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A Delta-EE podcast
We're a group of new energy experts, talking about the energy transition in Europe and how it will affect the customer.
Delta-EE Director Jon Slowe hosts a selection of guests from across the new energy industry.
Looking at how the energy transition is developing across Europe.
Discussing the hottest topics across New Energy, and how they all fit together.
In this episode, host Jon Slowe explores the role that utilities are playing in public charging infrastructure for electric vehicles. He is joined by Amadeus Regerbis, Head of Charging Infrastructure at utility EnBW, and Delta-EE expert Alexander Lewis-Jones.
Heating controls play a vital role in keeping our buildings comfortable. And as decarbonisation comes more and more into the spotlight, so does the focus on heat. Much of this focus is on the fuel for heating and the appliances used. But heating controls are a vital part of the ecosystem. And, like many parts of the energy sector, it’s a dynamic sector. We’re in the middle of a shift from analogue to digital, and heating controls will have to keep pace with a likely growth in electrically-driven heating. To explore what’s going on in the world of heating controls, host Jon Slowe is joined this week by Remi Volpe, Vice President of Residential Temperatur Control at Schneider Electric, Eamon Conway, Managing Director of Climote, and Delta-EE's Arthur Jouannic.
Jon Slowe, Director, Delta-EE
Arthur Jouannic, Head of Business Development - Europe, Delta-EE
Remi Volpe, Vice President of Residential Temperatur Control at Schneider Electric
Eamon Conway, Managing Director, Climote
[00:00:04.560] - Jon Slowe
Welcome to Talking New 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.
Heating controls is a topic every listener, unless you're listening from a tropical climate, will be able to relate to, likely on a daily or weekly basis at his time of year. Thermostats to radiator valves and switches may not be as shiny and as exciting as an electric vehicle but they play a vital role in keeping our buildings comfortable. And as decarbonisation comes more and more into the spotlight, so does the focus on heat. Much of the focus on heat is on the fuel for heating and the appliance used to generate heat but heating controls are a vital part of the ecosystem.
And like many parts of the energy sector it's a dynamic sector. We're in the middle of a shift from analog to digital and heating control will have to keep pace with the shift and they'll also have to keep pace with a likely growth in electrically driven heating. To explore what's going on in the world of heating controls, I'm joined by one giant in the sector, one new growing company, and of course aresident expert on the topic here at Delta-EE. So without any further ado, time to introduce my guests.
My first guess is Remi Volpe, VP of residential heating controls at Schneider Electric in Europe. Hello Remi.
[00:01:44.050] - Remi Volpe
Hi, good morning Jon.
[00:01:45.870] - Jon Slowe
Remi, our listeners will have heard about Schneider, I'm sure. But can you give us a snapshot of your residential heating controls business? A few facts and figures.
[00:01:57.620] - Remi Volpe
Certainly yeah. Schneider Electric is known more for its role in the electric sector of both the residential and commercial areas [...] business units is focused essentially around residential heating so we operate in the UK under Drayton controls. We've had a presence here for over said actually 70 years. This year is our seventieth anniversary.
[00:02:28.500] - Jon Slowe
[00:02:30.690] - Remi Volpe
Thank you. I wasn't there at the start! Hopefully hear from my voice! But no we've we've got a good tradition in terms of understanding the UK heating market, the industry, and a rich sort of knowledge base on on the applications. We've seen a number of transitions and we're really excited about how Schneider can help us take this step forward into the digital connected world. We're sort of leveraging some of the great experience that Schneider has. Right. Right the way across Europe and and globally. And we think we're adding real richness to the story by focusing in specifically on on heating and the funny ways in which people and consumers want to interact with their heating.
[00:03:17.210] - Jon Slowe
So in the UK you've been active for a long time. You're active with heating controls, working with with gas boilers. You've also got a strong business in France haven't you? And that's a mix of gas, oil and electric heating controls?
[00:03:35.350] - Remi Volpe
It is, I would say yes. I just headed out to out of France. So we have a lot of our businesses with a strong presence in that in that particular market. We are seeing that for heating it's predominantly electric and gas. We know it's one of the biggest markets for electric heating and we've been we've been able to sort of work very closely with a couple of organisations who are working in the electric heating space. It's allowed us to sort of understand some of the challenges that that people have when that when using electric heating but still it's it's an area that that needs more development, I would tend to say more around sort of how to engage with and let the consumer understand what what they can do with their heating. We're really sort of enjoying working with a couple of organizations focusing on demand response looking at how it's not only just sort of usage of electricity. It's also about making the aspects of feeding some electricity back where where itself generated.
So we're learning a lot where we're working with some strong partners and excited about how we can bring our experience to the new new emerging market.
[00:05:03.310] - Jon Slowe
And Remi, to give our listeners a feel for the size of your heating controls business, can you give us a feel for the number of thermostats or radiator valves or controls that you're shipping every year in Europe?
[00:05:19.020] - Remi Volpe
Yeah well we're shipping over 2 million radiator valves. That's sort of our high volume part of the business so we've we also sort of build on the installed base we have in the UK. We've both time clocks with time switches. Not to that extent but certainly several hundred thousand pieces every year. And I also sort of manage abusiness under the [...] brand. They're predominantly in Germany where we're more of a thermostat business and in that in that market we're selling over 3 million thermostats per year. So it's a strong base.
[00:06:00.220] - Jon Slowe
Thanks Remi. Well we'll come back to you shortly. Let's introduce my second guest now, Eamon Conway, M.D. at Ireland-based Climote. Hello Eamon.
[00:06:09.420] - Eamon Conway
[00:06:11.080] - Jon Slowe
Eamon, you, back in the days worked for well mainly one of Schneider's competitors Honeywell before helping to found Climote back in 2010. Many of our listeners might not have heard of Climote. So what's Climote's focus and mission?
[00:06:31.930] - Eamon Conway
Good question, Jon. So Climote's focus and mission is with, our expertise is really in the residential home energy space. Currently we market the remote heating control hub mostly in the UK and Ireland but I guess the vision of the businesses as being there providing the home technology that will facilitate the energy transition. Based on the large macro trends of decarbonisation, digitalisation, the electrification of heat and transport - that's really the direction of travel for the business and one which we've been very excited about. We're in we're in. We set up in 2011 and we started trading terms of sales from 2013 onwards.
So we would have north of between the salesand orders in hand of north of a hundred thousand devices sold at the moment and growing steadily both in sales volume and profitably. So it's all going quite well at the moment.
[00:07:35.170] - Jon Slowe
Great. And if you look back at the time since you were founded in 2011 the biggest achievement so far or what are you most proud of in terms of where you've got to?
[00:07:48.370] - Eamon Conway
Good question. I think a few things really, I mean it's still a journey. I mean we're still very early in the evolution of this industry but I guess from from a standing start being able to build up a team of 20 folks that can manage to deploy north of 100,000 devices. We've two folks in technical support, we can manage build very reliable stable products that customers like and do that get another profitable state. I mean it's been a hard old journey but very enjoyable so it's just a combination of the things that you learn on that journey have all been very interesting and exciting and not without its challenges.
[00:08:35.320] - Jon Slowe
I'm sure. Will maybe hear some more about those and your future plans in a little bit. My third guest is my Delta-EE colleague, Arthur Jouannic. Hello Arthur.
[00:08:43.990] - Arthur Jouannic
[00:08:44.100] - Jon Slowe
Arthur, can you tell us a bit about how you see the heatingin controlsspace at the moment?
[00:08:54.460] - Arthur Jouannic
Sure the heating control space has really evolved a lot in the last 10 years as Eamon said Climote to the market in 2011 and at the time a lot of the startup control companies came into the markets and obviously one of the most famous ones Nest was acquired by Google around 2014 which created a huge buzz around how can we digitalise the controls for heating systems across the world particularly across Europe.
And what happened since then is a huge number of companies have been investing a lot of money in trying to roll out these connected controls for heating systems. Right now you have really three main types of companies trying to produce products. The first one being that the startups like Climote who arereally innovative really creatingcool products that customers like to to engage with. And this has really created some sort of gadget customer, willingness to buymarket.
The second category is the traditional heating business, the likes of the boiler manufacturers, of the large heating control manufacturers like Schneider Electric for example.
And these guys have an established business, they have established routes to markets across Europe and they have been really trying to understand transition from analog to digital and the role that they have to play in this and some of them have been slow at innovating some of them have been really good and you can gradually see the amount of controls sold in the markets being increasingly connected which is very good news for the industry.
And finally the utilities obviously the last stakeholder that we're really interested in this because whereas heating being almost two thirds of the energy bill in Europe you can quickly imagine how you can advise customers to reduce their consumption by having better controls or connected controls that can be better programmed.
So the utilities have been trying to find a place in this market for a while. Some of them have, some of them of have let's say failed to some degree, but they are still trying to find how they can use heating controls that are connected for the energy transition and some of them are betting on this big time for the future.
[00:11:17.950] - Jon Slowe
Okay so that's a nice description of the types of companies, the start ups or younger new entrants, traditional heating businesses and then energy retailers or utilities trying to create propositions for customers. Remi I'd like to come back to you next. In terms you're managing a business of millions of heating controls a year. What do you see changing in the market at the moment is would you say it's static. Are there particular dynamics in the markets.What are the key issues that you see?
