[00:03:14.770] - Jon Slowe

We'll come back to you shortly. My second guest is Gilles Corby, Gilles worked at Centrica, or has worked for Centrica for many years where he was product manager in the My Energy team. Hello.

[00:03:29.210] - Gilles Corby

Good afternoon.

[00:03:31.120] - Jon Slowe

Can you tell us briefly what the My Energy team or My Energy product was that you worked on and what it did for Centrica and British Gas.

[00:03:40.750] - Gilles Corby

Right, so My Energy was a couple of applications. One was a web app, another one was a mobile app, it had two chapters, one which was using the normal smart metering and general metering data that provided insights. And there was also, well still is another product called My Energy Live that uses the 10-second data from smart meters in the UK that are channelled through the in-home display. So these products have been developed over a period of four years and I was part of that team.

[00:04:25.350] - Jon Slowe

 And actively being used by British Gas customers today.

[00:04:28.820]

Oh, yes, yes, indeed. Indeed, they are. The web app was addressing something like three and a half million BG customers, residential customers.

[00:04:43.650] - Jon Slowe

Okay.

[00:04:44.200] - Jon Slowe

Thanks, Gilles. And last but not least, my colleague, here at Delta-EE David Trevithick. Hello David.

[00:04:51.530] - David Trevithick

Hello, Jon.

[00:04:53.230] - Jon Slowe

David, you manage are energy insights research here at Delta-EE

[00:04:59.860] - Jon Slowe

Can you, for our listeners, just paint a brief picture of the landscape across Europe. So is this something that or where would you put it in terms of being embryonic through to being mainstream in terms of energy retailers offering energy insights to their customers?

[00:05:18.060] - David Trevithick

Yes. Thanks, Jon.

[00:05:18.730] - David Trevithick

Yes, the way the market now is beyond embryonic, it is becoming mainstream. There are now millions of users of this and most larger energy suppliers and certainly a lot of the smaller ones now are starting to offer advance energy insight solutions.

[00:05:38.210] - Jon Slowe

Okay.

[00:05:38.460] - Jon Slowe

So, it's really moving, as you say, from embryonic starting into more of a mainstream offering. What about coming back to my introduction, the question on value.

[00:05:49.870] - Jon Slowe

So, how is energy insights delivering value for customers? How is it delivering value for energy retailers? How should we think about the different dimensions of value?

[00:06:01.880] - David Trevithick

Yes, definitely worth thinking about the customer the end user here, the value that they would derive from this. And you know, for them it's about shining a light really on their energy consumption and getting greater transparency into that and their bills and to empower them then to reduce their energy bill. So if that's for them, this is perhaps an even larger, larger focus. Their energy retailer metrics around customer engagements might well be important as high satisfaction or high advocacy.

[00:06:39.130] - David Trevithick

Of your brand can lead to a future value for the company.

[00:06:44.110] - David Trevithick

But there are sort of value streams right now that can be unlocked by energy retailers.

[00:06:52.000] - Jon Slowe

So how well understood are those value streams? Well, what are they? How well understood are they? And I'll share a conversation, I won’t say with who, with a head of data at one big energy retailer that I had. And they were nervous about committing to this area, not because they thought they shouldn't. But in terms of the business case, the value or the potential benefits to the energy retailer, we're not certain. They were not clear, and that made it difficult for them to make a big commitment.

[00:07:23.350] - Jon Slowe

So, how would you explain to them the sources of value or how mature or well understood you think those values are?

[00:07:31.210] - David Trevithick

Yeah, that's a good question. Obviously, every energy retailer or energy company will have their own perspective on this. But the sort of buckets of value could be looked at are the cost to serve particularly for the bigger energy retailers by reducing the number of inbound calls into their call centre, for instance, [illegible] value for them. Also, retention, them getting customers to actually have increase in loyalty and retention over a period of time.

[00:08:04.480] - David Trevithick

Will also have a financial value to them as well. And there is perhaps more uncertainty about sort of value-add products.

[00:08:11.170] - David Trevithick

Whereby [illegible] can be additional components of some sort of future product. So, these are sort things that energy retailers might look at. There are not all the value streams. You know, some people actually charging a premium, for instance, for service or if you're a policy maker, you might be looking at engagement and energy saving metrics, for instance. But those are the key ones, I think, for energy retailers.

[00:08:36.560] - Jon Slowe

Okay. So, cost to serve, retention and then ability or better being able to sell, add value and tailor those to customers.

[00:08:45.020] - Jon Slowe

Gilles, let's come back to you now. So, how do you think about those three buckets of value that David's described from your time in this industry and working with a big energy retailer? Which ones of those, were front of mind?

[00:09:06.740] - Gilles Corby

Well it was all of the above. I think at the beginning, the the challenge that British Gas had is was a matter of retention of customers. They saw the possibility, the opportunity in energy insights in creating a higher level of transparency on increasing trust. And the way that they would measure that the they were actually moving the needle in the right direction was measuring the net promoter score and pull BG customers who were using the energy insights product. The Delta in NPS was 30 points, you know, between 20 and 30 points.

[00:09:51.130] - Gilles Corby

So, that was quite significant, and it worked out quite well. But then the issues to know what price they are going to put on an NPS point.

[00:10:01.250] - Jon Slowe

Gilles, just for our readers are familiar with Net Promoter Score. How significant is 20 to 30 points or can you put that into a wider context?

[00:10:12.410] - Gilles Corby

Well, you know, practically when the detractors and the recommenders were even, more or less even in the case of British Gas in general customers, you would have a positive level of recommendation with people that used, customers who used British Gas My Energy. So, it does increase the possibility of gaining customers because they're going to recommend it other people that help you to stand the churn.

[00:10:51.830] - Gilles Corby

Because in the U.K. context, there’s a high level of churn. Well, yes. And they. You can't keep your customers. So, you need to be able to acquire customers. So, you know, it's one way of making sure that you're going to keep your customer numbers at a level that allows you to stay alive. I think also that the cost to serve then became more important because we started having some interrogations about the actual value of an NPS point.

[00:11:25.970] - Gilles Corby

I think originally the business case was predicated on value that was put on an NPS point. Then the focus changed and looked more towards the cost to serve, reducing the inbound calls. And there were clear indications that the calls were reduced. And there's also an opportunity, which is that the people who are actually normally taking inbound calls can actually go into sales calls because British Gas doesn't only sell energy, they sell insurance, they sell boiler services.

[00:11:57.290] - Gilles Corby

They say boilers and Hive thermostats, for instance. So, that was also revenue opportunity.

[00:12:06.260] - Jon Slowe

So, Gilles, would you say then in your time there, it was a clear case that there were benefits around reducing cost to serve and NPS that wasn't argued about by anyone. There is consensus that energy insights did deliver these two values.

