TALKING NEW ENERGY

 [00:00:04.000] - Jon

Welcome to Talking New 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. Today we're looking at where we're at in the energy transition and what next in the next five years for the energy transition. And to unpick these two rather large questions, I'm joined by my colleagues, Jennifer Arran. Hello Jennifer.

[00:00:42.070] - Jennifer

Hi, Jon.

[00:00:44.070] - Jon

And Andy Bradley. Hello, Andy.

[00:00:44.800] - Andy

Hey, Jon.

[00:00:46.760] - Jon

So these are quite big questions. Where are we at in the energy transition and what next for the energy transition? But we're going to pick them off in three chunks and pick up particular examples that we think bring up some of the key themes. The first chunk will be what's happened, looking at where we are, particularly in the light of the COVID pandemic. Secondly, we'll be looking at the companies. So the types of companies, who is doing what, where, how and where the companies are at in the energy transition. And thirdly, looking ahead to the next five years. So without further ado, let's get stuck into these three questions. So first of all, looking back at what's happened in the last year or two. So, Jennifer, you've got some nice stats and numbers that painted a bit of a picture for the customer end of the energy transition.

[00:01:40.600] - Jennifer

Yeah. As luck would have it, this is quite a hot topic in our research services and the new energy business models research has looked across all of the different areas, products and services in new energy and calculated the customer spend over 2019, 2020 and into the future. What we found is that 2020 has been a growth year compared to 2019 on customer spend. And there's been a kind of double digit growth, so 50% growth in terms of customer spending on new energy technologies.

[00:02:15.820] - Jon

Jennifer, when you talk about customers spend on new technology is what sort of spend on technologies are you talking about?

[00:02:21.720] - Jennifer

Yeah. So technology wise, really, the growth has been around kind of three main areas. So e-mobility is not surprising, a huge part of the growth story across Europe in a number of different markets, new heating is definitely emerging stronger in some markets than others. And behind the meter generation and storage is really important as well.

[00:02:45.580] - Jon

Okay. So new heating, heat pumps and the like behind the meter generation and storage, PV and batteries effectively.

[00:02:51.260] - Jennifer

Yeah. Yeah, absolutely.

[00:02:53.050] - Jon

And any surprises to you in what's not in there? So connected home, for example, I guess we're seeing growth in smart controls in homes, but the value of each device is relatively low. So when you add it up in money terms, it looks quite small.

[00:03:10.360] - Jennifer

Yeah. Exactly that, so in terms of customer spend numbers, it's a part of all of the markets that we look at. We look across all the kind of major European markets. But it has a lower impact on that overall value story across the market. And the value story across the market is different depending on when you're looking. In Germany, for example, it’s very much split between the three main technologies that we just talked about. In France, there’s more of a new heating story emerging there. And in the UK, it's pretty much all about EVs at the moment, and e-mobility is really driving those numbers.

[00:03:47.100] - Jon

Okay. So even in three European countries that are relatively similar in some ways, very different patterns in where that investment on the customer side of the meter is going. Yeah.

[00:04:00.520] - Jennifer

Absolutely.

[00:04:02.260] - Jon

Andy, any surprises to you in what we've seen in the last year in those growth areas or the different patterns?

[00:04:10.260] - Andy

Yeah. So just to pick up on a couple of things that Jennifer said there, particularly around the heat market. Anecdotally I've heard that the market is really flying in Europe, actually, in the major European countries, the year on year growth from 2020 to 2019 is really strong from last year, but the then into 2021, the growth is continued to accelerate. And I think there are some strong subsidies in place in one or two countries, particularly Germany, for example. But the heat market in particular, seems to have really taken a strong recovery from the initial impact of COVID and then it's really gone from strength to strength in 2021.

[00:04:47.210] - Jon

And that's not only, Andy, the old technologies, the boilers that dominated the European market, but that's very much the new technologies the heat pumps.

[00:04:57.780] - Andy

I think it’s a mix, there are still a significant number of non condensing boilers across Europe. So I think that a lot of those non condensing boilers are being swapped out for condensing boilers, which is still on fossil based. Clearly, there is an efficiency game, of course, but it's condensing boilers swapping out non condensing, but also, of course, you know, continuing growth we see in the electrification of heat.

[00:05:22.360] - Jon

So when I think of these markets, I often think of inflection points, the curves are not normally nice, smooth curves that increase year on year at a steady rate. With many of the markets we're looking at, you get these inflection points where you suddenly get this jump in the market. Andy, I'm not sure of the inflection point for heat yet, but for electric vehicles, arguably, we are at that inflection point. Jennifer, in terms of the EV market, what sort of market shares are we seeing, and do you think we will see in the next years as EV markets really take off?

[00:06:00.080] - Jennifer

Yeah. I mean, the EV story is one that we started talking about with a lot more certainty. So it seems to be a kind of when not if that inflection point can happen. And an agreement that inflection point will be soon. I mean, from as early as kind of early 2020s, so 2022, 23 next year, we're going to see kind of around a 10% share of annual car registrations being EV, according to our forecasts, and then that ramps up really rapidly actually towards 2025 and 2026 where you might start to do that crossover inflection point that you're talking about.

[00:06:36.830] - Jon

So more than 50% being electric?

[00:06:40.830] - Jennifer

Yes

[00:06:43.830] - Jon

Andy, we're not going to see that in the heat market quite yet are we?