[00:11:52.940] - Remi Volpe
We are seeing at a changing marketplace. I think you know traditionally people have said well you know the heating industry and plumbers are quite conservative in what they do. You know we are starting to see a growing segment where you know a number of consumers are interested in understanding more around smart heating. I think that as Arthur mentioned a number of companies came to this market several years ago and started you know marketing into consumers directly around smart smart heating, smart controls, which I think initially sort of pricked I think people's attention at that point that's really then sort of been built upon with the growth in smart devices like you know Google Home or Alexa and people being comfortable with that as as a base technology in their home and are now looking at what else they can use or build on that particular platform and we've we've seen heating become more of an interest area as well both from an energy consumption perspective but also convenience.
[00:13:04.270] - Jon Slowe
So Remi how big is that segment at the moment do you think. You know are you talking like 1 percent and and a nice of a niche or do you think it's growing quickly towards 10 percent or a third of the market you think things are changing quickly.
[00:13:21.010] - Remi Volpe
I would say it is it's growing quickly off a very small base though and I would still say below 10 percent of the market. So the majority still is dominated by the installer and the installer will play a key part in sort of implementing any new technology into the marketplace. But we are seeing you know a growing number and we're also seeing when people move into into smart heating the level of interaction the engagement with it is much much higher than with sort of conventional products. So it's an interesting dynamic, it's a growing one, but it's still a small segment of the market.
[00:14:03.100] - Jon Slowe
So how have you responded. Have you brought out new products for this segment? Have you looked at new routes to market, new channels? How does a company with a very strong large established business manager a growing trend like this?
[00:14:19.000] - Remi Volpe
I would tend to say all of that. I think the starting point is that although we've been around for 70 years in the UK you know we embrace innovation and we really want to. We don't want to be considered as the you know the old guys in the corner who try and sort of protect and maintain old technologies. We don't. We've really embraced it. That means we've launched a new product called wider heat into the market. It's very much an upgrade for existing conventional controls. So we've tried to make it a DIY. In some instances we've embraced sort of new routes to market. So the product is available through Amazon and through companies like Screwfix and Toolstation as well as the traditional channels of Wolseley or Travis Perkin so we've embraces that aspect and where we're starting to as I've said market more to the consumer and rarely hear directly back from them in terms of what they think.
So that's one element.
[00:15:21.750] - Jon Slowe
Is that quite a change Remi in terms of marketing directly because the traditional route I guess will be through wholesales and installers rather than creating that customer brand and customer marketing.
It is, it's been a very steep learning curve and we haven't been perfect but we've sort of embraced the principle of better to sort of you know move down that route and you know learn from the errors and mistakes that we go that we learn. So you do get direct feedback. It hurts at times but it allows us to really sort of develop develop more. We we also are trying to move our installer channel which is important for us as well. People who have used Drayton for many many years in making them understand that the new technology a connected device actually you know isn't that much more difficult to sort of install and use as a as a conventional product so we're trying to take our 9 degree network of installers forward with more confidence into into an era of smart controls.
[00:16:29.380] - Jon Slowe
Okay. Thanks. Eamon, I'd like to come back to you in terms of what you've learnt about reaching customers and how customers respond. So Remi's talked about the direct route and going through installers. For a new company new into this sector, how's it been for you in terms of trying to bring your product to markets, create appetite in the market for your product?
[00:16:54.340] - Eamon Conway
Very good question John. I mean I guess my own background have been 15 years in the corporate world and in the heating and plumbing and electrical sector I would have known you know the traditional route to markets through the big DIY chains and the builder's merchants, electrical wholesalers. But I guess you're an only business you've got to make the choices that you see fit. That that's best your organisation at the time. I mean we were starting off with the businesses set up by myself and my business partner Derek Ruddy with six staff when we started off.
So one time we launched the product in 2013 that had moved up to about ten or twelve so very limited marketing budget. So you've got to think how can you get the product into and into people's houses. So in our case it was to partner with folks who had access to those houses and we we spoke originally to telcos and to utility companies. And I guess our main partnerships have been with utility companies and what we find is that most of our sales I mean we would be a B to B to C I guess and that our product is effectively gets to Mrs Smith or Mr. Jones' house of the package of some description whether it's with a tradesman who's packaged it up with a new boiler or utility with an electricity or a gas tariff.
So we find that by bundling the product with the partner who's got access to the customers. That's that's how we've done to get into houses but with a relatively non-existent marketing budget and with relatively low amount of folks on the sale side and what we find is that not dissimilar I mean I guess despite folks in the industry with the bigger resources the penetration of smart heating controls are still relatively small. And for me it's about deployment it's not really about the features and benefits because up until now all the way I think it has begun to change with the with the consumer trend to renewables and the climate change agenda. But energy has been not that interesting for folks. So what we find is when they get the product they really like it and the app engagement is very positive. But actually waiting for them to actually buy it or go looking for it would have been would have been a harder challenge. So if it's presented to have presented to them in a bundle or as a package that's interesting they'll take it and they really like it and it gets them started on the journey.
[00:19:25.580] - Jon Slowe
Arthur what do you think about that. From what Eamon says once the customers got it they like it but it's hard to get a customer to put their hand in their wallet and maybe spend a lot more money or more money than they would on an old analog heating control.
[00:19:40.330] - Arthur Jouannic
But it's exactly as men say its customers would never be willing to spend. I don't know what the price is now maybe 200 euros on on the Smart thermostats. The reality is people are going to spend this money on something else so we have to find a way to get these products to the customer's home without having them to feel like they are paying for it. And the utility bundle on that kind of contract. What we see happening especially in the heating sector is that all the major heating appliance manufacturers have turned now into connectivityso most of the appliances installed in Western Europe so far are connectable and that represents around 8 million heating systems of Europe and the challenge that these guys have is not to install its products it's to make people actually connect the heating systems and often that's there is an issue that installers are not able to or willing to communicate the functionality, the set up to their customers and we result in collectable products being rolled out all over Europe without having them connected.
So there is a beig need to train installers to educate them maybe even too motivate younger generations of installers to be motivated to sell and install and help customers whereas this products otherwise as Remi and Eamon says so this will remain a niche market and will never grow beyond the 10 20 percent market.
[00:21:15.790] - Jon Slowe
I mean Remi your route is through installers predominantly. And the anecdote is often used anecdotes about installers who say they want to get in and out as quick as they can with no risk of a callback. So how have you you know. Briefly how have you seen installers responding to this or how are you trying to work with installers in this way?
[00:21:39.230] - Remi Volpe
We're trying to you know bring them along the journey I guess and sort of do a number of training sessions face to face training sessions where you know that the principal we're using as this is it's an easy upgrade if you want but if you're going through a housing you see that you've got an out of control controls already installed into that system. You know it's very easy to upgrade that in to a connected system. We talk when we walk through that particular aspect it gives them confidence to try that. We're also doing a lot of online training as well.
So it's like you can only reach a limited number of organisations face to face or people face to face. So we've now put some training modules online that people can work their way through and at the end of each module there's a few questions that people need to answer to progress to the next steps. The way we're trying to sort of bring people along the journey ensure that you know it is regarded more as an upgrade and it's in a simplistic way to add some added value to that to that particular customer and the consumer.
[00:22:51.980] - Jon Slowe
As you said earlier on it's a traditional industry so it is changing but it's probably not going to change overnight or in a very rapid way.
I'd like to move on now to the second area I'd like to focus on which is electric heating and across most of Europe we're likely to see more electric heating in the next years and the next decade with a mix of other types of heating low carbon heating I'm sure. So electric heating operates in quite a different way to gas boilers.
Remi from Schneider's perspective what would you say you've learned from your work with electric heating in markets like France where it's is already widespread. And how could you bring that experience to a country like the Netherlands or or the UK where we're likely to see more electrification in the next year.
[00:23:54.660] - Remi Volpe
So I think the the aspect of moving to an you know more of an electrified basis for heat means it actually increases the ability to control you know when not to have heating as its own separate independent vertical if you want or system. What we've seen and what we can leverage is the move towards more of a so-called home controls solution is more viable as the electrification into heating moves along as well. So the interoperability or the way in which the electric heating will work with your EV charger, will work with your lighting and your blinds and your shutters can all but all come under one control system.
So we've got experience with EV charges. Schneider has a business where where we actually provide EV chargers. We also have an energy business in France where we can monitor and see what the usage and consumption of the electricity is. Make that make that sort of digital. And then we can combine that with the other uses of energy being ones that that are there are moving towards electrification. So that total home control I think becomes much more manageable and viable. What what we've learned as a lesson and where we're trying to do is this to make sure that there is beyond interoperability all the systems work with each other by having some common protocols defined.
So it's very easy for a consumer to connect the various parts together and we're not using sort of systems that are really hard to get them to work together. So we think that certainly open protocols that the industry will will embrace and make the simplicity of the consumer able to manage their total energy.
[00:25:57.120] - Jon Slowe
And how far forward are you with that at the moment Remi because of course electric vehicles of course smaller number today is going to get a lot bigger, everyone knows, photovoltaics, storage, smart homes with smart blinds and shutters and so on. Is this something you've got in the market that you see growing really quickly, is it something that's more development at the moment?
[00:26:21.310] - Remi Volpe
I would say the technology is that today and and in certain markets like France we already have our energy business which is is it being installed and operated. We've got our EV chargers not only in France but in the U.K. and other European countries. But they're still operating a separate system. I think the role of regulation the role of of of standard protocols still needs to evolve and be clarified, driven by I would say sort of governments to then make it happen at a much faster rate. Technology certainly is there and the products as individual systems are available today.
