Wytse Kaastra, Managing Director, Accenture

Andy Bradley, Director, Delta-EE

 [00:00:22.220] - Jon Slowe

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

[00:00:22.350] - Andy Bradley

Hello and welcome to the episode. Jon is taking a short break and I'm standing in for him today. My name is Andy Bradley and I'm Jon's fellow director at Delta-EE. For those that don't know me, I've been at Delta-EE and in the new energy space for over 10 years now.

[00:00:38.180] - Andy Bradley

Although before then I admit I had over 20 years in the oil and gas industry. So, I still have some way to go before I reach my own personal net net-zero target. Today, we're going to focus on one interesting and important aspect of the transition from old energy to new energy, namely how incumbent utilities are reinventing their digital infrastructures in response to the many changes that are happening throughout the energy system and in customers’ homes. Changes that I'm sure many listeners are familiar with, such as growth in renewable generation, battery storage, electrification of heat and transport.

[00:01:13.660] - Andy Bradley

Smart meters and increasing connectivity of all consumer devices. Or the so-called internet of energy in response to these changes, how are utilities redeveloping their CRM and billing systems or building new digital platforms to offer services into the market? What are the main challenges they need to overcome and what are the experiences to date? I'm delighted to say that I'm joined by Wytse Kaastra from Accenture, Wytse is lead for the utilities, Europe and energy retail business, and has many years of hands hands-on experience of working with utilities on these questions.

[00:01:49.150] - Andy Bradley

Hello Wytse

[00:01:51.810] - Wytse Kaastra

Hi, Andy, how you doing?

[00:01:53.680] - Andy Bradley

I'm very good, thank you. Welcome to the podcast. I'm sure everyone will be familiar with the Accenture name Wytse. But can you start perhaps just by giving us a short introduction to Accenture and your role within it?

[00:02:05.270] - Wytse Kaastra

Yeah, sure. So, we are a global professional services company with more or less 500,000 employees, which is sometimes hard to imagine even for myself.

[00:02:19.910] - Andy Bradley

That immense number, we work for the large corporations globally, for the Fortune 2000 companies and also some smaller selected ones. We focus a lot on innovation and technology. That's really at the heart of what we do. And the services we provide are starting from strategy consulting, straight into technology advisory and digital transformation type of work, system integration, application management and also business process outsourcing. This is more or less what we do. I'm personally doing that specifically for the utility industry that I'm leading in Europe, as you just mentioned earlier.

[00:03:05.090] - Wytse Kaastra

And next to that, I'm also leading our centre of excellence for energy consumption and retail services on a global level. So basically, to put it simply, I'm trying to best bring the best of Accenture to our clients and driving innovation and setting the agenda and then the strategy for our teams and supporting them in their daily delivery in the different countries where we operate.

[00:03:33.430] - Andy Bradley

OK, thanks. Thanks. I had no idea that Accenture was so big, actually half a million employees. I mean, within that huge organization, how important is the utilities segment for you as a business?

[00:03:46.000] - Wytse Kaastra

Well, utilities, is very important. It's actually one of the starting industries of Accenture. And many, many years ago when I joined and it's almost 23, 24 years ago, we were called Andersen Consulting and actually utilities was even at that time one of the key industries we had. So today we serve more or less 19 industries globally. And utilities is in the top five of that. So, it's a very important segment of business for Accenture.

[00:04:21.310] - Andy Bradley

Okay, cool. All right. Thank you for that. So let's start our discussion then, perhaps at a high level and then focus down on some more specific use cases before we get our sort of, or Jon's crystal ball ut towards the end of the discussion, perhaps just to kick things off. I mean, just to clarify what we're really talking about when we talk about digital infrastructure, is it primarily back-office systems like billing and CRM or are there other things that you think need to be considered?

[00:04:51.750] - Wytse Kaastra

Yes. So, perhaps one step back and if you look at the full value chain, you need digital infrastructure, digital platforms, I would say across the value chain from power generation and renewables. You need it for trading, obviously, for your transmission and distribution are finally on the customer side, which is the traditional retail area. So, we see these type of platforms supporting the business in all these areas. But for today, I think we would like to focus indeed on the retail side.

[00:05:24.360] - Wytse Kaastra

This as discussed.

[00:05:27.410] - Wytse Kaastra

And they are typically the traditional platforms that we have been working on with the industry over the past 25 years is clearly on the CRM and billing side. But I would say that today in this digital era and also in this energy transition where we are in the midst of, I would say there is more than only CRM and billing. So typically, I would say there are three channels. The top chunk is really around digital customer engagement, digital experience, managing the channels from phone to apps to chatbots.

[00:06:06.420] - Wytse Kaastra

That's a whole ecosystem in itself, which is driven by digital platforms and technology. Then at the heart, you have the systems of records, almost CRM billing, metering that's really where the heavy lifting and transactional machine is running on. And then next to it, you have all the new products and services, which is a bit of an IOP game, whether it's a smart thermostat, boiler's, demand response, electric mobility, solar panels and that also require specific solutions to support that.

[00:06:40.420] - Wytse Kaastra

So, it used to be very much CRM and billing. And today I would say it's a wider architecture of functionalities.

[00:06:49.250] - Andy Bradley

Okay, thanks. Thanks. That's a really great overview. I think we'll come on to a few specific use cases later in our discussion. But perhaps to start with starting at a high level, I mean, how would you characterize the position of European utilities when it comes to these types of aspects of the digital infrastructure?

[00:07:12.020] - Wytse Kaastra

Yeah, well, for those that are in the industry and active in Europe, it's not going to be a surprise that the retail space is not an easy area to operate in as a utility.

[00:07:25.700] - Wytse Kaastra

And the reason for that is that the market is liberalized. We know we have competition, and that's not always the case in other sites of the world where it's more of a monopoly.

[00:07:39.220] - Wytse Kaastra

But in Europe we have competition and electricity and gas are to a very large extent a commodity. So, whether you get it from company A, B or C for a consumer, it's more or less the same surprise becomes a very dominant factor. So, that's a bit the challenge, I would say, where the retail industry is in. So as a result, in order to be able to win and to compete and to be successful, it's mission-critical to a very low cost to serve.

[00:08:10.810] - Wytse Kaastra

Lower than the competition and in the same time, have a great customer experience in order to, I would say, improve the margins, reduce the challenge to make sure the clients are staying with you, improve loyalty by different programs, and also find new sources of growth, new products, new services and become more relevant as a brand. I mean, that's kind of where the challenge of the industry is. Some are making some good steps.

[00:08:41.710] - Wytse Kaastra

Others are, I would say, still struggling a bit. But that's the competitive arena of our clients.

[00:08:48.280] - Wytse Kaastra

And as a result, they need very strong digital infrastructure to support their business aspirations and their business strategy.

[00:09:00.740] - Andy Bradley

And I mean, how do you think companies are doing? I mean, my experience over the last 10 years has been that, you know, many utilities have tried to introduce new CRM systems and, you know, often made the front page of local newspapers for the wrong reasons and in the journey of rolling those systems out. I mean, do you think over the sort of more recent times European utilities have made great strides forward?

[00:09:30.020] - Wytse Kaastra

Now, your spot on. I think we've seen that across the globe and also specifically across Europe, that typically these implementations of these CRM and billing systems have been quite a painful experience, painful in the sense that it was very large it was expensive. And if you only had one percent wrong of your data, because we're talking about millions of customers, should quite quickly hit horrifying numbers.

[00:10:02.370] - Wytse Kaastra

And then you end up in the newspapers if you have your data and your migrations wrong. So, I would say that has been a bit the past. Most of the incumbent utilities have their back offices running quite smoothly at the moment and are really focusing more now on improving the experience and working on new products and services and are very hesitant, I would say, to touch the back office for exactly the reasons you said.

[00:10:34.170] - Andy Bradley

Yeah ok.

[00:10:34.170] - Wytse Kaastra

On the other hand, the good news is that at the time it was all very new.

[00:10:38.820] - Wytse Kaastra

I mean, this whole concept of switching from one provider to the other was new. And as a result, you had all these market communications companies were not prepared to manage that. But that's now well understood, and everybody is managing that, I think, quite properly. So, the maturity of the industry is much higher.

[00:10:59.210] - Wytse Kaastra

So, I think we're going to see also because, these companies are now moving into a new era of new products, new services, new ecosystems, that we're going to see a next wave of evolution of these platforms.

[00:11:15.990] - Wytse Kaastra

And we're already seeing the first movers doing that at the moment.

[00:11:21.650] - Andy Bradley

Because, again, going back a few years, my perception was the IT departments in many utilities had a lot of power and influence and unfortunately probably had a mindset of inventing things in-house rather than bringing things in from external vendors. Do you think that sort of description is completely invalid today? Or has the industry moved to some degree away from that to looking externally and bringing innovation and new approaches in from outside of the organizations?

[00:11:57.560] - Andy Bradley

Or is that still an issue for many companies in the sector in Europe?

[00:12:04.680] - Wytse Kaastra

Well, I mean, I would certainly not claim it's perfect, but I think the utilities would understand very, very well that they need to innovate, they need to adapt their business models. They need to tap into, I would say new growth opportunities. And that is very difficult to do that alone. So, I think everybody understands the theory of partnering and engaging with interesting other companies and setting up alliances and doing potentially acquisitions.

[00:12:37.810] - Wytse Kaastra

But, of course, I mean, there is a difference between the top strategy and the top thinkers and the execution on the ground. And I think that's where the challenges that we currently see is that although the strategy might be great, the execution is poor. And also, because technology is moving so quickly. Right. So, what was relevant five years ago is already outdated now. And what's hot now is already might be outdated in six months.

[00:13:05.990] - Wytse Kaastra

So, you need to keep enormously up to date with all the new trends and technologies. And also, your people need to evolve. And it's I mean, the French they say it's éducation permanente you need to learn over and over and over because the knowledge is just disappearing while you're looking at it. So, I think that's really the challenge. And that's also how we try to help our clients, is by building digital factories, by collaborating together, bringing in digital experience, bringing in these {illegible} thinkers, bringing in ecosystem partners, software vendors to keep that ecosystem and that factory running and helping them with that.

[00:13:46.680] - Wytse Kaastra

And next to that, perhaps another trend is, it's not only the IT organisations anymore, it's really much more business-led. And because these technologies, this whole digital transformation, digital is a business challenge. And because it's not only a technology supporting something, it's actually the technology might be the new product or the new service. So, I think also this convergence between the business and IT is very prominent on the agenda. And I think that separation that we had probably 10 or 20 years ago is not relevant anymore.

[00:14:21.420] - Wytse Kaastra

It's really business and IT working together in this digital transformation type of approach. And again, some companies have it better than others.

[00:14:32.020] - Andy Bradley

Okay. Yeah, absolutely.

[00:14:33.340] - Andy Bradley

I mean, sounds quite positive, actually, your perspective. The industry's come a long way to develop good strategies. Everyone recognizes the secret is in the implementation and the convergence between the business needs and input into these initiatives is much stronger, perhaps, than it was 10 years ago. So it's quite a you know, it sounds as though the industry has certainly moved in the right direction. And, you know, from the, all the work you've been doing over the last years, kind of interested into sort of discussing with you a bit about the challenges, the key challenges that you see for companies that are still having to overcome as they move forward with digital infrastructures.

[00:15:11.760] - Andy Bradley

I mean, based on your experience, what will you pick out your kind of top three challenges that you would highlight for any utility considering how to go about redeveloping digital infrastructure?

[00:15:24.920] - Wytse Kaastra

Yeah. So that's a good question because actually everybody's struggling with it. I think that there are many challenges. But let me try to give you my top three. The first one is really how to transform from legacy to the new world. So, this whole migration question, because sometimes defining where you want to go is almost the easiest part. And if you could start with a blank sheet of paper, you can build it from scratch, which is, I will not say, easy, but relatively straightforward.

[00:15:56.430] - Wytse Kaastra

But if you have a legacy business where you have invested in a lot of money, there's a lot of data and also sometimes unstructured data that is not properly cleaned and move that into a new digital infrastructure. It's a massive journey, which is really complicated. So how to do that? Which steps to take? How to manage the risk? How to minimize the exceptions? That's really one big challenge. The second challenge I would like to name is that our clients are becoming more and more pan-European or even global players.

[00:16:34.510] - Wytse Kaastra

And if you look at the energy transition that's not stopping in the UK or at the border of the Netherlands. That's something that goes across the world and across Europe. And our clients want to tap into that. But the utility market is actually very localised. So, if you have something that works in the UK and you bring it to France, it's not going to work anymore. And the same is going to Germany. So, you need localised solutions which are fitting into the local markets.

[00:17:04.020] - Wytse Kaastra

And that creates a lot of complexity and it's blocking speed, it's blocking scaling. So that's the second challenge. And it's quite expensive to keep up to date with all these regulations. And the third one is probably actually the most important is the people. And because sometimes we tend to focus too much on the platforms thinking that Platform A or B is the silver bullet and that's going to resolve all my problems. I believe it's yes; the technology is one big component.

[00:17:38.790] - Wytse Kaastra

It's the urbanization and the people around it. So, having the right culture, the right people, the right execution with the right skills, being entrepreneurial, being innovative, digital savvy, being agile. At the end of the day, the winning companies are not competing on the platform they use. They're competing with the people and the operating model that is using the tools. So those will be my top three challenges to overcome.

[00:18:04.780] - Andy Bradley

Okay. Really, the three fascinating challenges actually, on the last one there where you said most important when you talk about people are talking about simply people with the right skills in terms of digital software, IT, bringing those into the utility business and enabling the business to drive forward a digital strategy.

[00:18:27.130] - Wytse Kaastra

Yes. Soft skills is absolutely one thing. But it's also the methodology, so how do you work together in a major way? Well, it's not burning all the budget without realizing anything.

[00:18:38.580] - Wytse Kaastra

So, it's really the methodology. It's the skills. But it's also how to innovate. Right. Because innovation has not been a key strength of utilities. I mean, honestly, if you look at the percentage of money, of euros, or pounds that goes into innovation was close to zero 20 years ago. Today, it's much higher, but it's still way behind some of the other industries. And innovation has been seen a little bit in the past.

[00:19:08.100] - Wytse Kaastra

As something that you have a special department doing innovation and the rest is not caring about it. Whereas now innovation needs to be represented in every element of the business, in the IT, in the business, in the digital people. So, I think this mindset, this culture of innovation and driving entrepreneurship is also a key component.

[00:19:31.590] - Wytse Kaastra

So, it's, yes, it's IT skills and technology, but it's much more than that only.

[00:19:37.140] - Andy Bradley

Yeah, yeah. I absolutely agree with that. I mean, in terms of getting the talent in the industry. And what's your feeling on how attractive the utility spaces is for young talent, entrepreneurs, innovators, digital specialists to come into the utility sector, you know, utility sector from outside probably looks quite boring, quite {illegible}, quite traditional. Do you see the utility companies in Europe being able to attract the people with the mindset and the energy and ambition that you're implying is needed to be successful in the space?

[00:20:12.550] - Wytse Kaastra

Well, you can say the glass is half full or half empty, right? I'm probably going to make it half full.

[00:20:20.830] - Wytse Kaastra

Because it was a big problem in the past that indeed, the people wanted to go to investment banking or to fast-moving consumer goods companies or to telecom operators. And not to utilities, I mean, that was the picture probably 10-15 years ago. I think it's getting much better. It's getting much better given.

[00:20:43.270] - Wytse Kaastra

And we are helped. Well, we've not really helped by.

[00:20:46.630] - Wytse Kaastra

I think the whole energy transition and the sustainability agenda, that's really a massive attracting factor, I think, for many young people that really the generation wants to improve the world, they want to have a purposeful, I would say job and certainly gets what the utilities are at the heart of that transition. So, I think we're seeing improvements. Again, not every company is as attractive as the other. And some companies are much better in playing that card.

[00:21:20.380] - Wytse Kaastra

But clearly, I see a better uptake than in the past. And actually, we see that within Accenture as well, because the same issue as the industry has itself. We have it internally that we are also fighting for talent, for our own consultants, which department or entity do they want to join. And utilities has become much more attractive over the past years than it used to be, exactly because of this, because now we have people working on eMobility solutions.

[00:21:52.180] - Wytse Kaastra

We're working on IT platforms to support offshore wind farms and these type of things and suddenly that gets a lot of traction, I would say.

[00:22:02.550]

{Cross talk}

[00:22:02.700] - Wytse Kaastra

Still, a long way to go.

[00:22:04.710] - Andy Bradley

Yes, absolutely.

[00:22:06.570] - Andy Bradley

I mean, just picking up on eMobility there I just sort of perhaps sort of narrow down the conversation a little bit on some specific use cases and the digital infrastructure that's associated with those. For example, let's perhaps start with an EV use case, you know, where an EV owner wants to have, for example, a time of use tariff available to minimize their recharging costs for their car from a sort of digital infrastructure perspective. What are the main challenges to achieve that kind of time use proposition for an EV driver, do you think?

[00:22:43.480] - Wytse Kaastra

So, this is really where digital becomes very important and fun and relevant because the whole time of use thing is that if we take one step back, the objective of having that is to be able to better manage the grid at transmission-level, to manage supply and demand, making sure that not everybody starts to charge or consume at the same time. And also, at distribution level to avoid congestion. I live in the street with 10 Teslas and if they all start to charge at the same moment.

[00:23:18.220] - Wytse Kaastra

There is an immediate problem. So in order to steer the consumption and sometimes also the production at the right moment. This time of use solution can be a solution, another solution is more, I would say, top-down steering us, switching on and off batteries.