[00:06:46.830] - Andy

I don't think so. Not yet. I think those inflection points come, Jon, when the proposition for customers is one that customers want, there might be a price premium there still. And I think for some of these solutions, there will always be perhaps premium solutions. But when customers want them, I think that's when the market pulls demand, whereas in the early stages, it's the industry supply, if you like pushing into the market and trying to earn a right to get the customer's attention. So with EVs, I think as we know, the price of vehicles is dropping all the time and you might get closer to normal ICE vehicles in the next two, three years or so, and that will help their adoption. But I think as more drivers experience an EV and realise that actually it's just a better car, customers will start to want one and as long as the infrastructure is there and there aren’t nightmare stories about recharging, etc. I think the market will really start to pull the demand.

[00:07:45.540] - Jon

So in terms of the value pools, I guess a huge interface between electric vehicles, because of how they charge and the energy system. So there's a huge value pool that will certainly developed there. Heat is coming, but not quite there yet. And the other big bucket we talked about with EV and storage, arguably there in Germany, growing in a number of other countries. But in parts of Europe where there are poor incentives or electricity prices very low, that market's not there. So those are the three big growth areas we've seen in the last year, and I think we'll keep seeing those being the major capital spend items for distributed energy. Let's move on now to the second question, a bit around who is doing what in the energy transition and the different ways we can think about the energy transition, the large utility scale projects, the behind the meter, the distributed energy markets – Andy, what patterns do you see in terms of what role different companies are playing to date?

[00:08:56.000] - Andy

When you look back probably around a decade. I mean, the thinking about the European space, European utilities - a lot of the European utilities saw huge value destruction in the early part of the last decade and had some tough times through that. But a number of them are very successfully capitalised on the utility scale renewable boom and some of the valuations of some of these companies now have increased massively compared to, say, ten years ago. The oil majors, I think, missed that boat completely. But more recently, the oil majors have clearly come to the energy transition party, if you can describe it as that and they're all taking the energy transition very seriously. And the European majors, Total, Shell, BP, in particular, have all put money on the table and made big announcements about their future engagement. But they're still relatively early days in terms of their engagement. So I think when you look back on where we've got to, utility scale renewables is the big story for many of the big utility players and perhaps some of the new oil majors that are coming to the space. But I think when you look forward, the landscape is going to be very different because it's much more about distributed energy markets in the future. You know, a key aspect of the energy transition is how national grids, national energy systems are going to be increasingly fragmented. Assets are going to be distributed through the system.

[00:10:29.260] - Jon

Those behind the meter assets we were talking about earlier, for example.

[00:10:32.330] – Andy

Absolutely. So behind the meter will become really important. It's not going to become all of the system in the future, but it was really an irrelevant part of the system in the past. But in the future, it's going to be a very important part of how the system works. So those distributed energy markets and understanding those, the technologies required, the propositions required, the business models. I think that's going to be the big playing ground for a lot of the players in the space, which is attracting a huge number of startups, technology companies, software companies, the digital giants, controls companies, the car companies, all types of OEM really. So I see this sort of massive convergence of industry verticals, actually around the energy transition.

[00:11:19.260] - Jon

Can I use your boat analogy? So the boat’s sailing already for utility scale renewables, it's left the harbour, it's powering away. It's got further on its journey to go. There's a lot more build out of utility scale renewable to go. But that's on the journey. The boat for distributed energy markets is behind the meter markets is leaving the harbour. Is that the right way to think of it, left the harbour? Is it building up speed or is it still in the harbour?

[00:11:45.820] - Andy

I think it's still in the harbour, but it's building up speed.

[00:11:47.820] - Jennifer

Are there Russian players trying to get on?

[00:11:54.820] - Andy

There is because I think I you go back five years, Jon, to thinking about the work we're doing at Delta-EE together then, and the narrative’s moved on massively. It's no longer a strategic debate about do we need a transition strategy? That ship has sailed. And now, it’s OK, what do we do? How do we respond? How do we protect our legacy business? But how do we create the business for the future, the business for the transition. So those are the questions now that companies are focusing on.

[00:12:28.340] - Jon

Yeah. And I see some companies if I take a company like SSE, one of the big energy companies in Ireland, UK and Ireland, for example, they've made a deliberate decision to exit the residential retail business. But they're very good at utility scale renewables, so they've decided they won't play in one part of the market, but they will play in another. But I don't think I've seen many of those sort of very proactive decisions yet. I think my impression is that most companies are still trying to see if they can play in these distributed energy markets, trying to work out what the right business models are, the right customer groups to focus on how quickly they can get traction. It’s very wide open still.

[00:13:14.570] - Andy

Yeah, I agree with that. But I think most companies are trying to keep their options open, quite sensibly. I think there are other examples – E.ON, for example, split itself into two parts going back a while now, RWE or Innogy has made them move out of the downstream part to a large extent. Orsted, perhaps moved first of all around a decade ago. So there are examples of companies who are looking at their strategic position, their capabilities, their strengths and weaknesses, and positioning themselves in what they think is the right part of the supply chain for their business. But I think many companies are still perhaps trying to work that out, but also because of the nature of the transition where the customer is just going to get more and more important, you know, the value is shifting downstream towards the customer to become more distributed, more local, more behind the meter. That fundamentally means that if you give up your customers, are you giving up your future business opportunity? And I think that's the strategic conundrum for many of the companies.

