TALKING NEW ENERGY

Arjan Van Der Eijk, CEO innogy eMobility Solutions GmbH
Jon Slowe, Director, Delta-EE

[00:00:24.070] - Jon Slowe

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

[00:00:24.750] - Jon Slowe

Today, I'm exploring how incumbent energy retailers are navigating the energy transition, moving away from focusing only on selling kilowatt-hours and becoming more agile, more customer-centric, and helping their customers with added value products, services and solutions. To explore this. I'm talking with Arjan Van Der Eijk, who is currently CEO of Innogy eMobility Solutions and before that has worked for several years in the retail businesses of Essent and the Netherlands and Innogy in Germany and beyond.

[00:00:56.790] - Jon Slowe

Hello, Arjan.

[00:00:58.940] - Arjan Van Der Eijk

Hi Jon, nice to talk to you again.

[00:01:01.130] - Jon Slowe

Thanks for joining us again. Arjan, let's start by this challenge I described in the introduction for energy retailers to move away from commodity, away from kilowatt-hours or away from that only and towards services solutions becoming more customer-centric and more agile.

[00:01:21.110] - Jon Slowe

How big do you think that challenge is based on your experience?

[00:01:27.030] - Arjan Van Der Eijk

I think it's a big challenge for any company to not only do they have to deeply understand the new customer needs that they have not been looking at in the past. So really understanding the customer needs in-depth. And they also need to to buy or develop the right value propositions they have to develop to the right to different capabilities, business models.

[00:01:54.340] - Arjan Van Der Eijk

So, it's a really a complex, large scale change for four energy companies.

[00:02:01.500] - Jon Slowe

Now, 10 years ago or more, I would joke with some energy retailers that they don't think of their customers as customers, they think of their customers as meter points and addresses that they send bills to. Is that do you think that's too harsh to think of that was where many energy retailers were, or can you see aspects of what I say from your experiences?

[00:02:30.270] - Arjan Van Der Eijk

Well, I think this is definitely where we came from it was not a liberalized market so the customers could not leave anyway. So, it was easy to talk about customers as connections or metre points. But fortunately, those times are in most European countries, long behind us. I experienced the Dutch liberalisation and unbundling of the markets up close and personal, and that started in 2007, already so for the B2C customers.

[00:03:04.410] - Arjan Van Der Eijk

So, it's a long time ago and I think by now they are definitely totally different place and have developed a lot of the skill sets that really the customer-focused companies need.

[00:03:17.920] - Jon Slowe

And in terms of that journey that they've been on using the Netherlands as an example, what would you looking back, what would you highlight as the toughest parts of that journey? Or can you bring out two or three points that really bring home the challenges in that?

[00:03:39.690] - Arjan Van Der Eijk

Well, I think one of them you already named the creating the real customer focus, the mindset that belongs to that and ingraining that throughout the companies and getting it really into your DNA that a customer is no longer fixed through your company.

[00:04:00.330] - Arjan Van Der Eijk

 The customer continually leave and go somewhere else if you're not able to fulfil his or her needs.

[00:04:07.110] - Arjan Van Der Eijk

And this, I think, was the biggest mindset change. And next to this, of course, a large-scale change in processes and systems and products to make the market facilitation possible. So, it was a combination of a big mindset change and a lot of more technical process-oriented changes and discrimination made. It's a process that took years to become successful.

[00:04:35.880] - Jon Slowe

And which of those two I'm going to ask you which of those two is harder?

[00:04:39.840] - Jon Slowe

And you're going to tell they're both hard, in terms of changing mindsets or introducing new systems and processes, equal challenge, or when you look back, you think that one was a lot harder and that's the one that really causes problems.

[00:04:57.180] - Arjan Van Der Eijk

Well, in my days as a consultant, we always talked about teaching the elephant how to dance.

[00:05:03.480] - Arjan Van Der Eijk

And for me, the biggest change is always the mindset change.

[00:05:09.330] - Arjan Van Der Eijk

You can pretty rapidly change a process or a system or but if the people working with it do not really have in their DNA, that they have to do it differently, that they have to use it in a different way, that they have to interact differently with the customers, then the new systems and new processes eventually are not affected.

[00:05:31.920] - Arjan Van Der Eijk

So, the mindset change and the skill set change is for me always the biggest change.

[00:05:38.490] - Jon Slowe

Yeah, OK, well, let's look back Arjan at your time at Essent, one of the leading energy retailers in the Netherlands. You worked there for ten years from 2006 to 2016.

[00:05:55.000] - Jon Slowe

What can you tell us a bit about that mindset change during that time and how you were involved in that? Anything that stands out, any key learnings that you can share with our listeners or key insights?

[00:06:08.940] - Arjan Van Der Eijk

Well, I was leading the B2C division at that time in 2009, 2010, and when the real effects of the new systems and a new process were coming into effect and was a huge change.

[00:06:23.400] - Arjan Van Der Eijk

And at that time it was an organization B2C, alone was 2,000 people in 8 locations 4 brands, two and a half million customers. And if you see where they are right now, they're still serving the same amount or even more customers, I think, with currently about 600 people. So, that shows a bit of what happened in the meantime, with digitization, more effective and efficient processes and a sense very consciously went through that change and transition process and really put it as a change program in place.

[00:07:00.330] - Arjan Van Der Eijk

And the second thing they did and that was a few years later, is that they took advantage of the fact that they had some shares and so-called service partners and companies with {illegible} having a service and maintenance {illegible} and installation capabilities.

[00:07:17.100] - Arjan Van Der Eijk

And they extended their position and built up a significant workforce in the Netherlands. Beyond the services, the call centre, the billing capabilities that you expect with the normal energy company now adding capabilities to have {illegible}  on the street, being able to serve the customers at home in the heating systems, solar panels, etc. And they built it up pretty quickly. It was by decision, so to say, to create its capabilities and also be able to serve customers with new products and services that were not in the portfolio of the classical energy company.

[00:07:59.560] - Jon Slowe

And with that, was there a debate whether to buy that and bring that in or whether to keep that as a contract model, an outsourced model. Was that a big discussion?

[00:08:12.180] - Arjan Van Der Eijk

Yeah, that was a big discussion, and it was also a lot of trial and error and learning. So, what was the best way to deal with that? On the one hand, you want to, as with every I think every capability company you buy as a company, you want to keep the strength of that capability and on the other hand, take the benefits out of the integration.

[00:08:30.900] - Arjan Van Der Eijk

And that balance is always a difficult one. So, you have a large central organization, very digital, very focused on customer service from a central call centre.

[00:08:44.400] - Arjan Van Der Eijk

That's a totally different type of company.

[00:08:46.440] - Arjan Van Der Eijk

That and a company with a couple of hundred craftsmen on the road focusing on service and maintenance contracts, getting the best out of both worlds.

[00:08:57.990] - Arjan Van Der Eijk

This is always a difficult process and it took a couple of years to really find the best balance in working together, looking at branding, looking at what's the go to market strategy for those type of products looking at the digitization of the whole process.

[00:09:18.690] - Arjan Van Der Eijk

And I think by now, they found a good balance and getting really benefits for the customer.

[00:09:27.520] - Jon Slowe

Well, I've certainly seen a number of energy retailers buy or try and develop that capability and get it wrong and some indeed then selling that off because they just didn't understand or weren't able to successfully integrate those two very different types of businesses. In terms of changing the mindsets, the last question about this from your time at Essent. There are many ways to do that, you could recruit different types of people with different skill sets, reorganize, introduce KPI's.

[00:10:09.640] - Jon Slowe

Is there anything you can highlight that you look back and think that was a really key thing in helping to change our mindsets to a customer-led organization.

[00:10:21.210] - Arjan Van Der Eijk

That's a very good question, and I think it's changing a mindset is never one to measure, of course, it's always a group of measures, an orchestra that has to really work together towards the same goal, I think.

[00:10:35.940] - Arjan Van Der Eijk

And with hindsight, Essent was very aware of the needed to change.

[00:10:41.430] - Arjan Van Der Eijk

And I think that is one of the biggest assets, if you are aware of it and you can jointly with the management team, work on all the parts that you need to get it into place in a programmatic way, a coordinated way. I think that is a big asset and it helped Essent a lot that that they did it in that in that way. And so, I would not name one measure that made a difference. I think it's more the fact that they saw it as a congruent set of measures that all needed to work together in the same direction.

[00:11:18.600] - Jon Slowe

And I guess that required leadership. And again, thinking of my experiences and working with energy retailers, that that leadership hasn't always been there to drive home that customer focus that customer-centricity.

[00:11:31.530] - Arjan Van Der Eijk

Absolutely.

[00:11:32.340] - Arjan Van Der Eijk

I think you are you're making the key points here and it starts at the top or it doesn't start at all. And so you really need the leadership and mindset in the top of the organization and a sense that that's in place. And it also takes endurance. It's

[00:11:50.130] - Jon Slowe

Yeah,

[00:11:50.460] - Arjan Van Der Eijk

You're right. There's other companies also taking a step and one half a year later, {illegible} which doesn't work so we stop. Some changes take time, and you need to be.

[00:12:01.980] - Arjan Van Der Eijk

You need to be in there for the long run. We need to have a strategic view of things. And if you otherwise, you step out too early or do not get the {illegible} that you are planning.

[00:12:15.160] - Jon Slowe

Yeah, I guess knowing that it's not going to be easy when you start and it won't all go smoothly, but it needs persistence and resilience. So, after Essent, your role was in B2C and change and transformation at Essent, you then moved to Essent's, then parent company Innogy as international lead and energy plus and retail program management and then B2C marketing.

[00:12:45.910] - Jon Slowe

Tell us a bit about the without going too much into anything you're not comfortable sharing. Tell us a bit about what you saw when you made that move and your experiences in those roles in terms of this change to products, services, solutions and customer-centricity that we're talking about.

[00:13:05.500] - Arjan Van Der Eijk

Yeah, there was a very interesting period because I stepped in at the moment that Innogy really started as a versus a company of RWE and then also going to the going and doing an IPO etc.

[00:13:23.800] - Arjan Van Der Eijk

So, what Innogy did, is that they took a different approach in different countries and tried to learn from that. So, it was not they were not convinced to go left or right, but they tried different ways and tried to really learn quickly from that. In Germany, they started early already under RWE, to design and build own technical products like Smart Home you know it well there Jon, so they learned a lot, but they also invested a lot.

[00:13:53.140] - Arjan Van Der Eijk

So, it was not an easy road that they went and not all products that they designed and produced were easy to get to the market. It was a technology-push approach, but it really, really developed the products themselves for a market that was almost not there yet. So, in other countries, they followed a more similar approach, like a centre.

[00:14:17.890] - Arjan Van Der Eijk

For instance, in Poland, they bought a solar company and very successfully expanded that across the Polish market internationally. To get those learnings out, they implemented a category management approach to maximize the synergies in the different categories, for instance, in buying solar panels across all countries where energy was active.

