TALKING NEW ENERGY

[00:00:24.590] - 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. Many of you listening will own an electric vehicle, and I bet many of you who don't own an electric vehicle are looking to get one soon. And if you're in that camp, then you'll probably be thinking about a tariff for your charging your electric vehicle, and you'll probably need a wall box if you've got off-street parking to charge your electric vehicle.

[00:00:44.570] - Jon Slowe

And I wonder if you're looking at your energy supplier to help you with those two things. Well, today I'm talking with two energy retailers about how they're helping customers such as myself and many of you listening and their plans for their road in the coming collision between energy and mobility. So let's get into the discussion and say hello to my guests. First, Goncalo Castelo Branco, director of Smart Mobility at Portuguese energy retailer EDP. Hello, Goncalo.

[00:01:14.650] - Goncalo Castelo Branco

Hello. My pleasure.

[00:01:17.590] - Jon Slowe

Goncalo , if I lived in Portugal, what could EDP offer me, as I think about buying an electric car?

[00:01:25.580] - Goncalo Castelo Branco

Well, we tend to think on the customer journey of the electric mobility, so EDP in Portugal, actually we have around 75 percent of residential market, which totals about four million clients, and these clients are converting into easy users. And so we want to be their partner and their enabler in that transition. So typically, looking to the customer journey, we are present when they buy the car, helping them with the solution, the charging solution they will need.

[00:01:57.230] - Goncalo Castelo Branco

So we a charger for their home with a special tariff plan for their [inaudible 00:02:02], so with green energy, when you're buying an EV and a solution with us, and then also designing solutions for companies, of course, to corporate businesses and for public chargers, because that covers the whole electric mobility perspective from our clients. And that's where we are developing our products and services.

[00:02:23.570] - Jon Slowe

Sure. OK, so a charger tariff with green energy. You've mentioned when they buy the car, you want to be present when they buy the car. So are you trying to get yourself into the point of sale of the vehicle or trying to advise customers?

[00:02:38.360] - Goncalo Castelo Branco

Yes.

[00:02:39.110] - Jon Slowe

On which electric car to buy.

[00:02:39.920] - Goncalo Castelo Branco

Yes.

[00:02:41.160] - Goncalo Castelo Branco

Absolutely. So, I think that's a very important point because we understand that's when you buy the vehicle is when typically you understand that you don't know anything about charging. And so we see that on clients and the questions are just too many and have people have no idea. They have no relation which kilowatt, what's the power they have available to them? So, we need to be there. And so we are partnering with the financing lease companies as [inaudible 00:03:12].

[00:03:13.200] - Goncalo Castelo Branco

Also with OEM here in Portugal, Hyundai [inaudible 00:03:15] Volvo. So these are great. We are together with the retail and reviving the partnership so that we can help the client at that moment of purchase.

[00:03:27.030] - Jon Slowe

OK, thanks, Goncalo. We'll come back to you shortly. My second guest is Tom Hart, Head of Portfolio for Energy Management and Electric Vehicles at British Gas, which is part of energy company, Centrica in the UK. Hello, Tom.

[00:03:41.790] - Tom Hart

Hello,

[00:03:43.200] - Jon Slowe

Tom. Same question for you. What? I actually live in your territory, not EDP's territory. So what could you offer me if I'm thinking of buying an electric car?

[00:03:53.320] - Tom Hart

So, the first thing obviously is home charging. And that's a big part of what we're doing today and trying to make that journey really simple and easy and straightforward for consumers. So home charging is definitely the first part. I'd always say with home charging, definitely start your journey early because, you know, depending what the situation is in your particular home, what's going on with your district network operator, start that journey early and kind of get going in advance of buying that vehicle.

[00:04:19.740] - Tom Hart

To check what you need to do with that home.

[00:04:21.860]

[crosstalk 00:04:21]

[00:04:22.680] - Jon Slowe

I'm learning about the lead time of a wall box isn't quite as short as I thought it might be Tom.

[00:04:27.690] - Tom Hart

Absolutely. So I think, you know, my own journey was quite a long one when I got my charge point installed, mainly because of some additional work needed to be done to change the main view. So there are all kinds of things you need to do as a consumer so start early on the home charging and we can support that. And we'll surely talk more about that later in terms of our solution there. You've got home energy EV tariffs, as we said, and very similar in time of use tariffs [inaudible 00:04:54] tariffs, green energy that can be applied to any and you can combine those two together, you can take them separately, and that's completely up to you.

[00:05:02.590] - Tom Hart

And in terms of we also do quite a lot in the fleet space, which I'm sure we'll talk about later, maybe less applicable for your personal situation and then public charging as well and our approach to public charging. We'll talk a little bit about later, I'm sure. But, you know, we are not a you know, we're not an operator of charge points per se, but we've got a solution that maybe would help consumers actually in that space.

[00:05:26.610] - Tom Hart

And similar actually to Goncalo. We've partnered with a number of people and organisations OEMs,  leasing companies to provide those solutions, at point of sale. So, you know, some of which are in the public domain we can talk about, some which we can't Ford is obviously one of the main ones. We're working with Honda, Vauxhall, Lotus and Toyota Lexus as well, as well as some other brands of charge points. So, ABB is another good example of a charge point manufacturer working with them.

[00:05:59.520] - Tom Hart

So, yeah, so we can kind of do the whole lot for you and hopefully make sure it's a really simple and straightforward journey and take that pain and that hassle away for you.

[00:06:09.120] - Jon Slowe

Thanks, Tom, so quite similar actually both of you in terms of how you are helping customers. Goncalo, just come back briefly to you. Tom mentioned a time of use tariffs with cheaper charging at certain times. Is that something EDP is offering as well?

[00:06:26.280] - Goncalo Castelo Branco

That's exactly what our plan consists of. So, our standard tariff for someone adopting a charging solution, a wall box for their homes. We offer a 20 per cent discount during the night period. And this applies for the whole consumption of the house, actually. So and it's always a green tariff, which is not the standard tariff for EDP, but it is for EVs and for EV users because it's a very important factor for them because you electrify, you are driving if in reality, you are charging your car with energy, that is generated from renewable sources.

[00:07:02.320] - Jon Slowe

Yeah.

[00:07:03.340] - Jon Slowe

OK,

[00:07:04.630] - Tom Hart

That's an interesting point there in terms of the comparisons, I guess, between the territories, because in the UK, the differential between that night rate and day rate is even greater. So, it's more of a 3-1 ratio, I guess, in terms of the price between the two. So it's interesting to see those differences.

[00:07:21.100] - Jon Slowe

Yeah, sure. Before we get sucked into the discussion, because I have another question on the tip of my tongue, but let's introduce my third guest, John Murray, my colleague and Delta-EE and EV, expert. Hello, John.

[00:07:36.730] - John Murray

Hi, Jon.

[00:07:38.950] - Jon Slowe

Now, John, one of the things on my mind, as I've alluded to already, is a wall box. I need to get a wall box for my driveway. And Tom I'm very sorry.

[00:07:49.030] - Jon Slowe

I haven't yet looked to the British Gas website to think about getting my wall box from British Gas. But, John, from the customer research that you're carrying out, what are you finding about where people like me are thinking of buying their wall box from? Are there particular patterns coming out, people buying it directly from the energy retailer, from the car manufacturer, what are you seeing?

[00:08:13.240] - John Murray

Yeah, so that's right. We have just completed the results of the latest round of customer research where we've been surveying existing EV owners, over 1000 drivers across Europe, including France, the UK, Spain, Germany, and to truly understand more about their charging behaviour and the products and services that they are using. And one of the things that that research is enabling us to do is understand how many EV drivers, first of all, have actually installed a wall box at their home because not all can.

[00:08:44.920] - John Murray

But if they have where have they sourced that wall box from? And like you've alluded to, that there are different sales channels that we've looked at. So including the wall box that is bundled with the purchase of the vehicle, for example, at the car dealership, buying the wall box from an energy supplier like British Gas or EDP buying a wall box online from Amazon or the Mobility House in Germany or even buying directly from the charging manufacturer. And what we found is that the market share, sales channel are actually quite different from country to country.

[00:09:18.820] - John Murray

And that route where the wall box is bundled with the EV is a really interesting one because it's already alluded to that that is normally the first opportunity to offer a wall box to an EV customer because most customers will choose the make or model of the EV they want to buy before considering what brand of wall box they might want to use to charge their vehicle at home. In Germany that sales channel where the vehicle and wall box are bundled together today accounts for about one-third of all wall boxes.

[00:09:48.760] - John Murray

Yeah, so quite large. But actually, in France, it's two thirds [inaudible 00:09:53]

[00:09:55.510] - Jon Slowe

People are buying their wall box with their car whereas in Germany some are but less than France.

[00:10:02.530] - Jon Slowe

Goncalo and Tom, how do you see that because you've both mentioned that buying an EV and wall box is quite complex. It's complex. There's a lot for the customer to do. You both want to position yourself right at the beginning of that customer journey. Are you managing to do that? Are our customers thinking of British Gas or EDP as their partners or are they looking to other places?

[00:10:26.740] - Jon Slowe

Is it a struggle to get into that customer journey at the beginning?

[00:10:30.760] - Tom Hart

I think it's so, it is a real challenge. I think a lot of it's about education in terms of we found from some of the research we've done, the customers, you know, don't just make a decision to buy a car overnight. It's a process they go through. And the more we can do to kind of support customers upfront with education about the process, the you know, the better. And that's a real focus of us.

[00:10:51.310] - Tom Hart

And certainly, you'll see a lot more come out in the coming months of us trying to support education, as well as working with partners to help educate customers as well. So that might be the car OEMs, it might be of a closing automotive market. And it could also be the DNOs, or district network operators as well and potentials what we can do with them to educate customers. And our approach very much is to make sure we're touching base as many points as possible.

[00:11:19.540] - Tom Hart

So, whether it's when they're in the branch of the, you know, buying that car, we support the OEMs with education in that space with some of our solutions, whether it's on our website or whether it's conversations in the contact centre, it's just making sure that customers have got all the support there so they can have those informed conversations. So, yeah.

[00:11:39.100]

[crosstalk 00:11:39]

[00:11:39.166] - Jon Slowe

How hard is that?

[00:11:39.760] - Jon Slowe

Tom, I can see you can offer all of that and you can try and offer those solutions to customers but how broadly, how successful are you at them using you rather than other sources? You know, John mentioned Germany 2/3 buy the wall box from the OEM or I'm looking online, for example. So, is it a bit of a battle to position yourself as their partner? Or are you finding particular ways to succeed in that, or have you learned lessons about trying to position yourself as their partner?

[00:12:11.200] - Tom Hart

Yeah, so I think I'll put leasing to one side for a second, actually, maybe come back to that. But outside of that market, it's a real mix. So and I think we're seeing in the market where customers do want to kind of come direct sometimes, but actually, also they really want to just to get it all done at once and done in the dealership potentially the relationship we've got with Vauxhall. So the deal we do with Vauxhall, where you get a free charger and 30,000 free miles and a wall box and tariff altogether as one.

[00:12:41.230] - Tom Hart

You know, that's quite successful because customers just it's simple and straightforward. So yeah, I think just providing customer choice is the key, I guess on all occasions.

[00:12:50.380] - Jon Slowe

I guess customer choice and that all in one simple, attractive package. What you've just described there with Vauxhall, you know the miles, the free wall box that makes it reduces all the hassle, it is very attractive package.

[00:13:01.930] - Tom Hart

Yeah, absolutely.

[00:13:04.960] - Jon Slowe

Goncalo. How about you? Is it a challenge to get yourself as the customer's partner, to position yourself where you want to be?

[00:13:15.490] - Goncalo Castelo Branco

I think, everything that Tom was describing, so you see the client when he buys the car, typically focus on the car a lot and leaves the charging solution to a later stage when he realises it's probably so it's good to be there. When he buys and decides for the car to inform him about the decision, he has to think about how he's going to charge the car, because then there's typically a restriction on the power that he has contracted for his home.

[00:13:43.570] - Goncalo Castelo Branco

So, we just maybe charging on a plug and then the plug is not you shouldn't be using a normal plug of your home to be charging your car, even if it's a slow plug. So, you need to advise the client on that. And then they see they have a constraint on power. And for us in Portugal, we have actually a specific case that turns this even more difficult if you live in a condominium.

[00:14:08.650] - Goncalo Castelo Branco

So typically in condominiums, even if you have a charging place, a place for yourself and there's a plug there, or you can actually charge you can put a wall box there you are using energy that's paid by everyone, OK, because it's one of the three areas of the condominium, the same as the stairs and the elevators. So, the authorisations you need to do that. And so we developed products specifically for that. When you use our app.

[00:14:37.900] - Goncalo Castelo Branco

So, you're charging with our app and you have an inbuilt wallet and you're paying immediately to the condominium the amount of energy you just used to charge your car. So, we are helping the clients because we saw that in this case it was not being solved by the market. And so we entered to do that. And again, as I said, so I think being together with OEM, so the dealerships and the leasing companies and integrate the offer on behalf of the client is very important.

[00:15:04.430] - Goncalo Castelo Branco

So, we see this as an ecosystem and it's very important to be there because the more we can integrate ourselves in anticipation of the client, the more the client will have what he needs to be integrated into a single offer. And that's exactly what the [inaudible 00:15:21] was designed.

[00:15:24.760] - Tom Hart

Just building on that, I think around leasing companies they're really nice example of simplification in many respects, whether it be company cars, salary sacrifice or just, you know, private leasing, it makes it really simple because you're paying a monthly fee of £300. The charge points built into that price and you almost don't need to think about it. It just gets it all happens and it's really straightforward. So it's quite a nice model in terms of how they're approaching that in the leasing market we're partnered with two large leasing companies that are doing that and it's working quite well.

[00:15:59.570] - Jon Slowe

OK, so, Tom, is that one learning from your site about simplicity? Are you seeing these bundles where everything's included, the miles, the wall box, do you think that's going to be the direction the market goes in these bundles and simplicity? Or do you think that's too simplistic? Actually, there'll be many different parts of the market that want many different things.

[00:16:21.650] - Tom Hart

Yeah, I definitely think the bundled approach will take hold, particularly the charge point and the vehicle, I think is a very nice bundle, energy is an interesting one because obviously as Goncalo said there your energy for your EV is a big part of your consumption, which people don't always realise there is a big change, but it's only one part. So, it's quite an emotional decision to change your energy supplier to and to bundle that all in together might be almost too big a decision.

[00:16:50.630] - Tom Hart

And I think the other element of that is what we've seen from the research we've done is that people tend to only think about the tariff afterwards. So, it almost goes car, charger, then tariff. So, actually trying to bundle those all together almost might be a step too far for some customers where they just can't make that decision all at once. But the charger and the car maybe is that initial step, which bundles together quite, quite nicely as well.

[00:17:13.220] - Tom Hart

So so, yeah, there's definitely going to be bundling, I think, definitely.

[00:17:16.670] - Jon Slowe

But still bundling up with the one by one offers as well for different parts.

[00:17:21.480] - Tom Hart

As well.

[00:17:21.920] - Tom Hart

Yeah. Yeah, absolutely.

[00:17:24.380] - Jon Slowe

Goncalo, how do you see that. Do you see more and more bundles?

[00:17:28.670] - Goncalo Castelo Branco

Yeah, I was going back to the ecosystem I was referring to. I think what we've seen, in mobility is such a difference and kind of disruption in the tariffing that existed. This is breaking boundaries amongst players in markets. So what was established before it is not going to be the valuables that will be on and available for players in the future. So and you see the players are positioning themselves.

[00:17:55.790] - Goncalo Castelo Branco

So you see [inaudible 00:17:57]  entering into the as the service cars or connected car or shared car and even providing energy. So you see, this is where we are and who we are competing against is very different from even for the energy company as we were and are at EDP for energy and gas. So, in mobility, we are the player that competes with any start-up from around the world for a solution in a condominium instance, and that pushes hard for us.

[00:18:32.270] - Goncalo Castelo Branco

And so but in the end, we have the clients, the clients, again, typically we know from the client likes to buy energy services from their energy provider to from who then. So it's actually an obligation is something we have to do is talk to these partners, talk with companies. Because we've changed so much. If you used to have your own combustion car and you go to the gas station, you knew that. And now suddenly you're charging your car at home and at work, sometimes in public spacing much less than what people think of because people tend to think there's not enough public space and they cannot have any of it.

[00:19:16.700] - Goncalo Castelo Branco

So in the end, it will be 20 percent so and it will be on the supermarket. And so that's so different from the experience they had before. So that's what we learn from that is that we have to be partnering with all these companies. That's what we doing for public charging, we have more than 1000 public.

[00:19:33.131]

[crosstalk 00:19:33]

[00:19:35.000] - Jon Slowe

Goncalo, I just want to pick up on what you said about car manufacturers becoming energy suppliers or they might offer energy supply. Do you see that? And, John, I'd like to ask you about how do you see Volkswagen and LE in a minute, do you see that as a threat to EDP? You've said EDP has to develop these solutions, do you see it as a threat that other people might move onto your territory.