[00:12:26.070] - Gilles Corby

There was. It was clear that they were generating value. What had to be managed is the amount of cost that you put on the other side because to run that product, it does cost money. To have developers need to maintain in it to bring new features, because you could see that when the features remained stable, the interest was going down and the NPS was being down. So, you want to make sure that you can bring in new features and that costs money.

[00:12:55.610] - Gilles Corby

So, you have to have this business case, you know, it still is working. So, I haven't been close enough to the business case recently to give any information on that.

[00:13:12.320] - Jon Slowe

[illegible] of the cost to both launch and maintain and grow the energy is the product against those benefits that you described.

[00:13:19.500] - Gilles Corby

Absolutely, yeah, yeah.

[00:13:21.540] - Jon Slowe

 Stephen how does this chime with your experience and I guess experience of Quby working directly with your owner Eneco your parent company and then with other energy retailers in terms of the value and what David described and Gilles experience, at British Gas.

[00:13:39.580] - Stephen Galsworthy

Yeah, it's really interesting to compare because at Quby, we've got a lot of experience of working with many utilities across different European countries. We've come into this mostly from originally from a hardware perspective that we've been offering an energy insights display that also happens to function as a smart thermostat. So, you're having the two capabilities combined together. I think really the focus initially there was on changing the interaction from maybe a once per year interaction with your utility where you're receiving a bill.

[00:14:18.690] - Stephen Galsworthy

And it's often quite a negative reaction into a daily or a weekly touch points that is a lot more positive. So, getting some insight into how you've used electricity or being able to control your heating. Over time, we've moved on to...

[00:14:33.990] - Jon Slowe

 What about the value you can put on that?

[00:14:35.790] - Jon Slowe

Because I get that and I get that in the new energy world, energy retailers are going to need to transform there once a year negative bill paying type relationship into a much more positive weekly daily touch point. But how have you heard your energy retailer partners talking about the value of that or as Gilles said, the cost of delivering those types of insights against the value of those daily or weekly positive touch points?

[00:15:05.470] - Stephen Galsworthy

Yeah. I mean, initially with our smart thermostat products, we've really been targeting churn NPS and really seeing a huge uptake in that NPS scores across our customers. So, for example, a typical utility across Europe is having quite a strongly negative NPS score. But if you can as Gilles said, boost that by 30 points or more then that can really turn around its ability to interact with its customers. As we moved a little bit more into offering energy insights without hardware in the home.

[00:15:43.560] - Stephen Galsworthy

So, for example, since the end of last year, we've been powering the Energy Insight services within the Eneco app within the Netherlands. So that includes a bill breakdown just based on a smart meter data as well as triggers and tips to save energy. We're seeing that you can engage customers in a different way. And it's often getting that engagement that is key to unlocking further services down the line. What we found is that many utilities across Europe are very different stages in their maturity.

[00:16:20.910] - Stephen Galsworthy

Some utilities are just starting to get the email contact details of their own customers. Others are having been operating with apps for a number of years already. So, there's quite a varied landscape out there.

[00:16:36.300] - Jon Slowe

Yeah

[00:16:37.080] - Gilles Corby

 Yeah. I think it all depends on the competitive landscape also depending on the market.

[00:16:43.110] - Stephen Galsworthy

Exactly.

[00:16:43.580] - Stephen Galsworthy

I think the countries where we've been active as Quby, in the Netherlands and Belgium that are competitive markets are similar as you see in the UK. Other countries, Germany, for example, there's much less competition in a historical sense.

[00:17:00.740] - Gilles Corby

I would agree with that.

[00:17:02.260] - Jon Slowe

David, how does that fit with your discussions you have with your energy retailers across Europe in that sort of spectrum of those just beginning? You said at the beginning, this is not about embryonic, but the level of confidence that energy retailers have in the business case. Would you say that confidence is there? Or it's still being learned or being established or is wavering a bit?

[00:17:28.260] - David Trevithick

Yeah, I think it's an it's a difficult one.

[00:17:30.150] - David Trevithick

I think people are going from, slightly different angles. And I don't think there's that much clarity on the hard business metrics. I think some companies that are experiencing that don't necessarily want to share that too widely and those people are struggling to unpick some of these things. Some of these metrics are quite difficult to unpick. So if we look at retention, for instance, it's not always it's not always easy as the people who are using energy insights are your energy engage customers and your energy engaged customers are more likely to switch suppliers anyway because they've engaged the market.

[00:18:10.110] - David Trevithick

So our research, for instance, of European customer research has identified some of this stuff and it validates a few thoughts on this, but actually found that, yes, they are more likely to switch suppliers, but they're also more likely to stay compared to what the situation would've been without any energy, insights, solutions and services there. So, it does provide retention benefit, for instance.

[00:18:37.770] - Jon Slowe

You've really got to then segment the customer base, understand the value that's delivered to different types of customers.

[00:18:44.420] - Jon Slowe

There's quite a lot of learning there from the sound of it.

[00:18:46.760] - David Trevithick

I think you're right. Yeah, you got to have the systems and processes in place to be able to get these learnings.

[00:18:50.620] - Jon Slowe

Yeah, yeah, yeah.

[00:18:52.080] - Gilles Corby

Yeah, you also need to bear in mind that the utility world leads us at a certain pace and energy insights comes from an internet world where the pace is much faster. The saying is that in utility years, is seven man years, whereas nearly seven internet years. So, you can see the difference in pace. I think that there's an issue where utilities don't move fast enough for the year, the developments and the renewal of the futures for the for this type of services with energy insights that usually come over a mobile app or web app.

[00:19:32.070] - Gilles Corby

So that's a really interesting point Gilles, I am guessing you and Steven you've both live in the tech or digital world, that fast moving world. But you've both worked for or with traditional energy retailers.

[00:19:46.500] - Jon Slowe

So how was that conflict of those different paces, those different ways of working between a traditional energy retailer and yourself in more tech roles?

[00:19:58.790] - Gilles Corby

I think the reason that it happened is that BG was really trying hard to and did succeed in breaking new ground. And typically, when you talk to other players in industry BG is seen as an innovator. But I think that forced Steve, the objective was/is also true to sell the solution to other utilities, which is not so much the case for British Gas.

[00:20:33.070] - Gilles Corby

And obviously you're in front of organisations that are slow to move on. Also, you need to bear in mind that you need to talk to people who have a joined-up approach to customer data and metering data. Even BG, there in some way failed, just to give you an example, the customer number for BG customer for the energy retail is not the same customer number for a Hive customer.

[00:21:07.910] - Gilles Corby

So, if you want to do up sell, cross-sell activity, you're going to struggle because you can't marry the two data sets.

[00:21:18.820] - Jon Slowe

Simply the structure of those databases, a customer had a different I.D. for each, so for Hive and the energy retailers.

[00:21:24.510] - Gilles Corby

Right. Yeah.