[00:14:20.340] - Jon

Yeah. It's the future battleground, I think for the next five years. And it will be fascinating to see whether the likes of Volkswagen with their energy retail or energy service company they set up, Elli, or Tesla, who have been - will they move into the heating market? Will they become an energy retailer? They're already doing that in some markets, or would it be the incumbent utilities that have got the big customer bases that can exploit them?

[00:14:54.800] - Andy

Absolutely. And some of the oil companies have a fantastic opportunity because of their brand strength. You know, they have some of the most recognisable brands globally. BP and Shell, can they use those brands in a positive way with customers to fundamentally reposition themselves? And that's an opportunity or challenge for them, depending on your perspective?

[00:15:18.080] - Jon

Well, my view is that the winners here will be the ones that are truly customer centric, that really put the customer at the heart of their businesses. And I still think most of the types of companies we talked about still have to learn that. I don’t know whether I'm being too cynical or not. But it's really a mindset change that, you hear that mindset when you talk to company like Procter & Gamble on one of my recent podcasts, the R&D team will spend a third of their time in customer homes. And that's just so different from the energy sector at the moment. OK, let's move on to the next topic, which is what next - looking forward to the next five years. So I’m going to, as a talking point here, use a poll that we carried out for our research network. We gave them a number of options to choose as to, which would be the most important topic. We didn't put e-mobility in there because it was so obvious as Jennifer you talked about earlier, we have passed the inflection point there, arguably. But the topics we gave them were flexibility, heat, the rise of DSOs, so distribution system operators or distribution network companies, customers and communities and hydrogen. So a bit of an eclectic mix and not a like for like, what we found was that when we asked them the top three, there were flexibility, heat and DSOs - distribution system operators, and customers and community weren’t far behind, hydrogen was quite far behind. So Jennifer and Andy, any surprises there from your side or comments on that order?

[00:17:25.020] - Jennifer

I mean, I wasn't surprised to see flexibility up there. It seems to be one of the almost, I think, the key to holding everything together in this new entity future we might have, at some level, you know, how we use flexibility to manage demand on the network is going to be absolutely critical.

[00:17:46.080] - Jon

And it cuts across virtually, well most, if you segment the world by technologies, it cuts across most of the technologies.

[00:17:54.160] - Jennifer

Yeah, and eventually it will. So in the near term electrication of heat, for example, we're still talking about air to air heat pump, hydrolic heat pumps, electric hot water heaters. There's big replacement markets there post 2025. How you then use those loads when those technologies are in homes becomes really important. And that's going to require some sort of flexibility to really maximise that and use that and that's a big opportunity there. So it will be important, I think flexibility.

[00:18:15.610] - Jon

So you would put that at the top as well or toward it?

[00:18:25.610] - Jennifer

I think I would, because I think, like you said, it scans across everything and it's the way that everything is going to be linked together. And it's the way to get the best value out of all these different parts that we're seeing emerge. So it's almost that linking piece.

[00:18:37.580] - Jon

Ok. Andy, what about you?

[00:18:41.160] - Andy

I mean, the three make sense to me, actually. I mean, heat in particular. It's been the elephant in the room that no one's talked about for a decade. Really. We know how to decarbonise generation of electricity. We know how to decarbonise transport now, or at least cars. Heat, well, there's been lots of talk, but not much action, really outside the new build sector for quite some years. So it's fantastic to see heat coming into focus in terms of policy making and regulators. And I see that in discussions with the companies that I'm dealing with, that there's big opportunities and challenges in the heat market. So I think flexibility and heat made a lot of sense to me. And the DSOs are intimately related to both of those. I mean, they both an active demand side, and much higher rates of electricity use for heating or comfort in the home will lead to huge pressures on distribution networks.

[00:19:40.190] - Jon

And they become the key enablers, in my view, as you electrify more and more, you need to optimise, you get more challenges, more congestion on the network at lower and lower voltage levels, and the need to optimise and glue all of these together. Jennifer, the same way you talked about flexibility becomes critical.

[00:20:00.400] - Andy

Absolutely. The network industry, when you look back over the last decade, probably has been cost driven for the whole time. But actually, now I think if I was advising a young graduate looking to come into the energy sector, I would advise them to really look at that part of the energy sector because it's going to be the key part of the energy supply chain in the energy transition. And actually it's going to be fascinating and interesting part of the industry to be in I think, over the next decade.

[00:20:28.500] - Andy

So I think those 3 topics, sorry Jon, I think I agree with, but there are a couple of other things that I feel quite strongly about, and they are I suppose related to those some way, but just two things that perhaps surprised we haven't talked about. One is the kind of ‘as a service’ concept, e-mobility cars are expensive. Heat pumps, the product is expensive. There's really really big commercial challenges for customers to engage with and take those propositions ‘as a service’ business model concept can be a way of squaring that circle from a customer perspective that may make it affordable.

[00:21:10.240] - Jon

That's a fourth topic of customers and communities, which in a way, it's not an either flex or flexibility or customers and communities. But it's an and because as you said, unless you package it in a way that makes it doable for customers and attractive for customers, it's going to be technology push and industry push without any customer pull. And the second one Andy, you said two things?  