[00:20:02.350] - Goncalo Castelo Branco

I think it's just another variable we have to take into account because smart mobility and news on stream in general, so the energy transition brings new markets to EDP so we can enter also adjacent markets where we were before. So that's what we're looking to. And I think actually EVs are actually have a pivotal role because entering a condominium and then you have the distributed generation solar, self-contained local energy community, new businesses like vehicles, degrees, even the sharing mobility.

[00:20:44.170] - Goncalo Castelo Branco

So, there are many areas and value areas that are available that we have to compete with. What we have to know is that as incumbents, we don't have an advantage, a competitive advantage just. So we have to do our own way. And that that's what EDP's doing with all this ecosystem that we are also trying to gather.

[00:21:06.260] - Jon Slowe

Yes, so you have to earn your share of these new markets, and compete.

[00:21:10.310] - Goncalo Castelo Branco

What we know is that I think what we know is that no one will be able to be vertically integrated across all of this. And if you try to do that, you'll probably lose. So in our view, the one that will be able to do the most effective partnerships now is the one that will be ready and able to win in the future.

[00:21:29.760] - Jon Slowe

Yeah, yeah. So, John, just for our listeners, benefits do you to contrast, and just outline what Volkswagen is doing beyond making nice electric vehicles.

[00:21:42.210] - John Murray

Yeah, sure. So Volkswagen clearly one of the conventional auto AM's that we're all familiar with. They're probably the most advanced in terms of their transition towards or move towards the energy sector. I think there's an acceptance that the auto AM's are moving in that direction and the energy companies as we've talked about are sort of moving toward providing mobility, but Volkswagen they launched a few years ago now their Elli company, which is essentially their energy company that's providing services beyond the electric vehicle.

[00:22:13.650] - John Murray

So, they are offering to their customers in some markets, not all over Europe, but in some markets, EV tariffs, wall boxes and things like that. And so they are probably the best example today of an auto AM providing energy services, but even they are having to rely on partnerships to enable that. So they are moving forward to vertical integration, but are still having to rely on partnerships with many other companies across the value chain.

[00:22:40.980] - Tom Hart

And we've, just building on that.  It's a really interesting question. And it may vary from territory to territory, actually, but certainly in the UK, from what we've seen, energy is quite challenging to deliver and quite challenging to and complex lots of regulation, etc. So, it's not impossible, but it's quite a big leap to do that, especially when obviously the car AM's are their prime goal is trying to sell cars and to and to drive value from that.

[00:23:11.250] - Tom Hart

And our approach is very always been and we work really closely with a lot of the OEMs, including Elli, actually, and certainly, in the UK, our approach is how can we work together with the OEMs to create solutions and actually bring the two together, similar to what Goncalo said? If you're going to, if you want to own everything from mobility to the home and be a single company, there's every single element to that, that is extremely difficult to do, even for some of the biggest companies in the world.

[00:23:40.320] - John Murray

I completely agree with that. And especially when you start to talk about topics such as smart charging and try to provide services to the grid, the electricity grid, that opens up a whole different box of questions around the regulations and the value streams and the business models to enable you to to develop value from providing those services to the grid.

[00:24:01.620] - Jon Slowe

Yeah, Tom and Goncalo do those discussions with OEM's, for example. Do they ever get difficult in terms of, oh, we'd like to do a bit of that now, we'd like to do that part. And if not, do you anticipate they might get difficult in the future or is it all very straightforward?

[00:24:20.460] - Goncalo Castelo Branco

Well, I think for the moment, not at all.  It's a complementary offer that they need. So they have that need to fulfil something that their client also needs, because, in the end, their client will be our client because there's a great chance and probability that in the end, the client, they are selling a car to at home, they will be an EDP client or as the company. So if they can get with through a special customer experience that we can design for their clients, it makes it easier for them to understand for that specific car model, what is the best, the charging wallbox solution that is able to that model.

[00:25:02.580] - Goncalo Castelo Branco

And we can help on that and bring a special discount on a tariff and also give them a special tariff to be charging on public charge. And so this is the kind of deals we are doing today. If you ask me 10 years from now, that would be probably a different answer. So we don't we probably don't know how the market will be then. I think for today, it just makes sense. It makes sense for them.

[00:25:27.700] - Goncalo Castelo Branco

It makes sense for us because the client needs it.

[00:25:30.810] - Jon Slowe

And you each have enough to do there's enough for them to focus on the vehicles, enough to focus on the energy side.

[00:25:37.080] - Tom Hart

And don't forget, there is an element of you can have our expertise. You can play around with branding, for example, and you white label things. So there are lots of different approaches you can kind of take. That doesn't mean you've got one company doing everything. It could be a two or three companies, but it's how you bring that together to a single solution for the customer and be clever with your branding to get almost the sum of the parts is greater.

[00:26:01.830] - Tom Hart

And that's the ambition for those partnerships.

[00:26:04.260] - Jon Slowe

Yeah, interesting. So you're open Tom to some of it might be British Gas branded, some of it could be white label branded and on the other way round as well.

[00:26:13.020] - Tom Hart

Absolutely. Yeah. Whatever works I think.

[00:26:15.390] - Jon Slowe

Yeah.

[00:26:15.990] - Goncalo Castelo Branco

I just like to give another angle on this. So we are EDP, so we are a supplier of energy. We don't have location, and although we have 1,000 charging points contracted on public charging. So we do this with two partnerships, so all the all the charging stations that we own and operate, they are either in a hotel, hospital or hotel chain, a restaurant chain or so this is all partnerships we've made and that we've closed just recently with McDonald's in Portugal to say one.

[00:26:51.050] - Goncalo Castelo Branco

So, we're going to do all the restaurants. So, these partnerships go way beyond just the [inaudible 00:26:57] and then the charging at home or companies, but also in public charging are quite important.

[00:27:02.330] - Jon Slowe

Yeah, there are so many aspects, I guess, to the customer experiences, to providing a good customer experience that as everyone has been saying no one company could do all of that.

[00:27:12.420] - Goncalo Castelo Branco

I would agree with that.

[00:27:15.720] - Jon Slowe

Looking forward, Goncalo, you, said things might change a bit in the future, so it's already got to that time of the podcast when we need to bring out the Talking New Energy crystal ball. And I'd like to set the dial this week to 2030. So, let's assume the take-up of electric vehicles has been a huge success in the 2020s. How might you as EDP and British Gas and John, if you want to think about the energy retail sector in general, how might energy companies be working with customers in the area of eMobility?

[00:27:49.800] - Jon Slowe

So, what might your ambitions be? Or can you sketch out one possible future for the role that an energy retailer might be playing in 2030?

[00:28:03.570] - Jon Slowe

Goncalo, do you want to go first?

[00:28:03.570] - Goncalo Castelo Branco

Well, OK, so I think the crystal ball exercises as you said, but I will agree with you, I think the take-off of EVs will be actually quite more expressive than what we are anticipating today. That's why we're seeing the last few years. We are always anticipating the targets. And that, I think, is going to happen faster than we think. And so I think the challenge is for us we are now an energy retail company. Energy will be turning into a commodity and a scarce resource of the future will be power.

[00:28:41.200] - Goncalo Castelo Branco

So I think, as John was mentioning, I think we can keep the journey of offering energy home services connected to energy, but we will look beyond that. I think the fact that power is a scarce resource, looking to a smart charging and to vehicle to grid technologies increased by 90 or 95 percent of the time. So it creates the opportunity to move to new services, to the system that can be brought in. These are new businesses that are there to be explored.

[00:29:14.170] - Goncalo Castelo Branco

So and in the end, I think it just being an energy company, I think the one advantage that we have is that we know those assets well. So we can deal well with the power that's available in the building so we can control and offer these services. And so and go beyond this is looking into creating market structures that enhance and allow integration of distributed resources. I think so. The distributed resources will be the future also. So you'll be able to generate your own energy at your home with solar or whatever.

[00:29:51.010] - Goncalo Castelo Branco

And so we have to accommodate that. So in the intimacy of the renewables bundle with storage and being part of the car as the battery part of that system, I think it's probably where we'll be in a few years time.

[00:30:06.710] - Jon Slowe

OK, so that's quite a change from being an energy retailer, primarily an energy retailer today and the beginning of that journey to that future you described, Tom. [crosstalk 00:30:15]

[00:30:16.360] - Goncalo Castelo Branco

Not forgetting to say this is all this is a huge digital challenge for us. So it's not just asset management, but all of this business will be very digital-centric. And that's also the step we have to move for.

[00:30:30.230] - Jon Slowe

Yes, thanks.

[00:30:32.710] - Tom Hart

Yeah, I'm building on some of that. Really, I guess what's going to be interesting, not just in the EV space and we very much look, you know, as I said, energy management is part of my role as well. So we're very much looking at EV in the home at least as one device of many devices, and that we're going to have to be consuming large amounts of energy, whether it be heat pumps potentially and other devices.

[00:30:54.400] - Tom Hart

So, one of the interesting things that's going to be is a, how does the home change in terms of consuming energy? And that could be about, you know, self-consumption, more solar, potentially battery storage. But most importantly, I think, is about how we can use the ability to flexibility. So demand response, residential demand response and optimisation both within the home, but also how that reacts and links into the grid. And actually, one of the great things that we have in Centrica is that residential demand response, you know, we're doing that on or about to launch that later this year on EVs will also do it with heat pumps where we're shifting load around within the home to help manage constraints at a national grid level.

[00:31:38.800] - Tom Hart

But particularly as we move forward, that's going to become a DNO/DSO challenge as well. So providing flexibility services as a residential customer to the grid will be hugely important as we move forward. And that brings in, you know, a vehicle to vehicle to home, as well as a number of other technologies. And that's going to be required if we're going to make this, you know, electrify heating, but also electric mobility all at the same time and not lead to lots of money spent on the grid reinforcement.

[00:32:09.280] - Tom Hart

So, that optimisation piece of energy in the residential space, I think is massive for the future. So, yeah, that's probably quite home-focused, but that's probably where I see it kind of playing out quite, quite significantly.

[00:32:22.840] - Jon Slowe

Well, I think it's very clear for both of you about the future for your companies being, well, it will still involve energy retail a lot around energy optimisation, energy management, distributed generation and how all of those come together.

[00:32:35.290] - Tom Hart

Yeah.

[00:32:36.610] - Jon Slowe

John, from your perspective?

[00:32:38.650] - John Murray

Well, yeah, I just wanted to come back and Goncalo's point actually, that you made around the transition to electric vehicles happening more quickly than anyone anticipated. And actually, we, I think and I particularly wholeheartedly agree with that sentiment. We've just published a white paper that talks about our updated EV forecast to 2030 across all of Europe, and we're forecasting the number of EVs on the road in Europe today would grow from 3-million around about 3-million today to 84-million by 2030, which is much more than anyone predicted, including ourselves even just 12 months ago.

[00:33:13.800] - John Murray

So, this transition to electric vehicles is the market moving more quickly than anyone could have thought I think.

[00:33:21.600] - Jon Slowe

Yeah, it certainly is. I think it will go when change happens. Change can go incredibly fast when you reach that hockey stick point in the curve. I'm actually before buying my electric vehicle, I've got to I'm going to subscribe to an electric vehicle for a few months on a monthly subscription model. One of our previous guests on the podcast, as a company that I'm turning to for that.

[00:33:45.750] - Jon Slowe

And that includes, well, not home energy, but all my public charging and a nice bundle keeping it really simple for me. So, I think we'll see lots of new value pools as you, Goncalo, lots of optimisation, Tom as you've said, and this will go very fast. So people will need to be quite nimble, but amazingly customer focussed on making that journey, which is still a little bit complex today for customers, much simpler in the future.

[00:34:14.250] - Jon Slowe

And we've run out of time. So I'm sure we could carry on for twice again on this topic. But let's leave it there for now. Thanks, Goncalo very much for joining.

[00:34:23.930] - Goncalo Castelo Branco

Thank you very much for the invitation was a pleasure.

[00:34:26.570] - Jon Slowe

Thanks, Tom.

[00:34:27.770] - Tom Hart

Thank you very much it was a pleasure.

[00:34:29.440] - Jon Slowe

And thanks, John.

[00:34:31.760] - John Murray

Thank you very much for having me.

[00:34:33.590] - Jon Slowe

As always, thanks to everyone for listening. We hope you enjoyed the podcast. Whether you got an electric vehicle thinking about an electric vehicle in the future or a long way away from buying an electric vehicle. I look forward to welcoming back to the podcast next week. Thanks and goodbye.

[00:35:18.390] - 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.   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

[00:00:25.190]

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. Energy customers are increasingly walking the walk to buy their energy from green sources, not just for green tariffs, but more and more linkages directly to generators through a multi-year deal. On the other side of the fence, renewable energy generators like the guarantee of a long-term agreement to sell their energy.

[00:00:46.320] - Jon Slowe

And between the consumer and the generator in the middle often sits energy companies facilitating and enabling these transactions. Today, we're talking with energy company Alpiq and renewable energy asset owner Aquila about the rise of PPA's or power purchase agreements with a particular focus on the Spanish market and as usual, with a one of my Delta-EE colleagues and experts to help us navigate this area. So, without further ado, let's introduce my guests. First up is Jesus Reyes from Alpiq.

[00:01:26.610] - Jon Slowe

Hello, Jesus.

[00:01:29.320] - Jesus Reyes

Hello, good afternoon.

[00:01:32.300] - Jon Slowe

Thanks for joining us on the podcast. Now, not all of our listeners may know of or have heard of Alpiq. So, could you give us a few facts and figures about Alpiq to start with?

[00:01:44.050] - Jesus Reyes

Yeah, well, Alpiq is a Swiss energy company with a pan-European presence and local offices all across Europe, from Spain to most Eastern European countries, including the largest European markets like France, Italy, Germany, the Nordics, we have a large generation portfolio with a big relevance of the Swiss hydro assets as a legacy for my company. And more specifically about Spain, and we have our own generation activity, and we also manage a large portfolio of third-party assets, and we are currently supplying energy, both the gas and power to industrial customers for around 6 [inaudible 00:02:29] hours per year, combining both.

[00:02:32.080] - Jesus Reyes

And we have concluded in the past couple of years ago half a dozen PPA's around 350-megawatts of installed capacity just basically to cover our corporate customer’s needs.

[00:02:49.760] - Jon Slowe

OK, thanks, that paints a nice picture, and your job title is Head of Sales and Origination. In the part of the value chain, you sit in, that's probably well understood, but some of our listeners won't be familiar with what a Head of Sales and origination does. So, could you describe your role in a more tangible way than the dry job title?

[00:03:15.000] - Jesus Reyes

Yeah, absolutely, when we talk about origination, we like to see ourselves as facilitators or as solution partners for our customers challenges. So basically, what we are requested is to be able to implement in concrete the contractor proposals those high-level ideas that we are discussing, both with producers and with consumers. We need to make them real and to make them happen and make sure that every aspect is covered from credit to regulatory reporting. We need to be the translators internally with our traders and externally and to make sure that the customer's requests are taken for consideration.

[00:04:01.380] - Jesus Reyes

That would be our task.

[00:04:03.920] - Jon Slowe

Yeah, OK, so very you're driven by what your customers want, by what they're asking you, and you make that happen by working with your colleagues internally. OK, thanks, Jesus. We'll come back to you shortly. My second guest is Marcos Domingo's from Aquila Capital, Hello Marcos.

[00:04:22.360] - Marcos Dominguez

Hi. Good afternoon. Glad to be here with you.

[00:04:25.630] - Jon Slowe

And thanks for joining us. Marcos, likewise, could you give us a very brief introduction to Aquila Capital, who is Aquila and what do you do?

[00:04:33.340] - Marcos Dominguez

Sure, Aquila group is a leading investment manager in Real Assets Solutions. It's sustainable investment strategy, focus on investments in renewable energy and energy efficiency and infrastructure, residential real estate, green logistics and all the things like timber and agriculture. It was founded in 2001. So, we're not super old company, but we are already managing above 12.5 billion as of 31st of December of last year.

[00:05:07.390] - Marcos Dominguez

So, through sustainable investments, Aquila group is committed to contributing to the European energy transition. We try to create value for our investors, so we employ fully integrated investment and asset management approach. We have 14 offices in 12 different countries. We are continuously looking to expand and looking with these things, try to draw on the sector networks and experience to screen, develop, finance, manage and operate investments along the entire value chain.

[00:05:43.450] - Jon Slowe

A part of those investments is renewable generation.

[00:05:47.260] - Marcos Dominguez

Yeah, most of it is as renewable.

[00:05:51.310] - Jon Slowe

And particular type solar, wind, gas, bit of everything.

[00:05:57.250] - Marcos Dominguez

Well, it's only pure renewables. So, we have as normal investors. So, there is a big wave now of renewable investments, mainly PV and wind. But we are also quite unique in having quite a wide hydro portfolio that we manage. For example, just in Norway, we have both. I think the figure I don't know the figure by heart, but I think it's over 111 small hydro plans in Norway.