[00:23:39.270] - Wytse Kaastra

But they all have something in common is that it needs to be close to real-time because if there is an hour delay or it's pointless. And we see that with some smart meter data. Sometimes they come in 24 hours later. So that's great to send a bill, that's fine, but it's not great at all if you want to steer actively steer consumption behaviour. So, it needs to be close to real-time, you need to be able to communicate with millions of devices or assets which are distributed across the country.

[00:24:12.610] - Wytse Kaastra

So, it's not one factory. It's millions of cars across the country. So, you need a very strong IoT platform that is able to communicate with these devices. And the quality of the data needs to be, I would say a hundred percent right because if not, it's not going to work. So, I mean, that's the world we're moving into. We're moving from, I would say, traditional back end stuff which will stay there.

[00:24:38.440] - Wytse Kaastra

I mean, you need it. You need to be able to send a bill but we're moving into a real-time IT-led data environment to support this type of time of use or demand response type of programs and that's the new world, it's a complete new world.

[00:24:57.640] - Andy Bradley

Do you see specific companies out there that are leading the charge in terms of developing those new IoT platforms? Are there any sort of good use cases or examples that you might point to and say, you know, this demonstration is of good practice not to embarrass anybody and any companies or anything? But if there's any examples that you might like to highlight for listeners, I think that would be interesting.

[00:25:28.370] - Wytse Kaastra

Yes. So honestly, it's a fascinating area.

[00:25:31.740] - Wytse Kaastra

Right, because the traditional big players don't have yet solutions in this space. I'm talking about software solutions. So, you see a lot of smaller start-up scale-ups jumping into these type of markets. And then if they got it right, they get, they will get acquired hopefully and or being absorbed by the big utilities or backed by the big platform players.

[00:25:59.550] - Wytse Kaastra

So, I mean, in terms of software solutions, I mean Microsoft, is placing a very big bet on this and because {illegible} platform and solar around IoT and data. But it's a generic platform, so you need to build the business application on top of it. On the EV side, we see some very interesting companies emerging that are doing this. And so companies like GreenFlux and {illegible} are having very compelling solutions for the whole eMobility market.

[00:26:32.940] - Wytse Kaastra

And then if you look at the users and you have the NewMotion that was started in the Netherlands doing eMobility services and actually not only the charging of the cars, but they are now becoming even a utility providing electricity for the house. So, they're becoming actually competitive with the traditional utilities. That company has been acquired by Shell and Shell is now making that part of their utility of the future. Engie has been acquiring EV-Box, same story.

[00:27:04.050] - Wytse Kaastra

So, you see basically all the big utilities spinning off this EV place because it's well it's charging its electricity, cars, batteries on wheels. So, there is a future business model potentially there with smart charging and vehicle to grid type of solutions. And if you don't attack, I would say or grasp that markets.

[00:27:27.000] - Wytse Kaastra

Others will do it. Right, because the Volkswagen has announced to set up an energy retailer to loose, charging but whilst they are charging the home, they also charge your home and the car. So basically, Total is doing the same, big oil company. So, it's a very interesting battlefield with no clear winners yet, but we are contemplating everybody making the first moves there.

[00:27:53.470] - Andy Bradley

Okay.

[00:27:54.260] - Andy Bradley

I mean all the different types of use cases that we could talk about, you know, connected storage heaters, heat pumps, different lows, aggregation, demand response. You mentioned data earlier on in the conversation, you know the value of understanding consumption data in consumers’ homes and using that to create value for customers. You know, all of these different use cases. Do you think they will all sit on a single sort of enterprise platform ultimately, or do you see an ecosystem, of platforms that relate to one another?

[00:28:25.770] - Andy Bradley

You know, when you looked forward, how do you see the digital infrastructure developing for these types of utilities?

[00:28:34.310] - Wytse Kaastra

Yes, I would expect the latter. I think the days of the monolithic solutions where everything is captured in one application are behind us. So, the modern architectures are cloud-based, are modular, are component-based, are tied together by microservices, loosely couples. So, I think that that's going to be the future. So, you don't want to have 25 different point solutions either.

[00:29:08.500] - Wytse Kaastra

So, I'm expecting that these utilities are, will move to an architecture where you will see two or three distinct, architectures linked together based on the principles I mentioned earlier. I'm not expecting anybody being able to capture everything in one system, even if that's technically feasible. You can build everything, but that is going to limit your agility for the future as an example. If you have, something very cool, I would say omnichannel solution to interact with your customers.

[00:29:45.250] - Wytse Kaastra

If in three years from now there is a new solution provided by Weber, that is better you want to be able to apply that and to plug that into your architecture. And the same is true for something on the analytics or charging sides. So, I think that's the flexibility that these architectures will have. So that’s my expectations for the future.

[00:30:10.570] - Andy Bradley

Yeah, ok. But coming back to one of the challenges you mentioned earlier about legacy systems and moving, going from legacy to new world, that surely must be a recurring challenge for all of the existing players. And indeed, is that essentially the big opportunity for new players to come to the space who can come in with a clean sheet paper and essentially start a business as a digital business? Right from the beginning, perhaps the analogy might be Tesla in the automotive world.

[00:30:38.900] - Andy Bradley

You know, it started purely on EVs and a digital platform. You know, companies doing that in the utility space, which potentially might be quite disruptive over the next years. Will, incumbent utilities, because of this challenge they have around their legacy systems.

[00:30:54.050] - Wytse Kaastra

Yeah, 100% percent. I mean, you're 100% right. And that's what we are contemplating as well. Because what I said earlier, it's always easier to start from scratch and build something fully digital in the new.

[00:31:05.930] - Wytse Kaastra

Than having this legacy. And I think Octopus Kraken is a great example that they have been able to build something from scratch and not really familiar with the technology, but clearly they have an advantage of being able to start from zero and not having this legacy to carry with you. But ultimately, also those type of businesses will scale, will become bigger, will migrate millions of clients. And so, I think this legacy issue is.

[00:31:37.710] - Wytse Kaastra

Something ultimately in the long run. It's everybody will build their own legacy in some form or way. But clearly, that indeed the small digital players can capture can create an opening. But I think scaling up from it's easy to do the first 300,000 customers or services or what have you. But taking it from there to 10 million is not that easy anymore because suddenly you need to comply to all kinds of regulations.

[00:32:09.880] - Wytse Kaastra

It's difficult to grow organically at that speed, you need to take over when you perhaps need to merge or to acquire some legacy businesses. And before you know it, you end up in the same complexity that the governments have. So that's a bit my expectation.

[00:32:29.150] - Andy Bradley

Okay, okay.

[00:32:30.300] - Andy Bradley

You sort of pre-empted my crystal ball question slightly there and taking Jon's crystal ball out of the cupboard and setting the dial to 2025. What would you, you know if you went forward in a time machine? You know, what would you be really pleased to see in 2025 that you don't see today?

[00:32:50.780] - Wytse Kaastra

Yes, so perhaps starting from the business side, I mean, I spend my whole career on utilities and before utilities I was in energy, so I'm really passionate about it.

[00:33:01.590] - Wytse Kaastra

And I think we are living probably one of the most exciting times at the moment with this shift towards renewables and eMobility and decentralised solutions. And I think with the recent announced green deal for the European Union, and that's going to be even doubled down on by the European Commission to fight the COVID crisis. I think that the speed of adoption will accelerate. So, in terms of EV's and solar and these type of things, I'm expecting an explosion in the next 5-8 years in terms of adoption and scaling.

[00:33:46.470] - Wytse Kaastra

And with that, you need all the platforms and infrastructure, digital infrastructure we just discussed you need it because if not, you're just not able to manage it. So that's one big expectation I’m having and then clearly who's going to benefit from it, I think it's going to be a mixed bag between some very good start-ups that are able to scale at speed and the incumbents that will be able to adjust and transform themselves into this new world and can keep up the pace to meet customer expectations.

[00:34:26.250] - Wytse Kaastra

But again, there will be also some losers, I'm afraid that if you're too slow and if you concentrate too long only on the electricity and gas and you keep being a commodity player. I think the role of those type of utilities will be marginalized over time. That's my expectation.

[00:34:47.850] - Andy Bradley

Yeah, I think I agree. Some of the companies will no doubt become wholesalers or asset managers and, you know, withdraw from the retail space and other companies will benefit from that.

[00:35:00.590] - Wytse Kaastra

Exactly

[00:35:00.590] - Andy Bradley

Wytse, thank you for that discussion. That was a fascinating run through. I totally agree with the obvious passion that you have on the opportunity to help the world get to a better place. And, you know, I think we've both been in the industry for about 30 years and I totally agree that now is a fantastic time to be in this space because the opportunity to contribute to that energy transition journey that we're all on is really significant.

[00:35:24.920] - Andy Bradley

So, it's a really exciting time to be in the industry for sure. So, Wytse, thank you very much for your time. Thank you for your contribution today to the podcast.

[00:35:34.400] - Wytse Kaastra

Thank you very much. It was a pleasure.

[00:35:37.150] - Andy Bradley

OK, so thanks. That's it for this week. We hope you found it, an interesting discussion. This episode wraps up series six of our Talking New Energy podcast. We'll be taking a short break before we start series seven, but Jon will be back with you soon. Goodbye.

[00:36:05.610] - Jon Slowe

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

[00:36:22.020] - Jon Slowe

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

Simon Bushell, CEO, Sympower

Emeka Chukwureh, Director of International Strategy, Electricity Exchange

Jon Slowe, Director, Delta-EE

[00:00:22.310] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition. Hello and welcome to the podcast. In the current coronavirus crisis, balancing the electricity system has become more challenging in some countries. The challenges have been different from the balancing challenges before the crisis. In some cases, we've seen really high levels of renewable generation together with periods of very low demand on a local and national basis.

[00:00:46.880] - Jon Slowe

Prices have turned negative in some markets. Other markets with less variable generation have seen different challenges and maybe less extreme challenges. But to explore how these challenges have changed and how the markets have responded to them. I'm joined today by two aggregators whose day job is using demand-side flexibility to help balance the electricity system.

[00:01:10.970] - Jon Slowe

And we'll explore what life has been like for them in the crisis. So, let me introduce my two guests. First up is Emeka Chukwureh from Electricity Exchange in Ireland. Hello Emeka,

[00:01:23.750] - Emeka Chukwureh

Hello,

[00:01:23.750] - Jon Slowe

Emeka, thanks for joining the podcast. Can you give us a quick introduction to electricity exchange as a company? Who you are and what you do?

[00:01:36.940] - Emeka Chukwureh

Absolutely, Jon. Thanks for that, a pleasure to be here. So, Electricity Exchange is a smart grid technology and services company. We are focused pretty much on researching, developing and deploying demand-side flexibility solutions, as you alluded to. And the aim of that is to unlock ever greater system flexibilities that are required as we move to more variables, not Synchronoss, renewable energy on the system that is

[00:02:04.820] - Jon Slowe

 And in Ireland

[00:02:05.420] - Jon Slowe

You've got plenty of that, haven't you? It's as a market where there's very high levels, of wind generation.

[00:02:13.630] - Emeka Chukwureh

Absolutely it is a big fact of managing our system from the system operator’s perspective.

[00:02:21.160] - Jon Slowe

Yes. And to give an idea of scale, history, how long have you been around as a company? How many customers do you work with or how many megawatts do you manage?

[00:02:32.420] - Emeka Chukwureh

So, I say business. We've been around since 2013 and we've seen the cycle from the previous market that was in Ireland into the new market arrangements that went live in late 2018 in terms of size.

[00:02:48.540] - Emeka Chukwureh

We are in the mid-hundreds of megawatts, which makes us about 30-35 percent of the demand-side share in Ireland at number two.

[00:03:02.040] - Emeka Chukwureh

And that'll be made up of lots of customers nudging hundreds at this stage.

[00:03:08.830] - Jon Slowe

OK, thanks very much Emeka, we'll come back to you shortly. My second guest is Simon Bushell, from Sympower in the Netherlands. Hello Simon.

[00:03:17.820] - Simon Bushell

Hello, Jon.

[00:03:20.170] - Jon Slowe

Simon, likewise, can you give us an elevator pitch for Sympower, please?

[00:03:25.220] - Simon Bushell

Sure, yeah.

[00:03:25.650] - Simon Bushell

Great to be here. Sympower is an independent international demand responce aggregator. We're very mission-driven company. We believe that flexibility is vital for a successful energy transition. We currently work in the Netherlands where I'm based, as well as Finland, Sweden, Switzerland and Israel. And yes, we are a software company. We connect our customers to our software platform and that platform provides end to end solution that stabilizes the energy grids and offers real-time monitoring in order to keep the supply and demand of electricity in balance.

[00:04:00.020] - Jon Slowe

Great. And again, an idea of scale you've given us, the countries that you're you're active in, customers, employees, megawatts, years in the market. Can you give us a feel for that?

[00:04:12.350] - Simon Bushell

So, we founded the company back in 2015 in Estonia, actually. And yeah, right now we've got a few hundred megawatts of controllable capacity across the different geographies I mentioned earlier and mostly commercial-industrial customers.

[00:04:29.500] - Jon Slowe

Right. OK, thanks Emeka, thanks, Simon. So, I'd like to ask each of you now for the changes that you've seen in your business since the corona crisis back, I guess, in February, March. So, what's been in the business of being an aggregator?

[00:04:48.250] - Jon Slowe

What's been different? What's changed? Emeka do you want to start with one or two points and then we can go Simon to you.

[00:04:55.960] - Emeka Chukwureh

Yeah, sure. So, the biggest change really has, I mean this has been this has been a shock to the system, to everybody. And as you probably would imagine, particularly so for commercial and industrial customers who a lot of them have had to pretty much lock down their operations. So that has a huge impact on availability, on flex availability from demand that is there for the system. Conversely, there's some parts of the system that actually the demand has gone up because of this crisis, for argument's sake, any company that produces oxygen for hospitals, has been running pretty much on full load.

[00:05:38.860] - Emeka Chukwureh

So, their availability sorry, their demand is high but the availability to flex is low because, you know, we have to produce oxygen for the health conditions in hospitals. So that's been the biggest change. It's been the. So, there's there is demand destruction in some cases, there's actual increase in demand in other cases. But in general, it has impacted the ability of demand to flex.

[00:06:04.990] - Jon Slowe

Yeah, and I bet you never. Well, maybe you did have the foresight to see this possibility.

[00:06:10.100] - Jon Slowe

It's very difficult to see this coming. Simon how about you.

[00:06:16.600] - Jon Slowe

What would you what would you highlight?

[00:06:19.660] - Simon Bushell

Well, I think we've been very lucky from an internal perspective because yeah like I said, we're based in quite a few different countries to start off with. So, we're very used to remote working. So, for us, we didn't have that kind of tricky phase of a few weeks that I know. Yeah. Other people had where, you know, you're trying to use the zoom calls and all that sort of sort of thing. So that's been yeah.

[00:06:40.750] - Simon Bushell

That's been quite lucky for us. And I think I completely agree with what Emeka said. I think there's, what's been interesting is kind of to see both sides of the coin. So, there's been some companies that have been affected by the pandemic and have therefore had less flexibility to offer. But actually, flexibility can offer a new revenue stream. So actually, some companies that have been maybe affected by the pandemic but have got some, sort of some bandwidth to look at other projects have actually been even more interested in, you know, what flexibility has to offer to them, because, yeah, it can add that extra revenue stream in a time when they when they really need it.

[00:07:19.710] - Simon Bushell

So that's been kind of. Yeah. Good and bad let's say.

[00:07:26.320] - Jon Slowe

So, I can see the challenges with your, your both focused on commercial and industrial customers. So, I can really imagine how that's affected you.

[00:07:35.500] - Jon Slowe

What about the demand for flexibility?

[00:07:37.480] - Jon Slowe

So, I think both of your businesses are focused on, helping or working with the system operator the TSO has the need for flexibility changed significantly. Emeka do you want to go first?

[00:07:52.600] - Emeka Chukwureh

Absolutely. And I'm going to use the example of this past weekend. It was a bank holiday in Ireland. And I do actually keep an eye on GB as well. And incidentally, the flexibility that this system needs is more like a it's a downward flexibility if you like. And that's National Grid in GB pre-empted that with their new program. So, if you like, we always think of flex in one direction. But what has happened particularly over this weekend is that they actually need flex in the other direction.

[00:08:26.570] - Emeka Chukwureh

So, it's stopped by direction elements, which I think has come out, you know, to the fore. And Simon alluded to that. So, if you look at the demand turn up, it actually is a service that's as you have demand destruction. But you still have say in Ireland with wind farms going gangbusters as it did.

[00:08:48.050] - Emeka Chukwureh

Over the weekend. If you have the ability to turn up demand again, if for argument's sake, in this case, does end up producing oxygen, which is really required, if they can ramp up production, even more, that is that's the flip side of flexibility.

[00:09:04.540] - Emeka Chukwureh

So, it's not just in one direction, but the flex on the other direction as well.

[00:09:12.320] - Jon Slowe

And has that been the same in the markets, Simon, you operate in?

[00:09:14.130] - Simon Bushell

Yeah, absolutely. I mean, if you look at the Netherlands, energy consumption has been down, I think about 10 percent lower than normal. And what's also been interesting is that in the Netherlands, we've had an unusually sunny but also windy spring, which means that for the first time we're seeing a lot of significantly negative energy prices.

[00:09:35.390] - Simon Bushell

{Illegible} markets, which is definitely at the very least, it's sparking interest. And, you know, you if you can consume flexibly, then, you know, we should do something about it.

[00:09:47.270] - Simon Bushell

I think what's been very impressive is that you know, a crisis always puts stress on a system and especially a system that needs to be balanced. So precisely. And I think, you know, I think that at least, in markets, we've worked the system has there been any really significant problems. So, you know, clearly, the processes and markets that we have in place that the grid operators have in place now are working even in a really, you know, extreme situation.