[00:14:43.180] - Arjan Van Der Eijk

So, this combination of different local approaches and an international ribbon around it following category management approach, I think was an intelligent way of learning from all the different transitions and getting the best out of it. And also, here, there's not one best way there's no school solutions, it's very much depended on the leadership, on the strategical vision on the consequence, implementation of all the measures. So, I would not say that one method is better than the other, but the success factors are more important than, the eventual choice in my perspectives.

[00:15:28.600] - Jon Slowe

So, one thing I'd like to just drill into a bit is this. The fact from what you described, very much an attitude of rolling up your sleeves, getting your hands dirty, getting involved, trying different approaches, and some of the approaches involved, quite a lot of investments, like, for example, developing a portfolio of smart home products, buying a solar company in Poland. How hard was that, given the uncertainties about what the right approach was with smart homes?

[00:16:04.210] - Jon Slowe

There wasn't even a market there, as you described it. It's really about creating a market.

[00:16:08.380] - Jon Slowe

So, those are fairly chunky investment decisions with quite a lack of certainty about what the return on those investment decisions will be, that must have been hard?

[00:16:23.320] - Arjan Van Der Eijk

Then it became increasingly harder when the financial results were, of course, not coming. So, it's we come from a situation where our energy companies, especially with a production back up like RWE were still relatively successful and earning a relatively good rate of return. And from that basis, they knew they had to develop, that the future was changing, that energy flexibility and energy transition was coming in Germany. So, they needed different products, needed new business models, and they still had money to invest.

[00:17:01.810] - Arjan Van Der Eijk

So, at that moment in time, making the decision to do it is not that difficult to try it out. What happens as you go further down? You invest more and more and more money at this one moment in time to go to market strategy needs to pay off. And if it needs to come and what do you do? When it doesn't come quickly enough. So, that was a difficult time for certain products. And you see, for instance, that the smart home as an example was only partly successful.

[00:17:33.610] - Arjan Van Der Eijk

It didn't work in all countries. And so, it's not an easy way to go as an energy company to really develop everything yourself.

[00:17:43.270] - Arjan Van Der Eijk

And on the other hand, you learn an awful lot if you do it, but you need to really make sure you're in it for the long run. And I think what they learned at that time as well is that they need to find the right partners to do things like that. Doing everything yourself in a complex environment is not always the best way.

[00:18:03.580] - Jon Slowe

And I guess that comes back to a bit about the discussion we had earlier about do this in house is it a core competence?

[00:18:11.380] - Jon Slowe

Do you outsource it?

[00:18:12.820] - Jon Slowe

Do you partner and develop it jointly?

[00:18:15.820] - Arjan Van Der Eijk

That's right.

[00:18:17.350] - Jon Slowe

Yeah.

[00:18:17.810] - Jon Slowe

And there's not a right or wrong answer. Have you come to any conclusions yourself or have your experience has made you think, well, more often than not, one approach is going to work better than another approach or is that too hard to say?

[00:18:34.570] - Arjan Van Der Eijk

No, if I would have a golden bullet, I would have already written a book about it. It's, what I've learned is, you know, building it up yourself is a very timely and costly effort.

[00:18:51.490] - Arjan Van Der Eijk

But it can pay off if you're in it for the long run and if you really invest in the technical capabilities and build it up. And we talk about eMobility a little bit later, and I think this is where we've been quite successful in doing it.

[00:19:07.470] - Arjan Van Der Eijk

Yeah, but it takes a lot of time and you need to have that time and be willing to invest the time. So, buying it, of course, is something that goes much faster and gives you much faster access to the capabilities that you need. But then you've got the integration question. Can you bring it together and you make it work together, different companies, different ways of working, and that creates a complexity on its own. And some companies are more successful in that than others.

[00:19:41.410] - Arjan Van Der Eijk

Finding the right balance between keeping it at arm's length and keeping the benefits and on the other hand, jointly developed propositions and get the integration efforts, the benefits out. It's I don't think there is a recipe book here, but it's clear that both methods, there are pros and cons and both methods have their own risks. And success factors that you need to manage very consistently.

[00:20:11.950] - Jon Slowe

Yeah. If I again think that to the companies that I've worked with, that Delta-EE’s worked with originally, I think a lot of the tendency, the natural tendency would be to develop in-house. And it was quite difficult to think about partnering or jointly developing. And now I see that changing more a lot more innovation labs, a lot more quick, agile development with partners. So, it seems to me that, as you say, there's not a right or wrong developing in-house can be successful.

[00:20:46.840] - Jon Slowe

But you need to make a very conscious choice to do that. Whereas I think too often in the past that's been the default way of doing things. And then people have realized, oh, this takes a lot of time, a lot of money, a lot of patience, and we might not be the best of doing it.

[00:21:03.710] - Arjan Van Der Eijk

Yeah, exactly where do you want to be in the value chain and where are your {illegible}? Where is the natural position where you know, you can be successful and where is it not?

[00:21:13.180] - Arjan Van Der Eijk

And but on the other hand, sometimes you need to have a certain debt to the value chain to get the money out, to go to have the right margins in the end. And you cannot be scattered all over the value chain and pick and choose sometimes. And so, it's not an easy, easy decision to take.

[00:21:31.660] - Jon Slowe

Well, let's move on now to your current role. Since March of this year, you've been CEO of Innogy eMobility Solutions. For our listeners will you just give a very quick summary of what that business is? Because it's more along the make lines or build in house lines that we talked about and then some of your observations coming into this business?

[00:21:56.590] - Arjan Van Der Eijk

Yeah, well, first of all, it's a very exciting market.

[00:22:00.920] - Arjan Van Der Eijk

It's a, it has been growing already, but it's taking off at an even more rapid pace we're expecting growth numbers across Europe exceeding the 30 percent per year.

[00:22:15.700] - Arjan Van Der Eijk

And I think we have a unique position as Innogy eMobility solutions because we deliver both the AC and DC hardware and the connecting software and all from our own development.

[00:22:30.250] - Arjan Van Der Eijk

And if you look at where we are a part of it, we developed ourselves and part of it, we bought and so the AC hardware we have fully developed ourselves in Germany coming from the same roots from RWE as we just discussed for smart home with strong engineering capability, not building it ourselves.

[00:22:55.840] - Arjan Van Der Eijk

We have a production company that does it for us. All the IP is with us and.

[00:23:01.570] - Jon Slowe

Yeah. so you're right into that part of the value chain. Deep inside.

[00:23:07.370] - Arjan Van Der Eijk

Exactly, you're right in the heart of the value chain. But on the other hand, we {illegible}, of course, that the markets, is now also rapidly developing for DC and that means that for two years we bought the company in the US B2C power who has exactly that capability. So, who has been building DC hardware for years already and for instance, supplying large CPO's in North America like electrified America with their DC hardware, and they have now a production facility in Cebu, in the Philippines.

[00:23:42.410] - Arjan Van Der Eijk

And that means that we now have our own IP and knowledge and products, both in AC and DC and the same thing we have on the connecting software side.

[00:23:55.230] - Arjan Van Der Eijk

So, developed a software platform for many years already, which we have migrated this year, fully to microservices into the cloud. So, it's fully scalable architecture and we are connecting over 20,000 charging points across Europe already, over that system. And that means that both on the hardware and software side. We can basically facilitate all use cases for eMobility, whether you're charging at home, at your workplace, whether you're in the public domain or charging along the highway with ultrafast charging.

[00:24:36.890] - Arjan Van Der Eijk

We have the products to support this. And that makes it a very interesting situation where we are right now in this market taking off rapidly.

[00:24:47.330] - Arjan Van Der Eijk

And it's a very exciting time to work in this new situation, new market.

[00:24:55.820] - Jon Slowe

And that's as you said, it's a fast-moving market. It's not an open space because that market has been around for a number of years. But there's a bit of a battle going on for that market there won't be many tens of winners in this market. They'll probably be a smaller number of winners.

[00:25:17.840] - Jon Slowe

What's your what do you think are the key things that Innogy is focusing on needs to focus on to really make sure that you come out as one of the key players in this market.

[00:25:31.660] - Arjan Van Der Eijk

Yeah, it's very interesting to see that, I mean, you're right, the market is there for some time already, but the dynamics that are happening right now are unprecedented for. You see the car manufacturers are finally really producing models in a broad sense until a couple of years, it was Tesla.

[00:25:53.980] - Arjan Van Der Eijk

Then there was a long time, nothing. And by now we have really a broader range of vehicles on the road. And the numbers are even in this COVID times, that is one of the few types of cars that are still growing in sales. So, the growth rate is going up and so. When you want to be successful in a market like that, you need to have the right products. You need to have customer access in the markets where you want to be.

[00:26:31.190] - Arjan Van Der Eijk

So, for us that's North America and Europe. So, we have as you know a sales office in the UK and France and Germany. We have, of course, a large presence. And the same goes in Santa Ana, California, covering the US and Canadian market. You really need to understand your customers and customer strategy because that changes a lot as well. We are B2B company, so we are delivering to large OEMs, large CPOs, cities. So, we need to really understand what goes on there with our customers and be able to deliver at the right moment in time with a customer journey that really works.

[00:27:12.350] - Arjan Van Der Eijk

And you see now that this market is also shifting from pure technology products, becoming more and more customer-focused here as well and really putting products on the market that are easy to use for the EV driver in the past, it was more and more focused on, you know, simply making sure technology works. Now, much more than that. It's also a point of sale, having payment modules and so, in the end, it will be only a success if the EV driver can effortlessly drive through Europe and charge wherever he wants to with the car he has, with the payment methods he has.

[00:27:56.030] - Arjan Van Der Eijk

And that means we need roving concepts we need. So, it's really a broad set of capabilities that you need as a company right now to be successful.

[00:28:07.550] - Jon Slowe

So it really does. I think to me it's come full circle to your time at Essent when the market for electricity retail, gas retail was opened up in the late 2000s. You've got, you know, Innogy's got, built up a really strong heritage in products in the charging products AC and acquiring DC, you've led on software onto that. You've package that up as solutions. But the key battle now is a market transformed from technology push to I guess delivering a great experience to customers will be that service and how you package that together and offer that up to the market.

[00:28:48.800] - Arjan Van Der Eijk

Absolutely.

[00:28:49.820] - Arjan Van Der Eijk

Yeah. And it's for us also still we also still have to learn a lot there. If you look at our roll-out of DC products across Europe, we also need a strong service management offering that our customers. If you're CPO, you don't want to worry about the reliability of your charges. You want to make sure that those things are working all the time because that is where the money comes from so we need a strong service management capabilities across Europe to be able to as soon as a charger, has a problem server directly.

[00:29:22.220] - Arjan Van Der Eijk

Have 24-hour spare parts delivery, have service capabilities in all countries available. That is something that is now rapidly building up as well.