[00:06:30.620] - Jon Slowe

Okay. So quite a variation then by type and geography size.

[00:06:34.900] - Jesus Reyes

Yes.

[00:06:35.470] - Jon Slowe

And your role is Director of Power Markets in Spain. So, are you in that role, are you developing new assets? Are you managing existing assets? So, you're doing a bit of everything?

[00:06:48.940] - Marcos Dominguez

Yes. Well, I belong to a department called the Merchant Market Desk. We focus on power markets, and we try to provide assets with means for hedging their output, using PPA's amongst other structures. We don't limit ourselves to PPA's. We always say that there are there is life beyond PPA's. And what we do is try to. Yeah, but the main characteristic of the job would be to try to enable the assets with a hedge solution for their output.

[00:07:27.850] - Marcos Dominguez

Yeah. OK, so getting the right balance, some risk but not too much risk, enough certainty, the right blend between those two will look for the structure. We measure the possible risk. We try to balance it with a structure, with a PPA or with an alternative structure, and we go into the market and try to source it for the assets providing the best risk return profile to our investors and according to the needs, of course.

[00:07:59.410] - Jon Slowe

Yeah.

[00:08:00.160] - Jon Slowe

OK, thanks very much, Marcus. Last but not least, my colleague and Delta-EE expert, Dina Darshini. Hello, Dina.

[00:08:08.670] - Dina Darshini

Hi, hi Jon.

[00:08:11.980] - Jon Slowe

We've used the acronym; I've described it with our purchase agreement. Both Marcus and Jesus have talked a bit about it. But for a listener, that have never heard of the term PPA before. How could you simplify that and describe it in a nutshell?

[00:08:29.010] - Dina Darshini

Yeah, yeah, so PPA or power purchase agreement is a contractual agreement between an electricity buyer and an electricity seller. So, the agreement is to purchase an amount of energy at an agreed price for a certain length of time, say 10 years, and in advance of producing that energy. So that's the agreement. But just before I go any further on the contracts, I just want to take just one step back. And, you know, if you put yourself in a renewable energy developer's shoes, so you imagine you're building a 10-megawatt solar PV plant, which is high capital costs, involved in some operating costs going forward.

[00:09:18.500] - Dina Darshini

You can take this on yourself or in most cases will often need third party funding. So, a bank or credit provider or some other source. Now, in a world where are generous government subsidies and feed in tariffs, which typically have, let's say, 10-to-20-year contracts, now, they can be more financial security to invest in a renewable asset.

[00:09:43.480] - Jon Slowe

But guaranteed revenue stream as long as the asset produces electricity.

[00:09:48.070] - Dina Darshini

Exactly, now but without the certainty of those subsidies. So, this is where the PPA well, it's one of the options. BP can prove that this solar PV plant, this developer is aiming to build has already found a long-term buyer at a fixed price. And hence, both developer and financier feel more confident that the proceeds from the electricity sales will, of course, cover this investment costs. So that's, I guess in a nutshell, you can think of it that way, a PPA and it's uses.

[00:10:20.470] - Jon Slowe

And then within the world of PPA.

[00:10:23.380] - Jon Slowe

There's a lot of variation. We won't necessarily go to them all now because otherwise the podcast will turn into a teaching on PPA's. But I saw recently an example of some Dutch companies, Heineken and Phillips, that have a PPA with some wind farms in Finland that would be developed. So, it's unlikely the power flows. That's a virtual PPA, I guess, so if the power doesn't flow necessarily from those wind farms to the facilities in the Netherlands. But we have everything for those virtual PPA's to on site PPA's.

[00:10:58.860] - Jon Slowe

It is a broad spectrum, isn't it?

[00:11:03.280] - Dina Darshini

Yeah, like you said, within that sort of conceptual boundary, there'll be different types of PPA's you know different lengths of contracts, the specific contractual agreements, all this there are there's quite a range. And like I said, there's physical PPA's, there's virtual PPA's. And then within the physical PPA's you have on site PPA where the plant is at the site of the consumer or at least, you know, very close proximity, then you have offsite where it's not sort of physically there.

[00:11:38.050] - Dina Darshini

And in contrast to the onsite PPA, the producer will deliver the electricity to the consumer through a grid, public grid usually. But this would require an additional settlement via the balancing groups of the electricity generating plant and the consumer. And then you have another one within the physical PPA, which is called sleeved PPA, and which is simply kind of like an offsite PPA. But there's, let's say, an energy service provider, which takes on various processes and acts and acts as an intermediary between the producer and consumer.

[00:12:13.180] - Dina Darshini

So, it could take on services like balancing group management. We could aggregate various electricity producers in its portfolio and could supply residual quantities of electricity or of these surplus quantities, sell it on, forecast. There'll be a range of things that could market green certificates and that would be in the sleeve PPA, broadly I think that covers most of the PPA's.

[00:12:40.540] - Jon Slowe

Very quick lesson on PPA's, thanks Dina. Jesus, I'd like to just briefly ask from Alpiq's perspective in Spain, what functional of those different variations Dina talked about.

[00:12:53.740] - Jon Slowe

What does Alpiq do, are you sitting between the generator and the customer typically, or what's the typical role that you're playing?

[00:13:01.760] - Jesus Reyes

Yeah, well, basically, our role is trying to accommodate all the customers demand from us, and it covers every kind of scheme. So, we're talking specifically about corporate PPA's. So, the schemes mentioned by Dina and for some customers the most relevant thing is to focus on the sustainability that this deal is going to offer to them and how to communicate that to their stakeholders. And that typically includes sometimes physical supply. But there are some other players that are more focussed on just purely achieving the lowest price possible.

[00:13:49.970] - Jesus Reyes

And in that case, it's typically a pure financial contract. That can also be a possibility. There are even combinations. So, I mean, somehow, we can offer the full lot. We are just trying to identify what is the critical point on the corporate and just trying to present something with it is the most suitable product. And, we need to have, and we need to accommodate also the producer's interest. And this is somehow the game that we have.

[00:14:26.300] - Jesus Reyes

We are making sure that everything is feasible and somehow, we see ourselves in the middle.

[00:14:33.470] - Jon Slowe

And I gave that example of Heineken and Philips, I think in the Dutch market. Now, some of our listeners may be thinking, well, why do customers just buy a green tariff? That's lots of green tariffs on offer. Are you seeing more and more customers want to make that link between their consumption and an actual generation plant? Rather than just buy a green tariff and have no idea where their electricity is coming from, as long as it's green.

[00:15:03.760] - Jesus Reyes

Absolutely. I mean, the green tariff is a possibility for them. They need to think about what is really operating. And we are starting to hear about the. At a higher level of requirements coming from the corporate side that initially were only requesting and that sustainability is confirmed, but now they're starting to talk about additionality on top of it. So, requirements on the let's say, the green quality of the assets behind their supply is rising day by day, I guess, because simply the market is increasing and the requirements that they want to insist as their partners [inaudible 00:15:57].

[00:15:58.890] - Jon Slowe

And that additionality, it could, for example, be OK, we want to know that our demand for green energy is coming from a new renewable site, from a new solar farm, for example. And can we link our consumption with construction of that solar farm?

[00:16:13.220] - Jesus Reyes

That's absolutely correct. It comes exactly from that fact. And on top of it, there are even some changes in the regulation, particularly in Spain, and also a posture that these types of contracts are signed with the newly built plants out of any kind of subsidy. And this is what we're talking about. And it's the market is trying to find a way to facilitate the installation of these new plants that are at the energy transition.

[00:16:51.170] - Jon Slowe

OK, and Marcos, from your perspective, I guess, a time ago and maybe still in some markets that were guaranteed feed in tariffs, like Dina described, when you're looking at a new PV farm, for example, that you're building or taking up on the management of. Do you have access in Spain to that guaranteed income and to what degree do you want what you talked about, that balance of market risk and long-term contract? So how attractive is it for you to tie your output directly to a particular energy consumer, for example?

[00:17:29.500] - Jon Slowe

Is that something you're doing more and more of? Is it something that you sometimes do, but only sometimes do?

[00:17:36.970] - Marcos Dominguez

So, for us at Aquila once subsidies are gone, the way we view PPA's are as one of the building blocks in the energy transition. Of course, in this respect, what would be like ideal is what you're suggesting about tying in the asset and the consumption. What happens is that, well, to get that consumption tied up for a price for a long period of time is something that as of now in Iberia, we're still going through it. We're seeing more and more corporate PPA's.

[00:18:15.400] - Marcos Dominguez

But it is still a growing market. We do believe that this is a trend. And the more and more people, Jesus was mentioning, additionality initiatives like our E 100 are something that should prop up this willingness to acquire green energy for a long period of time. As of now, we are not seeing that much. Perhaps people are more used to the one-year, two-year contract and this is moving away from the business as usual.

[00:18:48.070] - Marcos Dominguez

But given good regulation, we have the electro intensive royal decree and late last year, that would be something that would, in our opinion, that would help prop up the interest for corporate PPA's.

[00:19:05.200] - Jon Slowe

And in your view, the longer the contract, the better. Or I guess it depends on what's in the contract.

[00:19:11.010] - Marcos Dominguez

That depends. I was mentioning that we see this as a building block. The PPA can have several functions. It can enable the financing or give you financing at better terms. And it can also give you and this is part of the reason for being able to enable finances is the fact that it ensures the stability of cash flows into the future. But at the same time, and given how the forward curve is in Spain, if you enter into much into a too long PPA, it can hurt the yields you construct from it, from serving the PPA, from serving the debt.

[00:19:53.590] - Marcos Dominguez

You might be too tied up in order to have a lot of free cash flow to serve to your investors. For us, I was mentioning one of the key things that we do at the [illegible] is structuring, and it is seeing how the different prices of different tenants and the different structures for this PPA's. What suits each investor? Depending on the investor type, you might have more appetite for one type of PPA's or another.

[00:20:29.320] - Jon Slowe

Yeah, OK, so one investor may be open to more risk and although not one may have trouble financing it, the other may not.

[00:20:37.360] - Marcos Dominguez

Yeah, sorry. Some of the structures we have that are some of our investors are mainly focussing to yield for those obviously we need to work with more flexible structures than just a plain vanilla 10 years pay as produced PPA.

[00:20:55.550] - Jon Slowe

Jesus, from your customers perspectives, what trends or patterns do you see about the length of people that they're interested in? Are they interested in, because the longer it is, maybe they lock in prices, but they have certainty. So, what factors you see affecting the length and what patterns you see from your customers in the length of PPA's they want to sign up to?

[00:21:18.670] - Jesus Reyes

Yeah, there's certainly pros and cons. What we have tried to, I was going to say advice, not really advice, but just highlight to our customers is that they need first need to be very clear on their side the reasons that for what they really need, or they want to sign a PPA. For example, if the customer wants it for sustainability reasons and even pushing for additionality, then it makes no sense that they go for a short term PPA because it's of little use for a plant to go for a five-year contract.

[00:22:00.100] - Jesus Reyes

But sometimes you receive this type of contradictory requests and then this is our task to identify, on the other hand, what we also try to explain to them, especially on the corporate side. I think that the producers are more trained because they are in constant contact with the lenders, and they need, and they have a very clear view of what they really need to get to know to optimise the financing structure. On the corporate side, some of them approach the market.

[00:22:36.690] - Jesus Reyes

Just trying to the strike, the best price. And PPA's are not about just getting the lowest price in class. It's just a decision you take on a corporate level to go for it. And then once you have taken it, if it is for the right reasons, you have to conduct a process a competitive process, have to make sure that you do it in competitive conditions. But it's not a matter of deciding exactly what is the lowest moment or the tunnel that is going to make you to the lowest price.

[00:23:14.910] - Jesus Reyes

And from all this sector, this is probably and not what we would recommend, because especially in long term contracts, it's going to be very difficult to anticipate absolutely every circumstance. So, you need to make sure that your stakeholders understand the main reasons are pushing you to take this decision.

[00:23:36.600] - Jon Slowe

So, it sounds like there is quite an education process there or working with your customers. So, they're really clear about their objectives and they understand the trade-offs.

[00:23:46.320] - Jesus Reyes

This is precisely one of the biggest changes that we have seen in the past couple of years. So, where this teaching process was very long at the beginning and now has reduced quite dramatically because every customer is well trained. And when they go out in the market and they know much better what they want, this is somehow helping also to shorten negotiation periods that were the beginning where really taking the long term.

[00:24:21.330] - Jon Slowe

So, there was a lot of market creation in a way, at the beginning. Would you say you're through all of that or is that still you've got quite some customers that are still learning at the beginning that you need to take through or that education process?

[00:24:37.820] - Jesus Reyes

But there's still a little bit of everything, but I mean, for this type of contracts, everybody tries to seek also their own advisers. And these advisers have also gone now through a number of negotiations. [inaudible 00:24:52]

[00:24:55.320] - Marcos Dominguez

I'd like also to highlight that it is not only customers, I think education needs to come always and not saying always in time. But, you know, for old players in this world, I think education needs to come from all fronts. So, for Jesus it would be his customers asking for the lowest price. For me, it would be my investors asking for the highest price. It is not that it is a matter of a striking in our case, it is a bit more risk reward, but that is something.

[00:25:29.640] - Marcos Dominguez

And the education, the continuous education of our stakeholders is something that requires and takes a good chunk of every day.

[00:25:43.290] - Jon Slowe

Yeah, I can see that. You've got to really align interests and objectives across all parties. Dina, in terms of globally, we're talking about Spain today, but can you just give us a very quick bit of context where other parts of the world, or parts of Europe where PPA's have really taken off first, are there countries ahead? Or are most markets, as we've been hearing about in Spain today at that stage?

[00:26:15.220] - Dina Darshini

Yeah, no it definitely varies by region, per country, but the good news is globally, I mean, the PPA market is growing and especially corporate PPA’s, which are only at the start of the year, I would say market journey. I mean, if you look at the trends globally between 2014 and 2017, I think anywhere between, so this is global, anywhere between two to six point something gigawatt of corporate PPA's was signed annually. And then in 2018 and 2019, these were record years, I think over 10 or to 19 gigawatts of corporate PPA's signed annually. Of course.

[00:26:55.300] - Dina Darshini

OK, 2020 and I suspect this will continue in 2021 due to COVID related impacts, these were hit. But I believe again this will pick up again from2022 onwards and the majority of this market currently is corporate PPA's based in the USA. But there is lots of activities in the Nordics and a bit in Latin America. We look at Europe, Spain, Italy, UK, Germany is picking up here and Europe. India is doing well in Asia through the captive model.

[00:27:32.500] - Dina Darshini

And the world's largest corporate PPA is in Taiwan, I think. And there's a 900-megawatt wind power plant in this contract between Ørsted and Taiwan Semiconductor Manufacturing Company. So, yeah, it's definitely I think globally there is a lot of activity there. Of course, little pockets which are a little bit more advance in Europe, for example, there are still some barriers, for example, in countries like France and, you know, low wholesale energy prices.

[00:28:06.130] - Dina Darshini

The French state still has some feed in tariffs, support the scaling it back other regulatory barriers. So, yeah, it varies.

[00:28:15.440] - Jon Slowe

Quite country specific in many ways, but I can also see if you've got companies like Microsoft, Google, Apple, Amazon, they're global companies got operations around the world. And as I become more familiar with PPA's, they're going to take advantages of countries where they can where PPA's can be done. Jesus, are you seeing that in Spain? Are U.S. multinationals or local companies or mixture of both or any patterns across those types of customers?

[00:28:46.310] - Jesus Reyes

We see absolutely every pattern. So, for different reasons. Some of them, probably the multinationals are trying to, so they have a well-defined sustainability target and then they simply need this type of tools. And other smaller corporates are just basically seeking the advantage that they can now take from lower price if they commit to long term growth. So, for different reasons, but we see different people approaching and even the type of contracts that you mentioned from multinationals that have some presence in Spain, but that's from probably bigger in Europe.

[00:29:26.360] - Jesus Reyes

But they are seeking for Spanish [inaudible 00:29:29] PPA's because it's at present one of the lowest possible prices to be achieved.

[00:29:36.050] - Jon Slowe

Yeah.

[00:29:39.210] - Jon Slowe

OK, interesting, so it looks like it's a trend we'll see growing dependent on country regulations, but quite a wide variety of customers showing interest in activity from a generator perspective. As you describe, Marcos, it's going to be a good fit. I'd like now to bring up the Talking New Energy crystal ball and look forward a bit. So, if we set the dial this week to 2025, I'd like to ask each of you, what developments you think we'll see in the PPA market between now and 2025.

[00:30:18.880] - Jon Slowe

So, keeping it brief, one or two developments each. But what would you highlight that you'd expect to see between now and 2025? Jesus let's start with you and then Marcos and then Dina.