[00:27:01.710] - Jon Slowe
Okay. So yeah the individual bits are there; bringing it together, that's probably more for the next years. Eamon, you've you've focused on gas boiler controls to date but I know you're also busy and active with electric heating. Can you tell us a bit about what you're doing in this area?
[00:27:22.110] - Eamon Conway
Yeah. Jon. I get it as an evolution of what we currently our strengths and expertise in home technology and linking it to the energy transition. So by way of a wee bit of background we were involved with the project with the Irish National Grid and the ESB group a couple of years back whereby we built a platform to to turn off the signal from the National Grid for 100 homes that took to turn off immersion controls hot water tank controls at the wish of the grid. That was a fairly early pilot but it got us on that trajectory off of how you could what would be required to facilitate the electrification journey so effectively I guess at a high level we're looking to match the increasing generation from renewables being able to create a home for those renewables through being able to store it withretrofit devices and probably the first one we see would be the immersion tank and hot water tank.
We've done a lot of work on that and we'll have some announcements in the new year with with products and partnerships that'll be the start of that journey. So we would see the potential for you know flexible storage and to electrify existing assets such as an immersion tank to create tens of gigawatts of flexible storage which will really facilitate the energy transition.
[00:28:56.390] - Jon Slowe
Well I think asmany of our listeners know thermal storage is a lot cheaper than the batteries and electricity storage. Even with the falling battery cost today. So there are lots of homes still with hot water tanks in them so tapping into that.
[00:29:12.270] - Eamon Conway
Absolutely. Yeah I mean if you take if you take the UK and Ireland every home got an immersion tank UK there's probably eight or 10 million still there but. Well one of the challenges on that journey as well though will be the pricing obviously from the consumer because at the moment if you would if you were to heat your your hot water which is 20 percent of your energy bill with electricity it would cost you more than it would do fossil. Yeah. So there's a transition that has to happen there between bringing all the stakeholders onboard and probably over time of it that we'll see we know what we would see as it will be you know new tariffs created to match the flexibility that the technology can provide so that you can see that it's really starting to see some of the some of the UK utilities and others have that sort of tariffs offering lower cost electricity you know for for overnight charging and the like.
So I think that's the direction of travel and our view is that bring in our expertise of being able to bring low cost reliable home technology products to facility at that is where we see our space and the electrification of heating transport and also on the topic that Remi mentioned that it's important that you know that the technology can manage all of the future requirements. So doing one piece in isolation won't do the trick. Therefore it has to be thought through that if in the future outside someone's there's an electric vehicle, they could be using renewable electricity to heat their space heating under and hot water tanks and that has to be managed to the to the to the fact that the relevant energy actors such as the networks and the grids are all happy with that and that doesn't, one action doesn't cause someone else a problem.
So that's where we'll be coming from to look at it from a whole energy system point of view.
[00:31:02.980] - Jon Slowe
Yeah and I guess the market starts with with point products and then those products linked together within the home in the way Remi you described and then Eamon as you describe they linked together across see electricity value chains that they're working for maybe a a dynamic time of use tariff and also for the network company and also for the system operator Reid.
So as always time is marching on, so it's now crystal ball time, how we and all of our podcasts. So let's set the crystal ball now to 2025. And the question I'd like to pose to each of you will be the proportion of us that will be using heating controls or controlling the temperature in our buildings via a digital interface or even by voice.
So today most of us will press a button or turn a dial up or down to manage the temperature in our in our homes in 2025. What proportion of us will be doing that to our voice or a digital interface on a phone for example.
[00:32:15.950] - Jon Slowe
Arthur let's start with you in terms of where where you think that will in five years' time, six years' time.
[00:32:22.780] - Arthur Jouannic
Well I was trying to dig out the forecast that we did at Delta-EE on this but actually I think I think a lot of things changed in the last year. A lot of the service companies, utilities, have been talking about home energy management, about heat as the service, about energy service, where you basically for example get a service where you pay for your heating system and you just have 21 degree as a service.
And before this year I felt like this was a dream or something really far ahead and now I see everyone talking about it and trying different solutions in order to bring new solutions to market. Companies have to bring connectivity to the heating systems. So I actually really believe that there is enormous value in providing the services and therefore connectivity and heating controls and cooling controls even will become mainstream relatively quickly and quicker than we saw so potentially around a third or half of customers I think willl be connected to their are heating or cooling systems by 2025 and potentially even more as a service and energy companies want to bring the services industry.
So really moving out of today's niche even if it's a growing niche into the mainstream. Eamon, you may have a vested interest in answering this but how about yourself?
[00:33:51.840] - Jon Slowe
I'd say it will be two strands, Jon. I would agree with Arthur probably on the digital heating controls as a point product I would probably think 25 to 30 percent penetration but I think the more interesting development will probably be the electrification of heating transport whereby I see I see technologies such as ours being linked with flexible tariffs with utilities and folks able to turn on their devices as when there was a price signal and I think that there's a lot of value for for the energy industry and getting that right. And I think as as most industries people find where the money is and where the market value is and I think that will drive most of the activity.
So I would I would think there would be from a standing start probably a lot of penetration in that area where the energy utilities will will be providing time of use tariffs or flexible tariffs based on having technologies to facilitate that.
Okay. And last but not least Remi you've got a foot in both camps you've got a big foot in the analog, traditional world and a foot in the new world. So what proportion, where are you going to place your bets?
[00:35:06.090] - Remi Volpe
I think I'm I'm more in line with with Eamon around or around sort of 30 40 30 to 35 40 percent is where my my head's at and I think that what will drive this is is a number of I would say sort of three key areas. I think the first one is what the governments across Europe decide and you know we know that with this sort of recent announcement to become carbon neutral by 2050 you know that the initial focus is is on new build by 2025. My feeling is that some governments may well start to drive that into the installed base as well.
So I think the government will could potentially determine an acceleration of you know a big move into more you know electric heating sooner than what's currently in place today. That then lends itself to make sure that the interoperability and the way that the various verticals in a house can easily communicate with each other I think that's got to be paramount that people don't engage with the heating only, they can they can integrate with all the other aspects in their house like the EV, the lighting et cetera. And then I think the third key important parties we've got to get the installers onside as well that they are comfortable with what's going to be required, that there's a major sort of you know sort of training and upskilling and we're embracing new entrants to come into the into that professional channel who who really can help accelerate the uptake of smart controls.
Okay. So I think we've got the 25 to 30 percent, Arthur a third to a half and Remi 30 to 40 percent. So all three of you agreeing that we're going to see a lot of growth in more sophisticated heating controls in the next five years.
And I hope I'm encouraging all the listeners to this podcast to go back home and look at your heating controls. Have a think about what you could do with smarter digital controls and maybe upgrade, who knows. We hope you enjoyed the episode. Time to wrap up now. Thank you listeners as always for listening. Thank you Eamon for your time.
[00:37:32.990] - Eamon Conway
[00:37:34.130] - Jon Slowe
[00:37:36.290] - Remi Volpe
Thank you I look forward to an invite to 2025 when we can see who's won!
[00:37:41.390] - Jon Slowe
I'll hold you to that. And thanks Arthur as well.
[00:37:46.400] - Arthur Jouannic
Thanks Jon, thanks Eamon, thanks Remi.
[00:37:48.020] - Jon Slowe
We'll be back with another episode of Talking New Energy next week. Thanks and goodbye.
Host Jon Slowe is joined by John Murray, Delta-EE EV expert, Mark Henderson, Gridserve, and Stirling Habbitts, Triodos Bank. This week they discuss the financing of the EV charging infrastructure.
Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts . We'll 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 is becoming more distributed. We're seeing millions of energy assets across countries, comprised of rooftop photovoltaics, demand response enabled products, batteries EV charging infrastructure and more. Now this is opening up opportunities and challenges for financing energy infrastructure. Financing large numbers of small assets is really different from financing a small number of large power plants which is what we've had over previous decades. And in this episode we'll be exploring this financing challenge with a particular focus on EV electric vehicle charging. And within that this area looking particularly at public charging electric vehicle infrastructure.
As electrification of transport gathers pace, so grows the amount of charging infrastructure and with that the need for finance for this infrastructure. So I'm joined today by three fantastic guests to explore this area. My first guest is from the finance sector, Stirling Habbitts, who works with Dutch based Triodos Bank on financing renewable energy and sustainable infrastructure.
[00:01:38.510] - Stirling Habbitts
Hi Jon. Thank you for having me on the podcast.
[00:01:42.510] - Jon Slowe
You're very welcome and Stirling for those listeners who aren't familiar with the finance world. How would you describe your role in the energy transition?
[00:01:54.900] - Stirling Habbitts
Yes sure. So Triodos Bank is a Dutch bank. We've always focused on environmental and and sustainability as part of our mission. And in practice that means that we have done a lot of finance of renewable energy. That would be solar farm, wind farms, hydroelectric projects across Europe and also in the UK, where we've been active for about 20 years already.
And we are actually one of the leading banks in financing of renewable energy. And as part of that we've also done rooftop solar and related areas such as smart meters and electric vehicle charging as well.
[00:02:37.090] - Jon Slowe
Okay. So you're you're moving Stirling from financing larger assets or small numbers of larger assets maybe a big wind farm or a big solar farm to many smaller assets. So smart meters, electric vehicle charging, rooftop solar. These are very small in size. Are you comfortable or would you say you've made that transition to be really comfortable with financing smaller assets or is that still something you're learning about as you're moving more or more in that direction.