[00:10:16.040] - Simon Bushell

So that's been that's what's been sort of good and interesting to observe.

[00:10:22.590] - Jon Slowe

Let's pick out these two points out of your commercial and industrial customers. Maybe not being able to provide the same flexibility they did either because they've shut down or Emeka as you said they're working flat out producing oxygen for a hospital.

[00:10:37.600] - Jon Slowe

So you've had changes to the availability of flexibility. And then on the other side, you have had much more requirement for demand turn up. So, the need for flexibility has changed. So, I'm really interested to hear from each of you how you've coped with that or how you've navigated those. You know, I guess one challenge and one opportunity. Who would like to start on that?

[00:11:07.100] - Simon Bushell

Well for us.

[00:11:07.480] - Simon Bushell

What's been interesting is seeing the difference across the different geographies. So, in the Nordics, for example, I think it's been relatively business as usual with insulation's ongoing, you know, customers in general not really changing their patterns that much.

[00:11:27.220] - Simon Bushell

But then in Israel, for example, they had a very strictly enforced lockdown. And that's made things quite difficult. And they've had some really extreme sort of imbalances in the last weeks, especially last weekend, for example. So, yeah, it's been very, very different in different countries. And as you said, the energy mix also has a big impact. Yeah.

[00:11:51.450] - Jon Slowe

So, in Israel, for example, Simon, what have you been able to do? Because has it been very frustrating because there's been a real opportunity to provide flexibility. But you've not been able to because your normal customers just aren't able to provide that.

[00:12:07.210] - Simon Bushell

Yeah. And I think Israel's a very nascent market. We're working with the grid operator and the Ministry of Energy to actually start, kind of kick start demand response markets there. And I think that this hopefully has really provided an example of why this is really needed. And yeah. And what you what the potential of demand response could be.

[00:12:36.700] - Emeka Chukwureh

I'm going to {illegible} what Simon is saying there. So, I remember the days when I moved to Ireland fifteen years ago and Ryanair would advertise fares at one euro. And I was doing my MBA then my classmates would all jump on booked flights to all over Europe. Now, I couldn't book those flights because I didn't have an EU passport so I could not respond to the prices even though I could see them. So, like Simon said over the past weekend, we've had negative prices.

[00:13:07.190] - Emeka Chukwureh

I mean, for the first time in GB, we've had an average daily negative price. But you can respond to that. I mean, some of the retailers have products that you can respond to. But generally, it's not something we can respond to because to enrol assets into that, I mean, we have to queue to get into a program that maybe six months away or a year where then we have to install equipment and all that.

[00:13:31.810] - Emeka Chukwureh

So, I think what will happen with this is the notion that when you're designing flexibility into the system, I think this situation will give everyone a point to reference and say if this ever happens again, touch wood it doesn't, but if it does happen again, we need to have a system that can, you know, allow a bi-directional flex and all that kind of stuff.

 [00:13:58.240] - Simon Bushell

Absolutely and we're also kind of getting a kind of insight into what the future of the you know what, if you fast forward, say, five years into the future, what the energy system then is going to look like, because, you know, the conventional generators have been the ones that have been producing less in general, which means that we've suddenly seen renewables all of sudden dominating the markets. And that is, you know, that's the trend that's going to continue in the years to come.

[00:14:24.610] - Simon Bushell

So, yeah, exactly. So hopefully it's given an insight into how we need to design markets, the cope of this.

[00:14:33.180] - Jon Slowe

How much variation have you seen in your customers? Emeka you gave this really nice example of a company producing oxygen, they've not shut down, in fact, they're working absolutely flat out.

[00:14:45.080] - Jon Slowe

Are there any other examples, Emeka, or Simon of customers that you've been surprised by or where you've learned more about the flexibility that your customers do have?

[00:14:59.290] - Emeka Chukwureh

I think the oxygen one is one that stands out to me. I mean, data centres, as a class.

[00:15:08.690] - Emeka Chukwureh

I mean, everyone is, I mean, in contrast to CNI demand everyone is at home watching Netflix.

[00:15:17.900] - Emeka Chukwureh

Not that it's been surprising, but if you like, that's another demand class that is just going at it. I mean we are in a virtual chatroom; people are on Zoom the whole time. So, it's not a surprise, but it's just another class where demand has held up and actually probably increased.

[00:15:41.100] - Simon Bushell

Yeah, and I think two examples I can give.

[00:15:43.630] - Simon Bushell

Firstly, the greenhouse and in general the agricultural sector, which hasn't really taken a hit, at least not amongst our customers and also the paper industry. And I thought was quite funny, too, when there was some talk about toilet paper shortages. I was quite, quite glad to know that our customers, in the paper industry would, for the time being, have plenty of work to do.

[00:16:17.360] - Jon Slowe

Maybe one of the busiest set of businesses about, I imagine.

[00:16:21.720] - Simon Bushell

Exactly.

[00:16:23.250] - Jon Slowe

So, and in terms of the automation of your platform and your optimisation activities, you know, I think back to that when demand response first started or was gaining ground in the US. I don't know the stories of an aggregator phoning up a hotel to say, can you reduce your demand? And then some poor person in the hotel having to run up to each floor and switch off the ice machines and then write down and say, yes, we've reduced our demand.

[00:16:53.710] - Jon Slowe

Now we're in an automated world here. But how automated have you been able to be? I think it will be really interesting to hear about whether the degree of automation and the degree of where you're able to just where you have to pick up the phone your customers and speak with your customers. What's that balance been like for you?

[00:17:17.060] - Simon Bushell

Well, I think from our side, we are, yeah, our platforms sort of fully automated. So that hasn't really posed a problem. I think that, yeah,  what we have done more recently is to have more conversations with our customers to understand what their challenges are and where maybe flex, where we may be as we talked about earlier, you know, there is more flexibility or less flexibility. But yeah, in general, we have a fully automated platform, so which we're continuously improving.

[00:17:47.570] - Simon Bushell

So, you know, we've hopefully taken some of the sort of results of the stress test that happened in the last months into account in future. But in general, things have been holding up well, let's say.

[00:18:01.100] - Jon Slowe

Yeah.

[00:18:02.160] - Emeka Chukwureh

Yeah and same as ourselves. Our platforms are fully automated, and our preference is always to offer automated response and then notify the customers subsequently if an event has taken place, we do offer manual dispatch. But generally, that's, you know, in a few cases and usually very large customers who would have a dedicated resource on-site to respond accordingly. So, if we call them up, they know what we're talking about and they you know, they probably have a button at their desk that they push and it activates stuff at their site.

[00:18:38.700] - Emeka Chukwureh

So, we offer both, but our preference is always an automated response, and {illegible} afterwards.

[00:18:47.260] - Jon Slowe

Okay.

[00:18:48.890] - Jon Slowe

Let's move on to the second point that you both talked about at the beginning, which is the need for more turn up rather than turn down or the different flexibility requirements from the system operator.

[00:19:03.080] - Jon Slowe

Can you, could you both say a bit more about those and give our listeners an idea of how the patterns or the demand for flexibility has changed maybe, what it was like and what it is like now?

[00:19:15.380] - Simon Bushell

Yeah, so I think the. Yeah.

[00:19:18.610] - Simon Bushell

Traditionally, yeah, we have most been looking at demand turn down services and I think that TSOs have in general already sort of foreseen that there's going to be more and more, need for the turn-up services. So, for example, in the Nordics, they're planning next year to go live with a sort of fast, fast-acting turn-up service for when the system is very out of balance, in that direction. Yeah. They'll continue with plans to make that happen.

[00:19:54.260] - Simon Bushell

And I think that you know, like we said earlier, the current situation has really emphasised the need for that and the opportunity as well.

[00:20:04.460] - Jon Slowe

And has that been, what's it been like in terms of your customers, the industrial and commercial customers.

[00:20:09.290] - Jon Slowe

So, have you found that you've spent most of your time with them talking about turn down, but now you're suddenly talking with them about, hey, what can you turn up or have you been doing sufficient turn up already that actually that was relatively smooth to provide that turn up to the system operator.

[00:20:30.350] - Simon Bushell

 I guess a bit of both. I think that, yeah, we've been where we have been able to provide turn up in the past. We yeah, we have made sure that we've had the ability to start off with. I think that, you know, if you look at the new market, I talking about in Finland, I think like I said earlier the TSO's are doing a great job to keep things going in the current situation, but.

[00:20:56.690] - Simon Bushell

By their nature, they can't be that fast-moving. So, it's not like there's all of a sudden new products available or a new market available for turn up. So, yeah we've definitely been having the conversations and trying to find a way where we can. But I guess it's a slightly more slow-moving process, at least in the geographies we're in.

[00:21:17.050] - Jon Slowe

Sure

[00:21:19.430]

{Cross talk}

[00:21:19.860] - Jon Slowe

 Sorry, carry on.

[00:21:21.550] - Emeka Chukwureh

In our case, it's similar. We've led with both offerings. I mean turn down is what is more available because it's, I mean you have more demand on the system than we have surplus. So that's, what is there. But going forward it would always be a balancing act and an alignment issue. So, we are in an unusual situation where demand has been destroyed in such an incredible, literally a cliff face.

[00:21:53.330] - Emeka Chukwureh

However, if you roll forward, we are supposedly having a sector coupling with transportation. So we should start seeing EV's coming in and becoming electricity consumers. We are seeing a sector coupling with heat. And again, you know, heat is taking up a lot of about demand. So depending on the alignment of those changes, we may not run into where turn up is would ever be any significant case. However, again, if we ever have a situation like this, you know, stress, hope we don't, but you know as they tell us.

[00:22:35.630] - Emeka Chukwureh

You know, we're probably going into a zone of pandemics. So, who knows? But it's about designing the system to be able to deliver this if necessary, so that, you know, as proper economics dictates. If you see negative prices, it's one thing just admiring the prices. It's another thing being able to react to prices.

[00:23:01.160] - Emeka Chukwureh

We have to have the ability to react accordingly.

[00:23:06.350] - Jon Slowe

 Sure, sure and I guess looking forward. And we'll come onto this at the end as residential demand response through, as you said, Emeka, electric vehicles, electrification of heat.

[00:23:19.220] - Jon Slowe

As those volumes grow, then that will be another source of flexibility that will give you more diversity in your, across your customer base.

[00:23:29.010] - Emeka Chukwureh

Yeah, I'm sorry.

[00:23:32.940] - Jon Slowe

So, one other thing that I've seen in the market is challenges, more challenges that the distribution network level your businesses have focused on, mainly on the TSO at the national level, because that's where the markets are but talking with a number of DSO's I know they've had challenges with low demand and high levels of distribution, connected renewables, small winds, rooftop solar, solar farms connected to the distribution network.

[00:24:05.700] - Jon Slowe

Now, these markets aren't quite there for flexibility well they're emerging.

[00:24:09.870] - Jon Slowe

They're just starting that coming. I'm interested from both of your perspectives. Have you seen much interest at the distribution level or does this make you think those markets will open up more quickly in the next years?

[00:24:24.280] - Simon Bushell

Yeah, I think that these are slow-moving processes. That have, there's been a lot more interested in, a lot more interest sorry, in the, in these markets in the last years, you know, across all the countries we work in, we're involved with different projects about local distribution.

[00:24:43.760] - Simon Bushell

But I and I again, think that this is, that this sort of stress test on the system is again going to is hopefully going to be at least a sort of a catalyst to encourage distribution system operators to make that next step. Maybe a little bit quicker or maybe a little bit more ambitiously than they were hoping to before. Haven't seen it yet. But at least all the projects that are currently going have at least been, you know, the market openings that we are looking at have continued.

[00:25:12.460] - Simon Bushell

So at least there's not really that many delays or hold-ups. And, yeah, hopefully in the future, this will give me a good boost to get those markets open.

[00:25:22.760] - Jon Slowe

Yeah. And I know. One of the people I've spoken with his head of head of DSO at one of the distribution companies and trying to drive their transition from network operator to system operator. His view is this really accelerates that transition from a network operator to a system operator.

[00:25:42.690] - Simon Bushell

Well, that's great to hear.

[00:25:44.790] - Jon Slowe

Yeah. Yeah. Emeka, how about in Ireland, you don't have so many distribution DSO's over there, one main distribution operator.

[00:25:57.070] - Emeka Chukwureh

We have one in Ireland and one in Northern Ireland and that's about it.

[00:26:01.840] - Jon Slowe

Yeah.

[00:26:02.110] - Jon Slowe

So, do you see they've had challenges or in Ireland, is it mainly transmission connected renewables that have, of course, the stresses in the last week's?

[00:26:14.480] - Emeka Chukwureh

So, yes, in Ireland, we don't have a significant deployment of EV's, we don't have rooftop solar. We have a wind at the distribution level. But again, they are larger than you would have at the domestic levels. So, there are some challenges around that. But that's relatively manageable.

[00:26:35.420] - Emeka Chukwureh

So, from really small scale embedded stuff, it's not a huge challenge in Ireland. But looking across the market, you know, so pick South Australia, for argument's sake, last year, in South Australia 65 percent was from rooftop solar.

[00:26:53.950] - Jon Slowe

Yeah,

[00:26:54.710] - Emeka Chukwureh

That is just you know, it's just way out there. And the estimates are they're probably going to be going to 85 percent by 2025. So, when you look at, and that has led the market or data there to suggest mechanisms to sort of slow that process down.

[00:27:14.890] - Emeka Chukwureh

So when you look at that, when we don't design the systems then you get blunt instruments of, let's slow this process down rather than a market incentive or let's provide solutions to address this so we can harness this resource.

[00:27:28.670] - Jon Slowe

Yeah, either slow down or I've seen moves to try and switch off solar farms at certain times, where they're causing real problems for their distribution network.

[00:27:39.140] - Emeka Chukwureh

Yeah,

[00:27:39.340] - Jon Slowe

But of course, far better to use flexibility to maximise the output from their farms.

[00:27:44.630] - Emeka Chukwureh

Exactly. You know, so from the perspective of, you know, for the likes of us, I've been banging on about flexibility forever. And we're now hit with it in the face. We have to do stuff. Indeed, we did. You know, the emphasis, like I said, is we're not going to be able to do a huge lot while we're in this crisis.

[00:28:09.750] - Emeka Chukwureh

But, you know, the hope is that as we come out of this crisis and we plan future market arrangements, designs, and all that this crisis will be with large in the back of everyone's mind as we plan for it.

[00:28:26.150] - Jon Slowe

Yeah, and I hope it gives an additional boost to that momentum that's building around using flexibility to help manage distribution networks, it won't always be the right solution for that.

[00:28:36.620] - Jon Slowe

But I'm sure it'll be an important solution for them in the next year.

[00:28:42.250] - Jon Slowe

Okay. It's that time of the podcast now where we bring out the Talking New Energy crystal ball. So, here it is on the desk in front of me and I'm going to set the dial to 2025 and my question to both of you is.

[00:28:59.660] - Jon Slowe

How do you think the aggregator business will change in the next five years? So, if we fast forward to 2025, what differences do you think you'll be seeing in your businesses or how will your business be different in five years’ time than it is today? Apart from, of course, being a lot bigger and even more successful than it has been so far.

[00:29:26.760] - Jon Slowe

Simon, would you like to start with that?

[00:29:30.240] - Simon Bushell

Sure.

[00:29:30.470] - Simon Bushell

So, I think a couple of things we've touched on already. So firstly, I think there's going to be yeah, we're going to see a continuing increase in the share of renewable energy, you know, which has happened very quickly in last few months. But that trend will continue, which is going to mean there's more need flexibility on both a local level and a national level. And like we talked about earlier, more need for turn up flexibility. I think the sector coupling that Emeka talked about earlier is going to really start to have an impact in the next five years with both EV's transport and heat providing new challenges, but also new opportunities in terms of flexibility.

[00:30:08.780] - Simon Bushell

I think a final point, which I'm interested in, is that in the last few years we've seen quite a lot of consolidation in the aggregator business let's say with Centrica buying REstore and now buying Adnoc {illegible} etc.

[00:30:23.120] - Simon Bushell

And I'm, but on the other hand, you're seeing the European Commission, with the clean energy package, actually really pushing for there to be more independent aggregators and keeping that choice for customers. So, I'm interested to see what that's going to look like in five years’ time as an independent aggregator ourselves. Of course. Interested in that. Yeah. And hopefully, there'll be plenty of independent aggregators, meaning that people do have the choice when possible.

[00:30:53.190] - Jon Slowe

OK. So new challenges, bigger challenges for balancing the system, new sources of flexibility from sector coupling from electric heating, electric vehicles.

[00:31:04.410] - Jon Slowe

And this sort of question about whether aggregators are to become part of broader, bigger energy companies or stay independent.

[00:31:11.410] - Simon Bushell

Great summary.

[00:31:13.270] - Jon Slowe

Thank you. Emeka, how about you? If we looked at your business in five years’ time, what would we see different?

[00:31:22.920] - Emeka Chukwureh

So, Simon has stolen a lot of my notes.

[00:31:25.330]

{Cross talk} {Laughing}

[00:31:25.500] - Emeka Chukwureh

So'll try and come at this from another angle, but I'll leap off on the acquisition by aggregators, by utilities, because I was sort of part of one and that was acquired by Enel X that wave of acquisition was done by utilities who essentially have seen the challenges utilities and they're trying to transform and that's happened to them. But then straight on the back of that, you've seen the likes of the oil companies like Shell and BP become active and doing the same because, you know, again, they're seeing the challenges  to their business, which over this  virus, I mean, we're seeing oil prices that we haven't seen for 15-20 years.