[00:30:35.180] - Jesus Reyes

OK, I mean, from my side, I'm very anxious to get there, to jump in that tunnel of time because we've got a number of uncertainties at present that we are all trying to implement into our models and talking specifically about Spain. So, how the story strategy, it can really be implemented and how efficiently it can really materialise. It's going to be crucial. And by then, I think we will have probably a clearer view.

[00:31:12.320] - Jesus Reyes

And at present, this uncertainty is also leading to some risk premium in the contracts. And that's when we start seeing more real and future energy environment. It will be a little bit easier probably to forecast this type of effect and also the regulatory side. We are also eager to see and some uncertainty as we move as possible to make it easier for the discussion.

[00:31:49.680] - Jon Slowe

So, removing some regulatory uncertainty and managing the uncertainty of the very real output of renewables and I guess both of those, if you overcome both of those, you will see a lot more activity with PPA's in Spain.

[00:32:03.442] - Jesus Reyes

Absolutely

[00:32:06.870] - Jon Slowe

Marcos, from your perspective, one or two developments that you expect to see between now and 2025.

[00:32:13.380] - Marcos Dominguez

I think the main development that will happen is cooperate PPA's, instead of being a rare species, will still being mainstream. I mean, everyone will want to have a PPA in their balance sheet. I think also that we will stop talking about PV or wind or hydro and more hybridisation into those so that could be there. And of course. But I think structures will become we will move away from the plain vanilla 10 years pay as produced into more flexible structures, shorter tenures, longer tenures of fixes and floors and caps, collars, all those structures in order to accommodate and to leave that rigidity away from those.

[00:33:05.120] - Jon Slowe

Yeah, OK. Some maturing of the market, more of those risk management tools collars, caps, blending different assets. Yeah. OK, and last but not least, Dina, your thoughts about key developments, Spain or global or wherever between now and 2025?

[00:33:24.840] - Dina Darshini

Yeah, I mean, just to echo what Marcos and Jesus have said. I mean, in general, I think, yeah, we there is a general acceptance of renewables. And, you know, there were government subsidies before. But, you know, as each of these countries shift from subsidised projects to open markets, I think PPA will be, you know, one of those alternative options taken by renewable investors. And, you know, I think it was Marcos who mentioned more corporations are signing up to [illegible] or are aiming to green up the operations and brand.

[00:33:59.310] - Dina Darshini

So, again, this is all in the right direction and they'll be probably more flexibility in contracts. And with that, of course, potential customers will deem PPA's possibly as complex in their structure and pricing. And you know will need help to adequately understand and negotiate these contractual clauses, which can, of course, impact the overall revenue of a PPA. So, in the future, you know, there very well may be a lot more service providers or consultancies out there that help customers understand energy risk valuation in negotiation issues.

[00:34:40.410] - Dina Darshini

And also, I think the finance sector is becoming very comfortable with financing these sorts of projects or more comfortable, at least. So as the market develops further, not only are the customers being more educated, there are people out there to help. The finance sector is also moving up this curve. So, I think the market will move in the right direction. And yeah, so I think it will rise and rise in the next five years.

[00:35:07.170] - Jon Slowe

Well, I think that is a great example of markets moving away from subsidies incentives feed-in tariffs to more market-based mechanisms and customers driving that demand. Because what we've heard about today is customers wanting to link their demand to additionality, wanting to be linked to particular assets. That's only a good thing because that will drive that will make projects more financeable as Marcos has been saying and see more development of renewables. So really, really interesting discussion times got the better of us, so we better leave it there.

[00:35:40.410] - Jon Slowe

But thanks very much. Jesus, Marcos. Dina, it's been great having you on the podcast. Thanks very much for your contributions. Thanks, as always to listeners. We hope you've learnt more about the world of PPA's through a Spanish look lens and we look forward to welcoming you back to the episode next week. Thanks, and goodbye.

[00:36:15.390] - 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.

[00:36:31.830] - 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

[00:00:16.670] - 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.

[00:00:24.090] - Jon Slowe

Today, we're crossing the Atlantic and heading to Texas to explore what we can learn from the February power crisis. The crisis left over 4.5 million homes and businesses without power, some for many days. And by some estimates, the economic damage is a staggering, 195 billion dollars lots has been written about the causes, with much of the attention, understandably, on the supply side with the generating problem frozen wind turbines or frozen gas power plants or both.

[00:00:57.350] - Jon Slowe

But there's been less focus on what we saw happen with customers. Less focus on the demand side. And while the crisis has had terrible impacts for sure, these sorts of crisis also provide an opportunity to step back, look at how markets could be reformed and look and what could be better in the future. Could, for example, demand response, play a bigger role in the situation if it was to happen again. So, to explore these questions, I've got three great guests joining me today.

[00:01:26.990] - Jon Slowe

Let's say hello, first then Lynne Kiesling, who is an economist, a visiting professor at Carnegie Mellon University in the US. Hello, Lynne.

[00:01:35.501] - Lynne Kiesling

Hello

[00:01:40.340] - Jon Slowe

I'll introduce all of the guests straight up and then we'll get into the discussion, so second is Sid Sachdeva, founder and CEO at Innowatts a SaaS platform that leverages insights from more than 40 million meters across several countries. And many of those metres were in Texas, where I think you're based Sid, so hello Sid, welcome to the podcast.

[00:02:01.250] - Sid Sachdeva

Hey, Jon, thanks for having me.

[00:02:03.990] - Jon Slowe

And the third guest is my colleague and Delta-EE expert, John Ferris, one of our experts, on how the demand side can play a much greater role in electricity markets. Hello Jon.

[00:02:16.470] - Jon Ferris

Hello Jon.

[00:02:19.300] - Jon Slowe

Right, Lynne let's start with you, and I'm going to ask you what sounds like a simple question, how would you summarise the key causes of the crisis? Complex I know, but if you had to summarise it for all listeners, us aren't that familiar with it. What would you say?

[00:02:37.740] - Lynne Kiesling

You're exactly right. It is a very complex process. And I'll try to give an overview and then Sid can add from his hands-on experience on the ground in Texas. I think the event itself was a combination of an unprecedented and unexpected depth of cold weather and duration of cold weather. There were subsequent winter storms and Texas gets a bad winter storm at least every year. This one in particular was one of the worst since at least 1989.

[00:03:18.750] - Lynne Kiesling

There was another bad storm in 2011 that wasn't nearly this long or this cold, but this one started with a bad storm on February 11th, which involved a lot of ice and snow and very low temperatures into single digits and then subsequent storms, particularly in the 40s and 50s, which were surprisingly large in terms of the coverage covering almost the entire state. And Texas is a very large state. So, this is a very large storm system. And the duration of the single-digit temperatures throughout the whole week meant that the municipalities had run out of their storm, their sand and salt that they use to clear the roads so crews couldn't get to facilities to defrost them.

[00:04:20.580] - Lynne Kiesling

And so, the magnitude of the weather event was large. What this meant in terms of the set of interconnected infrastructures was really profound. And typically, we think about the electric system, but there are really three interdependent infrastructure systems that were in play here. One was obviously the electric system and there were but there were power plants that were sitting and ready to generate. But the upstream natural gas supply system was having a lot of problems. Natural gas, when it's extracted in Texas, is very wet.

[00:05:05.430] - Lynne Kiesling

It comes out with quite a bit of water. And so, there was a lot of freezing and freezing of hydraulic systems as well at the wellhead. So, then that meant that it was difficult for natural gas power plants to get their gas supply. And what limited gas supply there was, was going to be more to home heating that got prioritised. And then downstream from the electric is the water supply. And so, as the freeze continued, there was a lot of difficulty with the water system and places having to be on boil water alerts so that they could have potable water.

[00:05:46.740] - Jon Slowe

So, Lynne, obviously demand spiked the cold weather, a fair bit of electric heating. So, demand spiked generation. What in theory was there enough generation, if at all, been working, able to work and working properly? Or was there a fundamental mismatch between the spike in demand and how much a generation should be available?

[00:06:11.910] - Lynne Kiesling

It was an unprecedented spike in demand because of the very low single-digit Fahrenheit, I should say, temperatures. And that meant that the demand for electric heating was higher and then before and higher than typical. You have these combined demands for electricity and combined demands for natural gas, both for heating and for power generation.

[00:06:42.700] - Jon Slowe

Yeah, OK, so a mixture of very high demand generation capacity, not being able to work as it had hoped and therefore not enough generation to meet that demand Sid, from your perspective, you've got a lot of metre data coming through your platform, what did you see happen in customers’ homes? Can you paint a bit more of a picture, apart from the obvious that it got colder, and demand went up?

[00:07:14.470] - Sid Sachdeva

Yeah, so, the demand went up across the board in Texas, just so your listeners have the context. Homes, 60 percent of the homes use electric or use gas for heating, and about 40 percent of the homes use electricity for heating. The number of electric heating homes are increasing every year. So, one would imagine at least the non-electric heating customers or gas heating customers would not have much of a spike. But what we saw was almost across the board in Texas as coastal belt, too.

[00:07:59.560] - Sid Sachdeva

So, it backs up to the Gulf Coast of Mexico. So, what we observed was that one cities that were in the north, like Dallas Fort Worth. They saw a jump and that part of the state experiences cold weather almost every year, so they are pretty well versed with it. Even in that part of the state. We saw about 53 percent jump in energy consumption or power consumption for electric heating customers against a normal winter day and the non-electric heating.

[00:08:38.110] - Sid Sachdeva

Customers saw their power jump by about 70 percent,

[00:08:41.320] - Jon Slowe

70, Wow.

[00:08:42.400] - Sid Sachdeva

Yes.

[00:08:42.820] - Jon Slowe

So, what was going on there? Are people plugging in portable electric heaters?

[00:08:48.400] - Sid Sachdeva

That as well as just in Texas. We also have pools. So a lot of homes have swimming pools, and what you don't want is you don't want the pipes to freeze. So they have pumps running almost 24/7. So there are a lot of things that were running 24/7. Then if you come closer to the coast or actually on the coast of Texas, what we predicted was and we saw the actual scheme in line. The energy consumption, power consumption actually increased by about 140 to 160 percent across both electric and non-electric heating customers.

[00:09:33.190] - Sid Sachdeva

And the reason is that homes along the coast really don't get this kind of a cold snap and they're not used to and they can bare up to a certain extent. But when you have temperatures going down in single digits, the power consumption really shoots up. So that's the kind of granularity and visibility that I think was missing from the whole not just the discussion, but it's missing from our regular planning exercise as well. On a day-to-day basis.

[00:10:05.460] - Jon Slowe

Then you mentioned, maybe the worst storms since 1989, so that's a 1 in 31 year or 1 in 30-year storm, I guess. Was that not planned for did people, not understand what would happen when the next 1 in 30 storms came along or was not understanding there, but the generation side failed, and people didn't anticipate that.

[00:10:30.430] - Lynne Kiesling

I think in general, there are multiple levels at which we could talk about that. One is the kind of individual homeowner what as or resident, I should say, because renter, owner I don't think as a residential energy consumer, I don't think you think much about such infrequent weather events, especially in Texas. If you do think about weather events, you think about heat, you think about hurricanes. And so winter weather events are something that are so unusual.

[00:11:13.810] - Lynne Kiesling

And now if we go up, say, a planning layer to say either, the wires companies, the transmission and distribution utilities that plan the infrastructure or even or ERCOT, ERCOT is the Electricity Reliability Council of Texas. And they're responsible for the operations of the wires network, the reliability of service and the operations of the wholesale power markets. And so, in ERCOT's planning horizon, my understanding is that they use 10 years of data and so in 10 years of data.

[00:11:59.470] - Lynne Kiesling

It's hard to capture a one in 20 or a one in 30 event. And so, I think one of the retrospectives, how can we do better next time? Analysis that will be done is how can ERCOT improve its planning horizon and its planning methodology to adapt to the fact that with climate change, weather patterns are likely to be more variable and harder to predict.

[00:12:29.170] - Jon Slowe

Yeah, I guess that coupled with a more electrified future, more electric comes, as you said Sid, more electric vehicles. The yeah, it's happening both ways. More extreme weather events and more electrification as well.

[00:12:47.380] - Sid Sachdeva

I mean, if I may jump in, there are just the whole planning. And it's not just specific to Texas. It's almost everywhere in the world. You bundle residential power consumers as electric heat or non-electric heat. And you take an average of those consumers and that's what you use for planning and you're looking back to predict the future, and every time we will continue to if we continue with that same trend, we will continue to have these podcasts that will focus on what happened before and what can we do in the future instead of creating or modifying our planning exercise to include these scenarios, what could happen in future?

[00:13:38.540] - Sid Sachdeva

I mean, I don't know. Ten years down the road, Texas could see, God forbid, but a windstorm. So, you may have poles and wires go down. How would that change, what impact it would have on the consumer? So, we need to take these things into consideration. We are not learning from other markets. London had a beast from the east storm in 2017/2018.

[00:14:07.470] - Jon Slowe

Yeah.

[00:14:09.960] - Sid Sachdeva

And like Houston and many of the Texas cities.

[00:14:13.770] - Sid Sachdeva

And by the way, this is the only common thing between Houston and London. London does not have the sand and salt to remove snow from the streets or winter precipitation. So, the learning's the from a demand perspective how the demand changes when folks stay at home. Not many businesses are running when you have a winter precipitation. Houston and other parts of Texas could have learnt from that market. And being able to predict, at least in a I won't say a year before, but at least a week before the winter storm was supposed to hit Texas.

[00:14:51.690] - Jon Slowe

Yeah, OK, so one big lesson then is planning and maybe a different way of looking at the future, both the time horizons and probabilities rather than a deterministic way. And what can you learn from elsewhere? Jon, I'd like to look at the demand side of it now, and in Europe, we're seeing more and more activity with dynamic time of use pricing, so bigger industrial and commercial customers are used to this to some degree already.

[00:15:23.300] - Jon Slowe

But increasingly, residential customers could be on tariffs where the price changes every half hour, or every hour linked to the wholesale market. And it's quite a nice concept. People are attracted to the idea of negative prices or very low prices. Could I get paid for charging my electric vehicle, for example? But on the flip side, you could find yourself with very high prices. And in the Texas crisis, the price shot through the roof. Can you tell us a bit about a start-up called Griddy and what happened with them in the Texas crisis?

[00:15:56.070] - Jon Ferris

Yes, so Griddy was an electricity retailer, and what that means is that they don't own any of the networks and unlike some other retailers, they don't necessarily own any generation. So, what Griddy was responsible for was buying power for its customers on the wholesale market and recovering the costs of energy, use of the network, any taxes and levies through the tariffs that they charge customers. And most retailers historically have bought energy in advance and manage that market risk on behalf of consumers, giving them the certainty of a fixed rate for energy.

[00:16:33.680] - Jon Ferris

As you mentioned, Jon, there's a trend towards new innovative retailers, including the Barry energy in France, Octopus energy and Tiba, but are offering customers tariffs where the rates vary from day to day and under different times, reflecting the actual grid conditions. In the long run, this will tend to work out cheaper for the consumer. But in the short term, they're much more volatile, so higher during the evening peaks and lower, perhaps even negative on windy nights.

[00:17:06.470] - Jon Ferris

As a consumer, if you can take advantage of this volatility by charging your EV or running your washing machine when prices are low. Not only are you rewarded for helping to balance the grid, you're also consuming more when renewable generation is high. So, making the grid.

[00:17:25.680] - Jon Slowe

So that's a nice side of it. [inaudible 00:17:30]

[00:17:31.890] - Jon Ferris

That was what Griddy offered in the Texas market. So, consumers in Texas were able to have retail choice and decide whether to go to a traditional retailer or to move to Griddy who'd launched in 2016 and signed up about 30,000 customers on real time tariffs. So Griddy didn't purchase any energy in advance when the spot prices in Texas reached the cap of $9,000 a megawatt hour, compared to a typical range of around 40 or 50 dollars. When consumers ended up receiving bills in the tens of thousands of dollars for the week of the storm.

[00:18:15.500] - Jon Slowe

That's amazing

[00:18:18.410] - Jon Ferris

It was and Griddy wasn't the only country that offers such a tariff, Octopus Energy had actually launched in the U.S. that very week. So, having made an acquisition a few years ago, they rebranded the week before the storm and being part of a larger group, they were able to take the decision to cap the rates for their customers. So, not exposing to the full price of the imbalance markets. Griddy wasn't able to do this and ended up going into bankruptcy, owing the system operator over 25 million dollars.

[00:18:59.160] - Jon Slowe

Wow and customers still owing well do customers have, are they still liable for that amount of money, their customers.

[00:19:06.060] - Jon Ferris

I think that's an ongoing discussion within Texas as to whether customers should be charged, both rates and also whether the retailers should be charged, what they owe to ERCOT for their imbalance. It wasn't just the new retailers, but some of the more traditional entities where their own generation was unable to get the gas to meet their customer’s needs, find themselves with bills in the hundreds of millions, and I'll give one example, over two billion dollars owing to ERCOT.

[00:19:41.560] - Jon Slowe

Yeah, OK, so everyone was stung in some way through this huge jumps in the wholesale price. Sometimes it passed onto customers, sometimes it didn't.