[00:03:10.750] - Stirling Habbitts
I would say we the transition's already being made not only by us but by some other banks as well.
So rooftop solar for example has been quite widely financed by banks and that is many small rooftop installations of course across many buildings. One of the more common is rooftop solar on social housing for example. And in the UK for example it's not widely known that a lot of the smart meters in the UK have been financed by banks. So the techniques and the structures to do that are fairly established and we're now we're now using those structures to apply to finance of electric vehicle charging.
[00:03:51.870] - Jon Slowe
Great. We'll come back to you in a bit Stirling and hear more about that. My second guest today is Mark Henderson, chief investment officer at Gridserve. Hello Mark.
[00:04:01.800] - Mark Henderson
Hello Jon, thank you for having me on board today. GridServe may not be as well known as Triodos to many people listening but we are a rapidly growing tech enabled International Sustainable Energy business founded just a few years ago and we really cover the spectrum of developing, building, owning and operating solar energy and battery storage projects. And the aim of these projects is to provide services for what we term critical power infrastructure of which electric vehicle charging is a key focus for us. My role as a chief investment officer is to raise funding for the projects and for the company. And in that regard I'm a bit of a classic poacher turned gamekeeper having spent about 25 years financing infrastructure projects mainly in the power and renewable energy sectors.
[00:05:04.650] - Jon Slowe
Can you give us an idea have the scale of Gridserve, Mark I mean you're a few years old so I'm sure you, I know you're growing quickly, numbers of projects amount of money invested orwhat ever metric you prefer.
[00:05:18.750] - Mark Henderson
Well we've already got 60 megawatts of projects commissioning literally as we speak at the moment in the UK. These are solar and storage projects. And actually the first in the UK to have both by facial technology and tracking systems as well. So that's 60 megawatts so right about 60 million pounds of cost.
And we are about to launch our first electric vehicle charging station in Braintree in Essex hopefully breaking ground during the course this month says going to be a very busy month for us here at Gridserve. And we are planning on building over 100 electric vehicle charging stations in the next five years.
[00:06:08.340] - Jon Slowe
Great. Well we're excited to hear more about that in a minute after I've introduced my third guest. My colleague here at Delta-EE, John Murray. Hello John.
[00:06:18.820] - John Murray
Hello Jon, great to be here.
[00:06:19.760] - Jon Slowe
So two John's on this podcast. So John Murray John you work on our snappily named Electric Vehicles and Electricity Research Service. And can you start by breaking down the electric vehicle charging infrastructure space of it and how we should think about the different forms or type of easy charging.
[00:06:48.820] - John Murray
Yeah sure Jon. So at Delta-EE when we are considering EV charging we refer to three different types of charging locations in a very simple sense. We've got home charging, workplace charging, and public charging.
[00:07:05.420] - Jon Slowe
So home is of the essence in my driveway, workplaces obvious, public could encompass a few different things. How would you how should we think about public in the range of different things?
[00:07:18.150] - John Murray
That's right. Thanks. Yeah. So public charging. So yeah it's a bit more complicated. So again we've put this in to three different types. First of all there is destination charging which includes for example topping up when visiting the supermarket or the cinema, there is on street charging which as the name suggests refers to EV chargers that are located on roads and streets. These are particularly important for drivers that do not have access to off street car parking. And then there is what we refer to as transit. And these are the chargers that are typically higher speed higher powered devices that enable drivers to recharge their batteries in a relatively short time period to enable them to continue with their onward journeys.
[00:08:09.050] - Jon Slowe
Okay. So that's very helpful breakdown of public. And Mark if we can come back to you now and the project you described in Essex just outside London and 100 that you have in the pipeline, which one of those three types of public charging would you say Gridserve is focused on. How would you how would you match what you're doing to John's definitions?
[00:08:32.840] - Mark Henderson
That's quite simple and a very good series of definitions. We are very much a transit charging focus. We want to be along major roads - they don't have to be motorways - A roads are perfectly good but it's definitely high frequency of traffic. And we want to be close as well very close to urban centers so people can also easily nip out here within a 10-15 minute drive and quickly charge up while they're also getting their groceries as well. So it's slightly perhaps backs on to the destination definition as well but we see it overall as a transit approach.
[00:09:13.100] - Jon Slowe
Okay. And for our listeners paint a picture of what your charging station's will look like - maybe pick the one in Braintree in Essex. Yeah. What would we see. What would it be like turning up to one?
[00:09:26.420] - Mark Henderson
Well I'm delighted to say actually if you go on to Youtube and type in Gridserve you'll actually see a mockup of it in a virtual reality format. And the important thing is that these are scale infrastructure projects. So they are capable of taking multiple cars 24 at a time charging together very like a petrol forecourt and we can call them electric forecourts. So they can take multiple cars doing ultra fast charging that that 350 kilowatts and upwards. But it also has under a nice solar canopy a convenience retail area as well because we don't think range anxiety exists any longer.
At Gridserve we very much believe it's actually charging anxiety: if you turn up does it work? How easy is it to make it work and what do you do during the time you're waiting for the car to to charge up? So you want to make this ultra fast, very convenient and something which really can be fitted in to your normal day to day travelling and shopping and everything else.
[00:10:39.230] - Jon Slowe
So that's quite a sense of in terms of footprint physical footprint and trying to think of a petrol station you're talking about sort of a number of petrol stations equivalence physical footprint from the sound of it?
[00:10:54.810] - Mark Henderson
That's right. It's perhaps more easily envisaged as more like that though some motorway service stations to have with multiple car parking bays as well as the convenience retail side of it as well. And some of these projects as well will have solar, an actual solar farm, physically attached to them in the adjacent fields.
[00:11:21.620] - Jon Slowe
And how... it sounds quite capital intensive. So what sort of numbers are we talking about per project or the Braintree, Essex example, ..or how much investment. What's the price tag on that?
[00:11:37.130] - Mark Henderson
It is millions of pounds... single figure millions. I mean I suppose the easiest way to do it express it is that are over 100 sites that we're planning to build in the next five years is going to cost about one billion pounds so you can quickly do the maths on that. So these are serious 'bits of infrastructure. It's not just this individual charging points in a supermarket car park. These are standalone infrastructure which we expect to be here still in 50 years time.
[00:12:10.220] - Jon Slowe
And quite capital intensive or very capital intensive... So can you tell us a bit about that... the revenue model the the business model.
[00:12:22.610] - Mark Henderson
Well that's right. Because we are creating really a mini a whole new infrastructure class with each one being really a mini business in its own right So unlike a solar farm where we're just used to selling electricity and that's it, here we've had to model and develop programs for our whole series of different revenue streams. Where we're generating solar, you've got clearly the electricity generation, all of these projects will have a meaningful and I mean for at least five megawatt size of battery next to them in order to provide buffering to the grid and actually support the grid in places.
So that means that the battery has a number of different battery streams which you would probably familiar with in terms of frequency response and just load shifting and arbitrage of power loads and then you've got the revenue from the cars charging and also revenue from the retail itself. So we obviously think that this variety is a great thing for investors and lenders to to be supporting because it does give it reduces the risk by having that diversity of revenue streams.
And that's before we start getting into additional ones like advertising and charging our cars et cetera.
[00:13:43.620] - Jon Slowe
And I may be digging into commercially sensitive information Mark so tell me if I am, but how do those four revenue streams you outline compare? So for the car charging for example is that half or two thirds of the revenue or can you give us a feel for the relativity between those streams.
[00:14:01.220] - Mark Henderson
Yes it's early here. So it is a slightly delicate area but I think the easy one is that to begin with they are fairly, all fairly comparable. The big difference is over time the scale of the growth of the EV charging itself.
So at the moment we are having a wonderful revolution in terms of electric vehicles coming onto the roads in Britain but it's still a very very small number. So we have worked out a model of what do we have to believe in? Do we believe we'll get at least 5 percent utilisation in the first year? Now that's not a challenging number for example. Not saying it's the right number we picked on but if you can you can at least back sort of to that go right - that's something which everyone should be able to sign off on.
So if we've got that then overlay that with the growth of the EV sales over the next few years and then you can start mapping out how you feel the charging growth can can increase as well. And that gives a lot of upside but I think the community retail is perhaps less exciting in terms of growth but it's actually a very very meaningful and reliable source of revenue stream. BP have now gone public in saying that in their petrol forecourt half of the customers they have do not buy any petrol at all but purely go there for the convenience.
So you know even if there's no EVs, no electric vehicles going past, we think we'll be selling these coffees and food and the like.
[00:15:39.190] - Jon Slowe
Yeah and I think that's fascinating on us picking up what you said earlier it's a different type of different class of infrastructure because you are blending revenue streams that haven't been blended in that way before.
For financing, so clearly that's you know 100 of these sites a billion pounds of investment. Can you tell us a bit about how you're looking to finance them or the thought process you've gone through or the journey you've gone through and thinking about the financing of these assets.
[00:16:11.760] - Mark Henderson
Yes we are looking to a mix of debt and equity. Each project will be ringfenced in its own special purpose vehicle and into a good project finance style then raising debt and equity against each project itself. So they will be standalone and and capable of repaying any debt.
Clearly that with the revenue streams being uncontracted on the whole - this is an area which, Stirling, I'm sure it doesn't get you jumping out of bed in excitement in the morning because people are a little bit wary of uncontracted revenues. So we are looking at a range of solutions where we can be financing each side but I can guarantee today that these projects will not be financed once and once only, they'll be financed and they'll be refinanced as more of them are built out and can be aggregated together and they'll be re-refinanced every few years as the revenue streams start becoming more proven and more established and therefore more leverage can be applied to them. So it will be very capital intensive and we are always looking for different sources of capital that can come to play a part in it.