[00:29:36.170] - Jon Slowe

So, is it the same again, coming full circle back to the beginning of our discussion, you highlighted, on one hand, the right systems and processes and so on. And on the other hand, the mindset. Would you apply those two things to where you are today is that or is there a different, thing you need to focus on to really drive that customer-centricity into the business?

[00:30:04.520] - Arjan Van Der Eijk

No, I think you're very right. So, I think it's again, both. And what's interesting to see, if I look at my team at Innogy. It's a lot of people with a real heart for eMobility.

[00:30:17.510] - Arjan Van Der Eijk

I have hardly ever experienced that so strongly that the people working with us are really convinced of and in the hearts they're EV drivers and EV users.

[00:30:30.260]

{cross talk}

[00:30:30.390] - Jon Slowe

They are really passionate.

[00:30:33.260] - Arjan Van Der Eijk

So, the mindset is really extraordinary to focus on EV. Sometimes it needs some extra more customer focus.

[00:30:43.310] - Arjan Van Der Eijk

And but I think from a mindset perspective, we have the right I see the people having the heart in the right place and working relentlessly across all our product groups and around the clock to make things work for our customers and directly when a charger is not working, jumping on it. So, I think mindset wise, I see that we don't have enough coming from a mentality of, OK, customers cannot go anywhere. We are coming from a different mentality.

[00:31:20.300] - Arjan Van Der Eijk

So, I think the challenge here is more in really understanding the customer needs and fitting the value propositions to that and making sure you can deliver it flawlessly to the markets at the right speed and speed is essential as well at the moment because the market is commoditising on the AC side as well. So, you need to be able to with every product cycle it needs to fit, right? Every life cycle you cannot miss one product cycle because your competition will directly be ahead of you both in cost and in functionality.

[00:31:58.990] - Arjan Van Der Eijk

So, it's a very dynamic, but also a very competitive market.

[00:32:07.780] - Jon Slowe

Well, it sounds like a fascinating role you're in at the moment, Arjan.

[00:32:12.630] - Jon Slowe

And yeah, an area where there's a huge amount of passion and a huge need to get those solutions for customers. Right. So eMobility can continue to grow in the way it's going, and we can move to a more sustainable future for how we drive about. Now it's time to bring out the Talking New Energy crystal ball, which is how we end all our podcasts. So, the question I'd like to ask you is this thinking of companies like, I guess, Essent and Innogy as they were so incumbent utilities or incumbent energy retailers in general, maybe in northwest Europe, if 10 out of 10 means they're behaving and acting as a best in class retailer, agile, fast-moving, customer-centric, all the things we've talked about and 0 out of 10 means they're thinking of meta points rather than customers.

[00:33:08.800] - Jon Slowe

How would you score the sector today? And if we put the crystal ball setting to 2025, how would you score the sector in 2025? So, utilities in general in Northwest Europe, for example.

[00:33:23.770] - Arjan Van Der Eijk

Yeah, the difference, of course, will be across countries and companies, especially depending on if there is a high customer churn a lot of competition, whether it's the UK and the Dutch in the Nordics, are more competitive markets at the moment than, for instance, the German market.

[00:33:40.180] - Arjan Van Der Eijk

But in general, I would give most incumbents a 7.5 and I would say they're moving towards an 8.5. So, there's a lot of work done.

[00:33:54.100] - Arjan Van Der Eijk

And I think most energy incumbents are really aware that they need to develop, have done a lot of good work and but they've all become even better going forward.

[00:34:06.940] - Jon Slowe

Yeah.

[00:34:07.330] - Jon Slowe

So, a lot of the transformation done, but more still further to go.

[00:34:12.280] - Arjan Van Der Eijk

Absolutely.

[00:34:14.410] - Jon Slowe

Well, Arjan it's been fascinating talking with you, and I really appreciate you sharing your experiences and learnings all the work you've done in the Netherlands, Germany and beyond, wishing you the best of luck with Innogy eMobility solutions. And yeah, thanks very much. Really appreciated it and enjoyed the discussion.

[00:34:39.150] - Arjan Van Der Eijk

Thank you very much, Jon,

[00:34:40.290] - Arjan Van Der Eijk

 I enjoyed it, too. Thank you.

[00:34:43.020] - Jon Slowe

So, that's the end of today's episode. That's the last one in our current series. So, we'll be taking a short break of a couple of weeks and then be back with a brand-new series towards the end of November. Thank you, everyone, for listening. We hope you enjoyed the podcast, and we welcome you back soon goodbye.

[00:35:13.230] - 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.

[00:35:29.700] - 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

Jon Slowe, Director at Delta-EE

René Savelsberg, Co-Founder and Managing Partner at SET Ventures.

Charles Vaslet, Partner at Emerald Technology Ventures

Charmaine Coutinho, Head of Consultancy at Delta-EE

[00:00:23.550] - Jon Slowe

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

[00:00:24.330] - Jon Slowe

Today, we're taking a step into the investment world change and disruption in the energy transition means opportunity, and there's no shortage of startups, new entrants and emerging companies seeking to capture these opportunities. But these companies typically require cash to grow and have an impact in the transition to a cleaner, greener future so that cash often comes from investors. And today we're going to look at what it's like from an investor perspective. And to explore this, I'm joined by two people who have been investing in the energy sector for many, many years, together with one of my Delta-EE colleagues who has been working with both start-ups and investors alike.

[00:01:08.410] - Jon Slowe

So, without further ado, let's introduce our guests. My first guest is René Savelsberg, CEO and Co-Founder of SET Ventures, a specialist investment company in the energy transition based in Amsterdam. Hello, René.

[00:01:24.160] - René Savelsberg

Hi,

[00:01:25.000] - Jon Slowe

Thanks for joining us.

[00:01:27.430] - Jon Slowe

You co-founded SET Ventures 13 years ago, and your company has grown a lot. Can you give our listeners a pen portrait of SET Ventures today?

[00:01:38.020] - René Savelsberg

Yeah, well, indeed. We started in 2007 with our first fund. Currently, we are investing out of our third fund, which has the size of 100 million, the third fund. And we focus still on energy transition, even though we label it as the energy system transition. I can explain that definitely somewhat further later on in this podcast. But we believe that that is where the right excitement is right now to invest in companies.

[00:02:16.870] - Jon Slowe

And can you give us a feel of roughly you mentioned 100 million, in your third fund. Can you give our listeners a feel of how many companies you've invested in and how many you've maybe exited from to give a sense of how active you've been?

[00:02:32.710] - René Savelsberg

Yeah, we are.

[00:02:33.860] - René Savelsberg

We are close to 25 investments that we have done over the 13 years. We have exited about half of those so far, some successful, some a little bit less successful like always in our industry. But we are very happy with the overall performance. And obviously, we have a couple of very interesting companies still in our portfolio that we are working hard with to achieve our objectives.

[00:03:03.250] - Jon Slowe

And can you give us an example or two of your successes or companies in your portfolio that you're particularly excited about?

[00:03:11.920] - René Savelsberg

Yeah, well, I think it's known that Sonnen in Germany, a company that we invested in the B round that has become a successful company, not only from an investment perspective, but also in the market as it is now part of Shell and bringing home batteries to life in a virtual power plant, which is definitely one of our successes in our portfolio, but also very early on if I may add to it very early on, we already actually have a company in the EV charging business.

[00:03:45.140] - René Savelsberg

In 2011, we sold that company to ABB, which I think was very much ahead of the pack of everybody being in the electric vehicle. So, we can be proud of that.

[00:03:56.860] - Jon Slowe

Yeah, not quite a decade ahead, but not far off René. Thanks, René, we'll come back to you shortly.

[00:04:06.400] - Jon Slowe

Let's introduce our second guest, Charles Vaslet, a Partner at Emerald Technology Ventures in Zurich. Hello, Charles.

[00:04:14.850] - Charles Vaslet

Hi, Jon. Hi, René. Nice to be on this podcast as well. Looking forward to the discussion.

[00:04:21.160] - Jon Slowe

Thanks, Charles, you've been around a similarish time, a bit longer than SET Ventures and at Emerald, your focus is a bit wider, isn't it, than energy? Can you give likewise give our listeners a pen portrait of Emerald in terms of your focus, your size?

[00:04:39.520] - Charles Vaslet

Yeah, that's right, Jon. You know, we were founded in 2000, so we're 20 years old. I actually joined the firm in 2004 after a career in the energy sector.

[00:04:55.480] - Jon Slowe

Do you remember what number employee you were Charles?

[00:04:57.860] - Charles Vaslet

Oh, well, it was actually part of a larger group then, which we later separated from. That was SAM. And, you know, originally it was around sustainability and energy.

[00:05:09.700] - Charles Vaslet

And then we broadened out, as you said, to kind of cover advanced materials, water technologies, now industrial IT mobility circler solutions and actually a little bit of food and AG as well.

[00:05:25.230] - Charles Vaslet

And obviously, we're looking for to support entrepreneurial led early-stage and expansion-stage companies in Europe, North America and now in Asia, with a new office opening up in Singapore.

[00:05:42.070] - Jon Slowe

And number of investments or amount invested as of indicator of your activity.

[00:05:48.340] - Charles Vaslet

Yes.

[00:05:48.650] - Charles Vaslet

So we have an evergreen fund, which is the Emerald Industrial Innovation Fund. That's 135 million euros. But it basically grows as we add new investors.

[00:06:04.660] - Charles Vaslet

We've got 25 corporate LPs, very diverse in nature and sectarian interests, etc. In that fund, we just closed 100 million US Water Fund as well. And we're looking to start other kind of thematic funds as well.

[00:06:24.340] - Jon Slowe

OK, thanks very much.

[00:06:26.170] - Jon Slowe

And my final guest is Delta-EE colleague Charmaine Coutinho. Hello Charmaine.

[00:06:35.530] - Charmaine Coutinho

Hi Jon

[00:06:35.530] - Jon Slowe

Welcome back to the podcast. After a while, since you've joined us.

[00:06:39.960] - Charmaine Coutinho

A brief hiatus.

[00:06:41.580] - Jon Slowe

Yeah. Now we've been involved at Delta in quite a lot of work, both for start-ups and companies seeking investment and those seeking to invest in the energy transition. Can you give us an example of something that's really stuck in your mind from maybe an investor or investee side?

[00:07:03.890] - Charmaine Coutinho

Yeah, so from an investor side, I think what was a really interesting example is we were asked to give support on free investment in a heating technology. So, at Delta, we've been researching heating for a long, long time.

[00:07:18.240] - Charmaine Coutinho

And for me, that was really fascinating because this company's been around for a long time and very vocal in the marketplace and really being able to help the kind of really portray the picture of what that company's trying to do and where they sit in the market based on. Accessing, all these kinds of years of experience, it was really nice to see the heat transition starting to gather some pace or at least some interest from a financial perspective so that was quite nice on both sides.

[00:07:43.730] - Charmaine Coutinho

Actually really, because we knew the company beforehand and working with investors to help support them in making a sensible decision. So, that was great. And then, you know, going back to the past, just more of just traditional kind of market assessments to make sure that anyone investing in these is going to really understand the dynamics, the trends, the history as well, as well as kind of where all these companies could be going in the future.