[00:19:51.420] - Lynne Kiesling

And I think it's also important to note that, as Jon said, they had Griddy, had only about 29,000 customers and this is in a market of 1.2 million or so customers. So, the Griddy wholesale price passed through contract was very much a niche product, but it was very much in keeping with their business model, but they passed through that wholesale price. And unlike, as you said, unlike Octopus energy, which could use its internal hedging to kind of modify slight differences in the business model, but both offering real time prices.

[00:20:36.280] - Jon Slowe

Yeah, I guess we've got to be careful not to tar all real time price business models with well, with that brush, with that negative experience of Griddy, because there are lots of different variations to real time pricing and amounts of risk that you can pass through to customers and ways you can do that. But I'm interested in whether the degree to which flexible demand could have helped in this crisis. So, can we imagine Lynne, can you imagine a situation where it might have been cold, but rather than have some people or millions of people without power, could everyone have coped with a bit of cold for the sake of reducing demand and keeping the lights on everyone?

[00:21:21.510] - Lynne Kiesling

Yeah, and I think there's there are two aspects of that. One is the existing flexible demand and demand response portfolio in Texas. And there are quite a few industrial and commercial customers who are on demand response contracts. And again, like much of the Texas system, those contracts are geared towards summer heat and not necessarily towards February winter storms. But so, for especially industrial customers, it may not have been as easy for them to adjust their activities in February, given that they're sort of geared towards being able to adjust them in the summer.

[00:22:15.160] - Lynne Kiesling

But so, there is some demand response in the system. And there was commercial and industrial response I'd been interested in Sid's observation of this data. But compared to the magnitude of the demand for electricity, it just wasn't sufficient. The other the other part, I think, is the residential question and the extent to which there are untapped resources in homes that we can use. And Sid mentioned the pool pumps, but if, for example, more consumers were on real time prices, but that it was a transactive system.

[00:22:58.900] - Lynne Kiesling

So, you had digital sensors and you could automate responses to those price signals that people could have lowered their thermostat or people's thermostats could have been programmed to lower automatically and having your house, say, at 60 degrees. But being able to keep the system on is preferable to being blacked out for two days, using automation to and price signals to cycle pool pumps and to cycle refrigerator, fridge-freezer condensers, those kinds of things that would have provided some more demand-side flexibility in a highly distributed way that could have added up to enough to at least attenuate some of what was experienced.

[00:23:48.850] - Jon Ferris

That automation, I think, would have been really important in this situation where the blackouts actually started at about one o'clock in the morning on Monday. So, even the most dedicated of consumers that are looking for right demand response are unlikely to be monitoring the markets for that point in time.

[00:24:09.310] - Jon Slowe

Yeah, and with we're seeing more automation, some of those companies you mentioned in Europe, Jon, I know Lynne and Sid in the U.S., you've got smart thermostat programmes which have automation in them as well, where the customer might [inaudible 00:24:29]. Within that, you can have some automated response.

[00:24:33.610] - Sid Sachdeva

I think we also need to look at this from a structural angle. This is not the first time we are having a demand response discussion when around an event like this. But if I can take draw some analogy, a couple of analogies. One from the mortgage industry where whoever has taken a mortgage, home mortgage loan knows that the interest rate will be specific to that consumer because the factors are different. My risk profile is different. Same thing in the energy space.

[00:25:12.670] - Sid Sachdeva

Why do we have the same rate for every customer when the demand profile is different? So, if you look at Texas, the cost distribution actually across all consumers is about a 107 percent. It's way too white, right? So, if I am a retailer who has higher costs to serve customers and I'm giving them a lower rate or the average rate. I am running the risk of losing those customers versus I have a lower cost to serve customers and I'm giving them a higher or, giving them a higher rate than I have.

[00:25:52.250] - Sid Sachdeva

The other problem. So, the point I'm making is the more personalised pricing the industry can come up with, the more consumers can start making structural improvements within their homes or businesses to respond to either of these kind of events in an isolated way or more on an ongoing basis. So, if I can charge 20 cents a kilowatt hour versus 10 cents, which is the average rate, at least I will take notice and say, OK, something is wrong.

[00:26:27.080] - Sid Sachdeva

I need to either fill up my pool with sand, not use it, or make some other changes. So, I don't think we can to Jon's point, we can expect, folks, when you are going through all this or this unprecedented event to think about, oh, I need to turn off my light bulb or I need to turn off this. So, the industry needs to look at it on a more structural way rather than in a transactional.

[00:26:56.110] - Jon Slowe

And to what extent, Sid and Lynne do you see discussions starting to happen around or people really looking at that seriously, at personalisation Sid or Lynne in terms of more sophisticated demand-side programmes or demand response?

[00:27:11.560] - Lynne Kiesling

Deep sigh, because it's I do fear that this event is going to be a bit of a black eye for the idea of more personalised pricing and more dynamic pricing, even though the folks who did choose the wholesale, perhaps through price and did have high bills, were a very small share of the entire market. And so, I think Sid's exactly right. We have to have a larger conversation about both the transactional and economic and market aspects, but also the more kind of structural, regulatory and business model aspects of what do these increasingly heterogeneous and technologies with different capabilities that are going to be scattered throughout the distribution grid.

[00:28:06.790] - Lynne Kiesling

Now, what does that mean in terms of our ability to curate and customise electric services for different people who have different demand profiles and different preferences? And even more so because some of those resources are going to be things like electric vehicles and battery storage. Those small customers can even provide grid services, things like voltage regulation and local support of the grid and could be compensated accordingly, for example, in a local energy market for grid services.

[00:28:45.610] - Jon Ferris

There's a model of stopping prices that reflect the demand profile that is common and familiar to commercial and industrial customers, where you've got larger volumes that the history of having smart metre data is much longer and we're yet to see that in the consumer space. But that does lead to differentiated pricing. That doesn't necessarily lead the consumer open to the volatility of short-term pricing. So, I think that sets a baseline that reflects the shape of the consumer and from there you can look at deriving demand flexibility by giving access to markets.

[00:29:30.650] - Jon Ferris

One thing that didn't happen in Texas, apart from Griddy, was retailers offering customers $9,000 a megawatt hour or even anywhere close to that in order to reduce demand. And those that weren't cut off were more than able to continue consuming, paying 10, 12 cents an hour, regardless of the impact on the rest of the state.

[00:29:56.570] - Jon Slowe

Yeah, so you had this big mismatch between demand and generation, I guess you want to be careful how much you expose the customers to the volatility that Griddy customers were exposed to.

[00:30:09.170] - Sid Sachdeva

And this mismatch, will always stay if we are not extending or sharing the demand intelligence with the upstream supply traders and the grid operators.

[00:30:21.830] - Jon Slowe

Yeah,

[00:30:22.400] - Sid Sachdeva

If the grid operator and the supply generators would have known that along the coast, this is how the load will spike by more than 100 hundred percent when weather goes down. I'm sure at least the power plants supporting that part of the grid would have done weatherization or ERCOT would have forced them to have some weatherization in place.

[00:30:45.900] - Sid Sachdeva

So, the lack of intelligence about our customers. Is really, the way we see it is impacting the whole value chain. Every industry we talk about being customer centric, what is the simple definition of being customer centric in the utility space? Knowing my customers demand profile. Ask any utility 75 percent of them will have no idea of what demand profile is of their customers.

[00:31:16.250] - Jon Slowe

Then you can add layers onto that, they'd know the demand profile know the typical demand profile, how flexible that demand profile is.

[00:31:22.920] - Sid Sachdeva

Exactly

[00:31:23.520] - Jon Slowe

Know what happened to that demand profile in super cold or super-hot weather.

[00:31:27.530] - Sid Sachdeva

Absolutely, and it's not rocket science we do that when you buy auto insurance today. I have a red car. My neighbour has the same red car, but our insurance premiums are different. Why?

[00:31:42.770] - Jon Slowe

They know about you. Yeah, yeah.

[00:31:46.200] - Lynne Kiesling

I think the comparison to insurance is extremely apt that when we buy a vehicle and we buy the gasoline to drive the vehicle, we know that we are taking on certain risks of accidents and injury. But we have insurance policies. And at least in the US we're required to have insurance policies, I wouldn't necessarily go that far for like the Griddy's of the market. But one thing that I've been thinking about since February is whether it would be useful to have Griddy, you know have the kinds of, say, travel insurance policies that airlines offer where you can choose if you buy a non-refundable ticket, you can choose whether or not to buy travel insurance in case something unexpectedly means you have to cancel your trip.

[00:32:38.820] - Lynne Kiesling

 You could do something similar for if you're going to be on a real time price contract as a small residential customer, you could choose to buy an insurance contract with. If the price goes above a certain amount, then my rate will be capped at that amount. And I pay for that insurance policy so that those kind of market-based approaches to enabling self-insurance might be a good approach that I think draws on a lot of our auto and travel insurance expertise.

[00:33:15.500] - Jon Slowe

Sounds very logical when you describe it like that Lynne.

[00:33:20.960] - Jon Ferris

To Sid's point, that's asking a lot of the consumer when I think in February, we did the retailers that had the responsibility and should be experts not taking that principle of covering there risk. And I think to the point of providing data, actually being able to give not just the retailer, but consumers a better understanding of their consumption, better understanding of the risks that they're taking or the risk that they may be taking on.

[00:33:56.810] - Jon Ferris

I think it's an essential counterpoint if they are also going to be taking on the decision of whether to buy insurance or not.

[00:34:07.490] - Jon Slowe

Yeah, without the data, you can't evaluate the risk and therefore you couldn't ensure it in that case.

[00:34:12.410] - Sid Sachdeva

Just to add, some of the large retailers who have sophisticated risk management practises in place, they were covered up to 75 percent of the risk. It's the smaller ones and the ones like Griddy that made the whole industry expose the whole industry to the risk. And again, it's a very common-sense thing, demand should be equal to supply, and if my demand if my supply cost this much, I should be able to charge that from the demand.

[00:34:44.800] - Sid Sachdeva

So, if I'm serving my high-cost customers with 20 dollars per megawatt hour or two cents per kilowatt hour of energy, that is not the correct price. It may be just because there are government incentives for wind power in the night and they are bringing down the price, but there are ancillaries and other things that are sitting in the back providing insurance. So, we're not taking those cost components into consideration. So, most of the large ones, I would say, were up to seventy five percent covered, maybe not a hundred percent, but the smaller ones were the ones that really created more problems.

[00:35:23.860] - Jon Slowe

Yeah, well,

[00:35:25.240] - Lynne Kiesling

One other thing that is important in this specific event and in Texas in particular, that I it makes the data transparency question that much more complicated. Is that the real this is not a resource adequacy problem, as we discussed already the power supply infrastructure was ready that I think the real failure is upstream in the gas supply and that system is not very transparent. And in Texas, there's not a lot of data on reliability of the system just because they're so used to being able to extract it and supply it.

[00:36:09.230] - Lynne Kiesling

There's not a whole lot of storage on site. And I would argue that the regulatory relationship between the Railroad Commission and the industry is definitely the Railroad Commission's mission is basically to protect the health of the natural gas industry. And so, there are some very perverse incentives in the upstream gas supply system that make it very opaque. And so, it makes that data that Sid's talking about, that much more difficult to have deliver reliability and resilience.

[00:36:50.300] - Jon Slowe

Yeah.

[00:36:51.920] - Jon Slowe

Well, certainly, I know there's report after report looking at what can be learnt from this crisis, we've touched parts of that today, let's finish by bringing out the Talking New Energy crystal ball and set the dial to 2030. And imagine another Texas like crisis. So, yeah, I'd like to ask each of you if you can answer very briefly in the interest of time, what might be different in 2030 or so, the same winter storm comes along, a headline from each of you on what might be different in nine years’ time, let’s go Lynne, Sid and then Jon.

[00:37:34.870] - Lynne Kiesling

Oh, I think I will. If we implement some of the lessons we've learnt from this, we will have more data across the integrated interdependent systems from natural gas to electric to water, and will do some of the smart engineering things like re redesigning the distribution circuits so that they're smaller and you can actually roll the blackouts and we'll have automation to automate the rolling blackouts if they're needed, but more importantly, automation to send price signals and communicate them to consumers and their devices in ways that those devices can change their settings autonomously and hopefully alleviate the need to even have the rolling blackouts.

[00:38:33.030] - Jon Slowe

Thanks Lynne, Sid how about you?

[00:38:36.760] - Sid Sachdeva

I think. And I'm a big proponent of it that consumers should be their own risk managers at the end of the day, not the utilities. So having, unique price for every customer based on their demand profile. High or low should be should motivate customers to or encourage them to have their own distributed energy resource system or a more or higher depending on what every consumer they give more priority to reliability they will have, let's say, a battery or a fuel cell.

[00:39:15.080] - Sid Sachdeva

If they give more priority to carbon footprint, they may have solar or other renewable generation and be able to control those at their end or at the service point or at the grid edge, along in conjunction with a unique price for every customer.

[00:39:35.540] - Jon Slowe

Personalisation of passing the risk of the incentives to the customers for them to act on that?

[00:39:42.380] - Sid Sachdeva

Yeah, I mean, if I am buying a red Ferrari, I should be open to paying more insurance premium.

[00:39:47.360]

Yeah, I don't know if you've given away the brand of your car Sid or not.

[00:39:53.330] - Jon Slowe

But, uh, Jon, how about you, what would be different in 2030?

[00:40:00.560] - Jon Ferris

I would like to think that there is more whole system thinking in the regulator to provide resilience across the utilities. But from what I'm seeing from the state legislature I'm not overly hopeful. I think consumers are likely to take things into their own hands. We will see more EVs, more batteries and other assets that can provide individual resilience to a lot more properties across Texas, hopefully combined with better access to markets and price signals that can influence behaviour, those assets can then be used and can be incentivised for system benefit and provide a benefit to everyone.

[00:40:45.620] - Jon Ferris

So, flexible demand can get the full rewards for their actions and hopefully there will be enough demand response to avoid rolling blackouts in the future.

[00:40:56.570] - Jon Slowe

OK, well, I hope all of your visions for 2030 are proved right. It would make for a much better, smarter and more intelligent system. So thanks very much to Jon, Sid and Lynne that was a great discussion. We hope that shed more light on the Texas crisis for you and look forward to welcoming you back to the next episode next week. Thanks and goodbye.

[00:41:29.800] - 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.

[00:41:52.850] - 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

[00:00:23.010] - 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. Schneider Electric is a global giant in the energy sector, not in terms of producing energy, but in terms of how we distribute, use and manage energy. And today, I'm speaking with Jai Thampi from Schneider.

[00:00:37.230] - Jon Slowe

Jai is Senior Vice President for Strategy and Innovation in the home and distribution part of Schneider's energy management business.

[00:00:46.230] - Jon Slowe

Many of you will have heard of Schneider for those that haven't or aren't quite sure what Schneider does, its products and services are found in grids, industries, buildings in over 115 countries around the world, and it employs a mammoth 135,000 people. So, without doubt, Schneider's products and services can play a big role in helping to decarbonise our energy system. So, let's say hello now to Jai.

[00:01:16.860] - Jon Slowe

Hello Jai. How are you doing?

[00:01:19.050] - Jai Thampi

Hey, Jon, thank you for having me on this podcast. Doing very well. How about yourself?

[00:01:24.720] - Jon Slowe

Yeah, I'm good. It's a lovely, sunny spring morning here in Glasgow, and you're joining us, well it's evening where you are, isn't it?

[00:01:33.060] - Jai Thampi

Yes, indeed. It's evening in Singapore and we do get sun and rain, which is pretty much the two climates that you have at this part of the world.

[00:01:44.880] - Jon Slowe

Well, very different climates from Glasgow to Singapore. I think I prefer a bit more, of your one to be honest, Jai, I described your official job title. Official job titles are always a bit dry. So, can you give me the unofficial version? How would you describe your job at Schneider?

[00:02:01.290] - Jai Thampi

Yeah, not really well said, Jon. I mean, titles don't really mean much. So let me break this down this way. So, as you said, at Schneider we globally provide solutions for energy management and automation. So, energy management business is where we address many different segments. One of the big ones, the key ones being homes or residential, and that's the division that I represent. So, we are the primary focus on residential segments. But not only that, and within this division, I'm responsible for the global strategy and long-term innovation.

[00:02:33.030] - Jai Thampi

So, I'd say figuring out, together with my colleagues and my team, how to transform and how to shape the future of this industry.

[00:02:41.420] - Jon Slowe

OK, so can you give us a feel for your listeners what Schneider products, might they have in their homes today, for example?

[00:02:50.930] - Jai Thampi

Absolutely.

[00:02:52.220] - Jai Thampi

So, I normally tend to explain you know, when I explained it the first time to somebody that we make products across the home all the way from the products that keep you safe and give you peace of mind when you sleep at home. So, the circuit breakers, the electrical panel that's behind the wood, and then all of those products that actually you touch and interface with on a daily basis, the light switches, the sockets, the smart plugs, etc.