[00:17:35.750] - Jon Slowe
Great. Thanks Mark. That's really exciting to hear.
Stirling I'd like to bring you in at this point. Now Triodos you have outlined at the beginning the range of things that you finance from large wind farms down to the smaller rooftop solar on social housing. Looking at electric vehicle charging infrastructure and maybe the public different types of public infrastructure that John outlined at the beginning, how challenging is electric vehicle charging infrastructure for someone like Triodos? Is it just a case of a cookie cutter. We've done it for solar we've done it for smart meters do it for EV charging infrastructure or does it bring some very different challenges to you?
[00:18:23.280] - Stirling Habbitts
Thanks for question, Jon. It does it does have different challenges, absolutely. So I think it's a bit of a mix mixture. I think fundamentally if we look at the a few of the aspects starting perhaps with the technology I think we're relatively comfortable with the with the technology and on the whole it's relatively simple technology. For the most part it is a bit too simplistic to say it's a plug. Yeah it's a big plug and with perhaps an inverter and a bit more kit in it. Technology wise, I think we've become quite comfortable quite quickly so that's definitely a plus.
Certainly for example in the early days of solar there were questions about the solar panels and viewed as quite new technology. But I think in EVe charging we've become comfortable much much more quickly. The distributed nature of the assets, again it depends on the project, but having assets in many different locations we've tackled that and that's already been proven to be bankable for example with rooftop solar and smart meters so that is also okay you know probably the big challenge in the finance is the revenue actually that that's where we see the big challenge.
[00:19:45.810] - Jon Slowe
Yeah because of the utilisation rates of a lot of this infrastructure will be very low in the early days. And presumably when you model that revenue flows there's a lot of uncertainty and risk around that revenue. So that must be tough.
[00:20:06.410] - Stirling Habbitts
Yes. So we we have what we have found though is there's a lot there's a lot happening in the space that a lot of different opportunities out there. And so we we have found quite a diverse range of approaches and models. So one of the - I'll give you a couple of examples of projects which we have progressed further with. One project that we're working on at the moment which we're actually quite advanced on is a project for a large UK corporate. So it's quite different to Mark's project and this is something I think this type of project we will see more of as well.
So the corporate OEMs, I would say a household name corporate in the UK, they own a lot of buildings across the UK - thousands - and lots of their buildings do have parking in front of them and they have like many corporates now decided that they need to provide easy charging because their building is a destination which people are coming to and there's an expectation that they should be able to charge EVs. So we've said we've worked for about nine months now on a structure which is quite advanced and we're close to finalising it to finance the installation of a charging for the corporate. And what what the structure has in it which is quite unique is that the corporate is willing in the structure to pay a fixed monthly fee towards the revenue of the charge of the SPV that contains the chargepoint but the corporate wasn't willing to pay any or very little CAPEX upfront but they were basically looking for a model where they could get the charging points installed and and then without upfront cash outlay.
[00:22:07.070] - Jon Slowe
Okay. And in that model Stirling, it's easier for you with those monthly payments because they're taking some of that you're not reliant wholly on customers turning up and paying themselves to charge. Have you been presented with many projects where the sole revenue stream is from the utilisation by customers turning up with their electric vehicles? And in those projects is that more challenging a more challenging model for you?
[00:22:37.600] - Stirling Habbitts
Yes. So to answer your question maybe stepping one one step back. The first the first question there is of course also revenue from the charging in the model with the corporate because the people arriving at those buildings still do have to pay to charge their cars. And that is revenue that's channeled through the porfolio of chargepoints. So it's actually a mixture in that one of some fixed revenue if you like from the corporate monthly payments, or service fees they're called, and revenue is dependent on usage but to answer your second question Jon yes we've also looked back and worked on projects where the revenue is only from the usage and therefore has the risk of usage in it.
[00:23:28.030] - Jon Slowe
Okay. So that can work but with a bit more challenge for you.
[00:23:34.580] - Stirling Habbitts
Yes it's quite there's quite a lot of diversity out there at the moment in the different approaches and different business models. Another example I can give, which we we did receive approval for inside the bank, was a portfolio of electric vehicle charging for a medium sized town in the UK specifically installed for the taxi fleet of the town.
[00:23:59.710] - Jon Slowe
[00:24:00.060] - Stirling Habbitts
In that particular, so to elaborate a little more on that one... There are a lot of initiatives across cities in the UK to electrify taxis (different cities taking different approaches) but essentially cities can control and regulate their own taxi fleet and can require them to become electric. That's a very interesting area because of course if a city says the taxi fleets must become electric within a certain period of time then one has a bit more certainty around the demand for electric vehicle charging customer to those taxis of course.
[00:24:44.090] - Jon Slowe
Yeah I see that yes.
[00:24:48.780] - John Murray
Stirling, a question from my side if you don't mind. I mean well we've been monitoring the sector for a few years now and even over a relatively short period of time over the last three or four years we've seen the sector evolve very quickly from having what were so-called fast chargers being superseded by even faster rapid chargers and those almost to some extent being superseded by what have now been called high powered chargers. So it is a sector which has moved very quickly in the last just few years and the technology that's going in the ground.
How can you as an investor sort of mitigate the risk that that technology might be outdated and even just in the next three or four or five years time.
[00:25:35.970] - Stirling Habbitts
No it's a very valid question I think the main mitigate to the risk is for the the repayment of the loans, in our case it's mostly loans that we're providing, for the repayment of the loans to be within a period that doesn't expose the underlying assets to redundancy risk if you like. And we think that that's what we have seen quite a bit of time on that and we think that that is that is something we can become comfortable with a loan that could be repaid for example five six seven years that would would we don't believe that would have major redundancy risk with the underlying assets depending where it was actually put in. I think a longer a longer period of time one has to think more carefully but it's very much related to the period of the finance.
[00:26:27.960] - Jon Slowe
Maybe Mark, that's an interesting question for you with investment.
[00:26:31.680] - Mark Henderson
Yes absolutely. Yes.
I wanted to pick up on that because I think the redundancy is when we're used again to looking at standalone infrastructure projects which don't really change very much - take a power plant for example it sits have producing away - and whilst on an electric vehicle charging station you may have the actual chargers being a bit redundant or needing to be replaced butthat can be done within the if you like that the framework of the whole charging station and the charging station will still remain there and it will still be being used. So I see that really being an operation and maintenance sort of a general cost which will be incurred every year. I don't think there is any risk at all of these charging stations suddenly having to be closed down in a five or 10 years' time at all. You know look at the petrol stations and petrol stations have reduced in number but that's for other reasons. I think it's more akin to airports.
[00:27:37.890] - Stirling Habbitts
I would agree with Mark.
I think that what we'll probably see actually is that the the chargepoints, more chargepoints, get installed where chargepoints are already installed and that we will probably see with the newer chargepoints as they come in those are the ones that are faster and more sophisticated but that the existing charge points are still utilised because the the existing charge points are often what will they will be for electric vehicles that are rolled out now and those electric vehicles that have been rolled out now most of them probably won't be able to charge as fast as some of the future vehicles will be able to charge out but will nevertheless willhave to charge so there will be electric vehicles on the on the road that can use both the older electric vehicle charging point to newer ones. So having a mixture of technology as the technology changes and as more chargepoints get put in is probably also part of the mitigation.
[00:28:44.500] - Jon Slowe
Yeah I can I can see that. Mark, earlier on you talked a bit about the grid services so you have batteries, those batteries will be setting into ancillary services market. And Stirling I'm interested in the sorts of things your financing and looking at. That's an important revenue stream but how risky do you see that revenue stream of thosr grid services from from chargepoints?
[00:29:16.250] - Stirling Habbitts
Yes it's a that's a that's a very important question. So far we haven't quite got to tackle that yet but we haven't yet tackled the question of how to finance battery plus chargepoint. Projects that we're currently working on this year have been porfolios of only chargepoints and that has largely been possible because the number of charge points per location in the projects we're working on has been small enough that the there's no need for a grid an upgrade to the grid connection and also no need for battery to go alongside. But I can certainly see in the coming years as more chargepoints are installed in particular locations that that's going to be a more important question.
[00:30:03.350] - Jon Slowe
So Mark, those revenue streams, would you say that's the icing on the cake or is it a slice of the cake or is it just a cherry on top of the icing of the cake?
[00:30:14.230] - Mark Henderson
It's certainly a meaningful slice of the cake. And I think actually that the cherry on top is the charging itself. It came back to what is the growth going to be like in electric vehicles. I think everyone in this call will be saying it's going to be phenomenal. We're going from very low standing start almost to being something which would be the dominant form of of transport in most countries. And so that means there's going to be a lot more charging and that growth is is the real cherry and that's the the real equity upside if you're looking to invest in this.
I think the good news is that the battery revenues and the others say the convenience retail revenues mean that you don't lose your shirt you get to capital back but how many shirts you get back will depend on the scale of the EV uptake. And so that's what I think makes this actually a very interesting investment for people who can be more flexible. And in fact one thing I should have mentioned about the financing is that for all of our charging stations we want to introduce an element of crowdfunding because we want people in the local communities to share in it, share in the benefits of it. It is a community involvement and it's only right and proper that they should be enjoying the benefits of it as well. So we'll be making that available as well to people.