[00:21:27.140] - Stephen Galsworthy

Yeah. That that's something that we see with the partners that we work with because utilities are also expanding their operations maybe there as British Gas has in the UK an installer network or a smart thermostat that can be added on. And one thing that we've really added with Quby and spent a lot of time is bringing that perspective from the tech world, as you were saying, that the pace of change is quicker, but also the way of working is very different.

[00:21:55.730] - Stephen Galsworthy

It's a lot you have to do things in small iterative experiments rather than multiyear road-map planning. What we find is most what your traditional utility is very good at marketing a product and billing for it, but actually developing services on top of that and developing engagement insights when it gets down to working with hardware. And there's a lot of speciality, especially expertise that's required to operate a product like that. So that that's something that we've really been able to offer to other utility partners.

[00:22:35.750] - Jon Slowe

And I guess that's utilities have a choice. Some are developing this in-house. Some are buying in expertise. Some are partnering or buying as a service type expertise. So, there'll be pros and cons of doing this in-house and partnering.

[00:22:55.550] - Gilles Corby

BG has done both.

[00:22:55.970] - Gilles Corby

So BG first worked with AlertMe, which is how I got into the story because I was working for AlertMe and then decided to develop a new platform in house for the de-segregation part of it. And then the platform that was built from the de-segregation engine was different as well.

[00:23:22.970] - Stephen Galsworthy

And as you mentioned earlier, Jon Quby is now a fully owned subsidiary of the Eneco group. So, we started off working as partners, but then overtime that's become a stronger relationship there.

[00:23:39.680] - Jon Slowe

I'd like to move on to the third bucket of value that David introduced, so we've talked about cost to serve and retention and net promoter score being part of that. The third bucket was helping to sell added value products and services. And David, I guess the premises of this is that through energy insights, if you know your customer really, really well, then you're better able to decide what brought us the services to sell to the customer, to develop tailored offerings, personalised offerings.

[00:24:11.640] - Jon Slowe

Is that the idea of it?

[00:24:13.480] - David Trevithick

I think that's it.

[00:24:14.160] - David Trevithick

I think it's definitely I think it's one the harder ones to judge and judge your progress and see where you're at. I think some of the value buckets, we talked about before are the ones you start with and then perhaps for more advanced companies start to look at some other ways of extracting value.

[00:24:34.500] - Jon Slowe

Gilles and Stephen, any views yourself on that third bucket of value added for us in services and how energy insights can help to up-sell those to customers?

[00:24:44.850] - Stephen Galsworthy

Yeah, I think this is really where the big value is. We see utilities are shifting away from just selling commodity into wanting to offer a huge number of energy related services beyond that or even moving into the insurance area. We tend to see it in a way that you want to get some engagement with the customer and insight is a way of getting that engagement and giving that tailored advice before you can then move on to sort of the realisation phase of maybe giving someone insight and then they want to install a solar panel on the home.

[00:25:23.100]

And then once the solar panels there maybe you can offer some monitoring or maintenance services so you can detect when there's an issue with those solar panels. So, we do see those steps as really been quite key. And I think utilities across Europe are really at the beginning phases of really exploring how to add that value together. And what your...

[00:25:47.400] - Jon Slowe

What's the big challenge?

[00:25:48.210] - Jon Slowe

Do you think, Stephen, with that? You know, we’re at the beginning, there's a lot to do. What would you say are the really big steps that need to be taken to start succeeding with that?

[00:26:02.680] - Stephen Galsworthy

I think it's a very different mindset that needs to be in place within the utility to be able to offer services in that in that way. What we found with our partners that is successful in the areas they start off with are relatively simple services to offer. So, for example, with Eneco and Engie, we offer a product called the Waste Checker, which allows customers to get insight into their inefficient appliances. From there, you can see the customers themselves can quite easily take the step of if they've identified that washing machine is operating inefficiently, a customer knows how to get a new washing machine.

[00:26:45.500] - Stephen Galsworthy

We don't need to provide them with that service. But when it gets to the more complicated things like perhaps installing a new heat pump in your home, the end customer really can benefit from that advice and that that's tailor-made service. And it's all about triggering the next best step, the right time. So you can, you're not don't want to go just to a customer and recommend they install a wind turbine in the back garden when in their instance it might just be a turning down.

[00:27:21.100] - Stephen Galsworthy

Some of their standby usage overnight is the step that they could take right now.

[00:27:25.150] - Jon Slowe

Yes, the principal seems quite clear, doesn't it, but the practice, I guess, and the mindset behind that is harder.

[00:27:30.910] - Jon Slowe

Sorry Gilles,

[00:27:32.340] - Gilles Corby

I mean, to be able to volunteer this kind of advice, you need to have a pretty intimate knowledge of your customer. Likewise, if you say, oh have you got any good advice to put a solar panel, you need to know whether they actually have the right to put a solar panel on their roof. So, there's quite a few things you need to know for me that the value of energy insights rests on three pillars.

[00:28:02.290] - Gilles Corby

The first one is the accuracy, the confidence of the insight that you provide. There are also the time limits and the how actionable it is. And I remember getting actually some complaints from customers because we would tell them we'd give them tips or insights about the usage of electricity. So, at Christmas period and it would come with the bill that they received in February. So, you know what's in it for me? I've already wasted my energy.

[00:28:36.040] - Gilles Corby

You should have told me when I was wasting it, I would have stopped, OK. And there's another aspect of that as well. And I think that's the weak point of energy insight. As we know them today is that it does rely on behavioural change from customers.

[00:28:53.260] - Jon Slowe

So, there's a lot to get right then Gilles, then that accuracy, that timeliness and to make sure it's actionable. And if you get any one of those wrong, then you're going to quickly loose the trust and confidence of customers.

[00:29:04.520] - Gilles Corby

Yes, exactly. Exactly. I think ultimately you need to understand what the customer wants to do with that, with the energy insights you want to deliver. For me, it's typically to reduce to the bill. So either short term or long term. Because of that, you're working on a very limited envelope in the UK. The average electricity bill is going to be 700 pounds per year. So, you know, what proportion of that are you going to be able to reveal to turn back to the customer?

[00:29:38.170] - Gilles Corby

And how can you make a profit on it as well? So, with these things you surely want to make savings happen. And using the same processes that you used to have the energy insights but have something more automated that provides information and then the energy insights can be used to actually show you're working to your customer. If you've sold them a proposition where you optimise energy like in home energy management, for instance.

[00:30:08.760] - Stephen Galsworthy

Well, what we find is always important to remember is for the majority of electricity and gas customers. Energy is quite a boring topic. It's low interest at best. Because we're working with it every day, it's very easy to get passionate about the energy transition, but for your average household, it's something that becomes a very low priority in many cases and customers often starting from a very passive point of view. So if you can take steps to activate them and by offering sort of the right advice at the right time.

[00:30:48.730] - Stephen Galsworthy

As Gilles was mentioning that really makes a big difference.