[00:32:10.000] - Emeka Chukwureh

So.

[00:32:10.620] - Jon Slowe

Yeah.

[00:32:11.430] - Emeka Chukwureh

So they are becoming active, but then when you move for the you know, beyond those guys, you're seeing the likes of the Googles and the Amazons and the Tesla's becoming active in this space as well. So, this is not going to be by all means just utility exclusively you're going to see people, if you like, platform companies if I can class them as that. All pushing it into this space because, you know, like we talked earlier, our platforms automated to a large extent, what these guys do is platforms and skill.

[00:32:47.000] - Emeka Chukwureh

So, to the extent that you can turn this into a scale able business and be able to respond to those prices, you're going to see this not being a utility play or even a broader energy play. I know and maybe Simon wants to stay independent, you know, I won't comment on that, but the trends are that you're going to see, in my view, a lot more activity from non-energy players in this space, but from our business perspective.

[00:33:13.650] - Emeka Chukwureh

In five years’, time, we aim to be an international business-like Simon's is. I mean, that's what my title is that's what my role is, that's what my {illegible} to spread our wings into international markets and cover as many countries across the globe. So, that's on the cards for us as a business. But on other thing Simon mentioned is, I suppose, they by nature built-up.

[00:33:41.820] - Emeka Chukwureh

As a remote operations business, we've built up as a single location. Everybody's in there, you know we have had to learn now how to operate with distributed teams.

[00:33:56.790] - Emeka Chukwureh

It was something that I was going to implement as we go outside Ireland into international markets that we have to learn how to operate a remote business. I don't need to plan for that anymore. We are actually.

[00:34:10.740] - Jon Slowe

No, it's happened.

[00:34:13.590] - Emeka Chukwureh

So, part of my job has been done for me.

[00:34:17.690] - Jon Slowe

Well, that's always nice when that happens Emeka, but it doesn't sound like your short of other things to do as well.

[00:34:25.110] - Emeka Chukwureh

Absolutely not.

[00:34:28.860] - Jon Slowe

So yeah.

[00:34:29.420] - Jon Slowe

Remote coping with remote working and then. Yeah.

[00:34:33.360] - Jon Slowe

Really interesting point, I think about the number of companies that will see opportunities to in the sector. So yeah. Difficult to know exactly what the landscape of companies active in flexibility would look like in five years’ time. So Emeka, Simon, thanks very much for your time and sharing your views. And I admire everyone that's sort of had to pivot and manage challenges in their businesses over the last months. And as you say, the systems have stayed operating.

[00:35:12.390] - Jon Slowe

The lights have stayed on.

[00:35:13.860] - Jon Slowe

So, everyone's doing their jobs really well and good luck in the next years.

[00:35:21.180] - Emeka Chukwureh

Thank you, Jon. It's been a pleasure to be on here today.

[00:35:24.820] - Simon Bushell

Thank you. Thank you, Jon.

[00:35:26.640] - Jon Slowe

To our listeners, thanks for joining. We hope you found that interesting. And we look forward to welcoming you back next week. Thanks very much and goodbye.

[00:35:51.720] - Jon Slowe

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

[00:36:05.300] - Jon Slowe

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

Fossil fuel incumbents and their journeys to new energy

Chris Goodall – Author and Investor

Jon Slowe – Director – Delta-EE

 [00:00:24.230] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition. Hello and welcome to the episode. Today, we'll be looking at the fossil fuel sector, which might sound a bit old energy, but fossil fuels still do dominate energy globally, even if renewables are on the rise. Fossil fuels still dominate. And we'll look at how the fossil fuel value chain is evolving and how the fossil fuel sector is evolving in the energy transition.

[00:00:48.380] - Jon Slowe

I'm joined today by one guest, Chris Goodall, who some of you may know, as a popular science author. Some of you may have read Chris's books or seen his books on the bookshelves. Hello, Chris. And welcome to the podcast.

[00:01:03.100] - Chris Goodall

Oh, thank you very much indeed. Hello.

[00:01:06.710] - Jon Slowe

Chris, for the benefit of our listeners that might not have read your books or seen them on the bookshelves. Can you just give a quick background of your time in the energy sector and the perspective that you have on it?

[00:01:21.650] - Chris Goodall

Yes, I've been writing books on the energy transition in one form or another for about 12 years. My books, the most recent one, which came out in February, is entitled What We Need To Do Now, which is an outline plan for complete decarbonisation of the UK economy within about 20 years. It's an attempt to get people enthused with the idea that this might be a possible beneficial change. And I hope I write like this always; I try to give people a sense that there are alternatives.

[00:01:53.360] - Chris Goodall

We can do things differently. We are not absolutely tied to the fossil fuel economy.

[00:01:59.040] - Jon Slowe

And as well as writing for the last 12 years or so, you've got other activities around investing from time to time around advising.

[00:02:09.570] - Chris Goodall

Yes,

[00:02:10.490] - Jon Slowe

And way back as a consultant and an analyst on equity research.

[00:02:16.470] - Chris Goodall

Yes. What would I do now ranges from being a director of new energy start-ups. Until this time last year, for example, I was chair of the UK's fastest-growing car charging installation companies, which was sold to the French multinational Engie in June of 2019. I'm an investor in companies such as OXWASH, which calls itself space age washing its very low energy net-zero laundries for both commercial and domestic use. Switchee, which many of your listeners will probably know about, which does smart thermostats predominantly for the special housing sector.

[00:02:59.590] - Chris Goodall

And I've been looking at investment in something called GridDoc, which is a form of very highly decentralised, cheap, smart demand management, particularly for small enterprises. So that's the kind of thing I get interested in.

[00:03:13.330] - Jon Slowe

Okay. Now, there are lots we could talk about. But as I said in my introduction, let's focus on the fossil fuel sector today. And I think part of the reason for that is that they may be part of the problem today. And there are growing movements and trends to divest fossil fuel investments for some, particularly green investors. But they're almost certainly very much part of the answer as well and some of them are quite progressive in their engagement in activity, and investment in the energy transition.

[00:03:52.660] - Jon Slowe

But it's not only what we might think of as the traditional fossil fuel companies. It's the whole fossil fuel value chain. So, Chris, how should we think about that? That fossil fuel value chain, I guess, from extraction all the way down to utilisation. Can you add a bit of colour to or examples of companies in that sector?

 
[00:04:13.970] - Chris Goodall

And that, of course, is an utterly huge question. Large amount of substance, so I'm just going to dive in and make one point, to begin with and then perhaps restart again. And that is that the energy transition, in my view, is utterly impossible without the active participation of the large oil and gas companies. It's them, that have the capital, it's them that have the expertise and the ability to manage billion-dollar, billion-pound projects successfully. The energy transition is going to require the likes of Shell and BP to move away from oil and gas exploitation to seeing their future probably predominantly in offshore wind, plus the conversion of offshore wind through electrolysis into hydrogen with hydrogen, providing them with the key ingredients for the maintenance of their existing petrochemical businesses.

[00:05:15.670] - Chris Goodall

However, a zero-carbon {illegible} and carbon basis.

[00:05:19.840] - Jon Slowe

Chris, I really want to explore that point about the oil companies or fossil fuel companies being part of the future. Before we do that, let's just look at the value chain. And if you can characterise how you see that at a high level from extraction through to utilisation or give us a few examples of how you see that value chain and companies in it.

[00:05:43.360] - Chris Goodall

When we say value chain, we mean the variety of activities that an oil gas company gets involved in.

[00:05:50.140] - Chris Goodall

Right through from initial appraisal through to exploration, then right down to the production of petrochemicals and the end. When we say value chain, that's what we're meaning is it?

[00:06:01.930] - Jon Slowe

Yeah, I think so. So, you know, you might look all the way at a company like General Electric and their gas turbine business or combined cycle gas turbine power plants being in that value chain. So, yeah. So I guess it's a huge

[00:06:21.830]

{Cross talk}

 [00:06:23.830] - Chris Goodall

Okay. Indeed. Well, I think one of the fundamental things there's not a direct answer to your question, but one of the fundamental things is that for the majority existing large oil companies, particularly the national oil companies, not the publicly traded international ones, but the national companies they're controlling assets where the cost of extraction is ten dollars or so per barrel of oil and significantly less than that energy equivalent in terms for gas. So, they're running down existing proven reserves is something that they can do it is no threat to the long-term financial solvency of.

[00:07:08.900] - Chris Goodall

The major oil companies, particularly the national ones, because they've got access to this very low-cost resource. That doesn't mean to say that they're going to explore for more. That's a different matter. The fact is that a company like Shell could dissolve itself, could liquidate itself from its existing oil and gas activities within the space of about 12 years as it runs down existing resources. And during that time, a lot of free cash flow becomes available from the exploitation, even at relatively low prices of oil, probably not at today's prices.

[00:07:44.850] - Chris Goodall

And they can use that to give money back to shareholders or I hope, decide to exploit new energy opportunities with large amounts of cash that come off, that flow off the exploitation of already discovered oil and gas resources.

[00:08:01.460] - Jon Slowe

Okay,

[00:08:02.700] - Chris Goodall

That's the first point.

[00:08:03.690] - Jon Slowe

So just on that one, even if there's huge growth and continued growth in wind, in photovoltaics, in electric vehicles, these companies are still going to have, they're going to be very cash generative. They might watch these other sectors grow. They could choose whether to get involved in them. But they're still going to be quite happy.

[00:08:26.520] - Jon Slowe

Extracting oil and gas, as you've described.

[00:08:30.390] - Chris Goodall

 Unless the price of those resources falls even further, they are quite happy. They can survive, I'm not going to say they will be comfortable, but they can survive by just simply running down their resources and not exploring for more. And that has to be one of the things that we encourage these companies to do is to say, right, you've got approximately 10-12 years of resources in the ground. Why don't we all agree you don't go out and exploit some more all the cash flow that you get out of that.

[00:09:00.780] - Chris Goodall

You want to get back to your shareholders or ideally, you use it to exploit zero-carbon opportunities which are larger and larger than the world around you.

[00:09:13.880] - Jon Slowe

But then if you took a step down the value chain at gas turbines, for example, or companies in the automotive value chain, then that's a bit trickier for them as things start to change that so they can't.

[00:09:31.450] - Chris Goodall

OK. Now, the big problems arise in the industrial sectors where demand is dependent upon the continued existence and growth of oil or other sectors. So, you mentioned gas turbines. In a world where people decide that making electricity using gas turbines is no longer, they no longer want to invest in it, then the manufacturing of gas turbines dries up very quickly. It's very highly leveraged to the growth of the industry, not as existing state. And that's a very important point.

[00:10:09.610] - Chris Goodall

Large numbers of capital equipment suppliers in the world, whether it be machines for making gearboxes for cars whose entire business is dependent upon the air supply their customers. In this case the automatic variants deciding to expand. But we're probably actually already at even if it weren't for the demands. We're probably very close to the peak of fossil fuel-based car sales. We may, of course, be at the peak of oil consumption as well. But all this means the people who are reliant upon growth, largely the capital equipment suppliers, who equip new factories.

[00:10:53.000] - Chris Goodall

Their future is very, very weak indeed, very poor.

[00:10:56.750] - Jon Slowe

And do you see them struggling already? Or have you got examples to illustrate how some are struggling already with that?

[00:11:04.110] - Chris Goodall

Well, there's lots of examples out of gas turbines we've mentioned that several times and the crash of the gas turbine market three years ago, was cataclysmic from three major suppliers into that industry. Siemens, GE and to a lesser extent Mitsubishi. They continue to believe until the middle of 2018 or 17, forgive me, but the market would continue to be stable and they were producing forecasts, which suggested that there might be a small diminution.

[00:11:38.720] - Chris Goodall

But then there would be a recovery and all of a sudden everybody realised that the growth of the gas turbine market for new power stations was falling away to nothing. As, all of a sudden, it became obvious that in most parts of the world, renewable electricity could provide cheaper electricity than that generated by natural gas.

[00:11:59.710] - Jon Slowe

So, is it too strong to describe them as Kodak moments, Chris? I mean, I guess it's potentially going to be less of a sudden shock than a Kodak moment.

[00:12:09.300] - Jon Slowe

But in some cases, it might be.

[00:12:12.570] - Chris Goodall

 For some participants, in some industries, there will be already happy Kodak moments. We should probably explain to your listeners just what that meant. Kodak denied for a long time that cameras were digitalizing the era of the paper films was going to disappear alongside other people like Agfa, a name that's almost disappeared. Whereas one participant in the conventional camera industry, Fuji, realised what was going to happen made the painful transition and now prospers in the digital world.

[00:12:48.630] - Chris Goodall

Kodak pretty much went well bankrupt very quickly after {illegible} and began. Nobody predicted the speed of the downturn. The same thing is going to happen in sector after sector.

[00:13:02.910] - Jon Slowe

OK. So It's going to be a difficult place to be, if you're in that capital goods market, in the oil gas value chain. If we come back to the oil and gas companies themselves.

[00:13:18.170] - Jon Slowe

And you said earlier that they're, you know, they have to be part of the solution in your view. Are any, to what degree are any of them would you say setting out that vision or doing more to try and position themselves as greener than they might otherwise be seen?

[00:13:41.060] - Chris Goodall

Look they're treading gingerly in a sort of dance. They are all moving in the same direction. But I think all of them are worried that they might go too fast and be perceived by the stock market as being dangerously exposed to industries they don't know much about.

[00:13:59.680] - Chris Goodall

Every single announcement we get from the oil companies is a move often quite small and insignificant, but it is a move towards a no oil, no gas future. The companies that have made the transition entirely or nearly, such as what's now called Ørsted, most standard oil and natural gas have performed very much. And you only have to look at the stock price charts, Ørsted vs., say, Exxon, to realise what a disaster continuing to put on 100 percent of your assets into oil and gas has been for the large  oil companies.

[00:14:37.240] - Chris Goodall

Most of them have a very short-term time {illegible} that would take 10, 15 years to get them to realise the returns. For example, gigawatt-scale offshore wind.

[00:14:52.830]

{Cross talk}

[00:14:54.070] - Jon Slowe

How much of that time scale challenges do you think they're doing or how much of that is just the way the markets work and the people that did your old job as an equity analyst?

[00:15:05.650] - Jon Slowe

Look at these companies.

[00:15:09.350] - Chris Goodall

I'm afraid to say that the financial sector is all in this together. It's all about exploiting what they know now to be the temporary value of existing few companies and to do so as fast as possible. So, it's not a great reflection on humanity. We've got some companies that are beginning to move faster than others. The best example is probably Repsol in Spain, significant on gas-producing. But last week Total, France said that it was going to put a much higher fraction of its pension investments into renewables than it had indicated before.

[00:15:50.650] - Chris Goodall

On the other hand, it is still only 25 percent projected by 2030. We cannot continue on this road if they don't switch out of oil and gas. By 2030, they're probably going to be on the route to complete liquidation. But also, they've added too much carbon into the atmosphere by the end of the next investment cycle. For one point five degrees or anything like it to be possible.

[00:16:16.870] - Jon Slowe

So what do you think differentiates then the Ørsted, Repsol's, Total with their announcement last week from some of them that have been less progressive and I think of Exxon as one example, maybe that's not fair. I'm not sure. Is it mindset? Is it shareholder pressure? Is it vision? Is it an easy starting point?

[00:16:43.600] - Chris Goodall

 I think it's all of those things, you know in the past, talk to people privately who work for the oil companies and they say well, the problem with renewable energy, probably the shift is we have 20 billion dollars a year to invest and renewables just doesn't provide us with the kind of scale of investment that we need, with the rate of return. So, to begin with, it was just an assumption. The other industry was just too worried about and it's absolute tradition, it always happens.

[00:17:15.820] - Chris Goodall

Exponential growth, as we I think are beginning to understand part as a result of the virus exponential growth, looks as though it's moving very slowly. To begin with but then speeds up to an extent that humankind finds very difficult to understand. We humans cannot imagine the true impact.

[00:17:39.470] - Chris Goodall

We're linear thinkers rather than exponential thinkers, typically.

[00:17:43.000] - Chris Goodall

 We are linear thinkers at best with a short-term curtain in front of us through which we cannot see. So, that's one big problem. The second big problem, once again, this is talking to middle ranking people in oil and gas companies, is the people at the top are rewarded disproportionately well for short term performance.

[00:18:08.990] - Chris Goodall

They may only be there for a few years. They want options to be as valuable as they can, so there's an institutional problem here. The top thirty people, in oil and gas companies are so well rewarded and know that they can make enough money to live off for the rest of their lives if they continue down this planetary destruction route. It's difficult to stop and they're the people who make the big decisions.

[00:18:37.200] - Jon Slowe

OK. But then you look at a company like let's pick out someone like Shell, who you know, in your ballpark, 20 billion dollars a year investment.

[00:18:48.270] - Jon Slowe

They have been investing actively in new energy in one or two billion a year if I remember. Right. So, you could say that's small, that's not very much compared to their old business, their fossil fuel business. But maybe it's as fast as the market will allow them to do that as their shareholders will allow them to do that. Or do you think companies like Shell could go quicker?

[00:19:16.020] - Chris Goodall

I think they could in a quicker actually but requires taking risks, the kind of risk which they're not really well equipped to do. But they're beginning to move into hydrogen, they're beginning to move into offshore wind. The supply of electricity in several countries now and so on and so forth. But she said the numbers are still quite small, the bets are not bets on the company anymore. That's right. They're not bets on the company. That is to say if all of them go wrong.