That's an interesting angle and what I found really fascinating to explore so far has been how from both of your perspectives you canderisk the utilisation of the charging infrastructure. I've seen so many uptake curves for electric vehicles out there. They've all got slight different shapes. Hockey stick point in the plan was slightly different. So Ito try to structure finance around to follow those curves will have quite a lot of risk around it. And both of you have described ways in which you can derisk that.
[00:32:19.320] - Stirling Habbitts
Tthe different methods are, one is to mix the revenue with other types of revenues as in Mark's projects and another one is to look at the demand side. So when you have a more of a captive fleet of taxis or captive fleet of delivery vehicles you know the buses that's another route now.
[00:32:44.450] - Jon Slowe
Time is as always getting the better of us in this podcast so it's crystal ball time and I had a slight challenge this week planning the podcast in the crystal ball question was going to be because to get a sharp crystal ball question around finance was was tough. So I'm gonna go back to John, your definition of the different types of TV charging.
So we had home, work and public if I remember right.
[00:33:15.610] - John Murray
That's right. Yeah.
[00:33:17.840] - Jon Slowe
And of public there were the three different types of public charging. But if we put all that public charging together what I'm going to ask each of you to do is to set the dial to 2030 on the crystal ball and I'll ask each of you what you think the split of EV charging will be in 2030 that will use public infrastructure rather than home or workplace so you can give a range, a precise number, up to you...
John would you like to go first and what do you see in the crystal ball for 2030?
[00:33:55.530] - John Murray
Yeah thanks Jon. Well I mean it's a really interesting question. I mean there are some in the industry that are advocating the so called forecourt model that we're all very familiar with similar to how we refuel are petrol and diesel cars today. And so doing that by rolling out very high speed chargers that can charge up an EV in maybe say five or 10 minutes and then at the other end of the spectrum there is the opinion that home and workplace charging will be able to cater for a large majority of our charging needs. And we've not really talked actually on this podcast about home and workplace charging, there's been much more focus on the public charging space.
But the public charging and home and workplace charging they cater for different needs. We didn't really talk about home charging at all but that is a very convenient and relatively cheap way to charge our vehicles today. So I don't know if I'm in a position to really give some numbers but I think the reality is that we're going to see a real mix across the different types of charging locations to cater for the broad range of drivers needs because no two drivers have the same driving patterns, right
[00:35:09.310] - Jon Slowe
Yeah and if you would have to say which would be most or the least out of those three what would you say?
[00:35:14.150] - John Murray
So in the research that we've done, I mean home charging is very much the most common way to charge vehicles today. I think we see that home charging will continue to be the most predominant one into the future but that's not to undermine the role that public charging has in terms of giving driver the confidence that they will have enough juice in the battery to to get from A to B. So home charging, workplace charging and public charging are all really important but they play slightly different roles. But I think if you had to put me on one to go for one I think most charging will be within the home.
[00:35:53.180] - Mark Henderson
Okay that's interesting. I slightly disagree with that you see because I think you're absolutely right on that it will depend on the drivers habits. Sombody who's just bought a small EV just to do a quick run round to the shops or the school run, clearlythey'll be wanting to to charge at home, but where I think there is a flaw in your argument is the actual grid capacity and energy capacity. National Grid have already published studies showing that in the average UK street no more than five cars can be charging simultaneously. So if we really are moving to mass adoption of electric vehicles that means that people who are lucky enough to have charging at home are going to be in the minority. And so people will need more public spaces just the same way if you've met a petrol station with a couple of miles of them and go and try and fill up tey'll be doing the same thing with even charging. So I say I say this green believe it will be much more public charge and then people perhaps appreciating at the moment.
[00:36:59.610] - Jon Slowe
Well Mark, given your business I'm not surprised and I think that's [...] Stirling last but not least how do you see that mix of home workplace and public?
[00:37:12.990] - Stirling Habbitts
Yes, well there's two different views there. I'm not going to take sides this other one I'm going different into the mix. I live in London of course and actually many people in the inner cities in the US they don't have off street parking and we already see in my neighbourhood and around London cables across the across the pavements to charge EVs that are parked on the street. So I think that the on street parking and charging on street is an interesting one to watch. I wonder if a solution could be found there or not and if it could that could change the game quite quite dramatically if we see a lot of on street parking on street charging of cars. I don't I don't know if that will happen or not. That is difficult one to solve but I think it's quite an important part of the puzzle how to how to potentially provide on street charging.
And I had one other general thought actually. I think that if we if we look at the the diesel and petrol infrastructure to for fuelling vehicles this is this is a massive indu,stry billions in this industry, and in this conversation we're talking about it which is very exciting because what we're essentially doing is where the government has a net zero targets here in the UK now essentially we are moving towards replacing the diesel and petrol fuelling infrastructure with the very assets which we're talking about. That's a phenomenal amount of investment in assets that what coming to into existence and in the coming decades. It's very tough to say.
[00:39:00.510] - Mark Henderson
I agree very much that's a very good point there Stirling and people have to remember at the moment we've got something like eight thousand four hundred petrol stations in the UK. So when we talk about building 100 electric vehicle charging stations people seem to say oh that's an awful nice view and if it turns out there's a lot of space we're all going to fit in [...] roadside so there's definitely room for everyone in this industry.
[00:39:29.720] - Jon Slowe
Well I think that summed it up nicely, Mark.
The electric vehicle charging cake, coming back to the cake analogy, is going to be very large and different customers will charge in different ways as John explained and there will be no shortage of opportunities and need to develop public and charging.
So thank you to all my guests today, it's been a great discussion. Thanks for sharing your views. And thank you listeners for joining the podcast. And we look forward to welcoming you back next week. Goodbye.
Following European Utility Week in Paris, Jon Slowe is joined by Arthur Jouannic and John Murray of Delta-EE, who also attended. They discuss their key takeaways from the event: who was there, who wasn't there, and what the hot topics of new energy are.
European Utility Week: Our key takeaways
John Murray, Principal Analyst, Delta-EE
Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We'll be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.
Jon Slowe 00:00:21.160
Hello and welcome to the episode. Today we're discussing highlights from Europe's biggest meeting place for the energy transition, European Utility Week. Held over three days in beautiful Paris last week, the organisers boasted a heady 18,000 visitors. We didn't count them. We don't know whether that's right. But there sure were a lot of people there. And this year it was actually co-located with a ongoing exhibition called PowerGen Europe which has more for the megawatt scale gas engines and gas turbine market.
Jon Slowe 00:00:56.330
I'm here today with my colleagues Arthur Jouannic and John Murray who were part of the Delta-EE team in Paris. Hello Arthur.
Arthur Jouannic 00:01:05.860
Jon Slowe 00:01:07.070
John Murray 00:01:08.140
Jon Slowe 00:01:09.050
So we might get a bit of trouble John with two Johns here. One John with an H on John without an H!
John Murray 00:01:17.600
That's right. We'll try and we'll muddle through.
Jon Slowe 00:01:19.730
I think the three of us will manage.
Arthur Jouannic 00:01:20.870
The trouble is really for me actually!
Jon Slowe 00:01:27.530
So between the three of us and our colleagues, we presented at the exhibition we met clients we met new people, we talked to our network, we had people come and join us at our booth. We listened to other presentations. So I think a perfect mix of experiences to talk about the highlights and help our listeners understand what was hot at the event, what's changed, what's upcoming, maybe what wasn't there as well that we expected. So we'll have I think two highlights from each of us if that's okay with you both.
John Murray 00:02:01.850
Sounds good to me.
Jon Slowe 00:02:03.710
And we'll maybe, Arthur, start with you. So, what would one of your two highlights or takeaways be Arthur?
Arthur Jouannic 00:02:15.610
Well John I've been attending that conference for the past seven years now and what I can tell you is that it was really different back in the day, seven years ago. You were walking into European Utility Week and you were facing a marathon of walking from booth to booth. Basically all the companies exhibiting there were huge manufacturing companies having huge booths and really trying to show off how big they are and how great they are to potential utility customers. So it was a very very formal, you had to be dressed very formally. This year what really struck me was the fact that the event was much smaller in a way. But nonetheless with as many companies that they used to have, it's just that the the size of the booths and the number of companies were completely different from previous years.
Jon Slowe 00:03:15.890
Arthur, so you're trying to say people were a lot scruffier as well than they were before?
Arthur Jouannic 00:03:20.710
Yeah in a way. There was a lot more of a startup innovation culture compared to to previous years, which means there is more dynamics in the room, a lot more discussion, a lot more fun between people. Delta-EE were located next to the innovation hub which was a lot of small startups showing their cool products and software and that was very exciting place to be, it was really buzzing. And that wasn't something we have seen before at European Utility Week, at least not seven years ago. It was really fun, really fun event for for us to go to.
John Murray 00:03:56.480
That was one of the things that I took away as well. It was my first time at European Utility Week, but I have been to the twin event PowerGen Europe before and while you had the traditional companies that have been there for many years, you know, they were still present, the established utility companies, the network companies, but you had lots of different companies from different backgrounds like the tech startups, the industry associations, the network companies and car manufacturers and mobility service providers. They were all there, all exchanging views and giving their perspective on the market. It was a really great high energy event to be at.