[00:08:08.720] - Jon Slowe

Well, maybe René and Charles, I'll just ask you on that point in terms of understanding the market. One thing that I think is a challenge for investors in energy is the level of complexity in the energy market, the regulations of policy, the market structures, the dynamics in the market. Maybe it's the same whatever sector you go into, but energy is, I think, particularly complicated. How hard does that make it for you or how much of a USP does that give you as investors if you're focused on energy?

[00:08:40.700] - Jon Slowe

Do you still struggle sometimes with those complexities? Is it hard to really identify those compelling companies when energy is such a complex area?

[00:08:53.750] - René Savelsberg

Well, I totally agree with you. I applaud always investors that have a very broad scope and need to understand a lot of sectors in detailed in order to make decisions. And we had said we focus for 100 percent on what is happening in the energy system as it is evolving as we speak and through the transition from fossil fuel to renewables and from centralized or decentralized. And indeed, as you said, it's a very complex market where regulatory environments are evolving as we speak, per country there is differences and opportunities that are working in one country will never fly in another.

[00:09:39.380] - René Savelsberg

So, knowing those realities is something that is very needed in order to make right decisions. And we are specializing in that we are focusing in that, we do, our {illegible} our studies in these areas in order to educate ourselves and prepare ourselves for the right investments at the right time.

[00:10:00.160] - Jon Slowe

And how do you find that René? Do you ever look at investments and think, even though you're a specialist in this area, you think, wow, there's just too much, I don't understand it.

[00:10:10.840] - Jon Slowe

Or over the years, do you find that you can understand the risks and the what you need to understand in the energy sector to really evaluate investment opportunities.

[00:10:23.200] - Jon Slowe

I agree with the complexity that it is complex at a certain level.

[00:10:27.040] - René Savelsberg

But if you're abstract, it also becomes clear what is happening. So that in itself, I don't think that we are lacking the knowledge about the where the market is going to but what is always difficult. And that counts for every investment and every sector that you're investing in is the timing of when things are happening. So, the timing issue of when companies with great propositions will really hit the market and start scaling up. That is something that I'm still worried about, that we sometimes wish that either we are too conservative or sometimes we are too optimistic.

[00:11:07.690] - René Savelsberg

The timing that is the issue.

[00:11:11.590] - Jon Slowe

OK, Charles, how do you see that, because you're a little wider than just energy. Do you have to be master of a few trades rather than just one?

[00:11:20.860] - Charles Vaslet

Yes.

[00:11:21.170] - Charles Vaslet

So, every industry I think we touch is going through a transition, whether it's an energy transition or a circular economy transition or a digital transition or changes in an environment. Climate change obviously imposing pretty ambitious goals on many corporations who are kind of seeking to get to, you know, to reduce emissions significantly. So, and that's a struggle because it's not clearly the regulations today it's the regulations tomorrow. And, you know, as this industry transition regulations will either be ahead or behind and obviously regulations will change geographically as well.

[00:12:11.200] - Charles Vaslet

So, some you know, some nations or states or super nations will be moving at different paces. So, you know, it's critical to try and understand not just the market today, but how you think that's going to continue. For example, you know, is are regulated or utility-owned, but regulated companies in the US utility sector is that a sustainable business model? Or are we going to see greater deregulation, as we saw 20 years ago, kind of re-emerging as the necessity for these kind of, you know, companies which are almost guaranteed a profit, kind of goes away.

[00:13:01.150] - Charles Vaslet

So, I just think there's going to be enormous change. And it's that's also needs to be understood.

[00:13:09.520] - Jon Slowe

OK, well, let's come back to this area of risk and uncertainty and regulation in a bit. I'd like to ask you both first from about investment opportunities. So, I'm constantly amazed by how many new entrants are trying to find their way into the energy sector in terms of investment opportunities coming across your desk, do you struggle for opportunities? Are you swamped and overwhelmed by opportunities? Can you give our listeners a feel for the volume of opportunities in the energy sector that you're saying?

[00:13:49.320] - René Savelsberg

If I may answer that, consistently over the years we see about north of 700 propositions per year coming through to us in Amsterdam, and that number is not changing. What is changing, though, is that more and more of these propositions are all geared towards what we call smart energy solutions, solutions that are propositions that have a digital component in its business model, software-driven and are working along that access to make the energy system transition happen.

[00:14:31.270] - René Savelsberg

And that is encouraging event that we see more and more of those type of companies coming to us that are at the heart of where we feel the opportunities are for an investor like us.

[00:14:45.240] - Jon Slowe

That's quite a 700 a year. And from what you said in your introduction, you've made around 25 investments over 13 years. Now, I know that won't be evenly spaced, but that averages to a year.

[00:14:57.690] - Jon Slowe

So, you're not short of opportunities. That sounds like quite a challenge to evaluate those 700. How many would you say of those 700 do you really then look at seriously over the course of a year?

[00:15:12.060] - René Savelsberg

I would say between 10 and 20 percent. By the way, I want to stipulate that we look at all of them. We have a weekly meeting in which we discuss all of the things that come in. So, we quickly shift between those that are worth further investigation. And then if they're really interesting, we bring them to a proposal and then we execute later on the deal. And that is indeed, as you say, that's a low number.

[00:15:37.350] - René Savelsberg

The last one, because we have to be very picky and timing is everything on this.

[00:15:44.180] - Jon Slowe

Yeah.

[00:15:45.190] - Jon Slowe

Charles, are those numbers similar to you or do you have a different experience?

[00:15:49.470] - Charles Vaslet

Yeah, I think I think it's really important as an investor has to have a consistent and systematic process. And, you know, it's taken us years to kind of develop, you know, how do we shift through the 1500 deals that we see per year of which about half are of kind of pure energy-related, some kind of energy and water, etc, but, you know, shifting through that amount of deal flow and we probably reach out to about half of them to actually speak to the company.

[00:16:21.420] - Charles Vaslet

We have these kinds of informal tire-kicking sessions with the team and then a three-game process to get from that number. So, we use the same kind of pipeline. We're trying to also find interesting companies for our LPs because they are also interested in kind of what's going on in the steel flow. So, similar numbers to René. I mean, we're basically from an investment perspective, within 10 to 20 percent and probably discussing a similar amount with our LPs.

[00:17:00.090] - Charles Vaslet

Now, obviously not the same deal we discuss with every LP because they have different interests. But yeah, it's a lot of reviewing, writing up, processing. And if you haven't got a systematic process for that, you won't identify those few companies which will basically carry the front performance.

[00:17:22.440] - René Savelsberg

Jon, maybe I can add to that.

[00:17:23.400] - René Savelsberg

Because I think if you are a focused fund manager like we are, you know, obviously not every deal is a complete new deal that you have to start studying from scratch. In those 700 that we see on a yearly basis, there's quite some overlap because smart people are everywhere in every country and entrepreneurs are arising in every country with similar ideas. So, we can very much plug them into a certain bucket of what they want to do and similarities and therefore quickly scan the good from the bad.

[00:17:59.280] - René Savelsberg

And there is an efficiency that you get while you are focused on a certain sector, which in our case is in the energy system transition.

[00:18:08.970] - Charles Vaslet

But it isn't cheap, Jon, it's expensive if you think about the amount of time we spent, I would say about, you know, probably maybe 20 percent of our OpEx, maybe a little bit more is really just going through this deal flow. So, it's you know, it's thousands of dollars per deal of resources which are spent trying to, you know, assess light-up, discuss amongst the team through this solution.

[00:18:42.690] - Charles Vaslet

And I think a lot of people kind of don't necessarily understand that when they start a new fund in the sector.

[00:18:52.380] - Jon Slowe

Yeah.

[00:18:52.680] - Jon Slowe

That they're going to have this volume of opportunity to evaluate and understand. Now, we may have some listeners to this episode of the podcast who are considering pitching to you, René and Charles. What advice would you give them?

[00:19:11.340] - Jon Slowe

And then to Charmaine, what challenges do you see from working with some of these start-ups? So let's start with René and Charles, in terms of biggest single bit of advice to someone that has got a start-up that needs investment and is going to pitch to you, what would you say to them?

[00:19:32.640] - René Savelsberg

Well, I prepared this question because I actually it was on our internal discussion the other day. You know, the single theme, you know, in any event, pitch, it should be simple. So, the more simple you can bring your message across, the better it is. Obviously, but the number one thing is explain very carefully from the get-go. Who you, as a new company start-up, are going to send invoices to who is the one that, you know, has to sign on the other side of the okay for your invoice?

[00:20:07.760] - René Savelsberg

As long as that is not clear. And I tell you, in 99 of the 100 that's not on the table of any pitch,

[00:20:15.030] - Jon Slowe

Wow

[00:20:15.780] - René Savelsberg

Yeah, I know, because people start talking about how great they do the things that they do and how complex the market is and where they solve the problem. And then, in the end, you know, you have a solution. Who are you sending the invoice to? Who is sitting on the other side there and being your customer and signing off on that invoice?

[00:20:34.740] - Charmaine Coutinho

I would agree with that, Jon. Yeah sorry, I just I feel so strongly about that. We've been helping some start-ups with their investor packs and investor pitches. And quite a lot of them, not all of them are technical. So, they come from engineering backgrounds. So, they see a technical gap in the engineering system, and they have this great idea and they go straight to the detail of that rather than saying, and we're going to sell it to these people.

[00:20:58.230] - Charmaine Coutinho

These are our customers. And this is what it is in one line. And I kind of want to direct them all to reading like start-up.com is the top ten list, isn't it? But it is the one thing we have seen is just, no one, people are interested in you, but actually, how are you going to make money and if you don't know, how do you think you're going to make money and keeping that really simple, really.

[00:21:23.820] - Charmaine Coutinho

I think that's the biggest challenge we have.

[00:21:27.020] - Charles Vaslet

Let me expand on that a little bit, because I also think, you know if you're selling to anybody and in some respects, a pitch to an investor is a sales process. Right. You know, take the time to understand, you know, what the fund does, what the fund has historically invested in. Who are the people who are the decision-makers, you know, think about how you're going to progress this through that organization.

[00:21:52.610] - Charles Vaslet

How can I help them to make this easy for them to decide one way or the other if this is interesting proposition? The other thing I would say is its storytelling and, you know, to kind of build on René's point, boiling it down to simple messages, is actually very difficult. You know, it's easy, actually just stuff, you know, 20, 30 slides of technical diagrams and whatever, but actually boiling it down into this kind of story, make it, you know, make somebody care about what you're doing, make it interesting and make it human.

[00:22:29.600] - Charles Vaslet

And I think then you can kind of you know, you can kind of connect with the investors so they understand how you're going to make a difference, you know, not just for them, but, you know, in the application that you're doing for the customers that you're looking to serve.