[00:19:49.910] - Chris Goodall

Actually, earnings per share doesn't change very much. They have to go themselves in a position where they are actually taking capital investment decisions, which potentially, if they went wrong, could threaten the future of the company. Large institutionally owned big companies do not take that sort of decision very frequently. And indeed, they don't take it very easily. Those non-executive directors sitting at the top of their companies are often in their sixties with no real knowledge of what's going on in the outside world in renewable energy, are simply not capable of pushing companies, pushing managers into the right direction.

[00:20:34.090] - Jon Slowe

I guess unless those directions and steps are very easy and obvious steps to take, but then they're low risk and then you're probably a bit late if they're that low risk.

[00:20:45.940] - Chris Goodall

Yes, that may not happen.

[00:20:49.940] - Jon Slowe

The offshore wind is an interesting sort of example. If you think of the North Sea, those of our listeners that aren't aware there's growing amounts of offshore wind in the North Sea and huge potential for more.

[00:21:08.960] - Jon Slowe

And the profile of that type of investment in many ways should be quite comfortable for an oil company or oil and gas company. So, you mentioned that earlier, Chris, have you been. Have you been thinking much about the potential there and how well suited the oil majors are for that sector and how they're growing activity in that sector?

[00:21:32.670] - Chris Goodall

Yeah. But what I'd like to say is really the first few chapters of my book, which is that. If we do make our 100 percent switch to renewables, we will probably end up trying to produce far more electricity than we need in order to not have periods of intermittent lack of electricity supply.

[00:21:55.500] - Chris Goodall

Now, that means that the surplus electricity that's generated most of the time, perhaps 95 percent of the time, needs to be turned into something else. You can't put into batteries because it can be put into batteries, but it would be extraordinarily expensive too. So, on the kind of seasonal scale, we need here. So, what I want them to get interested in is turning renewable energy, predominant from offshore wind into hydrogen, first to power their own refineries. And both Shell and Phillips Petroleum in the {illegible} northeast coast of the UK have decided to make moves towards the use of hydrogen generated from.

[00:22:40.130] - Chris Goodall

Electricity from offshore wind and why that's important is that these refineries already use a lot of hydrogen. There's less risk involved {illegible} wholesale into a new world where you don't quite know how the hydrogen is going to be exploited.

[00:23:01.500] - Chris Goodall

But that's the important first step for the oil majors to begin. Particularly the ones that want {illegible} to begin to take.

 [00:23:11.250] - Jon Slowe

OK and that as you say, it's an easier step, it manages their risk, it potentially gives them a competitive advantage depending on the economics of that of hydrogen.

[00:23:23.380] - Chris Goodall

Yeah, indeed.

[00:23:27.050] - Chris Goodall

And I mean, all this is predicated upon the wholesale price of gas rising from its {illegible}. And I think that's going to happen simply because at these prices is not economic to produce gas in places like the shale zones of the United States. And that's going to take time to shake out the uneconomic producers and for gas to return to normal, the normal level in wholesale markets around the world. When it does, hydrogen is going to be competitive as the source of energy for conversion to petrochemicals.

[00:24:01.030] - Chris Goodall

And indeed, for direct burning.

[00:24:05.390] - Jon Slowe

OK. So, you've talked about a way for the oil majors or oil and gas majors to diversify in a place like the North Sea. For those that are in the transport or power generation value chain, the examples you talked about earlier, the gearbox manufacturers to the gas turbine manufacturers.

[00:24:32.100] - Jon Slowe

Do you see any good examples? Well, we talked about that's potentially a much, much riskier or harder place to be if the growth starts to disappear from the oil & gas sector. Well, or less gross, but it's a lot harder for them isn't it to diversify. Those are big steps and they have to potentially move more quickly.

[00:24:53.370] - Chris Goodall

It is. And if you look at the car industry, the OEMs, the manufacturing companies, the brands which we know most of them are trying to hedge, the move into electricity as the motive force by developing cars which can either operate with diesel or petrol or hybrid or fully battery versions.

[00:25:17.250] - Chris Goodall

That's the way they're covering their bet there. My guess for what it's worth, looking at the economics as far as, one can from the outside is that that's the wrong model. You actually do need to begin to separately develop a completely distinct electric and electric-only offering. Of course, the best example of this actually taking that strategy {illegible} Volkswagen trying to move into electric-only factories, battery production and large scale and so on and so forth. That seems to me to be the way out.

[00:25:51.870] - Chris Goodall

Whereas if you continue to try and hedge your bets, different {illegible} forces, whether it be diesel or electricity, you're going to end up much more {illegible} structuring and much less flexible company. If you set up an independent to run electricity deliberately, run the old segments down.

[00:26:11.340] - Jon Slowe

Yeah, we talked about Kodak before another saying, which I really like is, well, everyone will have seen hockey, hockey stick-shaped curves where you've got these inflexion moments when markets really transition.

[00:26:27.210] - Jon Slowe

And a lot of firms and start-ups bet on those hockey stick shape curves and bet on when that inflexion moment will happen. The saying I really like is that those inflexion points normally happen later than people think. But when they happen, they happen much more quickly and more steeply than people think.

[00:26:48.800] - Chris Goodall

Yes.

[00:26:49.620] - Jon Slowe

So it's hard to manage that through this sort of hedging strategy. I think, you've got to be in the market when those inflexion points happen and be right in the market when they happen.

[00:27:01.300] - Chris Goodall

Yeah. OK, so most large companies will want to wait to act until they can actually see the inflexion point rather than predicting it anyway. The problem is by that stage, it is almost certainly too late. But no chief executive wishes to be {illegible} too early. {Illegible} probably 10 years too early. {illegible}

[00:27:35.840] - Jon Slowe

So, Chris, if you look at someone like, a company like Ørsted who have moved relatively quickly.

[00:27:41.660] - Jon Slowe

Was that just down to their circumstance that it was easier for them to move quickly? Or is that when you look at a company like Ørsted, you think, wow, great leadership, great foresight, great decision making? Is that a real case study that shines out to you?

[00:27:59.080] - Chris Goodall

Well, it definitely is part becomes from the ownership structure. I think I'm right in saying it's partly owned by the Danish state. I really should know that it also had assets that were quite expensive in terms of exploiting oil and gas.

[00:28:18.460] - Chris Goodall

It wasn't the best-positioned company in that field. And it did see that there was massive opportunity, in the offshore wind segment, and that by investing heavily in it, you would be able to build a business in the UK and other parts of Europe, North Sea, which was untouchable.

[00:28:41.490]

{Cross talk}

[00:28:41.580] - Jon Slowe

Yeah, and the fact that Denmark was a early mover and leader in wind made it potentially a better understandable and less risky decision for them.

[00:28:50.700] - Jon Slowe

So maybe a nice set of circumstances behind that.

[00:28:54.710] - Chris Goodall

Yeah.

[00:28:55.480] - Chris Goodall

Yeah, yeah. Yeah, indeed.

[00:28:58.040] - Jon Slowe

Chris, I want to finish now by looking forward. We will normally get to Talking New Energy crystal ball out, so I've got it in front of me here.

[00:29:08.090] - Jon Slowe

If we look forward to let's pick five years’ time because that's close enough to be near term and focus our minds.

[00:29:21.050] - Jon Slowe

Where do you think the fossil fuel incumbents, let's focus on the oil and gas majors. Where will they be in five years? How many will have sort of do you think really changed the emphasis in their business or in their investments or in their future?

[00:29:41.180] - Chris Goodall

Gosh, I wish I could be optimistic about this. I think they're trying to do it at the moment, but they don't really mean what they're saying because they can't see that early hockey stick that you mentioned.

[00:29:55.640] - Chris Goodall

 Five years.

[00:29:58.990] - Chris Goodall

I still think they'll be talking about devoting the majority of their capital expenditure to conventional oil and gas by that stage could be wrong. Perhaps I'm being too pessimistic, but they're not moving anywhere near fast enough.

[00:30:14.200] - Jon Slowe

And maybe I was going to say, if we set the crystal ball to 10 years, what would you see? But a different way to ask that question maybe. How long do you think it will take?

[00:30:25.590] - Chris Goodall

Well, about 10 years would have been my answer, actually. Because by that stage oil in all probability, in my view oil and natural gas demand will be falling at a rate that means that there's no point in engaging in any further exploration.

[00:30:43.360] - Chris Goodall

So, they've got nothing to do. They keep {illegible} pulling barrels out of the ground but most of their staff haven't got a job anymore because it's a very simple and uncomplicated world they're living in and by that stage they would have checked.

[00:31:00.970] - Jon Slowe

But that will be more because they've had to and they've be pushed into it rather than they've had the foresight or ability to move ahead.

[00:31:08.520] - Chris Goodall

Yes, indeed. I don't see any evidence. Majority of the largest oil companies really have made any decisions about moving into renewables.

[00:31:19.650] - Chris Goodall

Everything that has been done so far is an attempt to hedge.

[00:31:23.740] - Jon Slowe

Yes.

[00:31:24.180] - Chris Goodall

There's no betting going on. You simply have to look at. To worst problems with investors who are getting clearly increasingly worried by the month, but no commitments to trying to work out how they could turn that huge organisation away from {illegible}. I've seen none of that, {illegible}.

[00:31:44.860] - Jon Slowe

I guess everything starts.

[00:31:47.450] - Chris Goodall

Yeah.

[00:31:50.330]

{Cross talk}

[00:31:50.370] - Jon Slowe

Yeah, everything starts small. Everything starts somewhere. And I guess only time will tell whether it's 5 years, 10 years, 15 years or how quickly that investment moves towards more sustainable, cleaner, greener forms of energy.

[00:32:08.050] - Chris Goodall

Yeah. If it is 10 years, we're in a mess. So, let's try and make it happen faster.

[00:32:13.940] - Jon Slowe

Well, I think we share the same desires Chris and we're both working in the energy sector to try and help this to happen as quickly and effectively as it can. So, plenty for us to do, plenty for all of our listeners to do as well, because we're I know that most of you are active in the sector and share the same sort of thinking as Chris myself.

[00:32:39.860] - Jon Slowe

Chris, thanks for taking the time to talk with me today and share your thoughts. I thought it was a fascinating discussion.

[00:32:49.900] - Jon Slowe

And

[00:32:50.660] - Chris Goodall

Thank you very much.

[00:32:53.740] - Jon Slowe

And thanks, as always to our listeners. We hope you enjoyed the episode and look forward to welcoming you back next week to the next episode of Talking New Energy. Thanks very much and goodbye.

[00:33:18.790] - Jon Slowe

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

[00:33:35.200] - Jon Slowe

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

Energy insights and customer engagement

Håkan Ludvigson, CEO & Founder, Eliq

Ronald Root, Data Science Enabler at Eneco

Jon Slowe, Director, Delta-EE

David Trevithick, Energy Insights + Service Manager, Delta-EE

 [00:00:24.480] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition. Hello and welcome to the episode. Today, we're circling back to the topic of energy insights. In the last episode in series five, we looked at where the market for energy insights is today in Europe and we explored the commercial value of energy insights. Today, we're looking forward about the direction that the market takes in the next years.

[00:00:43.740] - Jon Slowe

What energy insights will be able to do for customers in the future and how we'll get there. Some of you may be thinking energy insights. That's just about graphs and charts for customers on their energy consumption. Well, I would challenge that and say you're probably looking in the rear-view mirror about how energy insights got started. But if we look forward, the big trends, we're seeing more distributed energy and distributed assets, more customer centricity, more service-focused propositions, then I think energy and science will be at the heart of the relationship between customers and the energy retailer or the energy service provider.

[00:01:28.000] - Jon Slowe

So, to explore this question about where energy insights is going and its role in the future. I've got three fantastic guests. Let's introduce them. First up, Ronald Root, Manager of Data Science and Business Innovation with the Dutch energy company Eneco. Hello, Ronald.

[00:01:46.000] - Ronald Root

A little bit about Eneco in energy insights. I think we have quite, quite some interesting experience.

[00:01:51.400] - Ronald Root

At least we've done a lot of experiments and also a lot of things that can go wrong, which I'm happy to share my learning with you about and look very much forward to this discussion.

[00:02:07.270] - Jon Slowe

And Ronald, if you had to describe where Eneco is at with energy insights today, I mean, you mentioned you've learnt stuff that's gone wrong.

[00:02:15.430] - Jon Slowe

Can you give us a quick feel for maybe what you've learned in the last year or where you are at today?

[00:02:23.260] - Ronald Root

Yes, absolutely.

[00:02:24.790] - Ronald Root

The journey, I think, started with the building and also bringing to market our smart thermostats that go to the top, toon if you pronounce it in an English way.

[00:02:37.720] - Ronald Root

And basically, in that 10-year journey since now, we've learned a lot about all the different ways of customer interaction. And also, you shouldn't bring energy insights to the customer. But one of the most important things I think we have learned recently and also came across more recently is how to incorporate good feedback and also how to use all the information that you obtain through these insights. And you can present via these insights in order to have a more meaningful conversation with your customer actually leading to results.

[00:03:13.900] - Ronald Root

And the change of either behaviour or the actual change of the energy system in one's home. So, I think that's the focal point of where we are right now, is to make these all these advice's and insights concrete for our end customers, for their next step.

[00:03:32.290] - Jon Slowe

And you mentioned the smart thermostat and all the data you'll be getting back from a smart thermostat and you're also working with smart metering data now, is that something you've been doing for a while or you're just starting with?

[00:03:44.410] - Jon Slowe

Absolutely.

[00:03:45.220] - Ronald Root

Now also, our smart thermostat was already, from its inception designed to be collecting smart meter data as well. So in our journey and also in our advice, we rely heavily on the collection of smart meter data, and it enriches the actual information that you can give or the actual advice that you can give to your customer.

[00:04:14.050] - Ronald Root

A whole lot, I can say.

[00:04:16.810] - Jon Slowe

 Okay.

[00:04:17.080] - Jon Slowe

And the last question for now. Have you got an example of that feedback loop you mentioned to help our listeners visualise that, what might look like? Or have you got a nice example to make that real?

[00:04:30.280] - Ronald Root

Absolutely. One of the big challenges for the Netherlands is how to get rid of the gas. In order to heat our homes. It's actually one of the directives that are given to us by our government to be able to heat our homes as most efficient as possible with electricity such as with a heat pump.

[00:04:54.340] - Ronald Root

Well, a lot of a lot of homes in the Netherlands are still quite poorly insulated and therefore heating it with a heat pump could become a challenge. And as if you buy a home, which is a bit older, you can never really know how well it's insulated except for tearing down the wall, maybe and having a look inside. It does help a tremendous lot if you actually have numbers that can actually concluded into an advice if a heat pump.

[00:05:32.740] - Ronald Root

And if a heat pump then what type of heat pump and what capacity heat pump would be sufficient for you to be able to have a comfortable life in your house. And that's one of the, I think, ground-breaking, at least for the Netherlands.

[00:05:45.100] - Ronald Root

Now, we don't have that at the moment yet advise that we're working on right now to be able to give that to our customers.

[00:05:52.840] - Jon Slowe

Okay. That's a great example. Thanks, Ronald. We'll come back to you in a bit. My next guest is Håkan Ludvigson CEO and Founder at Eliq. Hello Håkan.

[00:06:05.960] - Håkan Ludvigson

Hi Jon, good to be here.

[00:06:09.820] - Jon Slowe

Thanks for joining. So Håkan, while our listeners, may well have heard of Eneco, one of the big Dutch energy companies. They might not have heard of Eliq if you don't mind me saying. So, can you give us an elevator pitch for Eliq please?

[00:06:24.810] - Håkan Ludvigson

Sure, yeah.

[00:06:26.320] - Håkan Ludvigson

So, for those of you who don't know Eliq, we're a software company based in Sweden, and the UK, I'm in London, actually. And we help utilities really reinvent their digital customer experience. So, we use energy insights, behavioural science and user experience design to make that come together. Typically, what that means is that we provide white-label mobile apps and web portals as well as an API's for some of those customers, the utilities that have their own development teams, to help them get a whole different level of customer experience.

[00:07:03.190] - Jon Slowe

 And to give us a feel Håkan of how many customers you're working with or how much activity you have in the market.

[00:07:12.190] - Jon Slowe

Are you able to say roughly how many companies you're working with and what sort of countries?

[00:07:18.230] - Håkan Ludvigson

Yes. So, we've got 16 customers. Some of them are groups or bigger utility groups that have multiple brands, so 16 customers across Western Europe and as it happens Chile. And serving 25 energy supply brands and utilities and, yeah. So those sort of span from on the one side of the spectrum. And it’s sort of where we started with digitally enabled, fast-growing challenger suppliers all the way to some of the more of the bigger, more traditional energy companies like.

[00:07:59.050] - Håkan Ludvigson

Now we've got three of the five biggest Nordic utilities, for example. And Chile's largest electricity company. There's couple of examples. So, yes, across the board now really.

[00:08:12.450] - Jon Slowe

 And have you got an example of a proposition or something you're working with that you're really proud of that you'd like to share again to help listeners understand the sorts of things that you're doing with your partners?

[00:08:26.350] - Håkan Ludvigson

So, I think that the most important things that we are doing with our clients is, we're helping them to get this, kind of get the basics right and really just eliminate as much as possible that the friction and opaqueness of how energy works in your home.

[00:08:43.210] - Håkan Ludvigson

And just to give people a better overall understanding for how they're using energy and what are the concrete things that they could do differently. It's still very, very far away for most people, the very sort of distant from what they're interested in. And, yes, really making that easier is where a lot of our focus is. But we're also doing some exciting things like connecting in with smart thermostats and time-shifting electrical heating to match kind of the availability in the grid, for example.

[00:09:20.890] - Håkan Ludvigson

So, we're sort of in that space a little bit as well.