[00:03:19.040] - Jai Thampi

And then, of course, the next level, which is where we go into the energy space, which is the smart home automation space. So, things like your smart thermostat, your EV charging system, etc. So, we do have a play also in the new electric landscape. So, we're addressing multiple parts of the home and I'm pretty certain that our audience would have experienced at least a few of our products along the way.

[00:03:44.030] - Jon Slowe

Yeah. OK, thanks, Jai. Now, most of our listeners are in Europe, although the podcast does have a global footprint. You've got a global role now; homes vary massively from one part of the world to another. So, can you give us an example of the contrast you're seeing in different regions or what's particularly important for Europe, maybe contrasting Europe with another region?

[00:04:11.150] - Jai Thampi

It's a great question, Jon. I think, as we always say in Schneider, that we have a multi local approach or business is local, but we play globally. So, the diversity for us goes actually beyond types and sizes of homes, but also in products. So, if you take, for instance, countries like Singapore where I am or in China or some of the even Nordic countries, we would have a higher share of multi-dwelling homes, high rise residential mixed use buildings, for example.

[00:04:36.390] - Jai Thampi

Whereas if you look in the UK, Australia or even the US, you would see a higher share of single dwelling landed homes. So, from a product standpoint, the electrical distribution standards and regulations are different across geographies. So that's the other approach which sort of plugs and sockets are different. So therefore, our business is about delivering these local solutions with local competencies, understanding the local regulatory requirements and code compliance while leveraging the strength of Schneider as a global engine, including global technology platforms, global partnership, etc.

[00:05:09.980] - Jon Slowe

Yeah, OK. And you've got that global perspective. So, can you make that real? So, what might a global partnership or global, I guess, core part of your technology looks like that you can then localise and apply around the world?

[00:05:25.790] - Jai Thampi

Absolutely. I'll probably take one example, each one from partnership and one from technology, for instance. So, Schneider is one of the key players in the Connectivity Ecosystem Alliance, which is a partnership between Schneider Electric, ASSA ABLOY, Somfy and Danfoss. And what we do, we bring our products together, especially to homebuilders and end consumers products that would work together in a simple way seamlessly. So that's a global partnership because these are all global giants and they are all, let's say, leaders in their own right.

[00:06:01.250] - Jai Thampi

And that sort of partnership we can leverage across different parts of the world. So, when we win new customer projects, from a technology standpoint, if I take our smart home, home energy management system, we call it Wiser. That's the brand name we use internally. So, Wiser platform is a global approach, but we have tailored that leveraging technologies available locally for Europe, Asia and North America. So, those would be two very close and hard examples of how we are playing globally, but still being able to deliver locally.

[00:06:35.640] - Jon Slowe

Yeah, OK, I get that. And how reflective are they? So, looking at the big global trends and looking at where you see your markets overall heading, you gave two examples there. One, interoperability of connectivity between different manufacturers products and a second home energy management and your Wiser platform.

[00:07:00.870] - Jon Slowe

Are they two of the big global trends or the biggest? Or if you step back a bit and look at what the global trends affecting your business are, how would you describe them?

[00:07:11.140] - Jai Thampi

So, I think that's a very interesting evolution right now, as we you know, even in Delta-EE, you're absolutely on top of that is the energy transitions that are around us. So, the energy transitions are impacting homes as well. And but when you look at it from a consumer perspective in a home, we would probably see the first step of digitisation in the home, which is mostly around smartphone.

[00:07:35.260] - Jai Thampi

So, where we come in is actually taking a view of how the smartphone of the future or the home of the future will evolve beyond what we today call a smartphone. So, if I take a specific example, North America today would be maybe 25 to 30 percent smartphone penetration. France would probably be about 15 percent. Germany just about 20 percent. So, we could argue that smart home in itself has a long way to go in terms of market penetration. However, when we see the real shift that is happening today in homes, that's actually also the evolution of where homes are becoming more sustainable.

[00:08:11.170] - Jai Thampi

Homes have, let's say, solar batteries, etc, coming into the home. So, the energy side is also evolving. And this is where Schneider is taking a very clear approach to say that the smart home of the future cannot be just smart. It has to be smart and sustainable. So, that would be one of the big shifts that we're seeing in the market right now.

[00:08:32.320] - Jon Slowe

So, integrating that smart part and the energy part together is that fair?

[00:08:40.190] - Jai Thampi

Absolutely, and we call that strategy grid to plug, so the grid representing the energy side of things and the plug sort of representing every load or device or appliance in your home. And when you bring that grid to plug view a home energy management system, which is, of course, bringing the elements of the energy management as well as the whole motivation and which is at the end of the day, where homes of the future are going.

[00:09:05.850] - Jon Slowe

What about the speed of those two trains? So, sometimes I get very excited about smart homes and home energy management.

[00:09:14.400] - Jon Slowe

Other times I'm a bit frustrated about the speed of adoption of these technologies, these approaches. And I think back to when Google acquired Nest several years ago and the huge excitement in the industry. Wow.

[00:09:29.850] - Jon Slowe

Smart homes are really going to take off you gave them percentages. You know that they're in the market, but they're still the minority of the market, so.

[00:09:40.870] - Jon Slowe

In a way, it's a today market, but how quickly do you see those numbers growing? Still most homes, apart from places like Germany, don't have you don't have large numbers of homes with PV and batteries if you take out Germany, Australia and certain other markets. So, yeah, how does a company like Schneider manage the speed?

[00:09:58.500] - Jon Slowe

You don't be too far ahead, but you want to drive it, but you can't afford to be too late either.

[00:10:08.200] - Jai Thampi

We have a view on that.

[00:10:09.340] - Jai Thampi

And let me put it this way. So, any technology adoption will come when the customer truly recognises a value from it. So, if I take a smart home, take voice assistance or any of those expediencies once, the initial fun experience fades over, we have seen a lot of customers coming back and saying, I hardly use the same with kitchen appliances, my kitchen appliance. So, we don't believe in Schneider that a bunch of glorified remote controls is going to serve the real purpose of home automation.

[00:10:39.910] - Jai Thampi

So, I go back to that only a question about the differences between the localised differences in homes around the world. So, what is really changing is this evolution of electric and digital is coming together and there are different phases. So smart home, of course, starts at a bit early, but you can see that there is rapid adoption of solar and storage happening for various reasons. Now, Australia kickstarted that, particularly because of, you know, that the major blackout that happened in South Australia a few years ago.

[00:11:09.520] - Jai Thampi

Since then, Australia became the forefront of residential solar rooftop. Likewise in the US and look at even the recent expediencies in Texas, etc. So, I think there will be a defining moment where people will find a reason to bring a certain technological capability in the home. And what I'm basically saying is that the interplay between that energy and home automation, that needs to happen because if you keep them separate, customers will never be able to find true value from the two.

[00:11:39.850] - Jai Thampi

Because, you know, you would wake up thinking of, like, what's the best time to charge EV? How do I manage the different loads with my battery back? How do I know which room in my home is being inefficient or efficient with my heating during winter? And think of your country, for instance, right. So, there is so much happening there or even take the solar example we just talked about, how do I maximise my rooftop solar system against all my energy guzzling appliances that get used at different times of the day?

[00:12:09.280] - Jai Thampi

So, these are the pertinent questions that customers are going to be living with. And if we can deliver a simple, efficient solution for that by linking the two, I think we have really the future of smart home of tomorrow.

[00:12:22.920] - Jon Slowe

Yeah, OK. Where would you say you are on that journey of linking the two?

[00:12:28.380] - Jai Thampi

I think we have a very good advantage with where we are today in terms of the grid to plug approach. So, we have announced, and we are actually launching our energy centre, which is our connected electrical panel, really the next generation, a smart panel in the US and France this year, actually very soon in the US the first units have already started shipping and combining that with our smart home products inside the home is going to deliver that true end-end experience.

[00:13:00.690] - Jai Thampi

So, we are there in the market with that experience ready and available today. And I think this is going to be, let's say, across different markets is going to be appearing in other markets as well. So, we do have an advantage. We have the capabilities. We have the presence in these markets. We have go to market available, for instance, whether it's through homebuilders, real estate developers or electricians. So, we have all of the pieces available today to really but I'm not saying that call us victorious, but we certainly have at the moment, you know, all of those pieces figured, especially from a grid to plug point of view.

[00:13:39.470] - Jon Slowe

OK, so where there are particular coming back to what you said about making customers lives easier, making customer lives better, that will change a lot country to country, market to market. The Australia example, parts of France where you have a lot of automated shutters or blinds, for example, that you don't have in the UK. So, they'll be very specific use cases in different countries.

[00:14:05.370] - Jon Slowe

And you're advantages is in you're already in the home, you're already in distribution. You've already got those products, those electrical panels.

[00:14:15.150] - Jon Slowe

Do you think you'll always push them through distribution, or do you think your what's the balance between going through distribution and going direct to customers, the B2C route?

[00:14:25.180] - Jai Thampi

Well, it's something that we are looking at the moment. I think we still have a big part to play in helping our existing customer base, for example, homebuilders and also our electrician community, because homebuilders, and particularly take the UK, for example, California, for example, they're already experiencing the new target, net zero targets, regulations, etc, coming their way.

[00:14:48.700] - Jai Thampi

And these are customers who actually want a one stop solution. It's not, let's say, in their best advantage. If they have to actually put these pieces together and figure it out, they do need the flexibility, the scalability, the customised ability. And also, they do want to work with someone who understands, particularly the regulatory part of this equation, because energy is still the centre of it. So, this is where we have an advantage. So, we do have a big part to play in helping our existing customers.

[00:15:16.720] - Jai Thampi

But at the same time, we're also looking at what would it mean to go directly to consumers, because this is not a product like a smart voice system that you could buy and hook up by yourself.

[00:15:29.140] - Jai Thampi

Right.

[00:15:30.310] - Jon Slowe

It's not a gadget.

[00:15:32.500] - Jai Thampi

Yeah.

[00:15:33.340] - Jon Slowe

It's not a gadget, it is not a new toy that you can just take home from the shop and plug in.

[00:15:38.290] - Jai Thampi

So, I think that is something that we still have to approach. And the other thing, of course, is utility are also playing a big part. If you look at the demand response programmes today facilitated through utility. So, this I would say that this landscape still needs to be explored and looked at, but we still have quite some challenges in front that we can address easily with our existing customer base.

[00:16:02.320] - Jon Slowe

Yeah, OK. Come back to the Wiser home energy management platform.

[00:16:08.590] - Jon Slowe

Tell us a bit more about what this platform can do.

[00:16:13.450] - Jai Thampi

So, a few things. And so, first of all, we position Wiser as addressing four key values in the home, so number one is the resilience element, which is about the safety of the home as well as the uninterrupted power availability. The second value that we provide is the efficiency. So, it is very important, especially as you put more electric appliances and more energy guzzling appliances and devices etc in your home.

[00:16:41.800] - Jai Thampi

The third value that we deliver is personalisation, which is being human centric because smart homes are successful wherever they are, because they are actually very easy to use as well as very personalised. So, we do need to bring that as well, particularly in the context of linking energy and smart home automation. And then the fourth value, which is the most crucial value and would be also almost like a by-product of these three.

[00:17:04.120] - Jai Thampi

But, you know, taking a lot more centre stage nowadays is sustainability because governments are going to work towards that. Builders and other, let's say, different players in the industry are going to be looking at new regulations and requirements, and we need to be playing a big part in that. And so, these are the four values that Wiser is delivering. So, what can we do if I were to translate that into concrete elements at the energy side, we have the possibility with our energy centre to almost act like a Fitbit of the home.

[00:17:33.490] - Jai Thampi

So, it's constantly checking on what's going on in the home. It'll keep your home safe; it will proactively tell you if something is going to go wrong. It'll give you circuit level access and monitoring, managing capability to your different loads in the home. Now, at a technology level, that all sounds like, why do I need to do that? But we have worked on a software system and an application that would simplify it. And it's a mobile app that would make it super simple for the consumer.

[00:18:00.790] - Jon Slowe

What are the elements of that then Jai? You've got the consumer app that you just mentioned that user interface. You've got intelligence, the software, which I guess is partly in the cloud, partly in the home?

[00:18:12.560] - Jai Thampi

So, there's part of the [inaudible 00:18:13] and then part is, of course, in cloud. And then the rest of the pieces, Jon, would be the hardware. So, it could be is that energy centre or it could just be something as simple as what we call a power tag. Which is a very small device that could sit in any electrical panel. It's connected so it could actually tell you what's going on for that particular circuit. It could be just the smart devices inside the home.

[00:18:36.730] - Jai Thampi

So, we have a smart thermostat, for instance, and you probably have the Drayton branded smart thermostats. So, depending on the application that the customer wants, we can actually allow the journey to start. Right. So, this is, I think, very core, because today we don't prescribe that the customer should have everything. The customer journey could start from the IoT or the smart home world. It can start from the energy side, could even start from the EV side because these systems are going to coincide and coexist in the homes of the future.

[00:19:04.360] - Jon Slowe

Or the electrical panel, as you said, that everyone's got in the home.

[00:19:07.310] - Jon Slowe

So, that will be another starting point.

[00:19:16.410] - Jon Slowe

In terms of your job, so you're looking globally, you've talked about the local focus of Schneider, how hard is it for you to make sure that your got a right global approach, but you're interfacing with the different countries as well?

[00:19:32.330] - Jon Slowe

You are getting or regions, are you getting pulled in different directions. Country X says, hey, we need that country. Y says, hey, we want that. And then it's really hard for you globally to look at how do we get a common approach that can then be localised, or do you find the countries are all telling you the same things?

[00:19:50.280] - Jai Thampi

Yeah, I think that is a very good question.

[00:19:51.720] - Jai Thampi

And I'm guessing that many of my peers who are listening to this would probably acknowledge this as well. This is a common challenge, right, in any large multinational. So, you have to look outwards, and you have to also look inwards. So, what I mean by looking outwards is the macro trends and the micro trends in the market are very specific. So, Australia, being the largest solar residential market, has a different need than maybe UK or perhaps India, for example.

[00:20:17.550] - Jai Thampi

Even within these four values that I talked about, sustainability and efficiency probably takes the centre stage in Europe, whereas in India, resiliency just to have uninterrupted power would be an important factor. So, that is one element that allows us to prioritise. The other part is where are we strong? So, we are strong in various markets around the world. Schneider always takes pride in the fact that we have an almost equal presence around the world, depending on all the geographies so are strong in the US with our local brand.

[00:20:46.290] - Jai Thampi

We're strong in Europe with multiple brands in different countries. So, in each of these countries we have a certain strength. We have a certain channel access, and we have certain customer base. So, these would be, in my view, coming together, allowing us to prioritise which markets do we go for and how do we cascade the different technologies? Like I mentioned, global platforms, global technologies, but localising for the needs of that market. And that's therefore eventually becomes a strategy.

[00:21:15.560] - Jon Slowe

Can you be fast enough because sometimes these markets are slow. We talked about that at the beginning, some of the frustration with the speed of development. Other times they can go very fast. So, when they go fast, a local Start-Up, for example, can move really, really quickly. Can Schneider move quickly enough or is that a challenge for you?

[00:21:38.540] - Jai Thampi

Well, I think this is an excellent question. I mean, we start with recognising that for any industry that is in a transition or disruption, the winning formula is not size. It's really speed and size. And I wouldn't say it's only size I think it's a good combination. So, we acknowledge that we don't have all the answers. We are looking for a win win win partnerships, as we say. So, you know, it has to be successful for the partner, for us, and therefore for our customers.

[00:22:00.510] - Jai Thampi

So, there have been strong historically innovating at the core. And now we have an organisation within Schneider Innovation at the Edge. So, we're constantly looking out for start-ups in different parts of the world. What kind of capabilities, competencies do they bring that can dovetail with our own expertise? And I think the UK is a great example. Last year I think it was the tail end of last year, we announced that we are working with geo green energy options. It's a great partnership allowing us to bring our Wiser eating solution together with their smart metre analytics capability.

[00:22:31.970] - Jai Thampi

And now we are piloting that in a few hundred homes and they're discovering great insights about efficiencies room by room, translating the heating down to dollar value or pounds and pence rather than just a kilowatt hour. So, this is how we work. This is how we learn. So, we have to leverage partnerships. Like I talked about the connectivity ecosystem. It's not just start-ups, it's even other leading companies in that ecosystem. So, we are a big believer that open platforms, open technologies and speed of execution will be key.

[00:23:01.010] - Jon Slowe

 I think it's really interesting that innovation at the edge of that example with geo green energy options, big companies are often very good at doing things from within, as you say, or acquiring and integrating, which takes time. Is that a relatively new approach to innovation at the edge?

[00:23:19.430] - Jon Slowe

Are you finding software in lots of it? Was that culturally difficult for Schneider to do?