Jon Slowe 00:04:35.560
One thing I noticed was that the the only two utilities, and you might correct me here, that I saw exhibiting were Centrica with Centrica Business Solutions, and Enedis, the French DSO. So maybe because we were in Paris, I don't know, whereas in previous years virtually all the big European utilities have had their own stands saying 'hey look at me I'm doing this I'm doing that'. So they weren't there although the people were certainly all there and we even had stands from Google focusing on their smart home, Microsoft on some of their capability around energy insights and managing data in the home. So yeah I think that's a good characterisation, John a real melting pot. And Arthur, do you think more more software than hardware or not at that stage yet just a bigger mix of software and hardware?
Arthur Jouannic 00:05:30.700
Well the thing is that before these companies were trying to sell physical products to utilities from electricity products to metering products etc. And what you realise is that now noone is really actually selling products anymore. Everyone is talking about how the software works and what it can enable, what services you can provide to utilities. And that's really one of the reasons why the types of companies change. The ones who are exhibiting are the ones who are trying to offer software to utility companies and that's a very different offer to the huge hardware stands like you used to have.
Jon Slowe 00:06:11.200
Okay. So some big hardware stands were there, like Siemens with a very big portfolio, they were exhibiting, so theme number is more software and less hardware. John - how about your number one takeaway?
John Murray 00:06:29.790
My number one takeaway, well one of the topics that I'm looking at very closely within Delta-EE is electric vehicles. And it's been, if not the hot topic of this year, maybe the hot topic of last year. It's a huge thing that that's kind of taken the energy world I guess by storm over the last few years. So I was there expecting to have lots of conversations about the different EV type players at European Utility Week and there were lots of people there talking about EVs, but it just wasn't quite of the scale that I had been expecting. I remember when speaking to you guys in previous years there was really high energy about electric vehicles. I'd expect a huge buzz around that. And I had a lot of conversations with people, but was it just wasn't quite at the scale that I had been expecting.
Jon Slowe 00:07:22.370
John for me that's a sign that the utility world, if I can use that slightly all encompassing word, or I think the electricity world and the EV world still have a lot further to go to come together. Our hypothesis here at Delta-EE is that they will become very very significant, particularly for the utility sector. But I think we're still quite early on in that journey between the two different worlds becoming one, maybe that's too strong, or getting to know each other better.
John Murray 00:07:57.240
Yeah I think you're right, they're sort of at the fringes I think of the energy world, trying to understand how it can best play into the EV space and vice versa. So yeah, I guess some companies are a bit more advanced than others when it comes to that interplay. But there's a huge opportunity there, and that's what we are certainly seeing. So I think it's a good observation, Jon, actually that there's still questions there about the role that energy companies, the utility guys, can play when it comes to moving into the e-mobility space and vice versa. And one of the other observations that I had is maybe just that there are so many EV events going on today so maybe an element of sort of 'EV event fatigue'. There are a few other EV events going on around about the same time. So an element of that as well.
Arthur Jouannic 00:08:55.880
So, one thing I realised actually about the utility business is that it seems to me that the EV teams are usually not part of the same teams as the rest of the core innovation services part of the business. Could it be that potentially the guys that we usually see at European Utility Week are people focusing on services and innovation? They are not the same guys that are looking at the EV world and that this is a completely separate business unit for most utilities still?
Jon Slowe 00:09:28.300
Yeah I think there might be something in that, Arthur, if I circle around different utilities in my head, then I think you're right, they generally are quite separate teams and whether that's right or wrong I don't know. It still feels it's like a little arm of most utilities or electricity retailers or electricity companies. And it's got some way to go before it becomes a core part. Maybe that's fair and right given the small number of EVs on the road at the moment.
John Murray 00:10:00.870
But I think it's also a nod, that when you look at some of the large utilities that they are actually investing quite a lot into the EV space and they are actually developing their own whole teams and business units looking at EVs. I think is a nod in how seriously the utility companies are starting to take EVs, but it's just not become integrated into the 'business as usual' part of their main operations.
Jon Slowe 00:10:25.850
Well I'm going to summarize this second point as, maybe a bit provocative, but 'where was the EV sector?'. So far - more software less hardware compared to previous years. Second, where is the EV sector. Now it's my go. So my takeaway number one will be around energy insights and services. So, I think like in previous years there were a number of energy insight vendors present. Arthur you spoke at Eliq's breakfast, for example, event talking about how they're developing their energy insights business.
John Murray 00:11:08.970
And very good it was too, by the way! I was there and you presented very well Arthur, it was a great conversation.
Arthur Jouannic 00:11:15.170
Thank you very much John.
Jon Slowe 00:11:16.910
What I still see as a lack though, is customer centricity and that's a horribly overused word but there was still a huge amount of what I'd call tech. Look what the tech can do - whether it's a virtual power plant, home energy management, energy insights - a huge amount of 'hey I can do X, I can do Y, I could do handstands, I can do forward rolls!', but still for me (and I'm happy to be challenged by people listening to this), a big lack of developing this into really strong customer propositions. Now we know that people are trying to change that but I came away from the event thinking wow, there's still a long way to go here before the sector can say at all whether its energy centric or really becoming more so more customer centric than it is today.
Arthur Jouannic 00:12:14.840
I kind of disagree with that Jon, actually what we saw four years ago was two groups of developments. One being energy monitoring/energy insights software companies, and the other one being these macro generation, home energy management companies trying to optimize self consumption within the home. And it feels to me like this year the two worlds are starting to emerge a little bit where the leading home energy management companies are asking the software specialists in energy insights and customer engagement to help them better engage these customers that are really engaging really well with their own self generation and consumption. So, you're right it's not mainstream yet, but for the new energy world it's seems to me that it starts to be much more integrated with specialist energy customer engagers and and software solutions that help home energy management companies do a better job with their customers.
Jon Slowe 00:13:15.100
Okay, well I take your point that maybe those two worlds of energy insights and home energy management are beginning to merge, and we see capabilities of one in the other and vice versa. What do you think about the point though Arthur, that this is still a bit 'tech push' because I still saw lots of 'oh we can create a graph of how you use electricity' and most customers just don't care about that. So I still feel there's a long way to go to turn it into really strong service propositions.
Arthur Jouannic 00:13:47.060
Yeah, I mean there are more than 25 million customers in Europe using energy insight apps. A lot of the apps actually are really good. They are less talking about kilowatt hours and consumption and they are much more trying to empower the customer to do things about it, to help them on a day to day basis and a lot of these companies now talk about collaboration with the customer. So we see a lot of propositions like an idea of service or heater service emerging which require a lot of understanding about the technicality of the devices in the home, but also working with the customer to to understand how best to optimize the services. Actually think I've seen a few demos for these products and I think they're really really good and engaging and we could potentially see the chasm being crossed with these sorts of products in the next few years. So I'm very optimistic about it.
John Murray 00:14:43.600
I think the companies that are making these products though Arthur, and maybe to you as well Jon, you know they're providing the energy insights but are they are they profitable, are they making money? I mean the might of millions of customers and doing these cartwheels that Jon mentioned but, is there money to be made at the moment in providing these services to customers.
Arthur Jouannic 00:15:02.810
Most of them are a 'software as a service' business model, where they are not owned by the utility itself, and yeah I see them making money, they are growing. We have seen them five, six years ago and they've been growing quite nicely. Perhaps some of them still require external investors to scale the business up, but I know some of them are doing quite good business in the SAAS business model and as long as they manage to deliver their products on time with the expectation in collaboration with their utility clients, I don't see why there's no business to do in this space. There will be lots more demand going forward.
Jon Slowe 00:15:44.590
Okay. Well I'm going to I'm going to compromise with you Arthur, and lets say where takeaway number three is we're on the journey towards more customer centric propositions and service based models. And I think you're right. There was evidence of this. I just think it's gone. And there were some great companies with great propositions but there's I think a lot further to go with that. So takeaway number three - on the journey to more customer centric propositions. So, Arthur I think we come back to you now for your second takeaway.
Arthur Jouannic 00:16:23.870
So I just mentioned it in the energy insights discussion that there were some companies that need more and more investors. What really struck me was the number of, or the larger presence of, investors around the exhibition. Back in the day there were investors but mostly focusing on fixed fee energy and now now it seems like there is a lot of VC from oil majors or from utilities. There are a new independent group of investors who are seeing an opportunity in new energy particularly around the customer end of things and all of them really believe that having a portfolio of investment in this space will be highly profitable in the future. And I think from two or three years ago the big change, people believed at the time that investing in new energy and the customer side of the meter was interesting but there were better investments. And today these guys seem to think that actually this is the better investment and are solely focused on that. So to me it was a clear change from from a few years ago to this year.
Jon Slowe 00:17:35.510
You know I talked with both a number of investors who are looking for opportunities and a number of companies who are in the middle of raising capital. And I think that's there was a nice meeting point of more investors, more more impact investment money (looking for a home) and lots of opportunities to invest. I do think that the energy sector is a potentially tricky sector to invest in because every market is so different, the complexities of the electricity markets country by country, the policy and regulations. But it is encouraging, I think that we see this meeting of more capital looking to come to the sector, and obviously the need for capital as you say Arthur to scale these promising businesses.
John Murray 00:18:32.170
I mean this is another example isn't it. If it were required of new energy becoming more mainstream and the money follows isn't it. And you need both don't you, you need the new energy sector to actually have the credibility and to progress and to provide your compelling products and services for customers but then also you need the financial backing to get to scale don't you.
Jon Slowe 00:18:54.040
Well let's call this takeaway number four - more investment interest. Either of you got a better word than interest? It's a bit weak.
Arthur Jouannic 00:19:05.820
Appetite. So there is there is money to make for investors and that's the big change from before.