[00:21:42.380] - Andy

The other one was, I see many, many companies focusing on net zero, our own company thinking about our net zero strategy. Big questions. How do we achieve that? What actually do we need to do? What investments do we need to make? What do we need to change in our business? What technologies do we need to adopt to achieve, to get ourselves on the pathway to net zero? Mainly, a question for commercial or industrial companies. But I see that as a really big topic at the moment. Actually, in the market, loads of companies have made really bold statements about that. But perhaps many of those companies don't quite how they're going to achieve it. So I think for me that's a big flashing red light and an opportunity for many companies, I think.

[00:22:27.790] - Jon

Yes. So translating a bold vision into a road map or a plan or a strategy?

[00:22:33.360] - Andy

Yes.

[00:22:36.220] - Jon

Keeping on time, let's bring out now the Talking New Energy crystal ball, and I'm going to set the dial five years forward. It fits the time frame we've been talking about. And the question this week for all three of us is what if we look forward to a fantastically successful five years in the energy transition, so we're well on the pathway we want to be on to reach our decarbonisation targets. What are the three lessons we’ll have taken from COVID or the COVID crisis that would have helped us to reach that point of by this time.

So what can we learn from COVID? What can we embrace? What can we use? What will we have used in 2026?

[00:23:34.200] - Andy

Could I start with that one Jon? The first one for me is money. We do have a magic money tree. Just seems to me that if the emergency is big enough and the urgency is strong enough, then actually we can find the resources and the focus to deal with problems. And it really made me think that through the pandemic that actually there is the capability for us to move faster and do more and have the resources to do that.

[00:24:04.800] - Jon

The three of us think it's urgent enough, Andy, compared to COVID, do you think society at large, political will, governments see it that way yet or is a bit more to go?

[00:24:16.120] - Andy

I think there's still a bit more to go quite clearly. But the news over the last weeks, the events and things, the pressure is building. COP26 is coming up rapidly. The geopolitics of it always clearly very challenging.

[00:24:25.120] - Jon

Moving in the right direction.

[00:24:30.120] - Andy

But for me if we look five years down the track, I really hope that actually we've taken the lessons from the pandemic and the way we've met this challenge and we're willing to be really ambitious in the way that we can meet the climate challenge.

[00:24:51.920] - Jon

Jennifer, how about you? What will we have taken from the COVID crisis that enables us to succeed in 2026, and be on the right track.

[00:24:59.770] - Jennifer

I mean, over last ten years at Delta-EE, I've always spent a lot of time focusing on what that means to the customer and the customer view on all of this. And I think what COVID has told us again is if there's that shared, you know, urgency, we are seeing communities pull together in a more local way. You know, people cooperating with their neighbours within their communities to make things happen. And if you engage people in the right way, then there is that community spirit there that perhaps we'd forgotten in countries like the UK that there really was, the country really did pull together and achieve a great deal over that time. And if we could put that shared effort into decarbonisation, for example, then that would be incredible. I also think there’s a lesson there around, you know, connecting impact. So those everyday impacts in terms of the overall bigger picture. So maybe that's a disconnect at the moment that people don't see that I insulate my house if I can have a big impact.

[00:25:57.980] - Jon

So people got in COVID - if I stay at home, if I do what I'm told, I will be helping to fight the pandemic..

[00:26:10.420] - Jennifer

Yes, it was for helping everybody, wasn’t it. It wasn’t just to help yourself. It was to help everybody.

[00:26:12.820] - Jon

Whereas people don't get that connection with climate change yet, or not to the degree they could.

[00:26:16.790] - Jennifer

Yeah, we still see that customers are really mainly motivated by their own personal circumstances or financial benefit on the whole. And that's not surprising.

[00:26:26.780] - Jon

But we can tap into that wider societal benefit?

[00:26:31.760] - Jennifer

And EVs is a big opportunity because actually once everyone’s got an EV, then you might find that everyone suddenly starts thinking about how they use their energy in a slightly different way. So that's a good opportunity to start engaging with customers through that.

[00:26:45.760] - Jon

Yeah, a critical part. If we can't do that, we probably won’t get to where you want to get to. The third point I'd make is that I think we can learn massively from local supply chains and the way in the COVID pandemic there was a benefit to having local supply chains to being more resilient, to be maybe slightly less reliant on global trade flows and on imports from other countries. So I think that will help us to better match local generation with local demand and balance the system at a more local level and then tap all the local energy resources that are that are there that can be used now.

[00:27:29.750] - Andy

Yeah, I agree. And I think it also supports Jennifer's point about engagement with end users, with customers, having local organisations or having them participate in local community energy or local energy systems is a great way of helping them understand the contribution they're making, perhaps to the system decarbonisation. As so often with the energy transition, everything is connected. And I think that's part of the challenge, isn't it? But the industry tends to start with the technology rather than the customer. If we can always really keep focusing on the customer and work backwards, I think that will be a fantastic achievement for the industry. And if in five years time that is business as normal in the way the industry works, that would be fantastic.

[00:28:15.130] - Jon

With the wheels oiled - that's not the right word, Andy - but the wheels oiled by the magic money tree. Okay, well, that's been a really interesting discussion on where we're at and where we're going. Andy and Jennifer, thanks very much for your time. Listeners, I hope that’s given you some useful ideas, perspectives, things that you can maybe take to your own activities, your own work in the energy transition and I look forward to welcoming you back to next week’s episode. Thanks and goodbye.