[00:23:26.090] - Jai Thampi

Now, we have been doing this, as a matter of fact, as a company, Schneider has been always admired for this sort of openness and willingness to partner and work with start-ups, etc. I think innovation at the Edge is basically just structuring that because you would have the start-ups, we would have adventurers’ team within which would focus on which are some of those start-ups that we would want to probably invest at some point in time. And then, of course, we also have the incubation teams, which are also within this bigger cohort that are looking at how can we quickly incubate certain activities or certain initiatives within certain countries just to get the agility.

[00:24:01.100] - Jai Thampi

So, it's an overarching structure, but it's not necessarily a new approach for Schneider.

[00:24:07.850] - Jon Slowe

Yeah, it's just, as you say, structuring it. Jai, before we bring out the Talking New Energy crystal ball, I'd like to ask you about well, you've worked in other sectors besides energy. You've worked similar roles in other consumer facing businesses. When since you've been working at Schneider, how have you seen the energy in the smart home sector compared to some of the other industries you've worked, and what do you think are the specific challenges or what really stands out to you when you think back to the other industries and then energy in smart homes?

[00:24:43.590] - Jai Thampi

I think it's very, very good point, Jon, because I came from working in the smart home space for a really long time, I worked in smart home technology. I worked on networking technology, even in home appliances space. But one of the things that all of those in all of those [inaudible 00:25:03] we couldn't do is to really get the true efficiency of these devices and gadgets and appliances until they are connected. Whereas what we can do today in Schneider is that even if your kitchen appliances not connected or your pool pump or your sun pump is not connected because it is on electrical infrastructure, we can actually manage that, particularly those appliances which are big energy guzzlers.

[00:25:28.230] - Jai Thampi

So, this is something which is really unique and allows us and therefore to evolve into this grid to plug system. Now what is what is really possible in this smart home world is that you would probably have a product or a device or an appliance. You can go specifically into applications pertinent to that device, which is what the smart home companies can do. But this is where we have really taken a clear departure. Now, the challenge that you asked about the challenge really is that this is a very fragmented approach.

[00:25:57.810] - Jai Thampi

Smart home is a more universal approach. I would say that. I mean, smart lights and voice assistance, etc, are pretty much working on a common domain. But when it comes to energy, as you can see, it is regulated. It will be a different pace, different countries, the way even the technologies are different. If your panel is different, your you know, your [inaudible 00:26:20] is levels are different. So, this is going to be an interesting space.

[00:26:24.540] - Jai Thampi

And I think it gives also gives us a competitive advantage because it is not something that consumers would wake up thinking about when it comes to smart home. And that also gives us an opportunity to really create that space grid to plug and give the peace of mind at the benefits to the customers around the four values that I talked about.

[00:26:43.920] - Jon Slowe

Yeah, okay and I think that point about it being very country specific is really, really important, actually, because if you look at, you know, people talk quite loosely sometimes. Oh, yeah. Amazon or Google will enter the energy market. But they yeah, they have to localise their product and solutions to each market, but they like doing as little localisation as they can and energy.

[00:27:07.020] - Jon Slowe

You need huge amounts of localisation. As you say the regulation, the market structures, the way people use the way homes are set up there is so much.

[00:27:14.970] - Jon Slowe

So, I see that as a really big challenge, actually. How do you get, and Schneider is in a nice position. You've got that global and local approach, but how do you get the scalable solutions, but then working in very, very different countries, even if those two countries are right next to each other?

[00:27:35.370] - Jai Thampi

Absolutely. And this is exactly what we are figuring right now with Wiser. And if I look at how that has been evolving over the let's say, particularly in the last year since we announced our recruitable strategy with our energy centre, and if I look at the two markets that we have taken to launch North America, so the US and France, one on the US standard, the other one being the IC standard. And we have used two different technologies so for North America.

[00:28:04.770] - Jai Thampi

We use the technology from a company that we partner with called [inaudible 00:28:08], whereas in Europe we use our own technology, which we have developed over many years. And then on top of that, we're bringing our smart home capability, which is our own technology and the software and the user experience, etc. And we have tried it in both markets and both markets and products hitting the market right now. And we are ready to scale it to the next level.

[00:28:28.050] - Jai Thampi

So, I think there's great learning. And again, like I mentioned at the beginning, it's not calling it a victory yet, but I think we have seen from two huge markets very important for Schneider, totally contrasting in terms of the market landscape, etc. But being able to do that and the learnings coming from that, he's putting us in a very, very good position to be able to scale.

[00:28:49.640] - Jon Slowe

Did you deliberately pick two very different markets?

[00:28:51.910] - Jon Slowe

Like, I guess it makes sense to do that?

[00:28:54.840] - Jai Thampi

Yes, actually, we did. And again, for the reasons that we talked about earlier, because these are two important markets, you know, and again, they from in terms of, let's say, the new energy landscape adoption, for example, California is very forward leaning when it comes to that. So, it was a no brainer for us to pick that we are market leader in that space in the US anyway with Square D brand. So, you know, customers are already knocking at our doors asking how could we do this?

[00:29:21.660] - Jai Thampi

So, that was a easy one for us. France, obviously, you know, I mean, it's a big market for us. Again, great growth opportunities and we're seeing other markets in next to it. Think of Australia, think of some of the other European markets where we are, you know, historically strong in Australia, for instance, with Clipsal. So, we have markets where this could just scale to the next level. And leveraging the global capabilities and platform etc, but indeed, yes, we picked those two markets where the first bring the product into, let's say this year, and we're seeing some really positive results there.

[00:29:54.890] - Jon Slowe

Yeah, OK, well, let's look forward now, as you just sort of, ended in your comments then and bring out the Talking New Energy crystal ball and set the dial to 2025, so just four years away, can you give me three things that you'd love to see Schneider achieve in this area by 2025?

[00:30:16.130] - Jai Thampi

Well, you know, I mean, first of all, I'm really hopeful that the strategy is really going in the right direction with all the continued successes, for sure. But if you're to really ask me three things, I probably put it this way. So, first of all, I'd love to see homes becoming more resilient and efficient, a significant number of them. You know, we're still seeing billions of euros spent on electrical fault related fires, etc, in homes, one would probably think is particularly in Europe.

[00:30:42.840] - Jai Thampi

We would think that, you know, high quality electricity, everything is secure, etc. But that's not the reality. There is so much going on. So, this would be one that I would really like to accomplish. And it's also one of the values that we are delivering with Wiser. The second one is that if we do the smart home of the of the future, right with Wiser grid to plug homes could become the edge of the autonomous grid of tomorrow because the grid is going away from just being smart to becoming more sentient or autonomous.

[00:31:11.270] - Jai Thampi

And homes have to become better because home is a big CO2 greenhouse gas emitter in the bigger scheme of things. And we recognise it. And that is why our business is particularly important. And the third one is, if we would do all of these right, we would really see homes becoming more sustainable and supporting the net zero and the other initiatives and the climate change initiatives that are going around in all the countries around. So, those will be my really three wishes if I had that crystal ball, really the rest coming together or really becoming the edge of the grid and therefore delivering sustainability in the true sense of it, because we are the number one most sustainable company in the world now.

[00:31:51.650] - Jai Thampi

And we take that as a responsibility and not just as a place on the podium, but it's also a big responsibility on our shoulders to make sure that we make this happen in every segment that we touch and hoping that we really have it because.

[00:32:04.580] - Jon Slowe

Yeah, well, if we're going to succeed in the energy transition, then companies like Schneider will need to be driving it forward and playing a very big part in that. So, it sounds like you've got a busy few years ahead of you, Jai.

[00:32:19.550] - Jai Thampi

Well, absolutely. As long as we can help our customers, as I said, as well as us, it's a win win that's going to be fabulous.

[00:32:26.920] - Jon Slowe

Yeah.

[00:32:28.070] - Jon Slowe

Well, Jai, thanks so much for your time. It was great hearing both about the company's perspective, how Schneider approaches this area and your experiences and your views. And I think that the passion and excitement that came across in the podcast today. So, yeah, we're wishing Schneider the best of luck with what you're doing hope the next years go well and maybe we'll come back and talk again. Well, if not before, definitely in 2025 and see how we're doing on those three things.

[00:32:57.800] - Jai Thampi

Yeah, and thank you again,

[00:32:59.690] - Jai Thampi

For having me on this podcast it is a great topic for us and very important for us, for the company as well as for the planet, for the industry. You know, and we are, as you rightly said, in the middle of this energy transition. So really happy to have this opportunity to share some of these thoughts here with you.

[00:33:15.440] - Jon Slowe

Thanks, Jai. Well, that brings us to the end of this episode. So, thanks, everyone, for listening. We hope you enjoyed that window on the world of Schneider Electric and what they're doing in the Smart Homes and home energy management space. Look forward to welcoming back next week. Thanks, and goodbye.

[00:33:43.970] - 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.

[00:34:00.410] - 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

[00:00:23.540] - 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.

[00:00:24.920] - Jon Slowe

If you're working in the energy transition, you'll be hearing more and more about hydrogen and the role it can play in decarbonising a world that will be increasingly electrified. As you may know, most hydrogen today is produced from natural gas with carbon dioxide being emitted into the atmosphere.

[00:00:43.490] - Jon Slowe

And this type of hydrogen is commonly used in refineries and for ammonia production.

[00:00:50.120] - Jon Slowe

So, that's dirty hydrogen, which is mainly used today, clean hydrogen, on the other hand, has two main varieties, blue, which is produced from natural gas. But with the carbon emissions being captured and stored underground or green, which is produced from electrolysis of water powered by renewable electricity. And today we'll be talking with one of the world's leading manufacturers of electrolysers which helped to produce green hydrogen, Norwegian company, Nel Hydrogen. We'll be exploring what life is like for a company like Nel, given the rapidly rising interest in hydrogen and their activities, plans and views of the future.

[00:01:29.750] - Jon Slowe

So, let's say hello to my guest, Raluca Leordeanu, Vice President of Business Development at Nel hydrogen. Hello, Raluca.

[00:01:38.030] - Raluca Leordeanu

Hi, and thank you for having me here.

[00:01:40.820] - Jon Slowe

Thanks for joining us. Raluca, while some of our listeners may be immersed in the world of hydrogen. Many of our listeners won't be that close to the world of hydrogen and might not have heard of Nel, so could you give us an elevator pitch for Nel Hydrogen?

[00:01:58.490] - Raluca Leordeanu

Sure.

[00:02:00.080] - Raluca Leordeanu

Nel actually stands for Norsk electrolyse, which means Norwegian electrolysis. And it was started more than 19 years ago in 1927 as part of Norsk Hydro, now we are a standalone company, pure-play hydrogen company listed on the stock exchange. We have manufacturing facilities in Norway, Denmark and the US, but we sell throughout the globe and we are the leading electrolyser company and hydrogen refuelling stations manufacturer.

[00:02:34.670] - Raluca Leordeanu

In fact, the largest

[00:02:37.183]

[crosstalk 00:02:37]

[00:02:37.270] - Raluca Leordeanu

Yes,

[00:02:38.060] - Jon Slowe

Can you give us an idea of scale Raluca, roughly how many employees or turnover or something that will help our listeners understand how big or small Nel is.

[00:02:49.300] - Raluca Leordeanu

We're, I don't know the exact number now. I think there are about 400 employees with a plan to add another 100 employees this year and growing rapidly. I mean, the whole space is rather small. I could think of green hydrogen and refuelling stations, but it is deemed to grow very fast.

[00:03:10.690] - Jon Slowe

Yeah, OK, I think it's fascinating that you've been hydrogen to some people's eyes, is new, but you've been around, the company has been around for 90 years.

[00:03:21.610] - Jon Slowe

Tell us a bit about what, you know, one or two highlights of what Nel has done in those 90 years, the flagship project or. Yeah, a bit about your heritage.

[00:03:32.030] - Raluca Leordeanu

Yes. So, if you think in the past, actually green hydrogen was used for ammonia in the past and it was, I think in the 50s that the gas took over as the main source of producing hydrogen.

[00:03:47.330] - Raluca Leordeanu

So, if you think of large projects that we have done, the latest was decommissioned in the 90s and that was 135-megawatt installation in Norway. More recent installations are much smaller. However, we do have also bigger ones from about 8 years ago, we installed a 25-megawatt plant in Malaysia.

[00:04:10.330] - Jon Slowe

OK, so, yeah, I think that's fascinating. This sector is new, but it's not new, it's coming again.

[00:04:17.300] - Jon Slowe

It had a time before natural gas it then shrank a little bit as natural gas, took over in producing hydrogen or the dominant source. And now it's rising again. So, where in the hydrogen value changes does Nel play and where does Nel not play, give us a feel of where you focus your activities?

[00:04:39.470] - Raluca Leordeanu

We are a technology manufacturer, so that's our focus. We typically do not own and operate. We do not invest in the projects. Also, we do not do civil works. So, we offer turnkey solutions. And we are the manufacturing provider.

[00:05:04.680] - Jon Slowe

Yeah, OK, so you're providing the equipment you mentioned earlier, hydrogen refuelling stations, so I guess you're doing more than just the electrolyser, you're providing a bit more of a complete solution for your clients.

[00:05:19.320] - Raluca Leordeanu

Yes. If you think we have installed, I think, more than 3,500 electrolyser plants throughout the globe in more than 80 countries. And we have installed more than 50 hydrogen refuelling stations in about 13 countries.

[00:05:37.510] - Jon Slowe

OK, presumably you're doing a lot of R&D or give us a feel for whether the technologies there, it's mature, you have to do only very incremental R&D and it's just a case of manufacturing or scaling up, or is there still a big slice of R&D within Nel?

[00:05:58.900] - Raluca Leordeanu

We still do a lot of R&D and I think that's going to continue. And we have different technologies in our portfolio at different stages. I would say alkaline is much more mature.

[00:06:11.020] - Raluca Leordeanu

So, there we're just scaling up, PEM [inaudible 00:06:14] R&D to increase the size of the cell stack, but also scaling up, which will come very soon on refuelling stations. We're going into heavy-duty segments and there is more R&D to come. So, there is still plenty of R&D to take place, which will increase the efficiency or reduce the cost.

[00:06:39.370] - Raluca Leordeanu

But a lot of the technology is there. The building blocks are there. So, we are ready to scale up.

[00:06:45.060] - Jon Slowe

Yeah, OK, so scaling up and further improving the technology.

[00:06:49.490] - Raluca Leordeanu

Yes.

[00:06:51.060] - Jon Slowe

Now, let's talk a bit about the market and the huge buzz there is about hydrogen at the moment, what's the balance that you see in the market between talk? There's lots of talk about hydrogen and action. So, is that translating into loads of projects or is it a bit too much talk and not enough action?

[00:07:17.690] - Raluca Leordeanu

I think there is a balance and I see more and more things happening just in the short three years that I've been with Nel. The whole industry is growing very fast and it's a really great industry to be in that's good for the planet and is growing very fast and it's going to help the economy. So that's positive. However, the electrolyser industry is much smaller than you would imagine, given all the talk. So, around half the percent to one percent of the hydrogen market is produced through electrolysis today.

[00:07:54.950] - Raluca Leordeanu

And just as an order of magnitude, I think in 2019, the estimated installed capacity was around 100-megawatts globally or even less than that. If you compare that wind, which was around 60 gigawatts, solar 115 gigawatts. So more than a thousand times larger because the electrolysis is about 10, 20 years behind the solar and wind.

[00:08:22.060] - Jon Slowe

Yeah, OK, so it's small both in terms of the hydrogen market, most of that hydrogen coming from or the vast majority of that hydrogen coming from natural gas and small in terms of the power market or the energy market but growing fast.

[00:08:37.090] - Jon Slowe

Yeah?

[00:08:38.450] - Raluca Leordeanu

Yes.

[00:08:38.920] - Raluca Leordeanu

So, the hydrogen council forecast that the whole hydrogen market will grow 7-8 times in the next 30 years until 2050. And there are different forecasts that say electrolysis is going to go from less than one percent to 20, 30 percent of the market. So, if you make the calculations, electrolysis industry is going to grow 150 to 300 times in the next 30 years, which is huge.

[00:09:04.600] - Jon Slowe

And how much.

[00:09:06.160] - Jon Slowe

Yeah, OK. Are you seeing that growth already? If you look at your order book, your pipeline, what is that? Without going into details, what does that look like is an exponential curve? Is it taking time for that interest to translate into orders at the moment?

[00:09:24.120] - Raluca Leordeanu

Our pipeline is growing very fast. Year by year, we see projects are larger and larger. The average size of the project is increasing. We have more projects that are over 100 megawatts in the pipeline, and we see more and more companies entering the industry on the customer side.

[00:09:44.820] - Raluca Leordeanu

Yes, there are some companies that don't really understand the space yet. You can call them dreamers. But in general, there are a lot of serious players that have clear plans and put down the money to invest.

[00:10:00.400] - Jon Slowe

And how do you manage that to the dreamers, as you call it, take a lot of time, or do you have to filter out the dreamers quite early on in your business development activities?

[00:10:15.520] - Raluca Leordeanu

Yeah, we do our best to understand who's serious and who's not and dedicate the time to the right projects, but it's always a balancing act.