Jon Slowe 00:19:11.920
More investor interest and appetite. Let's stick with that for number four. John - two more to go, one from you, one from me. So what's your second takeaway?
John Murray 00:19:23.440
Yeah okay. A second takeaway. We've talked a lot about actually what's happened on the European Utility Week side but let's not forget the other twin event which was PowerGen Europe, and that's an event that I've been to for a number of years before and this is really sort of talking about the hardware, the the gas engines, the gas turbines, and the power generation sector really.
Jon Slowe 00:19:45.710
So companies like Rolls Royce, like Kawasaki...
John Murray 00:19:48.910
Siemens, G.E., those sorts of familiar names that go across lots of different verticals but they've historically been very much involved in the power gen sector and they were present again at this event with the PowerGen Europe hat on. My observation here is that in the past when I've been to these companies for many many years there have been maybe a sort of a resistance to the change going on in the energy sector to some extent, maybe just not sort of believing necessarily the scale of the change they were seeing from old energy to new energy, the pace of change things like that. That for me has in the past led to questions about the role that these sorts of companies can play in the new energy world. But at the event last week and also in conversations I've been having with the industry more recently I think these guys have really changed their narrative about new energy and the role which they can play within that, so much more chat around flexible generation if you like. So being able to provide dispatchable power generation to complement intermittent renewables for example, much more in terms of distributed power, local energy systems microgrids. So providing that sort of very local energy for local consumers and then also the way in which these companies can use either low carbon or zero carbon gases rather than sort of the fossil fuel gases like natural gas and things like that. So it's an observation that actually this transition is potentially having quite a big impact on these guys. You know the names you mentioned before, it's taken a while for these companies I think to really consider how best can they play in the future. But actually I think now they're at the point of actually being able to have a much clearer direction in the role they can play in the proposition to make and develop and complement this whole new energy world that we are moving towards.
Jon Slowe 00:21:55.900
So John I'm going to try and characterize that with a key takeaway so something like old generation finds its niche in new energy?
John Murray 00:22:07.240
Yeah. I think that that captures it.
Jon Slowe 00:22:11.870
Okay. Niche is maybe a bit unfair. Old generation finds its place in new energy.
John Murray 00:22:16.650
Finds its place, complements new energy. Words to that effect. I think there really is a role, a really important role I think for that dispatchable generation. But the key is to look not just in the next 5, 10, 15 years where around the world there is always going to be a need for your access to power generation but actually what's going to be the role in sort of 20 or 30 or 40 years time from when we're at sort of a net zero.
Jon Slowe 00:22:48.020
So the three elements of that - old energy finds its place in new energy, flexibility, micro grids and low and zero carbon fuels.
John Murray 00:22:56.200
Yep that captures it.
Jon Slowe 00:22:56.310
Okay. Which brings me to my - I've got a choice of two for my last one. My less serious one is that the Belgian pavilion served the best beer at the event...
John Murray 00:23:11.010
Well let's start with that one. What do you think?
Arthur Jouannic 00:23:16.550
The two Johns have been spotted every day at this pavilion. I can attest to this!
Jon Slowe 00:23:21.340
Arthur you will make the case fo the French, I'm sure. My more serious one is around the flexibility, so for me it was interesting seeing the different angles on demand side flexibility. I think there were a number of really interesting home energy management companies looking to aggregate demand from the home, parcel it up in a platform or a virtual power plant, and be able to use that flexibility. And that's not new, but there was a big focus for example from the European Federation of Energy Traders, so the mainstream electricity markets starting to have more focus on flexibility. The start of distribution network companies using flexibility. That emerged a little bit.
John Murray 00:24:10.490
We've seen the emergence of haven't we Jon. We've been looking at that as a business in terms of the emergence of sort of flexibility markets in some countries. And in your view is that something which is just beginning to emerge across all of Europe or are some countries ahead when it comes to that sort of thing?
Jon Slowe 00:24:28.370
I think some are definitely ahead. I think it depends where, what angle you're taking. If you're looking at distribution networks, the UK or GB is definitely ahead. If you're looking at self consumption then that's a German market with PV and some of the inverter manufacturers doing more around that. Companies like Greencom, other companies who've been doing this for a while looking to monetize the flexibility in different ways for balancing services in the electricity markets, ancillary services for system operators. So I think flexibility across the whole value chain is getting a bigger focus. Arthur you've been looking at home energy management in this area. What was your your view on flexibility? Do you see much change?
Arthur Jouannic 00:25:17.600
Well the main change is, everyone is talking about flexibility in home energy management. That's clear, a lot of companies have their own views on what's happening in their own markets, in their own niche, and now this starts to sense an opportunity to grow somewhere else and do other things. And the number of questions I've tried to answer, linked to these two topics - flexibility and home energy management is huge. I've pretty much felt like I talked about it for three days. So to me the interest is really fascinating around this. What else is just a buzz, or the start of the industry believing in this market? I don't know but I really believe actually people start to think this is going to grow fast and I don't want to miss the boat. So yeah I felt a real buzz around that topic, yes.
Jon Slowe 00:26:13.740
Okay so I'm going to characterize this last one, number six, as flexibility across the whole value chain from the home to all elements of the electricity system. Okay. I'm going to run it through now all six and then I'm going to ask each of you for what you think the key theme will be next year if you have to pick out one. Well, next year or the next years. So the first theme was more software less hardware. The second theme with yours John - where was EV sector? The third theme was mine on the journey towards more customer centric propositions. Fourth, Arthur, with you about investors increasing investor interest and appetite in this area. Five, John, with you co-generation and old energy finds its role in new energy - flexibility, local energy systems low and zero carbon fuels and the last one was flexibility emerging from the home across the whole electricity value chain. So there are our takeaways. Get the crystal ball out now put it down on the table. And set it forward from one to three years so fairly short term. So Arthur what are we going to see in the next years at European Utility Week? Apart from a change of name.
Arthur Jouannic 00:27:40.380
So yeah the first thing, the change of name which I think characterizes the change in industry and I think the European Utility Week organizers want to to do something brand-wise to to make sure this happens but a very interesting to see the name changing. But anyway I think two things will happen next year. First one is the amount of people talking about communities and how we can capture value from energy communities, local energy system communities of consumption, all the stuff from making local communities use and generate their own energy and how this market will develop in future. The second thing actually is maybe not a market, but I really believe Europe is ahead of everyone else in the world in terms of new energy. We are starting to see a few North American and a few Asian companies coming to this event to learn a lot about Europe or to do business. I really believe a lot more non European companies will come to the European Utility Week (or it's future name) to make business, to learn about new energy and they probably are going to see Europe as a leading continent for this space, so a lot of things are happening. A lot of things will happen in the next few years and these countries will want to know about it.
Jon Slowe 00:29:03.700
Well you sneaked two in there, Arthur, but I think a sign of that second one already was a big Saudi Arabian delegation. So maybe that's a sign of that we'll see. John how about you? One or two
John Murray 00:29:18.100
One or two points, so for me, I want to stick my neck out and say the return of heat. We haven't really talked too much about heat during this episode here but I think as you know one of the biggest challenges I think facing the energy sector as a whole is how you decarbonise heat. So I think we're going to see a lot more of that in the next couple of years especially around the growth of heat pumps, the removal or the kind of slowdown in terms of new gas boilers going into homes. So lots of talk I think about heat pumps, heat as a service, topics like that.
Jon Slowe 00:29:56.170
And maybe hydrogen as well?
John Murray 00:29:57.490
Well that could be my sub-bullet point to that was hydrogen, we haven't really talked about hydrogen, well we haven't mentioned it in this podcast (episode) but it's been one of those topics which could potentially be the hot topic of 2019 and I think we'll certainly hear a lot more about hydrogen in the next one to two years.
Jon Slowe 00:30:13.150
Okay. And my point will be I think the thing that we felt maybe could have been stronger this year which was EVs, because I think what they'll mean for the sector in terms of demand, new business models, new companies coming into the space, flexibility from smart charging of EVs, maybe more in the longer term vehicle to grid will become a such a central part of the electricity sector that it's bound to be a big feature at these events. Yeah.
Arthur Jouannic 00:30:41.230
And Jon, which country do you think will have the better beer next year?
Jon Slowe 00:30:46.790
In Milan. Well Italy , I would have thought would have a bigger presence. I'm going to stick with the Belgians, I'm a big fan of Belgium.
John Murray 00:30:58.020
Hopefully there will be a French stand Arthur.
Arthur Jouannic 00:31:01.580
We'll do our best!
Jon Slowe 00:31:05.650
Although I must say the Belgian beer did run out rather quickly. Maybe that's because it was so popular and so good.
John Murray 00:31:10.440
We might have some Scottish beer, we might have a Tennents stand.
Jon Slowe 00:31:13.840
Yeah, or Brewdog?
Jon Slowe 00:31:14.380
Okay, well beer joking aside, I hope listeners you have enjoyed that and got a flavour if you weren't there of European Utility Week in Paris. And by flavour I mean not only the beer flavour, the energy flavour. Arthur, thanks very much. And John, thank you for sharing your insights.
John Murray 00:31:37.150
Thanks very much.
Arthur Jouannic 00:31:39.430
Thank you Jon and John.
Jon Slowe 00:31:41.210
And we avoided any John confusion...
John Murray 00:31:42.690
Jon Slowe 00:31:46.870
And we'll look forward to talking with you, my listeners next week. Thank you very much. And goodbye.
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