If you're as passionate about the energy transition as we are, then please keep in touch. You can follow us and me on Twitter, LinkedIn, or subscribe to the podcast on your chosen Podcast platform. If you like the podcasts and like sharing, then please do rate us and to listen to archived episodes. To read transcripts and see the latest Delta-EE insights, then please visit www.delta-ee.com.

[00:00:04.000] - Jon

Welcome to Talking New Energy, a podcast for new energy expert. 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.

[00:00:21.840] - Jon

Hello and welcome to the episode. Traditional utilities are evolving fast to navigate and help drive the energy transition. As part of this evolution, a number have established venture capital teams investing in innovative companies which are much needed for a successful energy transition. Today I'm talking with two people from two utility venture capital funds exploring their aims, their investments and their experiences. So let's say Hello to my guests. The first Terhi Vapola head and founder of Helen Ventures in Finland. Hello Terhi.

[00:00:58.520] - Terhi

Happy to be here. Thank you for inviting me.

[00:01:01.860] - Jon

Thanks for joining Terhi. Our listeners might not know the Finnish energy company Helen, so can you give us a very quick snapshot of Helen and then tell us in a nutshell about Helen Ventures?

[00:01:17.420] - Terhi

Sure. So Helen is originally from Helsinki Energy. So one of the largest energy companies here in the Nordics and being very advanced in terms of technology and development over the years. So being this kind of progressive player, establishing a venture capital arm was kind of a natural next step when realising that there is a change in the transition and also the additional needs needed. So what we do is focusing €50m into European startups, focusing on transforming the energy sector.

[00:01:54.040] - Jon

Ok. And can you give me an example of one of your, well, favourite investments? That's maybe a bit of a loaded question, but exciting investments that you've made in the last year.

[00:02:04.000] - Terhi

I’m thinking that all of my investments are of course my favourite, you can say, but maybe I'll just point out the first one, Virta, which is fastest growing mobility platform company in Europe, which actually we are all co-investors together with Jan.

[00:02:25.780] - Jon

Thanks Terhi. Our second guest is Jan Lozek, founding and managing partner at Future Energy Ventures, part of the E.ON Group in Germany. Hello Jan.

[00:02:38.800] - Jan

Hi, Jon. How are you?

[00:02:40.120] - Jon

Good, thanks. Thanks for joining. Jan, my guess is that more of our listeners will know about E.ON so probably no need to give a snapshot for E.ON, but can you give us a snapshot of Future Energy Ventures?

[00:02:52.980] - Jan

Sure. I would like to do it. Future Energy Ventures is a venture capital firm which is globally seeking for the most exciting young teams and technologies with regard to energy transition. We would like with this initiative to accelerate the energy transition, in fact, and we invest into digital solutions from A to B, which is what we call the future of energy technology, which also includes future city technologies and mobility. We have had invested so far €250,000,000 globally, mostly in Europe and North America. The team is really seasoned, coming from with the background from E.ON, energy from the venture capital scene, from startups and so on. So far, 15 people in Palo Alto, Tel Aviv and Germany, Berlin and Essen to change the world in energy and to solve a huge problem which may secure our planet for the future.

[00:03:53.680] - Jon

Thanks, Jan. So you've been, you mentioned the joining together of E.ON and Innogy’s teams. How many people all together in your team? Of course, quite a few locations you mentioned.

[00:04:06.360] - Jan

Yeah, we combined the best of both. We are now 15 people from both units – E.ON and Innogy. And this was quite a challenge. Two years of Covid and I'm not sure if you're aware of we launched Future Energy Ventures at the end of last year. So Covid was already running and most of the people or some of the people did not meet until today because Covid still ongoing. So it was really a challenge for us to create a team, to create team spirit, to create a high performing team in order to fulfil our task, our mission, our passion, and with regards to mission and passion I think we are all aligned and looking into the same direction. And also, as with regards to our past experience, both teams invested into energy transition technologies with slightly different focus, but in general, the same passion in the same direction. I think the challenge is really to build a team in that time. And that challenge is still here and we are looking forward to become closer and lock our industry.

[00:05:16.220] - Jon

Thanks Jan. Same question as I asked Terhi - one of your, and I won’t use the word favourite this time, one of your exciting investments you'd like to highlight for our listeners.

[00:05:25.200] - Jan

Yeah, it's really difficult. I fully agree with Terhi. I'm just taking the last two new announcements. One was we exited Waycare, which was a company which invested into the space of managing transportation and cities, having municipalities to manage their transportation more efficiently, especially in crowded and tense times in the transportation systems. And we got a great team or is a great team. And we exited this company to Rekor Systems and Nasdaq listed company just two weeks ago using the amazing technology, and we are also happy that this company can further grow now and further accelerate their technology because that's really helpful and great. And another company we just closed was bidgely another round of bidgely with our co-investors, a company from the US which is investing into energy management solution and also growing their business model into the mobility space.

[00:06:34.680] - Jon

Okay, thanks very much. So three quite, well, two related to transport from both of you and one around data and energy management. Okay, let's move on now. My first question is around the core aim of your fund, because the way I see it you're wearing two hats to a degree, you're wearing a financial venture capital hat, but you're also wearing an innovation hat for your energy companies. I'm interested in the balance between those two drivers, or maybe balance is the wrong way to think about it. Maybe they're complementing, I don't know. But how would you answer that question? Are you energy innovators? Are you investors? What are you measured on? What drives your decision making? Or is it that neat combination of both? Terhi, let's start with you. How would you answer that question?