[00:22:46.490] - Jon Slowe

Well, two things really struck me from all three of you said one is customer-centricity and how that's, I keep talking about this with lots of different people, that the energy sector still really lacks customer-centricity in many ways. And that's the same that I'm hearing now about treating you the investor, both treating you the investor as their customer and giving a really simple story and being clear who their customer is. And the second is keeping it simple. I think people love to make things complex but keeping things really simple.

[00:23:24.350] - Jon Slowe

So, if you are thinking of pitching for investment and you're listening to this podcast, hopefully, that's of help. I'd like now to spend a bit of time looking at how easy or hard it is to succeed as investors and cleantech I know is different from what each of you two do. But cleantech came out of the 2000s with quite a tarnished reputation, so. Yeah, how successful have your funds been and what are the biggest challenges you talked about, the regulatory risk, is that the biggest challenge or would you highlight another really big challenge for an investor to succeed, René do you want to go first with that?

[00:24:08.190] - René Savelsberg

Sure, um, yeah, well, the fact that the cleantech sector came out a little bit tarnished, as you said, has had to do with the fact that everybody believed that you could flip a capital intensive business into a venture capital model and then make great returns, that is what cleantech suffered at large. We are now obviously in a different era and investors like us have moved to the digital as part of the equation where we will with asset-light and recurring revenue models, we want to correct that success.

[00:24:46.660] - René Savelsberg

But the biggest the two biggest issues we see is still the timing of the market. As I said before, markets are different in every country, still in the energy sector, which is coming out of a regulated environment into a free environment. Technology is changing rapidly and predicting the market when it's picked up is still an issue.

[00:25:09.948]

{Cross talk}

[00:25:11.790] - Jon Slowe

René, regulation, one part of that timing, isn't it?

[00:25:14.580] - Jon Slowe

You've mentioned regulation, but the technology customer, it's a whole range of things affecting that timing.

[00:25:21.060] - René Savelsberg

It's definitely not only legislation, absolutely in a regulatory environment, it is also consumer attitude towards, you know, the appreciation of an energy transition and willing to pay for that. Absolutely. The second part of any of the market that we are in is that we are moving away from this engineering-driven to really a business-driven environment where the points that we made in the earlier in the previous topic, on what is important in a pitch being consumers and customer-centric and know what you are selling is becoming more apparent now than it was ever before.

[00:25:56.190] - René Savelsberg

So, that still is an issue good teams with experience in the sector are needed.

[00:26:03.620] - Jon Slowe

Yeah, OK. Thanks, René.

[00:26:05.200] - Charles Vaslet

Yeah, maybe.

[00:26:05.550] - Charles Vaslet

I think yeah, I kind of think of it the same, but I always think of it slightly at one level up. I mean we are asset managers or fund managers. So, you know, it's really important for us to understand that, that there are no single silver bullets. There's very few unicorns in this sector. Right. So you've got to construct a portfolio of diverse investments, diverse by sector stage, geography, time, you know, just making sure that there's no one event which is going to basically hit more than one or two companies at any one time then.

[00:26:46.940] - Charles Vaslet

Think about how you construct that individual investment, you know, what size of syndicate do you want? How many new investors versus existing investors? Can you ensure that that syndicate has enough money to carry you through the next round so things don't progress as René was saying a market comes later and you can't raise external moneys at the price that you want. Does the current syndicate have the power to basically take the company through to a cash flow break-even, build relationships with your board members, your management team.

[00:27:25.910] - Charles Vaslet

You don't wait until the crisis, which will inevitably happen. You need to establish those relationships. You need to work on those relationships. You need to meet people, dine with them, you know, just, you know, engage with them. Because one point there will be a shock. You know, either something goes off the rails, the economy changes, and at that point, you need to come together and work together.

[00:27:54.890] - Jon Slowe

Yeah, okay so two points there Charles, the portfolio approach that doesn't focus just on one narrow part of the market, but have a portfolio, and secondly, your investors, they'll need to go through hard times. So, making sure that you've got the firepower to act on opportunities when you see it. Charmaine, there's more and more activity from, I guess, a range of investors in the energy transition. Anyone stand out to you as starting to invest in addition to companies like René and Charles's companies?

[00:28:36.990] - Charmaine Coutinho

Well, I mean, I wouldn't say anyone particular stands out to me.

[00:28:42.240] - Charmaine Coutinho

I mean, we've seen a lot of our clients who are kind of in the corporate venture capital, which I find interesting anyway, because the dynamic that causes a big corporate to set up an investment team, why they do that, I find quite interesting.

[00:28:55.800] - Charmaine Coutinho

But from that group of people, I think Enel X is quite interesting just because they've gone beyond energy quite substantially in the way they look at their innovation hubs and innovation programs. So, I think they're quite interesting and starting to merge into that kind of circular economy piece that Charles mentioned. So, yeah, I find those interesting. I think the biggest thing for me, I've been working in the sector for about 15 years and it's really great to see people.

[00:29:24.900] - Charmaine Coutinho

Articulating things like ESG is now the most in one of the drivers that speeding everything up in the investment sector around energy and I don't really like ESG as a reason for doing something so when I say ESG, environmental, social and governance and such a weird phrase, but it is really refreshing to see that kind of speed of change across all investor types.

[00:29:47.420] - Charmaine Coutinho

So, I find that quite encouraging, really.

[00:29:50.490] - Jon Slowe

And René and Charles, do you see the interest in ESG sustainability, is that dragging, dragging, that's a bit of a negative way of saying it Is that bringing encouraging more and more investment into the space you're getting more competition or is there still is there a lack of investment in the space? How do you see it?

[00:30:11.360] - Charles Vaslet

Yeah, so I you know, I don't see yet, but I think it's certainly appearing in markets that we work in. So, for example, in the built environment buildings, you know, all of a sudden, you know, landlords, private equity firms, real estate companies are really focused in on ESG and that's just not new build that's existing built. So obviously, that's creating a demand for products that we're looking to invest in.

[00:30:48.000] - Charles Vaslet

So, I do see the pull of that. I see some institutional investors stipulating ESG policies to fund managers who, you know, and we do that. But I don't think that's necessarily driving investment yet into the C-funds.

[00:31:10.410] - Jon Slowe

No. OK.

[00:31:11.850] - Jon Slowe

René how about you? Do you see ESG bringing more investment money into the sector or not yet? Is this still too complicated and specialized for the more generalist investors?

[00:31:24.840] - René Savelsberg

No well SET Ventures has started ESG policy and toolkit and working with our portfolio companies on ESG already for seven years. So, we were one of the earliest adopters of that. And we believe that applying ESG principles to and running a company of any size, whether it's a start-up or a conglomerate, a huge conglomerate, you have to apply very simple business principles around ESG in order to survive in any case.

[00:31:56.960] - René Savelsberg

So, we don't think that is in itself a driver. What is a driver is impact investing. So, putting money that will really make the output of the effort, output of the investment is really creating an impact on, for instance, the environment. And then you start calculating, for instance, CO2 reductions, etc. And that matrix is becoming a very, very important driver for new entrants into the sector to really show that we not only focus on the financial return but also focus on making real impact in the transition that we want to achieve because we don't transition because of a transition.

[00:32:36.840] - René Savelsberg

We transition with the energy sector towards something that is more sustainable, and that matrix is therefore important.

[00:32:44.520] - Jon Slowe

So, if you can measure that accurately, then you can see over time you will get more and more impact, investors looking to make a difference in the energy sector.

[00:32:53.280] - René Savelsberg

Yeah.

[00:32:56.120] - Jon Slowe

OK, now, time is getting the better of us, we could talk a lot more about impact investing and ESG, but that's probably a different podcast altogether.

[00:33:04.550] - Jon Slowe

So, let's bring out the Talking New Energy crystal ball and set the dial this week to 2030. My question to each of you is this. So, I mentioned cleantech investing a bit different to energy investing, but cleantech investing came out of the 2000s with a bit of a tarnished reputation.

[00:33:24.380] - Jon Slowe

How will energy transition or energy investing emerge in the 2020s? So if we're in 2030 and we look back in the 2020s to energy investing. What does the next 10 years hold? And René and Charles

[00:33:40.700] - Jon Slowe

I fully expect you to say that in 2030 we will be looking back, and the energy tech will have been a huge success in the 2020s. So, if that is your answer, then maybe give me a reason why. So, how successful energy investing be in 2020s and why is a question. René let's start with you.

[00:34:05.180] - René Savelsberg

Well, I remember recently somebody told me that really big money is now going into infrastructure around a new energy distribution and deployment of all kinds of tools to make electrification possible. Only about charging EVs. And a lot of money is going into the infrastructure. So, we're getting to going to a moment in history where this transition is really deployable and the transition is based around obviously like I said, the sustainability, electrification and the digitalisation. And that is happening as we speak in the 20s.

[00:34:49.760] - René Savelsberg

So, I foresee that indeed these are the years where we can, with innovations, very much contribute to that and make the returns that we want. But I also and its part of our thesis of our investment fund is that we see new entrances into the energy systems, companies that historically did not take part in the energy system actively. And just to give an example of that, and Charles mentioned just the build environment, but the mobility sector is one that is going to be a major player in the energy system going forward, as will be all the oil and gas majors that are making transitions into this space.

[00:35:33.200] - René Savelsberg

So, the ones that I would be the most worried about are maybe the traditional energy retailers they have to transition themselves very, very swiftly, but they will be confronted with a lot of new propositions that they have to compete with for their customers.

[00:35:50.390] - Jon Slowe

It's going to be fascinating competition in the next year. I agree. Charles, 2020s will that be a decade of success for energy.

[00:35:59.210] - Charles Vaslet

Yeah.

[00:36:00.050] - Charles Vaslet

I think so. Exactly. We've been working so long and hard on it, but now it's maturing right?

[00:36:06.250] - Charles Vaslet

I mean, you know, wind, solar kind of have been dominant in new additions, you know in Europe, North America, I think Paris made such a big impact the fact that you have to do this kind of reviews every five years, which basically means that people have to question their long term investments in fossil fuels. So, I think that the prices have just come down and not just talking solar wind batteries, but I'm talking computation, edge computing, digital storage, the cost of connecting things.

[00:36:45.860] - Charles Vaslet

So, these kinds of multiple revolutions, you would think of them as quite distinct utilities, mobility, IT but they've actually all come together. And now we're going to add onto that kind of heating, storage in homes and industry, etc, etc. So, you know, it's just one, you know, what was quite siloed industries have now kind of crashed together. And I think that's why it's so exciting. And I think that's why it's going to be a successful decade.

[00:37:19.770] - Jon Slowe

So, lots of opportunity from all this disruption and innovation, Charmaine, how about yourself, you're maybe not so invested in the investor sector, but how do you see this decade for investing in the energy sector?

[00:37:36.090] - Charmaine Coutinho

So, I think this kind of touches René's point, which is really where it comes to almost all this investment, whether it's in infrastructure or in organizations or in start-ups, comes to being kind of much more mainstream commercially in homes and businesses. So, the presence of these assets or whatever they are actually enables them to start making money, I suppose.