[00:30:52.990] - Jon Slowe

Yeah, I think it's as you say, it's quite easy for us to forget how most customers engage with energy or don't. And the value of being led by the customer use cases of the customer benefit to the customer idea.

[00:31:07.220] - Jon Slowe

I'm getting now to the time where we bring up the talking new energy crystal ball and gaze into the future. So, I've got quite a clear question for all three of you. So, research that I say we, David has led here at Delta-EE. We've looked at 20 energy retailers across Europe, with I think cumulatively, ninety-five million customers and about fifteen million of those customers are on energy or have downloaded energy insight apps today. Using them? Maybe, maybe not but fifteen million have an app downloaded.

[00:31:45.340] - Jon Slowe

So, let's take that number proportion of roughly fifteen percent of customers across twenty European energy retailers are using energy insights today. If we look forward in five years’ time where do each of you think that percentage will be in terms of customers using their energy retailers, energy insight apps. So, a number or a range or review and a sentence about why. Gilles, I'll put you on the spot first.

[00:32:17.440] - Gilles Corby

Yes, I'm happy for that. I think that you're not going to see a big movement which doesn't feel very optimistic. But in fact, what's happening in the energy retail is coming to a very exciting period, where you can see the prospect of new exciting propositions there on home energy management about mobility. And I think that people are going to engage with these propositions will be much more engaged. And you've probably come to a usage level of the apps of thirty percent, which is the block figure for a healthy app.

[00:32:53.650] - Gilles Corby

I come from a mobile telephony background and 30 percent was the average. There are some applications that get much higher. But there are very few. Thirty percent is way much higher, much higher than 15 percent, as you say. So, I think you have pools of much higher engagement. I think probably in case of mobility will be even up to sixty percent usage. But overall, you probably go I'd, say, you’re going to be lucky if you're both twenty percent.

[00:33:28.430] - Jon Slowe

OK, so a bit of growth, but much more engagement from those people who have an app.

[00:33:33.660] - Gilles Corby

You will have relatively strong growth, but you've got maybe in fifteen years it will be up to thirty percent because more people will be using these new propositions that really rely on energy insights.

[00:33:47.350] - Jon Slowe

OK. Stephen, how about you?

[00:33:50.470] - Stephen Galsworthy

Yeah, I mean, I feel that if an energy insights app just remains as being an app to provide energy insights that the fifteen to twenty percent is what we would expect in a few years’ time. I don't see the nature of the proposition changing enough. I mean energy insights is just not appealing enough thinking from the perspective of end-user that they've got their phone, they've got maybe fifty apps on the phone, what is going to persuade them to click on that?

[00:34:25.730] - Stephen Galsworthy

Click on the app and use the app. So why should that be fighting for screen space? I think as you move towards giving that end user the ability to take actions to be able to either control smart devices within the home or to have some kind of monitoring service too, that gives them a push alerts when their solar panels need maintenance or when there's an issue with their refrigerator. I think then you’re slowly increasing the value of.

[00:34:57.380] - Stephen Galsworthy

Why would someone install that in the first place? I think you need to. You can move, I think a little bit in the way towards making energy insights easy to break down, easy, understandable. But there's a limit that if we just stay with energy insights on its own.

[00:35:15.290] - Jon Slowe

OK. So yes, some opportunity for the insights themselves but much more in what you do with that, how that can then be automated with connected devices.

[00:35:25.550] - Stephen Galsworthy

 Yeah.

[00:35:26.630] - Stephen Galsworthy

I think that insight's is really just one component that needs to be locked together into the whole experience of being a utility customer.

[00:35:37.340] - Jon Slowe

And last but not least David.

[00:35:39.650] - David Trevithick

Yeah, reflecting some of your views as well. I think it comes down to three areas that have room for growth. So, one is around the advancements of the smart meter rollouts across Europe. One is around to innovation in the market and how energy insights can develop further. And thirdly, around customer consent levels that can increase as well.

[00:36:03.950] - David Trevithick

And you know, some brands already have high levels of usage. So, I think it's possible. But I actually thought in my head thirty percent myself as well reflecting Gilles's. So, to be contrarian, I have to at least be different, so I’ll lower it to twenty-five percent.

[00:36:23.350] - Jon Slowe

Well, I'm optimistic. I think this is the start of a journey. And I think you've all described that journey in a similar way, from pure insights to more engagement, more automation, home energy management, integration with the e-mobility. So, we'll leave it there. Thanks to all of you for your time. Thanks, particularly Gilles and Stephen, for sharing your views. And as always, thank you to the listeners for joining this episode. We hope you enjoyed it.

[00:36:57.920] - Jon Slowe

And look forward to welcome you back next week. Thanks very much and goodbye.

[00:37:04.370] - Jon Slowe

If you're as passionate about the energy transition as we are, then please keep in touch. You can follow us and me on Twitter, LinkedIn or subscribe to the podcasts on your chosen podcast platform.

[00:37:16.400] - Jon Slowe

If you'd like the podcast and like sharing, then please to rate us and to listen to archived episodes, to read transcripts and to see the latest Delta-EE insights, then please visit www.delta-ee.com

Electrifying heat in the Netherlands – the role of data and services

Gijs Diependaal, Technology & Innovation Manager - Eneco

Elbert Stoffer, Innovation Manager - Itho Daalderop

Jon Slowe – Director – Delta-EE

Cate Lyon – Electrification of Heat Service Manager – Delta-EE

[00:00:25.130] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition.  Hello and welcome to the episode. Today we're going to the Netherlands and the context of why we're going to the Netherlands is electrification of heat.

[00:00:35.300] - Jon Slowe

The Netherlands is a country that I think at the forefront of the move to increasing electrification of heat across Europe. And we'll be looking at how two companies are responding to this. Two interesting dimensions of this will be the move from just selling products or letting a product drop into the market to selling services or having an ongoing relationship with customers. And the second element will be digitalisation and connectivity and how these are enabling services around the electrification of heat to develop in the Netherlands.

[00:01:14.720] - Jon Slowe

And we've got two great guests who join us and share their experiences together, as usual with our Delta-EE expert. So, without further ado, let me introduce my guests. First of all, Gijs Diependaal, who is technology and innovation manager at Eneco. Eneco is one of the three big energy companies in the Netherlands. Hello Gijs.

[00:01:39.640] - Gijs Diependaal

 Hello. Thank you for having me. I'm thrilled to be on the show.

[00:01:43.990] - Jon Slowe

Thanks for joining us to help listeners understand where you're coming from.

[00:01:48.370] - Jon Slowe

Can you describe in a nutshell your role at Eneco? What is it you you're you doing and how that relates to electrification of heat?

[00:01:56.290] - Gijs Diependaal

My role is to develop new business models for Eneco. Eneco is an energy supplier. And our core business is, of course, selling energy. But we're looking for new business models for Eneco with a long-term sustainable relation with our customers. Energy is changing. So, we're in the middle of the energy transition and Eneco is building new models for the longer term with our customers.