[00:07:33.060] - Terhi

First of all, I think that you should think of them in the continuum. So I think they are not opposites of each other. So for us, it's super important to have both at the same time. So maybe my own background - I come from the VC industry, so I could not think of making investments which would not be economically sound. And I also think that if you want to do a strategic impact, which is of course natural and expected of us, you can't do it unless the companies you are invested in are becoming successful and actually making a difference. So you see the strategy from, in our case the investment strategy and investment thesis. So looking at the themes which are really needed in the industry to drive it forward and actually make the energy transition happen. And in our case, especially focusing on the digital elements of it, which our tradition is something where utilities are not as strong and at the same time are typically the stronghold of startups, fast moving start ups. So bringing that element into the thesis enables us to actually make a strategic impact, but without any compromises on the economic front.

[00:08:50.640] - Jon

Would you say the financial decision making about the return would be the same as a pure play venture capital firm?

[00:08:59.030] - Terhi

Yes. Our focus is quite narrow. So we just look at that area. But in terms of finding and investing in companies there you cannot make compromises.

[00:09:10.180] - Jon

And what about your team? Do you need both sets of skills in your team? You said you come from the venture capital background. Are you all venture capital seasoned professional or a mixture of that and people from Helen, the energy company?

[00:09:23.720] - Terhi

We do have a mixture. So we have people with a strong energy background. We have people with a strong venture capital background and the combination of the two, and also the understanding of not just the energy field, but also the digitsl business. It's bringing these elements together and then kind of thinking as we see with benefits, having the access to the business and being able to have the experts to both evaluate the cases but also support maybe an indoor opening and helping the companies to actually grow.

[00:09:59.680] - Jon

Jan, do you see that the same way at Future Energy Ventures, or any differences in how you approach it?

[00:10:07.760] - Jan

I absolutely agree with Terhi. Well, you have answered most of the topics. Similarly, just another perspective on it. If you look at the problem we wanted to solve. Utilities used to set up huge systems, invested €3-€10 billion into grid systems, into generation, power generation systems like large nuclear power plants, coal plants and so on and so forth. And then they operated those assets for 40, 50, 60 years. But it's now happening with the immense growth of decentralised energy resources, there are a lot of small energy systems which are coming into the broader energy system with different ownerships, with different capacities, with different characteristics, and we need to manage and change that absolutely. And coming from that from that background and having the target to accelerate the change of our industry, we believe the venture capital is the best tool to innovate our industry. And if we believe that's the best tool, we need to operate as a venture capitalist in the industry to change our world and that where we are coming from. And I think that's absolutely different than venture capital firm thinks when they enter the market. However, we are coming with this strategic mindset into the venture capital market,

but the acting, the rules of the game, how we behave and rounds what we do when we access an investment is absolutely similar to any venture capital firm in the market. But if you are then in, you may have more time to exit. You may have a long, more longer term focused than a venture capital firm and so on and so forth. But again, the financial rules we apply, the techniques we use to assess a company are absolutely the same as any other company in the market.

[00:12:09.920] - Jon

So I can see very easily how you measure the financial return and the venture capital model - invest for three to five years, say, exit, you get your financial return on that investment. How do you measure the innovation return? Or can you put the question maybe a different way? Can you imagine a situation where you didn't get that financial return? But you really did get a great innovation return so a bit around how you measure that? And might there be a trade off between an okay financial return, but a great innovation return?

[00:12:49.200] - Jan

Happy to start this time with the question. I believe it's impossible to invest in a start up without having a clear financial return perspective. I mean, later everything can happen. But in general, I believe that's not possible because we are entering very small companies and here's A and B with a smaller team, this little revenue and so on and so forth and then. But we are doing mainly we are using the market and our capabilities to scale that company, and the company is only ready for great innovation return when it’s scaled, let's say to a stage and it has 100 employees and it have €20, €30, €40 million of revenues and you need the market capabilities to do so. So if you would focus too early or strategic return, you would always you always run into the risk that the business, the company, the team is dying over time. So hence we have an incentive not to do so and always focusing on final financial returns, which are the language of the market of good or bad innovation, so to say. So, hence, we are always focusing on financial returns. And then if the company grows, then it may become strategic relevant and exit candidates.

[00:14:13.080] - Jon

Yeah. Okay. So there's almost no hierarchy there. Focus on the financial return, and in some cases it might be a financial return and only that, in other cases you might get that and the strategic return as well.

[00:14:24.430] - Jan

And there's a little other argument into it. We, for example, Future Energy Ventures, we invested into 50 companies. Obviously 50 companies is far too much for E.ON to integrate to take over whatever. So the most of the companies will exit into the market to any other company and so on and so forth. So in order, if you wanted to do our business right, we need really to use the market techniques in order to have a profitable overall business investing into many companies.

[00:14:55.880] - Jon

Yeah. Okay. Terhi how about yourself at Helen Venture?

[00:15:01.020] - Terhi

If you think about the financial returns, as I said, that's easy finding the good measures for innovation. We actually haven't come up with it, they are very fluffy. So that's why we basically focus on the investment thesis and looking at the areas which are crucial and thinking of whether what the startup is doing is something which is really needed in the industry, and can it make a difference? And through that, then go in and then be part of the investment team of that company to help it grow. That's how I sit in terms of how to how to balance the two or measure.