[00:38:00.000] - Charmaine Coutinho

And I think this is the decade, because if you look back retrospectively, what could have happened in the 2010s? I just don't think consumer interest or understanding sounds a bit harsh or sound like a classic energy sector saying that the consumers don't understand. I don't mean that.

[00:38:15.030] - Charmaine Coutinho

I just don't think all the factors are there at the right timing and the right with the right technology at the right cost point.

[00:38:24.150] - Charmaine Coutinho

And I guess

[00:38:26.160] - Jon Slowe

The stars weren't aligned in the way that they're aligning now.

[00:38:29.190] - Charmaine Coutinho

So, it's a real tipping point, I think it is a tipping point.

[00:38:33.900] - Jon Slowe

Yeah, well. There's certainly going to be lots and lots of change over the next 10 years, and René and Charles, I guess you've been at this for so long, doing it for so many years, that you're well-positioned with the experience you've got to capitalize on that. But I would say there's what I hope is we see more and more investors coming into the space, more and more capital to help fuel the energy transition.

[00:39:04.970] - Jon Slowe

And at the end of the decade, we'll see who's coming out on top.

[00:39:10.560] - Jon Slowe

It's been a fascinating discussion, one which we could look at from a number of different angles in future podcasts, and we will do that maybe again with you, Renee and Charles. Welcome back to discuss some different angles. But thanks very much for your time, René. Thanks very much for joining us.

[00:39:29.040] - René Savelsberg

Thank you very much, pleasure and hope to connect with you again soon.

[00:39:34.140] - Jon Slowe

Likewise

[00:39:34.770] - Jon Slowe

And Charles, thanks for joining us from Zurich.

[00:39:36.960] - Charles Vaslet

Yeah, thanks a lot.

[00:39:37.950] - Charles Vaslet

It was great to discuss with you and Charmaine and René of course and yeah, just wishing that we get through this current situation so we can meet in person.

[00:39:49.320] - Jon Slowe

Yeah, likewise. Charmaine, thanks for coming back to the podcast after a little break. And as always, thanks to everyone for listening. And we look forward to welcoming you back next week. Thanks, and goodbye.

[00:40:15.660] - Jon Slowe

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

[00:40:32.130] - 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

Jon Slowe, Director at Delta-EE 
Abhishek Sampat, Principal Analyst at Delta-EE
Alex Lewis-Jones, EV Research Manager at Delta-EE
Kate Armitage, Associate at Delta-EE

[00:00:23.870] - Jon Slowe

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

[00:00:24.760] - Jon Slowe

Today, we have a new format for you, the Delta-EE debate, the theme of today's debate, the winners and losers from the electrification of transport. So, we'll be debating how the three big established industries are coming together, the electricity industry, specifically electricity retailers. Second, the automotive industry, specifically the car manufacturers or OEMs. And thirdly, the oil majors, who we're all used to buy petrol and diesel from their forecourts. So, as transport becomes electrified, these three industries are coming together.

[00:01:08.810] - Jon Slowe

And the question we're going to explore is whether they nicely come together like three jigsaw pieces of jigsaw puzzle slotting together, or is it more like three circles coming together with an overlapping Venn diagram? And are we going to see one industry take chunks out of another industry. To explore this, I'm welcomed by three of my Delta-EE colleagues who are going to put forward their views. And we'll see at the end whether this is a collision with winners and losers or a nice coming together of three complementary industries.

[00:01:45.620]

My first guest is Alexander Lewis-Jones. Hello, Alex.

[00:01:50.020] - Alexander Lewis-Jones

Hi, Jon. Thanks for having me.

[00:01:53.060]

Second, Kate Armitage. Hello Kate,

[00:01:55.760] - Kate Armitage

Hi Jon

[00:01:57.390] - Jon Slowe

 And third, Abhishek Sampat. Hello Abhishek.

[00:02:00.770] - Abhishek Sampat

Hi, Jon. Hi Alex, hi Kate.

[00:02:03.470] - Jon Slowe

So, I'll start with Alex and we'll just frame this collision because it's quite a hefty collision and we might need to pick off a distinct part of it rather than the whole area. And then Kate will talk from an electricity retailer’s perspective and Abhishek from a car manufacturer or OEM perspective.

[00:02:24.020] - Jon Slowe

Alex, you've got big oil. I don't know whether you're happy or sad about that.

[00:02:27.790] - Alexander Lewis-Jones

Fantastic.

[00:02:31.250] - Jon Slowe

So, Alex, to frame this collision, electrification of transport is a huge topic for everything from buses to fleets to household to home charging to workplace to public charging. How should we tackle it? Look at the whole thing or pick off a distinct part.

[00:02:48.470] - Alexander Lewis-Jones

Sure. So, yeah, not a day goes past without seeing another type of new electric plane or electric ferry. So, there's lots of different angles. I think today we'd like to focus on EVs in terms of the B2C car driver.

[00:03:05.180] - Alexander Lewis-Jones

So, like all of us who drive cars, that should be our focus today.

[00:03:11.540] - Alexander Lewis-Jones

And when we talk about that value chain in this space, let's talk around mobility and specifically how we get around in these electric vehicles. And to do that, we need to have the cars themselves and we need to have the energy to drive those cars. And the bit in between is the charging sector. And I think that's where the most interesting debate's going to be held.

 [00:03:44.600] - Jon Slowe

And if we're talking about households and you and me driving our cars around, then presumably we need to talk about charging at home and also charging a public charging when we can't charge at home.

[00:04:00.350] - Alexander Lewis-Jones

Yeah. So, when we start analysing the EV charging market loads of different products and services in, then I'm sure we'll cover lots of them today. But it's the easiest way to define it is by location. So, where's your car parked the most? Probably at home and then also at work, but also in public spaces. I think here the key interesting collisions will be in charging at home and charging in the work sorry, in the public spaces.

[00:04:29.180] - Jon Slowe

OK, so it will focus the debate around B2C, around households around you and me or listeners, with their own car. I'm actually looking at changing my car at the moment to an electric car. So maybe I can bring in one or two of my personal experiences into the discussion and household charging at home and charging publicly. Abhishek let's start with you from an OEM perspective, and you used to work for an OEM, so you're well qualified to have that perspective.

[00:05:06.530] - Jon Slowe

So, are OEMs going to stick to their knitting and carry on making cars complete with an electric drive train rather than an internal combustion engine?

[00:05:17.870] - Jon Slowe

Or will we see car manufacturers seeing this is wow, what an opportunity to do more to take a chunk out of the electricity sector? What do you think?

[00:05:31.160] - Abhishek Sampat

I think in an ideal world, every car OEM would like to be able to branch out into, I guess, services that affect their vehicles and their products because it's a revenue opportunity for them and it's a diversification opportunity. We're seeing examples of that now with LE by Volkswagen and Tesla, with Tesla Energy and Nissan as well. But I think due to where some of the manufacturers are in their electrification journey, some of them are still sticking to the cars and partnering for providing contracts for energy, for charge points, for domestic charging, for public charging, etc.

[00:06:11.750] - Abhishek Sampat

And some are able to go at it in a more investment heavy way, which is a first-mover advantage for them. But I think it depends entirely on where that OEM is in their electrification journey. They'll definitely stick to making cars because that's what they know best. But they will all at some point look at adding more features to the offering they provide to their customers.

[00:06:37.730] - Jon Slowe

 And on the offering that they provide to their customers Abhishek.

[00:06:41.300] - Jon Slowe

So, most of them sell through dealerships. You know, Tesla's maybe a little bit more direct and different.

[00:06:51.410] - Jon Slowe

How much of our relationship do the OEMs have with customers today or how do they think about those relationships? Is it a really important part of their business? Is it something that they're actively looking to grow even through their internal combustion engine products? Or is it quite a new thing to them given they're one step away from the customer often?

[00:07:18.230] - Abhishek Sampat

The dealerships and the retailer group specifically are the face of the OEM. They're not always owned by the OEM. They're trained by the OEM that meet the standards that the OEM decides for them. But they're in essence they're the face so for an OEM, the best customers are repeat customer. So, that customer relationship is very important to the OEM because if someone can convince you to buy a car today and you come back three years later and buy another one, great.

[00:07:48.140] - Abhishek Sampat

That's a that's a good day for everyone. Acquiring a customer from another brand is a little bit harder unless you have some special {illegible}. So, that relationship that they have with the end customer through the dealer groups and the retailer groups is very important. And it's and from our findings as well, in this part of what we've been doing as part of the EV & E team, the customer research has said that the dealership route to getting a charge point it and understanding about energy requirements and, you know, other things to do with electrification beyond buying the car is one of the most powerful.

[00:08:21.020] - Abhishek Sampat

And that's where customers wanted to ask the question. So, there's definitely an opportunity there for OEMs to capture more of the value chain of having a customer get electrified.

[00:08:32.490] - Jon Slowe

You identified LE and Tesla as examples of companies that are quite well, certainly have ambitions to grow in the energy space.

[00:08:43.360] - Jon Slowe

If you look at a sector as a whole, are they would you say that outliers or are they is that the direction everyone's moving in or are you seeing quite big splits in terms of motivations?

[00:08:55.090] - Abhishek Sampat

As you mentioned, LE and Tesla, they're definitely out there in front, but I don't think they're the outliers because every OEM group is doing something to support the electrified customers, whether it's providing a partnership for, you know, domestic charges in each market they're in or having their own branded ones or giving them away for free with their own brand on it as well. That's something we're seeing from some groups.

[00:09:20.350] - Jon Slowe

So, OK, so they're all actively supporting customers.

[00:09:23.650] - Jon Slowe

And maybe the question is, are they facilitating that through partnerships or are they trying to get more that value chain and have a bigger share of that? Is that part of the value?

[00:09:35.590] - Abhishek Sampat

Yeah.

[00:09:36.190] - Jon Slowe

Um, Kate, let's have a look at electricity retailers and like, Abhishek was qualified given he worked for an OEM. You've worked with electricity retailer in the past.

[00:09:49.270] - Jon Slowe

So, in some ways, this is a huge opportunity for electricity retailer and more electricity demand a rising tide floats all boats and so on. But to what degree are electricity retailers thinking, OK, hey, happy days, we can now get more involved in the automotive sector and capture some of the value or they're going to sit back and just ride on the rising tide or electricity sales.

[00:10:18.660] - Kate Armitage

So, thinking about I'm going to pick on the home charging sector first rather than public charging, because to me that's the biggest area of opportunity for the electricity retailers.

[00:10:37.520] - Kate Armitage

In Delta's own consumer survey, 2020. We saw that around across Europe, on average, 60 percent of all charging takes place at home and that increases to 70 percent in Norway. So, that's where the size of the prize is. And as you said, Jon, there are multiple revenue opportunities coming from charging. So, there's the opportunity to retail charging solutions, hardware and installation. Obviously, there's the retailing of the kilowatts themselves. There's also additional flexibility services through the control of the charge points.