[00:02:24.660] - Jon Slowe

Great. And we're looking forward to hearing about those models that are focusing on heat shortly.

[00:02:29.900] - Jon Slowe

My second guest is Elbert Stoffer. Now, Elbert also has a job title innovation so innovation manager at a company called Itho Daalderop, which is well known in the Netherlands, I think Elbert but maybe a bit less well-known in some European countries. So welcome to the podcast.

[00:02:49.920] - Elbert Stoffer

Hello, Jon. Hello Cate.

[00:02:53.040] - Jon Slowe

Could you help us understand a bit more about Itho Daalderop, and what your role is there?

[00:03:00.120] - Elbert Stoffer

Yes, please. Itho Daalderop is a company which supplies products made for a household which are taking care of a heat, domestic hot water and ventilation and my personal role in this organisation nowadays is innovation manager.

[00:03:18.310] - Elbert Stoffer

So quite a lot of the products we sell, we develop ourselves. Of course, we have quite some people to do that. Given the fact that we have products in all three of the elements I just mentioned. So heat, ventilation and domestic hot water. We focus within those product ranges quite a lot on the renewable products like heat pumps, for example.

[00:03:48.190] - Jon Slowe

Okay, great. So, we'll come back to Gijs and Elbert shortly to hear more about the two things they're focusing on. To give you a sneak preview. One is heat as a service or more specifically comfortable as a service. And from Elbert, not only selling heat pumps, but guaranteeing the performance of heat pumps. Now my last guest, but by no means least, is my colleague, Cate Lyon from Delta-EE. Hello Cate.

[00:04:19.080] - Cate Lyon

Hi, Jon. Thanks for having me on today.

[00:04:21.190] - Jon Slowe

Thanks for joining. So, Cate, you look at our research on electrification of heat across Europe. And I said in my introduction, the Netherlands is at the forefront of this. Can you just give a bit more depth and colour to that? So how is heat being electrified across Europe? At what rate treatment? Where does the Netherlands sit compared to other countries?

[00:04:43.870] - Cate Lyon

Yes, happy to do that. Thanks, Jon. So, as you say, I manage our Electrification of Heat service.

[00:04:50.980] - Cate Lyon

And across the heat services at Delta, we look at the major heating markets. We see how the transition to new energy is changing those markets, what's coming along in terms of new products, new services, and how is the energy mix in a lot of these markets changing. So, the Netherlands, as you said, it's one of the smaller of the markets that we look at in terms of heating sales and volumes. But it's a really interesting one because it's really kind of leading in terms of this move away from fossil fuels like natural gas and putting more, more emphasis on electrification.

[00:05:20.740] - Jon Slowe

Why is that? What's driving this in the Netherlands?

[00:05:24.010] - Cate Lyon

So, a couple of reasons. A lot of countries across Europe now have targets around reducing emissions of carbon dioxide and moving towards electricity. And renewable electricity is good by achieving that. The Netherlands in particular has been taking a really strong stance on phasing out natural gas after a series of earthquakes in the north of the country that have been caused by natural gas extraction.

[00:05:44.700] - Jon Slowe

And that's quite interesting because the Netherlands is famous really for being a gas country free for decades on the back of its gas reserves. So, it's quite a shift.

[00:05:55.530] - Cate Lyon

Yeah, definitely. It will be a big change, similar to the U.K., the Netherlands, as you say, it's been a country that's been dominated by dominated by gas heating for a very long time. Sort of 85, 90 percent of homes at the moment use natural gas as their main heat source.

[00:06:07.360] - Jon Slowe

So, I said the Dutch are at the forefront.

[00:06:11.190] - Jon Slowe

Are they leading, would you say, when it comes to electrification of heat, are they one of the leaders? How do they compare to the other big markets like Germany or France or UK?

[00:06:19.600] - Cate Lyon

So, they're definitely a leader in terms of new build. So, the Netherlands in 2018 passed a law that means the presumption on any new build house is that it will no longer get a connection to a gas network. In most circumstances, there are some exceptions.

[00:06:34.570] - Cate Lyon

And they've also been ramping up the support that they offer in terms of subsidies and legislation to help retrofit. The other really big sector that needs tackled to help that move towards electrification as well.

[00:06:45.350] - Jon Slowe

And I always think new builds actually relatively easy if we can't decarbonise new builds, then we don't have much hope with a huge challenge that's retrofit. That's a really hard part. That's where the emissions are, progress in retrofit compared to new builds, you've explained that legislation for new builds, is retrofit, moving yet or is it starting to move?

[00:07:08.540] - Cate Lyon

I'd say retrofit starting to move, definitely. And Netherlands has quite good structure in terms of putting obligations on social housing. And there's a lot of social housing in the Netherlands. That's a bigger chunk of the housing stock that than some of the other markets we look at. So legislation to encourage social housing providers to move away from natural gas helped homes disconnect. New build is kind of where most the emphasis still is. And that's similar to we're seeing that developing now in other markets in Europe as well.

[00:07:35.590] - Cate Lyon

So seeing, for example, proposals from the U.K., from the Republic of Ireland, from certain parts of Belgium as well, that they might follow the Netherlands down this route of banning gas connections in new builds. Yeah. So Netherlands is really kind of led the charge on the new build front.

[00:07:52.240] - Jon Slowe

And my last question before we come back to Gijs and Elbert.

[00:07:59.410] - Jon Slowe

Are the Netherlands purely following the electrification route? Or are there other solutions? We've seen hydrogen become a bigger topic in many markets, for example, heat networks. How do you see that in terms of focusing on electrification or a breadth of solutions?

[00:08:16.640] - Cate Lyon

Yeah, that's a really good question, Jon. So, I think when the ban on gas and new build was brought in, there was kind of this assumption that everything would move to being electric and probably high efficiency, so heat pumps.

[00:08:27.170] - Cate Lyon

I'd say that the narratives probably moved on a little bit in the last couple of years. There's definitely an increased interest in whether district heating can meet some of that new build connection need and renewed interest, I think, in biogas, in some of the more rural areas. And as you say, there's kind of growing interest in potential for 100 percent hydrogen networks in specific pockets in the Netherlands system, as to how we're seeing in the UK. And the new build picture is by no means guaranteed to be 100 percent electric, although I think we'd expect a good proportion to be mainly electric.

[00:09:00.010] - Jon Slowe

Yeah. Great. Thanks for that context Cate. Gijs I'd like to come back to you now at Eneco. Can you tell us about this heat as a service or comfort as a service proposition? You've developed if I'm a customer, what does it look like? What can I what can I get from Eneco?

[00:09:21.110] - Gijs Diependaal

The biggest difference compared to the traditional energy bill is that we now sell the product and not the kilowatt hours. So, we make a promise to a tenant for a fee per month. They have a bundle of energy so they can have a comfortable home temperature of 20 degrees or a fixed fee per month and they have a bundle for a hot shower, hot water every day.