[00:15:46.440] - Jon

So if you get the investment thesis right, then that really drives the chances of that strategic innovation return.

[00:15:54.660] - Terhi

Exactly. And also in terms of the individual cases. So here the investment thesis is the broad umbrella. But then also every single investment decision to thinking of that part of the company. So if it meets the financial hurdles, what is the impact of that particular company and what it could be in the market?

[00:16:15.620] - Jon

Yeah. Okay. So considering that in the investment case, you tick the financial return box. Was there much debate in Helen in setting up Helen Ventures -  you’ve been going for a few years, I think? Was there pros and cons discussed, was it a big decision, was it an obvious decision?

[00:16:38.320] - Terhi

I would say that it was very progressive as Helen is the company, which is looking at transforming the industry and being a fast moving player, being a medium size. So being able to actually take decisions to be more mature. And what was very clear out of the strategy process before Helen Ventures were started was that this future what we are building on is changing more rapidly than we anticipated and is requiring different kinds of skill sets, which are the core competencies. So in order to really get into where Helen wants to be at in terms of its strategy, it fundamentally needs tools. And of course, there are other tools as well to basically bridge that gap. But it was very clear from the strategy that the venture capitalist tool, to really address that, crossing the chasm, as you could say.

[00:17:39.980] - Jon

So you could do all of that from within the utility in the traditional way. That was quite clear. You felt you had to do that through having stakes in more - if I use the word more dynamic - but younger dynamic innovative companies.

[00:17:59.310] - Terhi

And also the kind of,  what they bring in into the market. So thinking of the digital capabilities and thinking of the kind of a way of developing but also the subject of subject matter. So thinking of AI or satellites or different kinds of technologies which are taking very rapid advances at the moment. So it's kind of realising that you need partners, and you can have different kinds of partners, also other types outside of the startup ecosystem. But the start up ecosystem is actually having a good chance of making a difference at this kind of phase we are at in the energy transition.

[00:18:34.640] - Jon

Yeah. So it's one of the tools to help companies like Helen really make the transformation you need to make. How do you bring that innovation back into the energy company? It’s topic I've discussed over the years with utilities, of innovation and venture capital. I think it's a fascinating topic, and I'm still not clear on -  there probably is an answer or the way. But on one hand, there's a driver not to interfere too much with the companies you are investing in, to let them run and grow their own way. On the other hand, you're investing in them because you want that access to that innovation. I'm really curious to hear your thoughts on how you work with the bigger energy company and how you get innovation from the start ups back into the energy company. Jan, do you want to go first on that?

[00:19:36.610] - Jan

So what we do is we work closely with E.ON as such, there's a huge innovation Department aspect or even bigger than Future Energy Ventures which is understanding, seeing and understanding and interacting with the core business to select the most burning topics. Technology topics, future topics, the people in the business scene. And this in mind, we source work together with our startup portfolio and invest into certain technologies as Terhi laid out given our investment strategy and so on and so forth. And if we have a startup, then we worked closely with the colleagues from E.ON to test and to check where to apply the technology, where to test the innovation and so on and so forth. So we are starting with small projects between customer services and the startup or our network business and the startup and so on and so forth. It's not working in all the cases, but in most cases we start just to test, to test the technology, get to know each other and so on and so forth. And so sometimes magic happens. And I would say 20% of startups there are magic happens, then it gets into commercial relationships and commercial relationships, meeting selling technologies for €1 million, €2 million, €500,000 and then so on, so forth.

[00:21:11.060] - Jon

When it works and when it doesn't work. Is that just a case of magic happening? Or can you look back and are there certain things that you can see really help to make that work? And any examples or any examples where yeah, looking back on that, that didn't work because… or is it just a case of as you describe magic happening?

[00:21:34.040] - Jan

Transformation  - good transformations are always more successful than bad transformation, so there is something we can influence here. Yeah. This the success rate of transformation or change process is 30%. It's not 70% or 60%. Referring to that, I would say, yes, you can do a lot of things. Understanding the people side, making sure that the people talk the right language, they understand each other, making the right introduction, starting smaller and then getting bigger, right? We work with champions in the business, which are eager and keen and exploring new solutions instead of trying to convince people which in the first moment are not interested in the technology and so and so forth. So we are using these typical transformation capabilities you should use. We wanted to change something in an organisation. Change management here is key and already be more successful and improve your success rate.

[00:22:38.220] - Jon

And I guess it's the relationships that you mentioned. The relationships and the people side that can be so critical. Terhi, what have you learned since you've been going about bringing that innovation back into the business or making those connections?

[00:22:53.400] - Terhi

I truly believe what you just said. It's a people business. So knowing the people and being close enough to the organisation is so very important for us. Of course, Helen is not a huge organisation. It is actually relatively easy to know who are the right people and who can be the champions of taking the innovation forward. We've also institutionalised a little bit so we had this kind of business. So we divide the roles in such a way that we have investment, which is our focus and then we have business decisions, which are the business’ focus. So we don't mix that too. But at the same time, we have taken in into our team to work with us. We call this like BD, business development persons who are from the business who part time work with us so that we bring bridge the gaps between the business unit and ourselves. And these are the champions or catchers of the innovation so that they can take it in their own respective organisations and try them forward. So that's one way we've done it.