[00:10:23.500] - Raluca Leordeanu

Sometimes the dreamers actually do get the perfect storm.

[00:10:32.740]

[crosstalk 00:10:32]

[00:10:33.770] - Jon Slowe

And then looking at sort of patterns and trends you see in your customer base, I like to think of the well, the existing hydrogen market, ammonia production, refineries and then the new applications and ability applications, the power to gas applications. So, what patterns do you see between those old worlds and those new worlds or the existing applications and the new applications?

[00:11:08.040] - Raluca Leordeanu

We see a change in the type of customers, of course, because in the past, many of the electrolysis installations were in places where the gas network couldn't reach.

[00:11:21.240] - Raluca Leordeanu

And now there is a vision of power flex with having off-grid installations directly connected to renewables - today most installations are grid-connected.

[00:11:32.750] - Raluca Leordeanu

So, there is a shift from what drives these installations and what's the need for them. There are also new customers, like you mentioned, with mobility, which would have different scope requirements. In the past, the traditional industrial customers did part of the installations themselves in many cases. Now we're seeing more and more customers asking for turnkey solutions.

[00:11:59.460] - Jon Slowe

OK, hence you being in the world of hydrogen refuelling stations because that gives you the ability to provide that turnkey or at least from the equipment side, all of the equipment packaged up a mobility customer would need.

[00:12:13.070] - Raluca Leordeanu

Yes.

[00:12:15.400] - Jon Slowe

And the mobility applications will be a bit smaller and capacity, you mentioned you even getting 100 megawatts projects and above.

[00:12:25.120] - Jon Slowe

Are you seeing the same interest across those smaller electrolyser, larger electrolyser do you expect it to go more to the large ones by capacity? If not, by number?

[00:12:40.410] - Raluca Leordeanu

From there, the segment is coming faster. But is indeed smaller. And today the hydrogen refuelling stations have a rather low utilisation and they're rather small.

[00:12:51.910] - Raluca Leordeanu

Yeah, they are increasing and if you think of heavy-duty the stations will be much larger, one or two tonnes a day or even higher and there's also this concept of valleys where there's the use of the electrolyser across different industries. [inaudible 00:13:16] transport, but also traditional users and also new users for ammonia refinery for green hydrogen.

[00:13:30.910] - Jon Slowe

What's one of the best examples of one of these hydrogen valleys or clusters where you get a mix of all these applications together?

[00:13:39.860] - Raluca Leordeanu

I think most are in the making there's not so many that are up and running already.

[00:13:42.520] - Jon Slowe

And what about locations or regions, you said at the beginning you're active globally, and you've got customers around the world, you've got manufacturing in the US and in Europe. Most of our listeners are in Europe but not all in Europe. So, where geographically stands out to you in terms of interest, or is it hard to pick one region? Are you getting really strong interest from lots of regions?

[00:14:11.940] - Raluca Leordeanu

We see a lot of interest from Europe, to be honest, and especially with the green deal on the plan for the 40 gigawatts of electrolysis in Europe, the IPCEI projects for funding these large projects. You see more and more happening in Europe, of course, there are things happening in other parts of the world. Be it the US, Australia, Asia. But I think the strongest pull is in Europe.

[00:14:44.810] - Jon Slowe

Do you think it will stay that way or do you think other regions over the next years will catch up or will it take more time to think?

[00:14:53.390] - Raluca Leordeanu

I think I mean if you think of solar and wind when you see what China has done there. I think we should expect something similar at some point. So, there's going to be some change. And China is one of the biggest users of hydrogen today, mainly based on coal. But we don't see that right now.

[00:15:17.130] - Jon Slowe

Yeah, I guess it's as you say, looking at what they've done with solar, looking what they're doing with electric vehicles, um, yeah, they achieve scale to a degree that was difficult to achieve in other countries.

[00:15:32.760] - Jon Slowe

So, I guess that's both an opportunity for you, but also a potential more competition for now.

[00:15:40.140] - Raluca Leordeanu

Yes.

[00:15:45.470] - Jon Slowe

In terms of energy company and so many of our listeners work for or work with utilities or oil and gas companies. So, you mentioned before about your customers traditionally having been industrial customers, now mobility customers. Are you seeing utilities and I guess the new energy part of oil and gas companies, are you seeing them dipping their toes in the water, jumping into the water, knocking on your door lots, or just starting to understand more about this market?

[00:16:21.920] - Raluca Leordeanu

More and more is happening in that direction, yes and you see, especially the utilities that are strong with renewables, they have an interest to integrate with hydrogen. [inaudible 00:16:36] You get new uses for old renewables or you have the ability to install in places where you wouldn't have because it was very, expensive to transport electricity from there. So, hydrogen opens up a lot of opportunities for renewables, which utilities are jumping on. And also, oil and gas companies, they are especially the ones that have refineries or are in downstream in refuelling stations, are, of course, very invested in this.

[00:17:15.350] - Jon Slowe

And you mentioned earlier the off-grid projects directly coupled to renewables. So, where you've got a renewable installation and you have an electrolyser next to that and you're producing hydrogen directly from that renewable installation, is that and you seeing that translate to actual projects, have you done projects like that or would you see that as something that's coming in the next year or more?

[00:17:39.740] - Raluca Leordeanu

We have done some projects like that, but they were rather small, and we seen more and more happening in that direction now.

[00:17:48.920] - Raluca Leordeanu

And I think you can't envision a world where electrolysis is 20 to 30 percent of the hydrogen production and its all grid connected. I just can't agree to that vision.

[00:18:02.900] - Jon Slowe

Yeah. So, you think you get more and more electrolysis directly co-located with renewables?

[00:18:10.790] - Raluca Leordeanu

Yes.

[00:18:13.310] - Jon Slowe

Transporting the energy by pipes rather than wires. In terms of we talked a bit about customers and the dreamers and the different types of customers that you're working with. If you think about the questions or concerns you get from customers, one, I guess is always money and they're trying to make the business casework. Tell us a bit about what the questions you're hearing or the concerns or the barriers stopping projects going ahead.

[00:18:43.370] - Jon Slowe

Is it just money or is there confidence issues or technical assurances that are needed? What do you hear from customers?

[00:18:52.120] - Raluca Leordeanu

I think in order for customers to install new projects, they need a good business case, so, I agree, money is a concern. So, they would need some sort of funding, be it grants, be it CO2 prices, there's a lot of talk but not so much happening in that direction or even avoidance of grid fees, because a large share of the cost of producing hydrogen is electricity.

[00:19:16.480] - Raluca Leordeanu

So, if you are grid connected but you don't pay the grid fees, that would greatly benefit the business case. And another thing that is stopping the development is the immature infrastructure. There's not much hydrogen pipelines in the world, however, at least in Europe, there is a plan to develop that. There's a report that came out which focuses on that and says that they would want to have 6,800 km [of hydrogen pipelines by 2030 and 23,000 km by 2040. That would bring the hydrogen market closer to what the gas market is, and then if you combine with storage in the salt caverns, so that you can trade it.

[00:20:05.110] - Raluca Leordeanu

Work with the seasonality and so on, I think it would make the markets much more dynamic.

[00:20:10.760] - Jon Slowe

Yeah, it would open up a huge part of the market, that I guess isn't open today. On the business case that you mentioned are most of your projects still grant funded in some way, as you said, theCO2 prices aren't really there at the moment? The market mechanisms aren't there.

[00:20:31.200] - Jon Slowe

There's lots of government programmes announcing stimulus money support grants. So, are the projects tending to all be grant funded or are you seeing some going ahead without any of that type of funding?

[00:20:45.900] - Raluca Leordeanu

The large majority are funded, and all the very large projects need to be funded.

[00:20:53.820] - Jon Slowe

OK,

[00:20:54.900] - Raluca Leordeanu

Compare it to the customers that get the funding.

[00:20:58.140] - Raluca Leordeanu

It's not us, we're just the technology provider.

[00:21:01.500] - Jon Slowe

Yeah. And on that topic of cost.

[00:21:06.270] - Jon Slowe

So, if you look at producing hydrogen from electrolysers today, it is quite a bit more expensive than producing it from natural gas.

[00:21:18.070] - Jon Slowe

It's potentially more expensive than producing it with natural gas and carbon capture and storage, but you've talked about scaling up. So, as you scale up, the costs come down as well. The cost of renewables is falling. So, you've got to cost drivers really.

[00:21:38.090] - Jon Slowe

Going in the right direction for you, let's look first at the production cost, so, can you give us a feel for what your production capacity is at the moment, how quickly you're trying to increase that and what that might do for cost?

[00:21:54.650] - Raluca Leordeanu

Yes, if you talk about electrolyser, we have production facilities in Norway and the US, both Norway and the US facility are in the range of 40, 50-megawatt production capacity today, we're expanding now the Norway plant to 500 megawatts and eventually two gigawatts. We expect cost reduction of about 40 percent from this expansion. We also see a lot more growth coming up afterwards. We have announced some aggressive targets to get to 1.5 dollars per kilo in 2025, which would basically means reaching parity with gas-based hydrogen.

[00:22:40.490] - Jon Slowe

Okay, so let's just start with those production numbers of 50 megawatts and 40 megawatts today for your two technologies. And you've mentioned at the beginning of the podcast the 25-megawatt project in Malaysia 8 years ago. So, a big project today can take up a big chunk of your annual capacity in terms of that scaling up to 500 megawatts and then 2 gigawatts. Well, I'm going to ask a simple question. How hard is that? And I'm sure you'll tell me there's a lot to do, but yeah.

[00:23:13.670] - Jon Slowe

How much is that? Just building bigger blocks that you're working with at the moment. How much that involves new things that really take a lot of time and effort and development. How quickly could you get to those sorts of numbers do you think?

[00:23:28.190] - Raluca Leordeanu

We can get to that quite quickly. The technology is there, so we are ready to scale up. It's not R&D based. We have the building blocks, as I said, and we can scale up. We can improve the manufacturing process and cut cost due to scale.

[00:23:51.990] - Jon Slowe

Yeah, OK, so getting to scale quickly, that will get you a big chunk of cost reduction, the 1.5 dollars per kilogram target cost to 2025. How does that compare roughly to where you're at today in terms of dollars per kilogram of hydrogen?

[00:24:11.670] - Raluca Leordeanu

It varies by every project in the cost of producing hydrogen. It's a smaller share of the CapEx, which, of course will go further down as CapEx decreasing. It is decreasing, but the biggest share is the electricity price and also how much you utilise the installation. So, it has utilization of 40 percent or 98/99 percent it will be very different. In this case, we're assuming a low electricity price, so 20 dollars per megawatt hour.

[00:24:51.240] - Jon Slowe

Yeah.

[00:24:52.470] - Raluca Leordeanu

And we are assuming a higher utilization, so it will depend on every installation. But what we want to say, is that this is doable. Let's just do it.

[00:25:03.410] - Jon Slowe

Yeah, OK, and as the market develops, if you think of refuelling stations in the mobility sector, the more vehicles you have, the more fleets you have with hydrogen vehicles, the higher the utilisation. Or if you think of those off grid applications, so the electrolyser directly coupled with a renewable electricity site, then you've potentially got this very low cost of electricity driving the hydrogen production.

[00:25:37.580] - Jon Slowe

OK, so scaling can happen relatively quickly. It can't happen overnight, but it sounds like you're working hard. What are you recruiting people from other industries?

[00:25:50.510] - Jon Slowe

That have scaled. What sort of skills do you need for that?

[00:25:53.810] - Raluca Leordeanu

Yes, we are recruiting people from other industries. We're attracting people from I mean; we have a lot of people from solar actually already in the company it's more by coincidence, I think people from wind, from oil and gas, from different end use segments. This is an industry that is growing very fast. So, it's very exciting and a lot of talent is interested to join which is very positive.

[00:26:20.840] - Jon Slowe

Yeah, okay and the biggest challenges then, um, you've worked in other industries you've worked with, McKinsey's looking at lots of other sectors.

[00:26:33.620] - Jon Slowe

What level of challenge and uncertainty do you see in scaling up hydrogen? Or when you look at it, do you see particular risks or do you think this is absolutely straightforward, there's a clear path it's going to happen. What's your observations when you step back and look at this?

[00:26:53.030] - Raluca Leordeanu

I'm surprised that people are still wondering, can this be done? I think we're way beyond that stage to ask that, yes, the technology is there.

[00:27:05.880] - Raluca Leordeanu

It was done in the past - we had large electrolyzer installations in the past. It was done in other industries for solar, for wind, for mobile telephones. So why doubt it.

[00:27:19.310] - Jon Slowe

Yeah, and I guess the fact that you've got no fundamental new technology that you're trying to develop. The technology is there, it's proven it works, yeah, you can improve it, you've got that R&D programme you talked about to make incremental improvements, the technology is there.

[00:27:36.940] - Jon Slowe

It looks likes the markets certainly from the government stimulus programmes. And the customers, as you said, both dreamers and non-dreamers.

[00:27:48.170] - Raluca Leordeanu

There's a lot of serious customers working on building the knowledge now and I think we'll move very fast in the next years and also a lot of very competent manufacturers beside us, which are scaling up and making things happen. So, I think that's very possible.

[00:28:08.140] - Jon Slowe

Yeah, I guess that helps as well. It would be in a way nice for Nel if you were the only manufacturer, but there are others out there and that gives customers confidence that there's a good supply chain out there.

[00:28:22.480] - Raluca Leordeanu

 Yes, we can do it, we can do 40 gigawatts in Europe, we can do several gigawatts in other parts of the world. I think everybody is ready to do it. We just need toget the projects rolling.

[00:28:36.660] - Jon Slowe

Yeah. OK, well, it's a good Segway into getting the Talking New Energy crystal ball out, so this week I want to set that up to 2030.

[00:28:53.360] - Jon Slowe

We've talked a bit about green hydrogen being in early stages today, it's not new, but it is still in the early stages in terms of scale.

[00:29:02.570] - Jon Slowe

If you look forward to 2030, imagine where 2030, can you give us a pen portrait of what you think the green hydrogen sector will look like in 2030?

[00:29:13.970] - Jon Slowe

And also, Raluca the two or three biggest challenges that Nel in particular will have to overcome to get there?

[00:29:22.370] - Raluca Leordeanu

I think the biggest challenge that we need to overcome and everybody in this industry needs to overcome is the cost reduction. So, of course, when we scale, we cut costs, we need to deliver on that. As soon as we break even from reliance on subsidies, and reach parity with SMR, so gas-based hydrogen, we will be in the same place where renewables are today, where you have record low prices and no need for subsidies when the market is much more dynamic and moving faster.

[00:30:01.290] - Raluca Leordeanu

I would say that in 10 years, we should have several electrolyser manufacturers with gigawatt production facilities, we should have several hundred megawatts plus or even gigawatts scale projects in operation. And everybody should have hydrogen as part of their plans. When they, every country that kind of reassesses, the energy infrastructure or the energy plants will more and more see hydrogen as an integral part of that.

[00:30:37.250] - Jon Slowe

So, you gave some metrics earlier on comparing green hydrogen or electrolyser market today to the wind market and the solar market, wind around 60 gigawatts, solar over 100 gigawatts by 2030, hydrogen in the single digits of gigawatt.

[00:30:56.870] - Jon Slowe

Or I guess, in the tens of gigawatts would be your vision for 2030?

[00:31:00.920] - Raluca Leordeanu

Yes, probably.

[00:31:02.990] - Jon Slowe

Yeah, so not yet at the wind and solar level, because they've had a big head start on hydrogen, but getting close to the scale that we see today for those technologies or certainly getting closer to those scales.

[00:31:22.870] - Raluca Leordeanu

Yes, and that's why I said that even though we say we're 10 years behind solar and wind. When I looked at the numbers actually it's probably more than 10 years, 15, 20 years, to be honest. So, who knows, green hydrogen might surprise everyone.

[00:31:39.530] - Jon Slowe

Well, that's what makes the energy transition so fascinating. It's got so many parts to it and it's, uh, you can see the general direction, but the specifics will play out over the next years/the next decade.

[00:31:55.790] - Jon Slowe

Raluca, that's been a fascinating conversation. It sounds like there's no shortage of activity for a company like Nel today, no shortage of things to do and scale to build over the next years. So, thanks for sharing your perspectives, your experiences and good luck over the next years as you scale up and make a bigger and bigger impact in the energy transition. Thanks very much.

[00:32:21.340] - Raluca Leordeanu

Thank you. It was nice talking to you. It's always exciting to talk about hydrogen and energy.

[00:32:27.190] - Raluca Leordeanu

I kind of fell in love with energy, I think about 14 years ago, the first time I figured out how energy is transported, electricity kind of stuck with me.

[00:32:39.850] - Jon Slowe

Well, you're in the right job then, but thanks again, thanks to everyone for listening. We hope you found that an interesting episode and we look forward to welcoming you back next week. Thanks, and goodbye.

[00:33:22.000] - 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. 

[00:33:22.000] - Jon Slowe

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