[00:09:50.000] - Gijs Diependaal

One hundred and eighty litres. So, the biggest difference is we sell comfort instead of kilowatt hours.

[00:09:57.520] - Jon Slowe

That's quite a change. It's quite a step. Tell me a bit about what drove you to doing this and how that started.

[00:10:09.970] - Jon Slowe

Where did the ideas come from or was it obvious? This is way you had to go. Or has it taken a few years to find your way to this point?

[00:10:19.530] - Gijs Diependaal

In this group of tenants, it's social housing. So, an unpleasant surprise on the energy bill, is a big issue. So, we searched for a model without unpleasant surprises on the energy bill. So, we have a monitoring system so the tenants can see what he's doing and how he's compared to his neighbours.

[00:10:44.420] - Gijs Diependaal

And of course, we have a legal framework to EPF, the energy performance fee. That's a legal framework show the investment can be earned back for the house owner. So, the house owner, the heat pump is of course, a much bigger investment compared to a gas fire boiler.

[00:11:05.600] - Jon Slowe

So Eneco is making that investment in the heat pump, you're monitoring that heat pump. Is Eneco also controlling the operation of that heat pump to deliver the comfort that the tenant needs?

[00:11:21.740] - Jon Slowe

Or is the tenant controlling the heat pumps operation?

[00:11:24.980] - Gijs Diependaal

 Both, of course, the tenant needs to be on the steering wheel for his room temperature, but also for his hot water that Eneco has also control because we pay the energy bill, the electricity used for the heat pump is connected to a secondary electricity meter. Connected to touch [illegible] energy. So, we deliver clean energy to the heat pumps and we are steering to have a good performance on the heater.

[00:11:55.490] - Gijs Diependaal

So, the output comfort is for the tenant. But he's also if he wants 21 degrees or 22 degrees. Of course, he can change that, but the bundle is for 20 degrees.

[00:12:08.820] - Jon Slowe

OK. How does a, so to be clear, this is mainly or is it only for tenants in social housing at the moment?

[00:12:20.370] - Gijs Diependaal

At this moment, we have a project for social housing because the legal framework the EPV is only for social housing. At this moment. We have our first pilots, 61 tenants in Utrecht with this solution.

[00:12:37.940] - Gijs Diependaal

Confidential service.

[00:12:40.470] - Jon Slowe

OK, can you see if this is successful? How widely would you roll it out? Would do you think just be social housing? Would it be new build and retrofit? Would it be. private housing as well?

[00:12:54.080] - Gijs Diependaal

Yes. A lot of questions. But we're in the middle of the pilot. And after this winter, we will have more insights into behaviour of the customer, the energy performance of the heat pump and things like that. And we're aiming for the bigger markets for comfort as a service of course.

[00:13:12.920] - Jon Slowe

OK, I guess that learning those sorts of things, you'll learn, the behaviour, of the tenants, the performance of the heat pump that all relates to the risk that an Eneco is taking.

[00:13:24.450] - Jon Slowe

For the customer it's a I think, a beautifully simple proposition, but Eneco there is a lot of complexity for you to manage and potentially a lot of risk. So, has that been hard to deal with or tell me a bit about how how you approach those risks or how you manage those risks?

[00:13:43.890] - Gijs Diependaal

Now, it's worth the risk because a new business model always takes risks.

[00:13:49.350] - Gijs Diependaal

And in this case, we have a very good monitoring system so the tenants can see what he's doing. We can see what a tenant is doing. So, we support, and we coach the tenants to be sustainable behaviour. So we're coaching the tenants. Because he moved from a home with a gas fired boiler and a quick shower all day, if you want it. And in his new house, you can only shower for half an hour if he wants more.

[00:14:19.490] - Gijs Diependaal

That's possible to change, he can ask a secondary load for the hot water that is outside of the bundle. So, we coach the tenants, give them insights, to prevent unpleasant surprises on the energy bill at the end of the year.

[00:14:38.790] - Jon Slowe

OK.

[00:14:39.220] - Gijs Diependaal

So this is the biggest change for energy as a service user behaviour and changing mindsets to be sustainable.

[00:14:50.580] - Jon Slowe

So, in my introduction, I talked about data and connectivity and presumably there's a huge amount of data you're getting and there's a lot for you to work out in terms of analysing that data.

[00:15:04.890] - Jon Slowe

Working out how to coach the tenant, working out how to manage the heat pump operation. So, have you got a big data science team or how have you been approaching the huge amounts of data and then what to do with that data?

[00:15:21.680] - Gijs Diependaal

Yes, we have a very big data science team and we have a lot of experience with Toon. Toon is a smart thermostat from Eneco with more than three hundred and fifty thousand tons installed in the fields with our customers.

[00:15:35.230] - Gijs Diependaal

So, what we learned there to coach our customer and to see the energy insights we use this for the pilot comfort as a service as well, of course.

[00:15:46.600] - Jon Slowe

OK. Gijs, there's lots more I'd like to ask you, but I'd like to move to Elbert now. And what Elbert's doing is at Itho Daalderop. And then we'll come back and have a wider discussion. So, Elbert, you’re a, well Itho Daalderop is a product manufacturer. And if I generalise, heating product manufacturers traditionally have been very good at making a box. And then their business model has been dropping that box into the market through wholesalers, installers, pick up that box and install it with the customer.

[00:16:23.360] - Jon Slowe

And you don't have any ongoing relationship with the customer. So that's not universally true across every heating appliance manufacturer. That's how I'd generalise the industry. Can you tell us a bit about how, what you're doing then with heat pumps and how you are having this ongoing relationship or interaction with a heat pump?

[00:16:45.890] - Elbert Stoffer

Of course. I think you exactly pinpointed the big change. We also as a company went through because from, as you mentioned it, dropping a product into the market. We now have become active sellers of the products, including all of the services which go along. And Itho Daalderop is part of the Climate for Life group. And within that group, we also have other companies which sell these services. And one of them is a […], as we call it.

[00:17:21.090] - Elbert Stoffer

And if you know a bit of Dutch, then that actually means that we guarantee the comfort more or less in the house. So, meaning as Gijs also already mentioned temperature in the house, a certain amount of domestic hot water and also the ventilation is part of that. So, we have moved quite a bit in the food chain more or less and have become quite closely attached to these customers.

[00:17:55.590] - Jon Slowe

OK. Tell us a bit about what the position with ground source heat pumps is in terms of guaranteeing the performance of that, help our listeners understand this specific proposition and what you're doing, and how it works.

[00:18:09.400] - Elbert Stoffer

Yeah, you're already correctly mentioned the ground source heat pumps because that is the type of heat pump, we use most for now for these heat as a service contract.