[00:24:03.400] - Jon

 And has that worked? Any lessons, or are you still learning how to make that work really well?

[00:24:09.920] - Terhi

We’re still learning, as you know, this is one of the one of the hardest things and the CBC business to actually bridge the gap and make it in a way where it adds value for both sides. What we've seen is that, again, going into what is the innovation or solution, what the startup is bringing and how well it fits into the what the business needs. So you want to make sure that you are innovating in the areas where external innovation makes sense and is needed. And for example, in our portfolio, we have a company called Gradient, which is working on bringing the digital twin into districting networks, being able to lower the temperatures, so therefore have the cost benefits and also the CO2 benefits and also being able to address the thing that soon these networks are going to be so complex, so being able to manage them, you need the more advanced tools. So kind of bringing that kind of solution in which is fundamentally needed on the business side is obviously where you have most fruitful possibilities to actually add value.

[00:25:28.320] - Jon

That's fascinating. So a lot of alignment, a lot on the people side and some structure around that as well.

Looking back at your time in this area, is there any if someone in another utility with starting up a court prevention capital fund, is there any one bit of advice you to give about making the connections and bringing that innovation back into the business?

[00:25:55.660] - Jan

A very good question. Makes me a little bit reflective right now, but we don't have the time to be mindful now. I think generally, what Helen was in making sure that on both sides it's a people business you don't get access to interesting technologies if you don't understand that it’s a people business and the same happens on the internal side, and then you need to have quite good stakeholder management in your organisation from the top to the bottom. There isn't any level you shouldn't be aware of because the board is as important as the people in the business, which then buy the technology to test them out.

[00:26:39.800] - Jon

Yeah, it's really interesting for both of you. I think we're getting to the time now where we need to bring out the talking new energy crystal ball and look to the future. We've reflected back a little bit. Let's look forward now and set the dial to five years time - 2026. And I want each of you to imagine that in 2026 you're looking back at the last five years, and what one thing do you think you'd be most proud of in your current roles in that situation? Terhi let's start with you and then Jan.

[00:27:24.900] - Terhi

So I think two things which I'd like to see happening. So one, obviously we are in the industry where climate change, we can actually make a difference by finding out technologies which can help us to address it. So I'd be super happy if we've been instrumental in making those technologies available and into the market. So played our role in enabling that to happen. And the other thing which I do believe we should be doing is bring the digital tools into the industry, which has happened in the other industries earlier. So I think bringing those capabilities and tools into the energy market in the next few years is fundamental to actually enable us to do things we want to do.

[00:28:20.440] - Jon

If you had to pick one biggest challenge, one thing that might keep you awake at night about achieving those two things. What would that be?

[00:28:30.920] - Terhi

Probably if you think about the kind of grand scale of climate change so we don't have the luxury of waiting anymore finding or solutions. And how do we accelerate, so that we bring the future quicker into the market so that actually we can make a difference.

[00:28:56.120] - Jon

Yes, so that’s speed. Thanks Terhi. Jan, what are you most proud of looking back over the last five years if you're in 2026?

[00:29:02.720] - Jan

Hopefully a climate report with an outlook that we may be closer to the 1.5 or 2.0 degree and which we wanted to achieve, the planet is not getting warmer, and that would make me really happy because that's our passion. We wanted to contribute to secure our planet. It looks not very good looking into the latest reports, and we wanted to be instrumental in changing here and using our skills and applying technologies. As Terhi already said I wanted to  repeat this again. But I think the topic, the topic we are fighting for is securing our planet and having something in our hands which fights back against climate change and making the world is a bit better for the next generation.

[00:29:56.660] - Jon

And the biggest challenge for the difference you can make on that, and the disadvantage of going second is you're not allowed to use the same challenge as Terhi has talked about.

[00:30:06.440] - Jan

Yeah. No, I think the challenges we need to shift a little bit our communication also in this in this round here we are talking about energy giants and what they are not doing on what's the right thing for venture capitalist. But the problem we are solving is climate change, and we need to keep all the attention of everyone to the point that this is the task and the mission we have. And I think that's the challenge. I'm also in our discussions in the company in E.ON and the board, wherever we are, we need to focus on that problem. It's not about optimising, getting more efficiency of a large corporation, it's not about sustaining the life for four, five years, it’s solving the most burning problem on Earth. And I think that's the huge challenge. If I'm looking into our conversation and conversations in our board, with my colleagues in E.ON and in the press, everyone is still on the mode ‘Yes, I'm doing my job and then everything is getting better’. But we are not there yet. We need to focus more. We need to challenge ourselves more.

[00:31:08.360] - Jon

It's really to be mission driven. Well, nothing hard changes overnight. I guess meaningful things always come with challenges and never easy to do. And I can see there's such a huge wave of innovators out there that can help to drive the energy transition that the investment and capital that companies like yourself can bring to that and then help to transform traditional utilities is a critical part of what we need to do. As you said Jan, keep to 1.5 degrees, hopefully, warming for the future. So thanks both very much.

Thanks Jan, thanks Terhi. That's been a fascinating discussion and a great window for our listeners into the world of utility or corporate venture capital. And thank you to listeners for joining this episode. We hope you found it interesting and look forward to welcoming back next week. Thanks and goodbye.

[00:32:13.220] - Jon

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