[00:09:26.280] - Jon Slowe

Yeah. OK.

[00:09:26.650] - Jon Slowe

So, you're on a journey with your customers there's some basics you've got to get right first, as you say, but then that time-shifting of electric heating does sound really interesting. And is that the sort of thing where customers can put in their comfort bands or they just say what temperature they want when a behind the scenes you work out when that heating system should run to deliver that comfort while minimising the price?

[00:09:49.000] - Håkan Ludvigson

Yes. That's exactly right, so that's exactly what we're doing with one of our Norwegian customers is connecting with a third party actually heat pump thermostat.

[00:09:59.720] - Håkan Ludvigson

And just like listening to their wholesale market price and sort of tweaking the temperature a little bit. So it's supposed to be unnoticeable. So typically, just heating a little bit earlier in the morning when the price is really low, just before everybody turns on their coffee machines in the morning. So, yeah. So this is really simple to do with things like heating and electric vehicles that are not really that time-critical. For example, when you're drawing the electricity off the grid.

[00:10:34.620] - Jon Slowe

Sure. OK. Thanks, Håkan. My third guest is my Delta-EE colleague and energy insights expert David Trevithick. Hello, David.

[00:10:45.420] - David Trevithick

Hello, Jon.

[00:10:48.960] - Jon Slowe

David, we've heard from Ronald and Håkan a couple of snippets about what they're working on. When you look across Europe, how typical are those examples or how would you give our listeners a very quick feel for energy insights across Europe, Håkan, explained the sort of the basics work, but then also the more advanced work. What picture would you draw of that market overall?

[00:11:16.410] - David Trevithick

Yeah, no, a similar one I think it's obviously a market in transition as all sort of new energy markets are. But I think it's progressed sort of beyond some other areas to be, you know, past perhaps the very early adopter phase. And it's approaching the, you know, the early mainstream now. There are, you know, millions of consumers across Europe now who are accessing energy insights and using them. So I think now the focus is, you know, creating more sophistication, more functionality and, you know, getting the basics right.

[00:11:48.740] - David Trevithick

But moving on with more innovation and newer and better things.

 [00:11:53.790] - Jon Slowe

Okay, well, let's look forwards now and focus a bit on that innovation. And we're going to do a bit of an experiment here. We're going to, at Delta, we're quite keen on our two by two matrix. And we're going to try and sketch one out here to help see where energy insights is headed. So, David, let's give this a go, tell us what's on the X-axis and what's on the Y-axis.

[00:12:18.960] - Jon Slowe

Of this two by two.

[00:12:20.920] - David Trevithick

 Ok, test my communication skills. So, okay, imagine this a two by two matrix on a PowerPoint slide, there are four boxes. You've got the vertical axis moving up from a basic energy retail model in the home. So effectively, your commodity-based from your pre-smart meter to the top of the axis. Lots of sort of new distributed energy technology, solar PV energy storage and the like. So, the vertical axis is about technology.

[00:12:52.260] - David Trevithick

Old world to the modern and future world. Then the horizontal axis is around customer engagement, and this increases from left to right. So, the starting point, perhaps the old meter still apply, actually, because it was very transnational, relationship-based or meter points. So, the left-hand side on the right-hand side though we have a sort of a fully customer-centric engagement. So perhaps a personalised service using relevant software and data to enhance those customer touchpoints and experience.

[00:13:26.560] - David Trevithick

So, in this visualisation, the top right-hand box is kind of the future where we're aiming towards, which is really this combination of new energy technology and fantastic customer engagement and where these two areas merge.

[00:13:41.890] - Jon Slowe

Thanks very, very clearly set out.

[00:13:44.200] - Jon Slowe

I think you've passed communication skills test David; I hope our listeners have followed that. Now you won't be surprised to hear.

 
[00:13:50.890] - Jon Slowe

I really like this, two by two.

[00:13:52.330] - Jon Slowe

Which is why I asked you to introduce it, because I think the axis often if used separately, there's a lot of focus on the y-axis. And so, going from commodity business models to distributor technology business models, maybe electric vehicle charging, PV and batteries, sophisticated heat pumps with time of use tariffs like Håkan mentioned. So, a lot of people focus just on that. And there's another set of people that focus just on the transition from old interaction to new interaction, which may be based around smart meter data, but just around commodity consumption.

[00:14:33.760] - Jon Slowe

And I think it's a really good way of depicting where we'll end up, which is, of course, a top. Right, just where you want to be on any two by two of this combination of new energy distributed assets with really great customer-centric engagement. David, this top right box, this nirvana of where we want to be, I guess we're a long way from there, but are we on the journey towards that, would you say, or have we even started that journey?

[00:15:04.680] - David Trevithick

Yeah, no, definitely a on the way there. And, you know, our views, are energy insights is a kind of central component of that future. And, you know, as you said, will evolve in both the functionality and features. You know, the what and the customer interface and experience, which is, you know, the how.

[00:15:21.520] - David Trevithick

So, you know, people are at different stages of that. But if we're thinking about this, that visual two by two grid, and the functionality, the what if we like we're moving to this world of new technology like solar PV energy storage and EV charging and the like. So, with that comes new data streams and, you know, different ones obviously focus not just on energy consumption, but on energy generation storage and trading, for instance. Another important data, streams will emerge like weather and wholesale electricity prices, for those on time of use, tariffs, for instance.

[00:15:54.610] - David Trevithick

So, the energy insights functionality will have to become much more sophisticated for customers to really use all this kit, well, whether to optimise their solar PV generation or to maximise incentives from peak shifting, for instance, or automate home energy use within given parameters. So, all that is happening and will continue to but that's just the what of the equation. And then you've got the how, which is, you know, obviously around this customer engagement.

[00:16:24.540] - David Trevithick

So currently, energy insight services engage the energy engaged audience already. So, you know, those people are quite happy with sort of data, heavy charts, for instance. But to engage this sort of more passive mainstream audience, this sort of user interface experience will have to evolve like the sophistication of the what, if you like. So, I see changes in how energy insights are both displayed, packaged and communicated. So as example do you want me to give examples of this.?

[00:17:01.510] - Jon Slowe

Let's, I'd like to bring Ronald in at this point and then maybe come back to more examples David. So, Ronald, you've got. I love your job title of Data Science and Business Innovation because too often we see them siloed. People just on Data Science or just in Business Innovation. And I guess that matches quite well to the sort of thing David has talked about. You're looking forward at some of the new things you can do. So how do you, how does David's framework fit your thinking?

[00:17:32.730] - Jon Slowe

And what Eneco's doing, and where you see energy insights going in the next years?

[00:17:38.160] - Ronald Root

Thanks. It's a beautiful frame, if I may comment on that. So, I think it works very well depicting the direction that we are going.

[00:17:52.100] - Ronald Root

I mean, more than just Eneco as a group of energy consumers.

[00:18:00.670] - Ronald Root

Shall we say. And our role in Eneco and more particularly, my role exactly as you pointed out. Joining innovation with data science is to make the most out of information that can be updates.

[00:18:21.910] - Ronald Root

This information and seeing how it gets used, but also collecting information all combined into new insights, highly personalised and highly individualised. So really going up towards this more sophisticated customers, as you put it, definitely gives you a lot of. Yeah, how do you say a room for innovation, a room for improvement on the whole energy system.

[00:18:51.800] - Ronald Root

Basically, what you want is to make the most energy or the most use out of energy of available energy as possible. Either coming from solar or any other points which relates to making a better grid.

[00:19:09.490] - Jon Slowe

So. How? Are you waiting Ronald for greater take-up of heat pumps, greater take-up of PV in the Netherlands? Or is there lots, is there plenty that you can start doing now by, for example, these personalised insights that you talked about with your building and whether they're ready for heat pumps or not?

[00:19:32.250] - Jon Slowe

How much are you getting stuck into this top right quadrant of that two by two?

[00:19:37.450] - Ronald Root

Yeah, I understand.

[00:19:39.810] - Ronald Root

And it's always it's a combination of a lot of factors. So, I find it difficult to get my head around it.

[00:19:46.910] - Ronald Root

In a two by two matrix, I think we probably need more dimensions than

[00:19:54.380]

{Cross talk}

[00:19:54.470] - Jon Slowe

I don’t think we could manage to communicate more dimensions on the podcast.

[00:19:59.210] - Jon Slowe

So, yeah. Talk us through it anyway.

[00:20:05.610] - Ronald Root

Yeah, I'll try to not let our listeners get lost too much at this point.

[00:20:12.860] - Jon Slowe

Yeah.

[00:20:13.240] - Ronald Root

But what happens basically is that you have a general direction that things are going pretty much and also much accompanied also by a government which states certain subsidies or which gives certain subsidies to certain directions or states that all new buildings should have an insulation factor of X and etc, etc. So, that's basically the grander scheme of things, which, funnily enough, also a lot of insights that we acquire also help to write these plans. So, the more insights that we generate, the more engaged customer relations that we have, the better feedback and a better direction we can also give to incentives that also give direction.

[00:21:05.070] - Ronald Root

So, let's say if you zoom out a little bit, and you look at it from a distance.

[00:21:11.670] - Ronald Root

The whole basic ingredient for all these things is data. And generally, obviously always within all the privacy concerns, the concerns and all the privacy regulations that we have, which obviously Eneco obeys, we should just collect all the data and transfer all this data into these useful insights. That's basically our job, at least it is my job, to be able to accelerate the energy transition like that, because it's all about meeting and re-balancing the demand to supply.

[00:21:49.370] - Ronald Root

Like Håkan also

[00:21:50.930] - Ronald Root

Clearly indicated in this, I think introduction that that's a very important point here.

[00:21:57.120] - Jon Slowe

Yeah. Okay. Håkan how about you? I mean, you talked at the beginning about working with your customers, energy retailers in getting the basics right through to that example you gave with a Norwegian retailer and time-shifting electric. How many people are at this advanced stage yet or where do you think? How quickly are we going to move to these advanced types of insights?

[00:22:23.550] - Håkan Ludvigson

So, I think they, something about that I think in every technology company has come across this like what you got.

[00:22:32.270] - Håkan Ludvigson

You got these innovators that they, that are, they're excited there's new technology, they're excited about using it, they believe in it. And they can kind of lead you down. As a technology product can lead you down a path of thinking that this is the reality. Whereas actually, you could like that. That's to some extent they will influence the rest of the population as well. But much more so. I think the big challenge here is going to be to not to your earlier point, to not just sort of engage the already engaged, but actually find out what is it that is that we need to do to get the rest of the customer base to see the light when it comes to.

[00:23:22.500] - Håkan Ludvigson

To energy insights or to  the energy transition really to understand what are the new technologies or solutions that are out there for me that could really help me being a part of the energy transition and probably saving some money in the process.

[00:23:40.220] - Håkan Ludvigson

Most likely.

[00:23:42.390] - Jon Slowe

 And Håkan is that a technology challenge is a data availability challenge, or is it more of the, what you mentioned right at the very beginning, behavioural insights and engagement challenge or all of that?

[00:23:58.800] - Håkan Ludvigson

I think it's. All of that, probably least of all the technology challenge. I think data availability is a huge, huge sort of barrier to scaling something up, that's for sure. But also, I think the commitment of utilities in those new business models is another blocker. So obviously within a company and I'm assuming this is saying within Eneco, you've got an echo spin, quite outspoken in wanting to take like a lead on doing a lot of things differently.

[00:24:35.330] - Håkan Ludvigson

But like, if you have a fundamentally if you have a business model where you're making money, the more energy people use then even though sort of logically it makes sense that in the future you're going to have a different business model. You're going to have that sort of internal struggle to really push things forward aggressively in terms of really leaning into these new business models and making it the centre of your proposition and attention. Does that make sense?

[00:25:09.770] - Jon Slowe

Yeah.

[00:25:10.100] - Jon Slowe

OK. So that's a I guess, a different challenge of the leadership of the energy retailer that you might be working with, that they have the commitment, that vision, that drive to move towards that top right quadrant.

[00:25:24.280] - Håkan Ludvigson

Yes. Exactly.

[00:25:26.870] - Jon Slowe

Ronald, I mean Eneco is, you know, seen generally and as very progressive, as wanting to drive towards these new business models. Where do you see the challenge within, you know, within your business, amongst that sort of range of your own internal challenges, engaging customers, data, distributed assets.

[00:25:50.550] - Jon Slowe

What's hardest for you?

[00:25:54.080] - Ronald Root

Yes, all are very challenging topics that you just mentioned, as well as also. Creating the right business model around all these new services. And I'm happy to admit that as I also said in my introduction, that we also make a lot of mistakes there.

[00:26:17.220] - Ronald Root

In a sense, we did sometimes do things that in the end didn't really bring us a lot of profits. And I think still, as you also put it, Eneco, has a very strong vision and ambition that drives us to that top right corner and also dares to walk ahead a little bit of the rest. But if we will move too far ahead, we'd forget all of our, let's say, more traditional business models our traditional commodity business, then we wouldn't stay afloat.

[00:26:55.730] - Ronald Root

So I think it's a balancing act between, let's say, these old and new things, which I think is in essence the most or the biggest challenge. Obviously, we have to let's say as if as soon as you found this balance or at least think you found this balance, then you're proceeding.

[00:27:20.720] - Ronald Root

Then you come across these issues like data collection and like that will take off all the engagements that you're trying to take.

[00:27:33.630] - Ronald Root

Does that make sense? That this is the first challenge that you have determining where your stance is in this balance?

[00:27:40.340] - Jon Slowe

Yeah, yeah.

[00:27:41.470] - Jon Slowe

It is a balance. And I think it's never a case of old energy or new energy. It's a transition and both will coexist.

[00:27:50.690] - Jon Slowe

David, from your perspective, looking and working and talking to people across the sector. Where do you see the next innovation or are there particular parts of the sector where you think we'll see a lot more innovation and activity in the next year?

[00:28:09.140] - David Trevithick

Yeah, I think there'll be innovations right across the area. We talked a little bit about functionality. But I think a lot of the innovations might well come in this customer engagement side of things to bring in this broader audience along the energy transition because it's in this essential part of how we're going to get to, you know, to zero carbon and that sort of thing.

[00:28:32.150] - David Trevithick

So, I think from that, I think we'll see changes in how things are displayed and presented to customers. I think there'll be a lot of innovation in that area from, you know, having more simple, to more visual representations and interpretations of data. So, I think things like the heat maps or traffic like indicators, you know, those sorts of things.

[00:28:58.460] - David Trevithick

And I think these sorts of things are kind of grounded in familiarity, but instantly you know, within a second you can understand, or you can power somebody to take some action. So, I think those sorts of things and how these are packaged perhaps within a broader range of services. So you get that visibility and familiarity and breeds trial over time for instance or perhaps using it in different channels, you know, right across like, you know, smart speakers, through to apps and portals, and all sorts just to get that visibility that trial going.

[00:29:31.700] - David Trevithick

So, I think there's been lots of stuff around that. But I also think there's going to be we can't rely on the customer to come to and seek out energy insight. So, again, I think that's going to be a greater use of gamification, incentives and push notifications to engage this broader audience because it has to happen.

[00:29:52.970] - Jon Slowe

So, before we get the crystal ball out, Håkan or Ronald, any reaction to those sort of things David just mentioned and whether they were on your road maps or things you're already doing or starting to do?

[00:30:05.410] - Håkan Ludvigson

Yeah, I think on, from my side, I think there's just one thing I wanted to sort of pick up on. I think so sort of looking at how energy insights have worked over the past 5/10 years. We look at it as very much a, let's, you'll typically have a data science company or a department that will look at, oh, here's a lot of smart meter data. Let's do something with it. What are the cool insights, we can find out that can add some value to people's lives?

[00:30:36.260] - Håkan Ludvigson

And you'll process it and you'll ship something back to the customer as mentioned earlier, like a bar chart or a pie chart of disaggregated consumption or whatever. And that's not actually I think that's something that's going to go away more and more. I think what we're moving into now is much more of a two-way relationship between energy suppliers and their customers. And that's both in terms of these digital products. So not, as well that the business model.

[00:31:14.510] - Håkan Ludvigson

I mean, you might be participating in flexibility programs. You might be generating your own electricity and so on. And that kind of one way street of taking some data, drawing some conclusions and shipping you a home energy report with your whether it's for the electricity bill or with email, that you won't really get that close to the customer in that approach. So, whereas if you've got a, if you manage to build like a digital channel to communicate with your customers and engage with and not engage a customer but engage with a customer.

[00:31:52.670] - Håkan Ludvigson

You can also learn from them. So how did they react to this piece of advice? How did they find or experience these different elements? If we, you know if we told you that you would save 15 euros per year if you turn your heater down by a third of a degree, would that make an impact? Or does it have to be, you know, 50 pounds for you to care at all? So, I think that's really the direction that I think we're ever going to see the whole market going.

[00:32:26.860] - Håkan Ludvigson

And that's ultimately that's what we do.

[00:32:32.820] - Jon Slowe

So, very much Håkan provide or engage with rather than provide insights to. And I guess Ronald, that comes from all the way back to the beginning where you talked about feedback and this being having that feedback loop with the customer.

[00:32:50.100] - Ronald Root

Yeah, I agree with Håkan that the bar chart or a pie chart only itself for the data-minded geeks like myself is very interesting and probably something that I will talk to my wife about.

[00:33:04.970] - Ronald Root

But for a lot of our customers, doesn't, yeah just chuck it away. And only if you do engage with the customer.

[00:33:16.370] - Ronald Root

And that has, I think, feedback in itself, or at least that's how I call engagement.

[00:33:23.840] - Ronald Root

You'll learn something about that customer at the same time and actually know also what message can be delivered where.