[00:18:20.310] - Elbert Stoffer

And one of the main reasons being that maybe one of them being that we have quite a good product in that area, but also that the system is very robust. So, the influence of the user is, of course, there but limited. The biggest example of that is that unit is able to make sixty degrees Celsius domestic hot water without electrical elements. So, using a bit more does have an effect, but not as much. So, restricting the risks, which is, as you mentioned, very important in these things, is also done by choosing the right products to do that.

[00:19:03.780] - Jon Slowe

OK. So, its ground source product is easiest in terms of managing those risks if you did this with an air source heat pump, do you think that model still works? It just gets a bit harder for you to manage risks.

[00:19:17.120] - Elbert Stoffer

Yes, it could still work, of course, but the influence of the user might be a bit bigger. And since if you start these models, you want to be able to handle the risks, then starting with the ground source heat pump is a easier. And of course, the heat pump itself is part of the solution. As Cate already mentioned. We started doing this about six or seven years ago now I think in new builds. And there is also quite a lot of control about the insulation of the house and all those kinds of parameters.

[00:19:55.700] - Elbert Stoffer

So, then the solution as a whole is quite robust. And if you then also have influence on solar panels and which ones are used and how good they are and on which side of the house they are, etc, etc, then all in all, the risks are quite low. And in terms of risk, we also have the benefit of being the manufacturer. So, we don't buy these products. In most cases, we make them ourselves.

[00:20:26.060] - Elbert Stoffer

So, they are the chain, the food chain. And the error of margin is pretty oversee-able. And that means that if for some reason a risk would become valid, then we have a short chain which results in the fact that our cost prices to solve it are relatively low.

[00:20:47.070] - Jon Slowe

OK. And how, so, I asked Gijs about data connectivity. How are you, can you tell us a bit about how you're using data to manage that performance risk or to guarantee the performance of the heat pump?

[00:21:01.760] - Elbert Stoffer

Yeah. So, I think it is pretty similar to what Gijs also mentioned. So, we now have for I think 10 years now, quite a few ground source heat pumps in our monitoring system.

[00:21:16.040] - Elbert Stoffer

And as you can imagine, on one end to the behaviour of the people living in a house is quite important. But also, the behaviour of the ground source is very important. And because of the fact that we now have quite a lot of data also over years of these ground sources that enables us to actually maybe increase the risk a bit. But based on the data, it's all within limits by withdrawing more power from those ground sources, putting more houses on one ground source.

[00:21:52.190] - Elbert Stoffer

Those kinds of steps we can make based on the data.

[00:21:58.420] - Jon Slowe

OK and Gijs talked about the experience of the Toon smart thermostat and Eneco can leverage a lot of that experience in terms of data optimization, data science, product manufacturer. I think our experience Cate, is that's not normally a core capability of a product manufacturer.

[00:22:17.880] - Cate Lyon

 No, it’s one that most are looking at more and more. But I think that coming into the game a bit behind some of the energy supplies, that have probably been ahead in that respect to thermostat manufacturers but certainly manufactures catching up.

[00:22:31.790] - Cate Lyon

It's just catching up.

[00:22:33.150] - Elbert Stoffer

Yeah.

[00:22:36.180] - Elbert Stoffer

For a company like an Eneco, I think it's logical that they can have quite easily a broad penetration into the market to get data like this logically. For us, that might be a bit less white. Let's say that experience. But in all the houses we have been equipping with our products, we have this data. And what is quite nice and good to see or interesting to see is that we are also able to see the relation between temperature setting in living rooms with, for example, certain types of ventilation.

[00:23:17.420] - Elbert Stoffer

Do you have heat recovery or not? Do you have low temperature heating or not? You will actually see the effects on how a homeowner sets its thermostat. That's very interesting data.

[00:23:31.310] - Jon Slowe

So, Elbert have you built a data science team or have you had that through the wider group that you talked about earlier on?

[00:23:39.110] - Elbert Stoffer

So, within the innovation team, we, about 25 percent of the people working there is working on data collection, databases itself and monitoring systems. And part of those people are also working on analysing the data for future developments on the commercial side of our business. We also have people, who actually use this data, for example, for service purposes.

[00:24:11.650] - Elbert Stoffer

So, and those the FDE’s working on that kind of activities, has been growing quite fast over the last couple of years.

[00:24:22.250] - Jon Slowe

Okay. So, you're building that organically within your team. I'd like to open up the discussion a bit now to look at the differences between new buildings and retrofitting electric heating systems, in old buildings. Cate, you alluded to this challenge earlier on. Can you give us the feeling of the scale for retrofit against new buildings?

[00:24:50.260] - Cate Lyon

Yeah, definitely. This is something we look at quite closely in our heat research because as you say, there's different opportunities and different challenges.

[00:24:57.040] - Cate Lyon

If you look at new builds where, it's quite often quite clear kind of what the insulation levels are. How's the PB been designed? You can understand the thermal dynamics, of the building a lot better.

[00:25:06.880] - Jon Slowe

The heat distribution system.

[00:25:09.380] - Cate Lyon

Yeah, things like that, where it's coming into retrofit, obviously there's potentially more challenges. I think you've talked about those in one of the previous podcasts, Jon, in terms of making sure the insulation levels are good and the distributions all set up, so that you can use high efficiency electric like heat pumps. And in terms of the different sizes.

[00:25:24.040] - Cate Lyon

I mean, if we across the five big heating markets that we tend to focus on at Delta so, Germany, U.K., Italy, France, Netherlands, we've got maybe half a million new build homes being constructed in a year. If you look at the existing housing stock, we've got over 100 million existing homes that don't use electric heating at the moment. So, a really big difference in terms of numbers.

[00:25:46.180] - Jon Slowe

Yeah. Okay. So, in that context, Gijs, Elbert, either of you, both of you.

[00:25:53.380] - Jon Slowe

How do you see new build, sorry, retrofit compared to new build? New build’s the easiest to start in. Can you take these sorts of solutions, these service models into the retrofit market?

[00:26:07.900] - Gijs Diependaal

 I think for the future it's possible, but for now we focus on new builds because new builds are well insulated. We have calculations about the heat demands of the house. So, we focus on new builds. That's the low hanging fruit. And then later we will makeshift to.

[00:26:28.910] - Gijs Diependaal

Retrofit houses and existing buildings. But for now, we focus on new builds because it's easier and for a pilot like with a promise like comfort as a service, which is quite a big promise we have. We need a home with well-calculated heat demands and well-designed insulation.

[00:26:53.920] - Jon Slowe

Yes, it's a logical place to start.

[00:26:56.280] - Gijs Diependaal

Yeah. Yeah.

[00:26:57.970] - Jon Slowe

How how about you Elbert, what are your thoughts?

[00:26:59.770] - Elbert Stoffer

Yeah. For us as a company, at this point in time, we are at least trying to move from new build. Not that we don't do that anymore, but also to extend our market to retrofit. But key in that is that the upfront costs need to be as low as possible to make it an attractive offer. So that means that it's really projects based. So social housing and not just somewhere one house, but small areas with, for example, a hundred houses or something like that.