[00:11:19.640] - Kate Armitage

And something that doesn't get talked about very much is this opportunity to win new customers. Or if you flip that around, an opportunity to lock in and retain existing customers, which is always a really kind of hot topic for utilities, because with the churn increasing, it's a challenge.

[00:11:41.940] - Jon Slowe

But Kate in a way, that's their existing game of electricity retail and maybe adding a bit to that from flexibility services, as I've been looking at what electric vehicle I want to buy I've seen in the UK, I could buy them from two electricity retailers who I could lease an electric vehicle from there maybe more so.

[00:12:04.130] - Jon Slowe

Do you, I think that's really interesting because as a customer, I might buy my car from an electricity company, so can they get that part of the value chain as well do you think? Or is that too big a stretch for most people and have not decided whether I'll get to do that yet or not to think of the electricity retailer as somewhere that can provide the car and the charging and the mobility needs?

[00:12:32.240] - Kate Armitage

So, I'm going to say, Jon, that I'd be very surprised if I met anyone at an electricity retailer who from a strategic perspective says what we really need to do is get into retailing cars. I think the reason they're doing this is because they want to get into eMobility. And the biggest barrier or one of the biggest barriers that they're facing is getting access to the customer, a point of sale. And again, we've seen from the research that we've done that 45 percent of EV buyers buy their wall box, their charging solution either from the dealer or on recommendation from the dealer.

[00:13:19.080] - Kate Armitage

So, and actually second to that is eMobility specialists and only third in line is your electricity retailers. So basically, if you're buying an electric vehicle, the electricity retailers are third in line for the queue for an opportunity for sale. And the way to potentially disjoined that. Well, I think there are three ways to disjoined that. And the first one is you've suggested is for utilities to start offering vehicles themselves, typically through leasing or through maybe a little bit out there, but through car club.

[00:14:02.060] - Kate Armitage

So, we were talking recently about Juicar, which was an offer from Alpiq in Switzerland, where you could lease your electric vehicle and get your wall box and electricity or paid for in a monthly sum. So that's great. That's how Alpiq can cut out this problem of not being in the dealership and go straight to market. Unfortunately, that proposition has been closed down because the timing wasn't right, and the demand wasn't there. You've referenced the UK, so we've got Octopus leasing in the UK who are doing similar.

[00:14:41.240] - Kate Armitage

I haven't seen the results of that. And then a slightly different approach is Innogy, who have opened up a car club called Innogy Go in Poland. So, again, it's a way of disrupting that value chain. I think for me, it's the timing is definitely not right. Will it ever be right? I'm not sure. I think it's much more practical for the electricity retailers to either form partnerships with the OEMs or they have a strategy that has been particularly successful.

[00:15:17.830] - Kate Armitage

I would say is to purchase charge point manufacturers and installers who actually already have relationships with the OEMs and therefore they're buying their way into that market.

[00:15:32.200] - Jon Slowe

OK, so I guess a summary of your main point there is that electricity retailers may move into the value chain, but it's primarily to get in a channel for their core product, which is electricity sales.

[00:15:47.470] - Kate Armitage

I believe so, yeah.

[00:15:49.370] - Jon Slowe

Yeah.

[00:15:50.440] - Jon Slowe

Some may have more ambitions from that and some really interesting examples. And time will tell whether that's something customers respond to.

[00:15:58.690] - Kate Armitage

Yeah,

[00:15:59.280] - Jon Slowe

OK, I'm Alex.

[00:16:01.810] - Jon Slowe

You're the odd one out in that you're looking at it from a big oil perspective but you haven't worked for that type of company before, but you know them well on talk and work with them closely.

[00:16:11.980] - Jon Slowe

So, if we look at big oil then they have been and will continue, as you said, to sell petrol and diesel from their forecourts ways for them to get in the value chain for electric cars and electricity and charge cars. What are you seeing at the moment?

[00:16:34.390] - Alexander Lewis-Jones

Yes, well, firstly, I think that's a really interesting point in that value chain for eMobility, the want of being excluded, there's no need for petrol and diesel. So, how do we gather pace towards entering into EV charging? And I actually think these are the most exciting players because they've been very busy building up strategies for the last few years. And lots of announcements around acquiring charge point companies have been really successful across Europe. Building in with their other brands and building up their forecourt capacity for fast charging means that they've got quite an interesting opportunity to capture an awful lot of the EV charging customer going forward, both in public through those fast-charging networks, as well as actually in the home.

[00:17:33.430] - Alexander Lewis-Jones

And look at Total with Direct Énergie in France and Shell with Shell Energy in the UK as examples.

[00:17:42.520] - Jon Slowe

So, they've bought their way into the electricity retail business. They've bought their way into the charge point or public charging business. They have their forecourts, which could be strategic assets.

[00:17:56.650] - Jon Slowe

And I guess a lot of that is driven by the fear that the two big motivations fear and opportunity, fear is often stronger than opportunity in that they are under threat long term if electrification of transport really takes off.

[00:18:14.270] - Alexander Lewis-Jones

Yeah, they have to transition and they're launching all of them, their strategies this year, there is a large prize there and here I would steer towards something that all players are active in. But again, DC fast charging these really high-powered charge points, that is the most similar in the customer experience to, say, petrol refuelling today. So, if they make a greater movement, a greater investment to install lots of banks of charging hubs across the road networks of Europe, I feel that that could actually be the most lucrative in terms of getting profitable and utilisation of public charging assets in, say, 10 years’ time.

[00:19:07.700] - Alexander Lewis-Jones

And we know the automotive players are there. We see the {illegible} network. We know that other utilities and energy suppliers like Kate was mentioning are active there too. But the oil majors might already have the locations. So, they might be one step ahead if they can capitalize on that.

[00:19:27.750] - Jon Slowe

That's interesting. So, if we just look at public charging for a minute, then, as you've said, we see oil companies, energy retailers, car manufacturers, all investing in public charging, particularly high-powered public charging. This is a new area it's a new space, question to all three of you. Are we going to see a single one of those, a single winner here or of the three types of companies, which one is going to dominate?

[00:19:55.280] - Jon Slowe

Or is it very much like the Wild West at the moment? And it's too early to say and the battle will be fought out over the next years.

[00:20:01.280] - Jon Slowe

What do people think?

[00:20:04.190] - Kate Armitage

 I'll jump in first.

[00:20:08.280] - Kate Armitage

As of today, I think the oil majors have the advantage because of the three they are the ones who are already hosts. They have the locations and they're used to retailing fuel. They have the convenience stores, they have the correct locations, all the other retail partnerships that will enable them to generate additional income. And I don't want to put words into Abhishek's mouth, but I think OEMs are in this space. And when I say OEMs really, I'm talking about IONITY, not Tesla, but that consortium of OEMs.

[00:20:55.010] - Jon Slowe

 For those listeners who don't know.

[00:20:56.930] - Jon Slowe

IONITY that's a consortium of European car manufactures.

[00:21:01.070] - Kate Armitage

 Exactly

[00:21:02.620] - Kate Armitage

And it is high powered chargers, real premium charging experience. And they're building across the whole of Europe they're doing that not I would say not because they have a desire to sell kilowatts, but because they have a desire to sell premium cars and premium charging experience to go with it.

[00:21:25.310] - Jon Slowe

 Abhishek, Kate said she didn't want to put words in your mouth.

[00:21:26.930] - Jon Slowe

But would you agree with those sentiments?

[00:21:30.180] - Abhishek Sampat

I would actually I fully think the IONITY network is there to enable customers of those OEMs to charge more conveniently and convenience is actually what is going to sell cars.

[00:21:45.330] - Jon Slowe

So, OEMs doing it to support the cars sales and their customer experience, the oil majors doing it because they're very much is part of their core business today and they can leverage that, utility stroke electricity retailers views from anyone in terms of their activity in this space.

[00:22:06.540] - Kate Armitage

Well, there's no shortage of electricity retailers and utilities across Europe who have all expressed a desire to become involved in public charging and have put some really ambitious targets out there in terms of tens of thousands of charge points, which, of course, is good news because we need that volume of charge points, and we need that volume of investment if we're going to satisfy what the EV driver needs. It's actually very early days, none of those networks are profitable at the moment that I'm aware of.

[00:22:43.350] - Kate Armitage

So, this is very much a speculative play, very much a land grab. My question mark comes from {illegible}, which is probably one of the earliest and most mature public charging networks in Scandinavia, and they divested their public charging interest to {illegible} capital and it's now rebranded Recharge. So, they've exited that market. So, my question is, will there be more exits as the going gets tough?

[00:23:19.350] - Alexander Lewis-Jones

And could I just come in on that? Because that is an interesting point there around public charging network. And with that one. Correct me if I'm wrong that this was around the model, slow speed charging the AC networks. So, we're increasingly seeing this divergence between the local networks where you might be parked for many hours at a time compared to the really fast forecourts style approach.

[00:23:50.420] - Alexander Lewis-Jones

And for me, my money's on these on these large, high powered charging hubs. We saw one launched only last week, which was a combination between Tesla, who most of us will know, but also Fastned, this public start-up from the Netherlands that has an ambition of installing thousands charging stations across Europe. And yeah, currently they're not being owned by anyone who's an oil major or a utility.

[00:24:24.720] - Alexander Lewis-Jones

But they are you know; they're starting from scratch and building a pretty strong name for themselves in that space. So, maybe there'll be some standalone players to.

[00:24:34.910] - Jon Slowe

OK, so really that public charging and the difference between the slower AC and the fast DC, really interesting battleground, if we come back to the home charging, which Kate you pointed out that's where the majority of charging will take place. So, I'm going to summarize the discussion so far as electricity retailers will add on some services to their commodity around that automotive, some will really become energy companies.

[00:25:10.040] - Jon Slowe

Or try to become energy companies. Others will partner to offer customer convenience and an all in one service at the point of sale of the car. Question mark over whether energy retailers can do more than the energy-related part of it and from big oil, Alex, some of them are already energy retailers buying some really interesting companies and really trying to grab a big chunk of that value chain themselves. So, if we think about those, are they pieces of the jigsaw puzzle slotting neatly together, or are they, of course, taking chunks out of each other?

[00:25:55.600] - Jon Slowe

To me, it seems like the biggest winners here could be the oil majors, although you could argue they're just not losing as much from their oil sales, possibly the OEMs, who could become energy companies themselves. Probably not so much the energy retailers, unless they can really benefit from the electricity value chain and services around that.

[00:26:23.860] - Jon Slowe

So, I'm sure that all three of you won't agree fully with my summary particular angles to play on it, and ultimately, I guess it's a customer that will decide who they want to buy these services from.

[00:26:36.890] - Jon Slowe

So, what do you think about customers and how the, what role customers will have in deciding who are the winners here, what your customers want?