[00:33:30.220] - Ronald Root

And I think brings also maybe a bit to our strategy on what we're now trying to accomplish, which also started as a traditional company like Eneco is quite a complex is to get all this information, all these engagements and all these feedback loops and all these things together.

[00:33:54.590] - Ronald Root

To one central place so we can use it actually in all the communication that we do with our customer, even driving what type of communication we do to our customers. So instead of sending an email, look at our new products, we actually know that this customer actually asked something about it some time ago.

[00:34:13.520] - Ronald Root

So that's the customer who will get a let's say referral to a question that they want to ask to the call centre employees, including.

[00:34:22.490] - Ronald Root

Hey, once you ask that. I looked it up for you and this is actually the answer to one of your problems. I think that.

[00:34:29.780] - Ronald Root

 Makes this much more appealing. Sorry.

[00:34:33.410]

{Cross talk}

[00:34:33.550] - Jon Slowe

Yeah.

[00:34:34.510] - Jon Slowe

No, I just, so yeah, the point you're making, I guess, is that this might sound great, but the practicalities of implementing this and doing it at scale are by no means straightforward, they can be very challenging. Well, time has run away with us. So, let's very quickly now get out the Talking New Energy crystal ball and we'll set the dial to 5 years’ time, 2025. And a question to each of you. What do you think we'll be seeing in 2025 on the market that excites you most? And in the interest of time,

[00:35:11.330] - Jon Slowe

Keep it short and sharp. So in 5 years’ time, what do you think will be most exciting around energy insights, digital customer engagement?

[00:35:22.580] - Jon Slowe

What would you like to see in 5 years’ time?

[00:35:26.720] - David Trevithick

David let's start with you. OK great, well to me, I think Ronald touched on it, it's about solving problems really to customer. So, to me, it around use cases that have potentially good functionality, but also customer engagement. And a personal example for me right now is around fault detection or predictive analytics. So, my dishwasher has just packed up. But detecting some sort of early inefficiency or alerting me with advice on an easy fix could probably save me lots of time now in the coming weeks, doing the washing up several times a day.

[00:36:01.780] - Jon Slowe

Well, I hope are you finding good stuff to listen to while you're doing the washing up in the next weeks David.

[00:36:08.480] - Jon Slowe

Håkan, how about you? What would you be most excited about do you think in five years’ time?

[00:36:13.090] - Håkan Ludvigson

Yeah, I think first of all, I'm really hopeful and really hoping that we can start to make some progress towards turning the tide, turning the CO2 emissions around. I think energy insights, I believe sort of on a 5-10-year horizon. I think we will see energy insights really underpin a lot of the growth of mass adoption of these technologies. I think not just in terms of engaging and making people more aware about their end-user, but actually being a fundamental sort of building block in how do you select the right technologies for your home and how do you and really getting customers to get with the program, really.

[00:37:07.620] - Håkan Ludvigson

So that's where I think sort of this space is going and hopefully we'll see like a lot more widespread adoption of flexibility. I'm pretty sure we will. But I think that will be a very different landscape to today.

[00:37:24.840] - Jon Slowe

Yeah, thanks Håkan.

[00:37:26.220] - Jon Slowe

And last but not least, Ronald, what would excite you in 5 years?

[00:37:30.450] - Ronald Root

 Already, I'm excited to hear about these great things.

[00:37:37.590]

{Illegible}

[00:37:38.620] - Ronald Root

You know, that's a happy thought in my day, today. No, in five years from now, I'd like to answer that from the customer's perspective. I'd like to see that the customer receives advice, actually follows up on advice and gets feedback on that.

[00:37:53.490] - Ronald Root

If that advice, then when that advice was followed, energy consumption should actually reduce. So, a full close feedback loop and a successful implement in advice that's pretty much my dream.

[00:38:08.600] - Ronald Root

That I'm trying to proceed with there.

[00:38:11.750] - Jon Slowe

Good.

[00:38:12.320] - Jon Slowe

Well, three very nice views into the future, for 5 years’ time. And let's hope we get there. And I'm sure my three guests will be working hard in the next years to help us get there. And I hope many of the people listening today are able to play their part as well. Because as I said at the beginning, I'm a firm believer that energy insights will be a critical part of transforming old energy into new energy.

[00:38:40.440] - Jon Slowe

So, thanks very much.

[00:38:42.520] - Jon Slowe

Ronald Håkan and David, for your time, your contributions and sharing your thoughts. Thanks, as always, to all the listeners. Thanks for joining. Making it to the end to the podcast. And look forward to welcoming you back next week. Thanks, and goodbye.

[00:39:12.030] - Jon Slowe

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

[00:39:23.740] - Jon Slowe

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

Covid-19 Delta-EE
[00:00:21.780] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition. Hello and welcome to the episode. Hello and welcome to the side. Today, we're talking about the topic of the moment COVID-19 and the impact of the crisis on the energy transition.

[00:00:32.240] - Jon Slowe

It's worth noting today's date, given how dynamic and fluid the situation is. We're recording this on the 6th of May. So maybe helpful for context.

[00:00:40.340] - Jon Slowe

If you're listening to this, later on, we here at Delta-EE have been thinking long and hard about the impact of the current crisis on the transition from old to new energy. We're going to share some of our thoughts today, hopefully, give you some new angles, new perspectives, new ways of thinking about the challenges and opportunities that we think maybe there in the future.

[00:01:05.120] - Jon Slowe

I'm joined by three of my colleagues, and I'll start by asking each of my guests to share one particular insight that they see in the short term. So how the crisis is currently affecting parts of the energy sector or companies in the energy sector. So, my first guest is my colleague Rox Pieterse, who works on our Heat research.

[00:01:27.820] - Jon Slowe

 Hello Rox.

[00:01:29.340] - Roxanne Pieterse

Hi Jon,

[00:01:31.070] - Jon Slowe

Rox's so you've been talking to a lot of companies in the heating sector. What are you hearing from the market at the moment in terms of how companies are being affected and are being affected at the moment?

[00:01:43.470] - Roxanne Pieterse

So, a few weeks ago when we started having discussions, there was a lot of uncertainty and the industry was sort of dealing with the immediate challenges of shutting factories and figuring out whether installations could continue. And now I'd say within the last sort of two weeks or so, especially with lockdown's lifting there's generally quite a lot of optimism about sort of getting back on track and catching up on sales in the second half of the year for low carbon heating, the question is, how will drivers like building regulations and new build rates and subsidies be impacted?

[00:02:18.260] - Roxanne Pieterse

And that obviously differs by country. But I do you think it's safe to say that the decarbonisation of heat will be set back at least a few months in the best of cases and probably a few years in the worst cases.

[00:02:32.770] - Jon Slowe

So, sales presumably have taken a bit of an impact in the short term. But companies see, I guess if your boiler breaks, if you need a new heating system, you need a new heating system, so.

[00:02:43.120] - Roxanne Pieterse

Exactly.

[00:02:43.870] - Jon Slowe

So, some impact on sales, but. Yeah. Okay. What about installers? Are companies being able to work with their installers? Have installers, generally being able to get into homes?

[00:02:54.830] - Roxanne Pieterse

It's different by country.

[00:02:56.200] - Roxanne Pieterse

So, in Germany, installations have pretty much continued as usual. And it helps there that systems are installed and in basements so that installers are well away from customers. But then in other countries, the guidance has been to limit installations to emergencies only. I mean, obviously, people still need heat and hot water. So, you can't say that an installation can't go ahead. But the guidance has been to delay if possible. Certainly, in the UK and France and Italy.

[00:03:27.190] - Jon Slowe

Okay, so some slowly growing confidence already coming back into the sector, but potentially some impacts on low carbon heating, which is higher cost and I guess a harder sell in hard economic times.

[00:03:41.980] - Roxanne Pieterse

Yeah, exactly, and very much dependent still on regulations and subsidies.

[00:03:48.350] - Jon Slowe

Yeah, OK, thanks, Rox. Next up is my colleague, Nigel Timperley, who looks at how new business models are evolving and in particular looking at some of the new energy start-ups.

[00:04:02.060] - Jon Slowe

Hello Nigel.

[00:04:03.830] - Nigel Timperley

Hi, Jon.

[00:04:07.420] - Jon Slowe

So Nigel what you hearing from the market at the moment, how are these plethoras of start-ups faring at the moment, is it tough for them?

[00:04:16.490] - Nigel Timperley

Yeah, it is tough, probably as you'd expect. What we're seeing we're hearing some interesting things, actually. That clearly digital models seem to do better, maybe doing better than physical ones. You've already suggested the issue to do with physical installations and the social distancing challenge that brings. What we're seeing generally a lot of the small start-ups we're talking to are saying that B2C models seem to be holding up a little bit better than they'd expected with some decent, you know, reasonable demand down a bit, but not devastated.

[00:04:55.640] - Nigel Timperley

Whereas B2B models are really suffering as companies look to conserve cash and not spend any more than they have to. So, probably more issues there.

[00:05:11.050] - Nigel Timperley

Though also we're hearing sounds of companies looking to collaborate with each on a sort of we're all in it together mode. Where possibly JV's or, you know, collaborative style projects might spread costs and will allow companies to come through together by leveraging other companies’ expertise.

[00:05:33.530] - Jon Slowe

And just picking up, Nigel, on what you're saying about some of the physical installation issues that Rox mentioned. Are you seeing a trend that if you're a software-focused, you're probably doing better than if your hardware-focused or not necessarily?

[00:05:47.390] - Nigel Timperley

Absolutely. Also, subscription model seemed to hold up quite well because some of the payment terms, you know, maybe running months and months into the future. But yes, broadly we're definitely seeing a split between digital solutions seem to be holding up a lot better than physical ones. Also, one or two companies we see are doing some quite interesting things where they're trying to work with their customers and show that they can help them through the crisis.

[00:06:18.850] - Nigel Timperley

So, for instance, STROMDAO, in Germany would have built their own digital conferencing software and they've decided to give it away to all their customers just to use a free if they want. So, sort of,

[00:06:30.070] - Jon Slowe

Right.

[00:06:31.120] - Nigel Timperley

Trying to bridge that gap to show that they're in it together. And I think that's an important idea.

[00:06:37.010] - Jon Slowe

OK. Thanks, Nigel. My third guest today is my fellow director, Andy Bradley. Hello Andy.

[00:06:43.640] - Andy Bradley

Hi, Jon.

[00:06:46.310] - Jon Slowe

Andy you've been speaking with a lot of different types of companies across Europe.

[00:06:52.170] - Jon Slowe

What's your standout observations in terms of how companies are responding and the impact on them.

[00:06:59.710] - Andy Bradley

Yeah, I mean, companies are clearly being really challenged by this situation, as Nigel mentioned. You know cash is king and, you know, every company in the spaces is being really careful about any kind of expenditure. Budgets are being locked down or frozen for a period of time. The key uncertainty remains really the longevity of the crisis. Thankfully, now most countries in Europe at least, are talking about how to come out.

[00:07:28.100] - Andy Bradley

The lockdown all started to come out of the lockdown. So, perhaps as more clarity today than there was a week ago or two weeks ago, certainly on the length of the challenge. But still, companies are being very cautious for sure. But having said that, actually, I've certainly over the last two or three weeks, I see quite a lot of evidence and I hear quite a lot of positive discussion with companies that we deal with that the nature of the energy transition is so strategic to their business that they are really doing everything they can to continue with those projects.

[00:08:09.840] - Andy Bradley

And it's really reassuring, for example, to see.

[00:08:11.820] - Jon Slowe

 Any examples?

[00:08:14.070] - Andy Bradley

Well, for example, you know, some of the deals that have been announced recently, I think it's refreshing to see you know Fortum have just divested some of their EV assets. Kensa attracted some some good investment recently from Legal & General, you know, and there's been one or two other deal announcements in our space recently. And for sure, those deals would have been worked on in the period leading up to the crisis.

[00:08:37.890] - Andy Bradley

But, you know, to see them continue and complete during the crisis, I think is a really positive sign actually about the strategic nature of this space for many companies. So, I think.

[00:08:49.070] - Jon Slowe

Yeah. OK. So, some.

[00:08:53.150] - Jon Slowe

They have had to hunker down then there's been some short-term hunkering down. But it doesn't mean everything has stopped by any means. I guess Rox's observation that some of the short-term activities carrying on, Nigel, you were saying some of the digital businesses, software businesses are doing rather well, Andy some of the deals going ahead.

[00:09:11.020] - Jon Slowe

So, it's by no means a complete stop of activity, but it has slowed things down.

[00:09:18.120] - Andy Bradley

Absolutely.

[00:09:18.380] - Andy Bradley

And, you know, it would be amazing to get through this economic downturn, you know, without some companies going under or projects being deferred and cancelled at some point. So there has to be disruption from this and there will be no doubt. But, you know, I think there is a lot of ongoing activity. We see it in our own work at Delta-EE. I think that a lot of the projects that we have been working on have continued through this through these last weeks.

[00:09:43.510] - Jon Slowe

So, I think that gives us confidence, I think about the nature of the energy transition, the importance it has.

[00:09:51.420] - Jon Slowe

So, let's look forward a bit further now. Look further ahead and everyone can speculate about the depth of the recession, the length of the recession, how steeply we'll come back out of it and get back to normal or not. Nigel, you've been thinking about a wider economic picture, but specifically how that will relate to the energy transition.

[00:10:20.490] - Jon Slowe

You've got a number of scenarios to share with us. Can you talk us through the four scenarios?

[00:10:25.210] - Nigel Timperley

Yeah, thanks, Jon. Yeah. One of the things that really stands out. When you actually do the analysis is that the energy industry is particularly a nexus here. You know, certain scenarios would be like being very positive as I'll come to others, very negative. So, the range of possibilities is extremely broad and probably more so for our in our industry, our sector, than for many others. So, at the positive end, the most positive scenario is what we call accelerated green transition.

[00:10:58.410] - Nigel Timperley

In this world, there's a relatively early exit from the crisis, either through development of vaccine or similar drug therapeutic drugs or very carefully managed exit from lockdown, which allows the crisis to be firmly brought under control. And then governments aim to reignite the economy by pouring investment into the renewable sector, into the green sector. As the world realises that external threats, existential threats are going to be taken seriously and we've got to work together on them. And so you end up with a gradual economic recovery driven by huge global government stimulus of the green economy.

[00:11:46.020]

{Cross talk}

[00:11:48.370] - Jon Slowe

Yeah, that scenario is not just back to normal for the energy transition. It's in a way, a boost to it, an even better outcome than maybe where we would have been otherwise.

[00:11:56.980] - Jon Slowe

Absolute, absolutely. That's the green economy on turbo boost. 

[00:12:01.210] - Jon Slowe

OK.

[00:12:01.630] - Jon Slowe

So that's the first one.

[00:12:05.070]

{Cross talk}

[00:12:05.340] - Jon Slowe

Yep. That's got reactor number.

[00:12:07.480] - Nigel Timperley

Number two is what we call back to business, which is still a positive scenario, it involves a very accommodative monetary and fiscal policy, effectively stimulating industries across the piece. So the green economy benefits just like all sectors benefit. It's just a reboot of the economy and possibly leading to a dramatic and unexpectedly strong economic recovery. We think that's quite plausible in the economy, in a world of cheap money and so forth.

[00:12:40.500] - Nigel Timperley

So, that's very much the stimulus argument. And third scenario, we've got the two sorts of good ones out the way. The third one down in descending order is what we call climate disunity. This is probably much more protracted crisis. A couple of false dawns. We think we're out of lockdown. We're going to go back in again and possibly, you know, vaccines aren't developed as quickly as we'd like and rise of some geopolitical tensions, maybe a twin track world.

[00:13:11.390] - Nigel Timperley

And we do recover, but it's very slow, very tedious, and it tests everybody's patience, and everybody gets really sick of the subject. That's a very sort of a slow crawl out. And so you get a sort of patchwork effect in that with some countries using the green future as an opportunity to find a way forward into a new economy others perhaps US switches to shale and China might focus more on air quality rather than climate. You get this sort of different multi-speed effect across the piece.

[00:13:43.790] - Jon Slowe

Yeah. OK.

[00:13:45.250] - Jon Slowe

So in this one, the energy transition, it sort of tracks economic recovery or it might even lag behind the economic recovery in some areas.

[00:13:56.200] - Nigel Timperley

Yeah. I think it's patchy. That's the point, you might expect to do well in one area, green and all the coal, and they really will be all over the board. I think very disjointed and then the final scenario.

[00:14:13.530] - Jon Slowe

Now, this is going to be the gloomiest.

[00:14:16.680] - Nigel Timperley

I'll be quick on this one, because it's, we don't like thinking about this too much. There are some very, very gloomy economic prognoses out there that's not really our area to do economic forecasting. But, you know, we've got to take those prognoses at least seriously as a possibility, even if we think it's only 10 percent possibility and essentially there, you know, full scale global depression and in this world, everybody says, look, you know, it's terrible.

[00:14:42.790] - Nigel Timperley

We've got the worst depression since I don't know, the 30s we hadn't time for that climate. That's a problem for another day. This is about keeping the lights on, energy business survival, probably emphasis on networks, you know, on support and just getting through, rather, and actually developing and building something new positive. So, we call that climate deferred.

[00:15:10.510]

{Cross talk}

[00:15:10.620] - Jon Slowe

Yes. So that's why you might get a response to a typical recession of where,

[00:15:15.070] - Jon Slowe

we've got other things to worry about before climate.