[00:27:36.470] - Elbert Stoffer

Preferably with houses which are all more or less the same. Because the thing is that risk is key in this whole discussion is that you need to keep the risk as much down as possible. And that means that if you have quite a lot of houses which are more or less eagle, then you can spend the effort of making a good inventory upfront once and then make this possible on all these houses. And if you would do that on a one by one basis, that would be for now at least close to impossible.

[00:28:11.930] - Elbert Stoffer

But yes, we are trying to reduce prices upfront and then step in to that the retrofit market.

[00:28:19.190] - Jon Slowe

So, again, I can understand very well the logic of new build and then retrofit on a project basis, as you described.

[00:28:26.740] - Jon Slowe

And you see this model ever working with one by one, retrofits in private housing?

[00:28:36.400] - Elbert Stoffer

 At this point in time, that's still very, very difficult. Will it? At some point work, I guess. Yes. But we need more experience, maybe some slightly different products as well. So that's yet to come.

[00:28:59.590]

([crosstalk])

[00:29:00.420] - Cate Lyon

Definitely. Sorry to interrupt you there Gijs. I was just going to say that both of you, with what you've got at the moment, you must be gathering so much useful data in terms of what user demands are, in terms of how the houses respond to the heating systems. You know, a lot of that can hopefully feed into helping to develop something in the future for retrofit once you've gathered the data in kind of the new build to start with.

[00:29:24.210] - Elbert Stoffer

I think that's part of the solution. If you also want to move to retrofit on a one by one basis. So, we now should first get the experience in social housing with quite a lot of houses which are more or less equal. See what happens, take into account the risks and manage that and then make steps based on the data.

[00:29:49.390] - Gijs Diependaal

And also based on new technologies. So, heat pumps are getting better and better, so the temperature is going up every year.

[00:29:57.820] - Gijs Diependaal

Because in the Netherlands, the heating, the radiators are designed for 90 degrees and the heat pumps most of the time working to about 50 or 60 degrees. So that's a big difference.

[00:30:11.000] - Jon Slowe

Yeah. And if you're taking that technology risk, you need to understand that that technology needs to work. You need to have that level of comfort with its operation.

[00:30:19.660] - Elbert Stoffer

Having said that, we don't want to move to too high temperatures, supply temperatures too easily. Cause if you need them, then you should should start to put your money in insulation and those kinds of things first.

[00:30:34.800] - Jon Slowe

OK. Now, as always, time is getting the better of us in these podcasts, though, it's time to bring out the talking new energy crystal ball and today I will set the dial to 2030, so 10 years away. Cate you mentioned at the beginning that the Dutch market is predominately gas at the moment.

[00:30:58.780] - Jon Slowe

We're starting to see more electric. But if you look at all the heating installations going into the Netherlands, electric is still, what, 10 percent, 50 percent, something like that.

[00:31:11.290] - Cate Lyon

A bit below 10 at the moment, actually. We estimate around 8 percent.

[00:31:14.220] - Jon Slowe

So about 8 percent of all heating systems being stored in the Netherlands at the moment are electric. If we look to 2030, the question is what proportion of these heating installations will be electric, either fully electric or partially electric, maybe a hybrid.

[00:31:31.450] - Jon Slowe

So, I'm going to ask each of you to share your view of what that number or range or approximate level will be. OK, OK. I'll start with you. Where would you where do you see it by 2030?

[00:31:46.640] - Cate Lyon

So, by 2030, it's not that far away, actually, when you think about it, only 10 years. But we can do a lot in that time, I think. By 2030, we're going to be looking at around a quarter of all sales that are heating appliances going in are going to be fully or partially electric.

[00:32:02.650] - Cate Lyon

And that's going to be, that's assuming that the majority but not all of new build, are going to be, electric. And I'd say about a fifth of sales into existing homes are going to be electric by 2030.

[00:32:15.200] - Jon Slowe

OK. Very clear. Thank you. How about yourself?

[00:32:19.940] - Gijs Diependaal

Yes, I think energy transition is very, very difficult and every transition. Go slower than expected. I'm in the middle of the transition. I'm the leader in the energy transition and I have a difference ambition, but I also have a realistic view on it.

[00:32:37.580] - Gijs Diependaal

My ambition would be 60 to 70 percent, but I'm afraid in 10 years we're only about 15 to 20 percent. And there will be a difference because we also have hydrogen, gas and there are other options than just electrical heating. So, I would say realistically it would be 20 percent, but my ambition is much higher.

[00:33:03.690] - Jon Slowe

I like the ambition. And how about how about you?

[00:33:09.150] - Elbert Stoffer

About your ambition or my guess?

[00:33:12.360] - Jon Slowe

Either or both.

[00:33:14.220] - Elbert Stoffer

I don't think Gijs and I differ much, if you talk about ambition.

[00:33:20.270] - Elbert Stoffer

I think that the biggest problem with this estimation is that in about 10 years from now, we will be. I hope at least more or less at a point in time that things should be picking up quite quickly. So, I can imagine that from, let's say 2018 sorry, 2028 to 2035. Things will be picking up very rapidly. So, moving one year back a fourth can mean quite a bit of change. But I think I'm.

[00:33:56.570] - Elbert Stoffer

I hope we will reach the numbers, Cate mentioned so 20 percent in the retrofit market. I think that would be very good if we enable that at that point in time. But then if we want to reach the targets, we have for 2050, then we should be running like hell to make that happen.

[00:34:16.130] - Jon Slowe

Well, I think you've got similar views. Yeah. If we are to hit our carbon targets, we're in a hurry. But the only way to get there is through the innovation, that Gijs and Elbert you both described and shared today on the podcast. So fantastic to hear about what you're both doing, wishing you both the best of luck and success as you take it forward. Cate, thanks for sharing your views on the Netherlands and putting it in the European context.

[00:34:50.720] - Jon Slowe

And as always, thank you to everyone listening for joining the podcast. We hope you found our little trip to the Netherlands of interest. And I'm sure we think that there again soon. So, thanks Gijs, thanks Elbert, thanks, Cate.  And look forward to welcoming back for the next episode.

[00:35:12.060] - Jon Slowe

Goodbye.

[00:35:13.190] - Elbert Stoffer

Goodbye.

[00:35:14.100] - Gijs Diependaal

Goodbye.

[00:35:16.520] - Jon Slowe

If you're as passionate about the energy transition as we are, then please keep in touch. You can follow us and me on Twitter Linked-In or subscribe to the podcasts on your chosen podcast platform.

[00:35:28.550] - Jon Slowe

If you like the podcast and like sharing, then please do rate us and to listen to archived episodes, to read transcripts and to see the latest Delta-EE insights, then please visit www.delta-ee.com