[00:15:17.380] - Jon Slowe

So,

[00:15:19.570] - Nigel Timperley

Exactly. And we don't think that's the most likely. But we do think it is a serious possibility that should be on the radar. I think the sort of key to take out and we could just talk about these all day. But the key take out is this is a very, very broad spectrum and all of the possibilities are at least plausible. So, the challenge for energy businesses becomes how do you plan for a world with such a broad range of outcomes from boom time,

[00:15:47.300] - Nigel Timperley

You know, happy days to all bets being off? How do you approach a world that's that varied? You know, the possibilities are that vary. And also, what are the signposts that we could look for that suggests that, you know, we're going one way or the other, but more. How do you plan for that? Because obviously a lot of this stuff is out of our control. But how you plan, how you prepare for that.

[00:16:09.640] - Nigel Timperley

That's what's under your control. That's what we've got to focus on.

[00:16:14.270] - Jon Slowe

Yeah.

[00:16:14.730] - Jon Slowe

Okay. So, let's just run through this again. Accelerated green transition, back to businesses, climate disunity, climate deferred. And the really interesting point that the extreme tier are even bigger than the extremes for the rest of the economy?

[00:16:30.060] - Nigel Timperley

Yes, I think so.

[00:16:31.250] - Jon Slowe

Real range here. Yeah. Andy in terms of signposts, Nigel mentioned signposts. What should we be looking for? Or are there any little hints out there of which way we might be going?

[00:16:46.990] - Andy Bradley

Yeah, there are some hints. I think or we've picked up over the last week or two, some things from the market, I suppose in general perspective, it's important to take a step back, look at this crisis in the round, not just in the new energy silo, but think about its overall impact on the world. And, you know, I think there was some really big things happening that will influence the new energy space, the energy transition.

[00:17:11.500] - Andy Bradley

For example, the world of work will never be the same again. I think we all accept that now. But other things, such as remote healthcare, the opportunity for assisted living may be fundamentally different in future. Consumer behaviours, consumer values may change as a result of this crisis. Nobody knows for sure yet. But the way customers make decisions may be quite different in future and the need for mobility, micro mobility in cities, urban centres may be fundamentally different.

[00:17:41.410] - Andy Bradley

So I think there are some really big themes that will shape the world that we live in, and they will create opportunities and challenges, I think, for companies involved in the energy transition. So, for me, those are some of the key signposts to look for and look at very closely.

[00:17:58.820] - Jon Slowe

Okay. I think it's really interesting. So, in accelerated green transition or back to business. The nature of the energy transition may be different in a number of ways from the way it was when we went into this crisis.

[00:18:13.430] - Jon Slowe

One of the side by side, I've seen is a focus on cycling in cities, for example. We've seen a number of cities in the last weeks look at cycling as a way to promote cycling much more as we come out of lockdown. So that has impacts for mobility business models.

[00:18:32.400] - Andy Bradley

Absolutely. And I think for individual companies, you know, where they're starting is obviously going to influence the choices that they can make or wish to make. And, you know, the point Nigel made, I think, is a really important one about having a digital platform or a digital mode of operation.

[00:18:47.780] - Andy Bradley

You know, that was already very important before the crisis, but that probably becomes essential following this period. So, companies who are already invested in that and have those platforms probably have, go into this period now with some kind of advantage and there will be geographical differences as well. There's differences between different countries and how this crisis is playing out so far and will play out in future. And certainly if you look at Germany in the European context, they seem particularly well positioned in terms of what they might do next and their ability to gain some kind of competitive market advantage out of this situation, perhaps in comparison to other European countries.

[00:19:27.260] - Andy Bradley

So, I think things like that will influence what individual companies can do going forward.

[00:19:36.950] - Jon Slowe

Yeah, we've talked on a macro level, I think if we let's come down to the micro level for a minute and look at an issue like building regulations and a new build. There's new build regulations are getting more stringent across Europe. That's leading to more opportunities for low carbon heating, photovoltaics in new builds. Rox, you’ve been looking at this trend, how do you think this will go?

[00:20:03.640] - Jon Slowe

Do you think this will increase the chance that those regulations will get rolled back a bit and lower cost heating systems going into new builds? Or do you think actually they might get enhanced, become more stringent as a way of helping to create new industries and stimulate the economy and grow the low carbon heating business, for example?

[00:20:25.530] - Roxanne Pieterse

I'm hopeful that it will be the latter that they become more stringent because that has been the general trend. You will obviously have lobbying from house builders and stuff looking to keep their industries afloat, asking governments to relax, building regulations so that they can continue to operate as they did in the past.

[00:20:48.420] - Roxanne Pieterse

But I think the only country so far where we've had a bit of a delay as a result of COVID-19 now is in the UK, building regulations will probably come in about a year later than previously. But other than that, generally, I think everything is still largely on track and we can be hopeful that there won't be any major delays to the shift, at least in the new build sector, to decarbonise heating.

[00:21:16.840] - Jon Slowe

This is an opportunity for the sector to lobby hard to create the narrative around how tightening up these regulations can help to grow a new industry, grow more jobs and so on.

[00:21:28.640] - Jon Slowe

So, I guess companies can shape their future quite a lot at this point in time.

[00:21:34.590] - Roxanne Pieterse

Yeah, absolutely. And make the argument for future proofing being more important than ever now.

[00:21:43.340] - Jon Slowe

Andy, I want to ask you one question about impact on oil companies and then look at what the three of you think this means for a company right at the middle of this, what that company should focus on what they might do. So, Andy, you've been looking at Shell's cutting their dividend recently, which if I remember right. That's the first time they've done that for a long time.

[00:22:09.420] - Andy Bradley

Yeah, I think since 1940. If I remember correctly, certainly since the Second World War. And I think it was a surprise, actually. Everything in the lead up to the decision suggested to me that it was unlikely they would cut it. But they cut it by two thirds. So, a really significant reduction, you know in the stated reasons, I think, well understood, protect their balance sheet, the uncertainty around each of oil pricing, longevity of this crisis.

[00:22:37.230] - Andy Bradley

But I think, you know, I think that's all understood. But I do think it also creates a really high degree of protection and headroom potentially for their new energy business. So, my thinking has always been about the big oil companies that, you know, the acid test for their commitment to the energy transition would come when the oil price collapses. You know that moment has arrived.

[00:23:02.830] - Jon Slowe

And a company like Shell have been investing a few billion a year, that sort of amount in new energy. So, I guess a very easy thing for them to do is preserve the dividend and cut that three billion if they don't see that as essential to their future. But your view is that they've chosen to cut the dividend, and this might be a sign that their investment in new energy is going to remain strong and be a core part of their future.

[00:23:29.450] - Andy Bradley

Well, it creates the opportunity for them to prove that. I think yes. So, yeah,

[00:23:36.770]

{Cross talk}

[00:23:37.410] - Andy Bradley

Yeah, I know. I think we'd all like that to be the case for you know, for me, the question has changed from what will they do when the oil price collapses, to what will they do when the oil price recovers? And I think the proof will come at that point now, actually, that, you know, they cut their dividend, you know, for other reasons, you know obviously their core business, the upstream business. But they're cutting a lot of costs.

[00:23:58.300] - Andy Bradley

They're stopping the share buyback scheme. So, you know, they really have deployed the big bazooka on this one. And I think, you know, when this current crisis passes and the oil price recovers, as it always does, and it will at some point in the future, I think at that point, that's when we will really know. And if they restore the dividend to historic levels and continue to be a company that's driven by investor return, generated from fossil fuel extraction, then I think actually we can say that, you know, their commitment to the energy transition is not what we would like it to be.

[00:24:33.120] - Andy Bradley

If however at that point, they'd take the opportunity to actually recycle some of the profits from the upstream sort of legacy businesses into an accelerated growth of the new energy business. You know, that's the opportunity I think they've created for themselves. But I think we will only know that come the moment when the oil price recovers and, you know, they make a decision on the dividend. And the final point, I'd say their shareholders have a huge role to play here.

[00:24:56.710] - Andy Bradley

You know, if the shareholders that they have support the company in the energy transition and the long-term vision for how the company can contribute to that, that would be fantastic to see. But if their shareholders are frankly putting them under intense pressure to maximise the dividend, that will be particularly disappointing.

[00:25:17.890] - Jon Slowe

OK. So, yeah, I know a lot of people in the new energy sector look to the activities of companies like Shell and Total, for example, Repsol.

[00:25:28.680] - Jon Slowe

Nigel, you've got an observation on types of energy companies, maybe not the big oil ones, but the I guess the traditional incumbents, the utilities who are under pressure to survive, hunkered down, maybe preserve cash, maybe a little bit of a retreating and a second type of energy company that's emerging. Tell us about the second type and how they can trust to, my probably over generalisation of the incumbents.

[00:25:57.500] - Nigel Timperley

Yeah. Well, like a lot of things in the crisis, there's a potential for existing trends to accelerate. And I think this is another example of that. So that, you know, several legacy energy companies, EDF, Centrica, Engie, Vattenfall have cancelled or reduced dividends in a bid to conserve cash. Some these same companies have also cancelled financial guidance to markets. So, they just don't know what's coming next. Maybe furloughed staff to save money.

[00:26:26.100] - Nigel Timperley

And we know that there's great reduction in power demand as the European economy is going into lockdown. And the big unknown, of course, is whether customers will pay their energy bills. But it's a part of our legacy business models and industry that energy companies provide free credit and then hope to get paid at the end of a period of time, which, you know, supermarkets don't have to deal with that, try that in Tesco or {illegible}. But so, there's this huge problem.

[00:26:54.120] - Nigel Timperley

There's this huge problem which the legacy companies have got, which is preserving cash. And will their cash flow be hit when customers don't pay? If they've lost their job or whatever. On the other hand, we've seen the emergence of these new really tech companies in disguise that are energy businesses. But scratch the surface and there's a tech start-up underneath the best two examples that immediately come to mind are Octopus energy in the UK and Eneco in the Netherlands.

[00:27:23.420] - Nigel Timperley

I mean, right in the middle of this crisis, not before. Right in the middle. Origin Energy of Australia has invested over 500 million Australian dollars in Octopus to buy a 20 percent share of the company, which values Octopus over a billion pounds a unicorn in UK terms. Similarly, Eneco has just been acquired by a consortium of Mitsubishi and Chubu from Japan for around four billion euros. So, you’ve got these new tech-oriented energy companies with huge financial firepower.

[00:27:55.920] - Nigel Timperley

They're not having to worry about hunkering down and cancelling dividends and just crossing their fingers. And so, we have a twin track picture there. And I think we might see them do different things because they're starting from different places. And no one will be focusing more on just getting through. The other one can start making advanced investments, getting in ahead of the game, putting down platforms that are very consumer oriented. Because one of the things coming out of our work is that on scenarios is that the consumer, although policy matters, although technology matters, possibly the consumer matters, most of all, the consumer's going through a fundamental change here in many ways.

[00:28:40.650] - Nigel Timperley

Home is the cocoon, the death of the city possibly. Tech, I can do everything from my home. I can see the rise of VR, you know, a lot people speculating. We don't quite know what that looks like, but it does look high tech and it looks about empowerment. And Andy's talked about assisted living. There's a lot of stuff going to go on in the home and in communities as people start to look at life differently.

[00:29:08.180] - Nigel Timperley

And possibly also they start to feel differently about the you know, the feel that the modern world is a lot less robust than they thought it was. You know, they're in and they regard the climate challenge in a similar way. Now they're enjoying clearer water in the Venice canals, blue skies over Delhi and wild animals roaming boldly in lockdown cities. Maybe people start to think, this is great. You know, the roads are quiet. They're aren't {illegible}.

[00:29:32.400] - Nigel Timperley

 All over the sky. I'd like to live in this world. So, the consumer is having a good long think about what sort of word they want. And these really responsive companies with big cash piles and serious investors behind them can respond to those customers’ needs with high tech solutions, because this is a tech game, the future, whereas the legacy companies are going to struggle because they're going to be focused more on just cash flow, get it, getting the bills paid.

[00:30:00.250] - Nigel Timperley

OK. So Nigel you've given us a hint there of some of the things you think are important for energy companies to focus on and maybe the challenges of incumbents versus some of these new tech focused companies, Rox's in the heating sector. Are there any things you'd pull out that if it were you in a heating related or heating service company, you'd focus on the moment?

[00:30:24.070] - Roxanne Pieterse

If we just pick up again on digital and finance. You know, so digital sales channels and services like remote diagnostics.

[00:30:32.880] - Roxanne Pieterse

I think the rationale for those kinds of products is going to be clearer than ever to customers and then finance, especially for low carbon heating, which is more expensive with households hanging on to cash, that, it's going to be more important than ever I think for businesses to look at ways that they can come up with service based business models and models that avoid high upfront costs to continue this sort of transition to low carbon heating.

[00:31:01.300] - Jon Slowe

Okay, that's Roxanne, and Andy are you going to echo Nigel and Rox's digital mantra and services around changing customer needs.

[00:31:10.790] - Jon Slowe

So, anything else to add to that?

[00:31:12.640] – Andy Bradley

Yeah, I mean, the customer is key. I totally agree with what Nigel said. The customer still doesn't get to focus on the industry. And I think the customer will determine what a lot of the opportunities are actually, and how the energy transition will play out. But as Nigel was speaking, there, I was thinking about that sort of  Mark Twain quote, I think about, you know, history doesn't repeat itself, but it echoes, I think and I was just thinking back to that perhaps the dot.com crisis in 2000 for those that are old enough to remember that, you know, that that didn't kill the internet, you know, and actually led to Amazon.

[00:31:49.380] - Andy Bradley

You know, the crisis in 2008-9, which, you know, basically destroyed the business models of the legacy of energy, utilities, European utilities. But most of those have survived. A lot of them have reinvented themselves and are quite different businesses today from what they were 10 years ago. And I think this current crisis needs to be seen in that context. I think the kind of, you know, the tech energy companies, perhaps a new  type of energy company in this space will get an accelerated boost from this crisis and, you know, come out and become really influential players quicker than they otherwise otherwise would have done as a result.

[00:32:28.600] - Andy Bradley

But that will really challenge the incumbents to to increase the pace at which they adapt to the changing world. I think.

[00:32:37.690] - Jon Slowe

OK, well, the challenge, of course, with I guess what all three of you have talked about is that those scenarios, Nigel, that you were introduced earlier and how  extreme for the energy transition, the two ends of those scenarios are. So I'm going to bring out the Talking New Energy crystal ball now. And at the risk of putting it under a lot of stress, hopefully we don't break it.

[00:33:00.730] - Jon Slowe

Ask each of you to predict which of those four scenarios you think we'll be in, in, let's say, two years time. So just to run through them again accelerated green transition, back to business, climate disunity and climate deferred. So where will we be in two years? Nigel, let's start with you as they were your scenarios.

[00:33:28.000] - Nigel Timperley

Ok well, I'm an optimist by nature, so I'm going to say we're going to be an accelerated green transition. I think pretty much every recession of my lifetime, the green movement, has been told to take a hike and we can't afford to focus on the climate just yet. We'll get back to you later when all of this is fixed. That feels very out of date to me. I think the argument is moved on. I think there are strategic companies making strategic decisions with serious investors behind them who were in it for the long haul.

[00:34:06.820] - Nigel Timperley

And fundamentally, I think consumers want it. I think the pull is from the consumer. So ultimately, consumers and voters, because they're the same people, are going to have a big say about what happens next. And I think that's what they're going to demand. I don't think they're going to go back to business as usual. So that's where my vote is.

[00:34:26.190] - Jon Slowe

OK, thanks. And I like your optimism! Rox, how about you? Are you equally optimistic or a little  bit more pragmatic or pessimistic?

[00:34:35.890] - Roxanne Pieterse

I would call myself a realist.

[00:34:37.430] - Roxanne Pieterse

So, I'm going to say back to business feels more likely to me.

[00:34:42.490] - Jon Slowe

OK and Andy how about you?

[00:34:46.640] - Andy Bradley

I think on, when I think of this on a European scale, I think I am with the accelerated green transition. If I think globally, I don't think that's the case. I think it potentially will be climate disunity or back to business, actually. But I think in Europe, I think there is a real groundswell of momentum from consumers and from government and from industry, I think, which supports that view.

[00:35:10.680] - Andy Bradley

And it always makes me nervous. You know, why is it going to be different this time? As Nigel said, previous recessions haven't really had the same kind of accelerated impact, if you like, on the transition. And I think it's going to be different this time for two reasons. One is, I think we probably reached peak oil, so, well in Europe we have reached peak oil some time ago, actually. But, you know, it creates the opportunity for a new renewable capacity to grab market share as the demand recovers, I think.

[00:35:40.670] - Andy Bradley

But renewables are so much cheaper than they were 10 years ago. You know, the cost of renewables and the economics for renewables today is really competitive without any subsidy. So it just makes sense.

[00:35:54.180] - Jon Slowe

So there's some clear reasons why it might be different this time.

[00:35:57.100] - Andy Bradley

Yeah, I think so. So, you know, in Europe, I'm really becoming increasingly positive that actually an acceleration of the energy transition is going to be one of the results from the crisis.

[00:36:12.450] - Jon Slowe

Well, only time will tell, and I'm pleased to say we haven't broken the crystal ball. It's remained intact despite this very difficult look into the future.

[00:36:22.650] - Jon Slowe

So we'll see where we end up with these scenarios. Listen, as I'm sure you have your own views, and if you want to message us, via our Twitter feed or our website we'd be very interested to hear from you.

[00:36:38.160] - Jon Slowe

We hope you found that interesting and gave you some new angles and new perspectives on the crisis and the impact on the energy transition. Thanks to all my guests. Thanks for listening. We hope you stay safe as we hope to get back towards normality and look forward to welcoming back to the next episode. Thanks, and goodbye.

[00:37:14.970] - Jon Slowe

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

[00:37:29.700] - Jon Slowe

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

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