[00:26:52.620] - Alexander Lewis-Jones

OK, I will jump in there because this is something, we're actually looking at right now and always seem to be coming back to this question in the service, starting from public charging.

[00:27:05.920] - Alexander Lewis-Jones

I think there's a lot of disruption is going to happen around how customers access and use charge points. And I think if you jump towards 10 years’ time, we can envisage a world where charging is just so seamless and so simplistic. And we don't have all these teething problems which talk to any EV driver and they'll talk to you about lots of different networks and how they've had various challenges. And for me, that comes down to this plug and charge technology that you can see in lots of Tesla cars using that for the Tesla supercharger network.

[00:27:48.220] - Alexander Lewis-Jones

I think maybe not in 5years time, but 10 years’ time. That's what customers are going to want because they'll see it. They'll see that the technologies worked so well. And that makes charging really nice and easy to make that work

[00:28:02.650]

{Cross talk}

[00:28:02.930] - Jon Slowe

With all that built into the car then Alex?

[00:28:05.410] - Jon Slowe

Is that becoming a seamless experience for a driver on the dashboard, the screen in the car. It just says where you're going and directs you to the charging point, it reserves it for you.

[00:28:14.620] - Jon Slowe

It pays it for you.

[00:28:17.590] - Alexander Lewis-Jones

 Completely.

[00:28:18.370] - Alexander Lewis-Jones

So, it agrees the authorization between charge point and the car. But I believe it can go beyond that and provide all the services of locating the charge point for you, sorting out all the billing and that that level of interoperability of all these different parts of the value chain really needs a lot of partnerships. And for me, of course, we need to have the car companies on board for that because it's their products which are going to need to have the right technology installed on.

[00:28:53.920] - Alexander Lewis-Jones

But beyond that, I look to who's making the biggest partnerships across the EV charging value chain. And for me, that again comes back to the oil majors who have been taking up lots of different parts of that. Bring it all together, give them a few years to develop their products internally. And I think they'll have a really nice solution for the customer in each country.

[00:29:21.840] - Jon Slowe

OK, so OEMs well placed, but oil majors also piecing together that to provide a really seamless solution for customers. Abhishek, from your experience.

[00:29:36.310] - Jon Slowe

OEMs are they in pole position because they will provide, they're best place to provide that seamless experience for the customer?

[00:29:43.310] - Abhishek Sampat

I mean, I'll second what Alex said about partnerships for OEMs to actually enable that, because it's quite a complex beast beyond building and making the car, designing and making the car. So, partnerships for some of these services is going to be absolutely required. But I think they're in pole position from the perspective of the customers already know them and the customers have an attachment to them and the customers well, they own the customer relationship right now with the EV customer for the most expensive part of the EV value chain, which is the car.

[00:30:20.680] - Abhishek Sampat

So, they're in the best position to then expand on that. They'll probably do it with partnership because a vehicle OEM is not going to be an energy market expert overnight, but with the right partnership and we're seeing the first few signs of that coming through, I think they'll be in a really good position to harness their customers to make that step.

[00:30:45.790] - Jon Slowe

And what about whether for you or for Kate what about whether they will go so far as saying, well, you bought your car from us, we've put your charger in and we can see how you're charging. Actually, would you like to buy a PV panel from us? Would you like to if we installed a stationary battery, we can reduce the costs of charging even further and reduce your home energy costs.

[00:31:09.400] - Jon Slowe

Is that the realm? Will that remain in the realm of the electricity sector or could the oil or OEM sector eat into that as well?

[00:31:23.830]

{Cross talk}

[00:31:25.630] - Abhishek Sampat

I think the OEM sector is already making its first few moves for that. So, we're seeing things like the Tesla Powerwall and the Nissan next xStorage. We've seen attempts made by Daimler and BMW as well for stationary storage.

[00:31:40.600] - Abhishek Sampat

So, it's not inconceivable that more OEMs will get to the same point where they will start offering these additional services to customers.

[00:31:52.260] - Jon Slowe

OK, Kate how about you?

[00:31:56.320] - Kate Armitage

My thinking was slightly different in that the OEMs are…

[00:32:06.560] - Kate Armitage

Have invested quite a lot in the digital play, and I think a lot that the whole plug and charge and potentially in the future, having that mobility package built into the vehicle and potentially having the {illegible} in the car is really a digital play. It's much less about the built environment. So, they won't need the OEMs won't need to install the charge point, whichever charge point plugging into the car will take control over the tariff and the provision of the electricity.

[00:32:41.810] - Kate Armitage

So, for me, what makes sense is for it to be a digital play. And actually, when you start getting into that built environment and the nitty-gritty of installing hardware, be a charge point or PV into someone's house, that's really quiet

[00:33:00.270] - Jon Slowe

 It's a very different game.

[00:33:01.350] - Kate Armitage

It's quite treacherous territory and one that the utility, the electricity retailers and utilities have taken a lot of pain in already and do have a head start.

[00:33:12.990] - Jon Slowe

Yeah, so if they're, have the pain of installing smart meters in people's houses. That's an experience they can then build on.

[00:33:20.510] - Kate Armitage

Yeah,

[00:33:22.450] - Jon Slowe

OK. Well, I think it's time to bring out the Talking New Energy crystal ball and we'll set the dial to 2025. So not too far away. And my question to each of you, let's put it into two parts. Where will the biggest collision be in the different areas we've talked around so public, home, the home ecosystem, PV and battery, etc, where will the biggest collision be and of the different types of companies we've talked about, who do you think is going to be the biggest winner here?

[00:34:01.340] - Jon Slowe

So, a little bit simplistic, but let's see what you come up with for 2025. Alex let's start with you.

[00:34:12.290] - Alexander Lewis-Jones

OK, for me, the biggest collision is actually in the access of public charging networks and.

[00:34:25.190] - Alexander Lewis-Jones

That currently is fought between lots of different apps, and I see that evolving quite quickly and because of the opportunity for entry into that space and the amount of interest in having that customer relationship, we're going to see an increase in the number of players entering over the next few years. And I would point to news from today of Lexus charging being the latest app to launch focussed for Lexus owning customers with over eighty-five thousand charge point available.

[00:35:05.980] - Alexander Lewis-Jones

Who's going to be the winner? I think it's whoever can win in the digital space ultimately. Honestly, I would say if Google has the capacity or interest to champion it, I cannot see anybody beating Google to the top spot.

[00:35:25.850] - Jon Slowe

OK, really interesting angle, Alex. Thanks. Abhishek, let's go to you and then to Kate, so the biggest area of collision and who is most likely to win?

[00:35:40.540] - Abhishek Sampat

Well, I think the biggest area of collision will be between the OEMs and dodging infrastructure providers, whether that's public or domestic because there's an obvious need for each other to survive for either of the two groups. And going back to what you said earlier about is it a jigsaw or Venn? I think it's a bit of both at the moment. In some cases, it's a jigsaw partnership. Some cases it's a Venn where there's competition. But I think that's going to be where the biggest collision will be.

[00:36:12.190] - Abhishek Sampat

And the biggest winner from that will be the one who can provide the easiest experience for the customer, because charging is not going to be a pleasurable activity for a customer, just like filling fuel in your car is not pleasurable. If you could have your car magically fill up all the time, that'd be great.

[00:36:30.310] - Abhishek Sampat

So, whoever can sort out that customer experience aspect of can you make it as fast as convenient and as economically viable? I think that's going to be the biggest. Whoever can sort that out is going to be the biggest winner.

[00:36:44.260] - Abhishek Sampat

But I'm not asking for much here, obviously.

[00:36:47.950] - Jon Slowe

 To make it a pleasurable, seamless, simple, enjoyable, fun experience.

[00:36:51.790] - Jon Slowe

Charging your car

[00:36:54.110] - Abhishek Sampat

 And inexpensive

[00:36:56.260] - Jon Slowe

And cheap.

[00:36:56.830] - Jon Slowe

Yeah, thanks Abhishek. And Kate, how about you?

[00:37:02.290] - Kate Armitage

I hate being asked these questions, Jon. It's very mean, I think as I've already alluded to, I think 2025 is actually when the expectation is that ISO 15118, which is the standard that underpins this seamless plug and charge technology will be introduced to market. So, when you said 2025, I gave a little bit of a smile because I really feel that is going to be the biggest collision in the future.

[00:37:44.140] - Kate Armitage

And I would add into that, that my expectation is by 2025 the EVs are going to be business as usual for the OEMs so they'll have got their R&D done, they'll have got their factories in place,

[00:38:04.260] - Jon Slowe

Supply chain

[00:38:04.260] - Kate Armitage

and then they'll be really focusing on starting to squeeze the extra value.  So, I think that's going to really cause quite a lot of ripples. However, I've been arguing for the electricity retailers or I hope I have. So, in terms of the winners, I would like to say to it'll be the electricity retailers, I think they have to really collaborate much more closely than they have done up until now with the OEMs and embrace that threat and turn it into an opportunity which they can do.

[00:38:45.880] - Kate Armitage

And my final plea is we've really got to get the {illegible} and the smart charging the mining of that value coming from the electricity retailers sooner rather than later. Please don't wait for another sector to do this. You've got to get there first.

[00:39:10.700] - Jon Slowe

Well, a wakeup call would be too strong. Kate, I think we'll stick with your plea, but get your skates on.

[00:39:19.300] - Jon Slowe

Well, thanks very much, Alex, Abhishek and Kate. A discussion that I'm sure will continue to have internally Delta-EE or debate that will continue to have. I'm sure some of you listening will have your own views and opinions. And I hope you all found the debate useful and interesting. And it will continue to be a big focus of ours, this collision jigsaw, or Venn diagram coming together between these different industries.

[00:39:49.150] - Jon Slowe

So, thanks very much for listening. We hope you enjoyed the podcast and look forward to welcoming you back next week. Goodbye.

[00:40:09.610] - 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.

[00:40:26.080] - 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

Jon Slowe, Director at Delta-EE
Niklas Arpula, Key Account Manager at EEbus
Joscha Koellner, Business Development Director at Kiwigrid
Alix Weil, Analyst at Delta-EE

[00:00:23.480] - 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.

[00:00:24.150] - Jon Slowe

Today, we're coming back to the area of home energy management for the second time in the series, but today, looking at it from a different angle, a couple of weeks ago, we heard the perspectives of people working on this topic from E.ON and Centrica two big European energy retailers. One of the challenges we didn't look at then, which we are looking at today, is how companies like E.ON and Centrica can connect to and communicate with the growing number of controls, assets and devices in our homes.

[00:00:54.570] - Jon Slowe

So, that's the topic we're exploring today. It's all very well having a connected, smart thermostat, connected EV charger and an inverter for PV system, for example. But what if they all have their own communication protocols and companies like E.ON and Centrica just can't reach them? So, today I'm delighted to be joined by two people who live deep in this world of connecting assets, control, devices in people's homes and of course, our Delta-EE expert. We'll do our best not to get too techie and will give you a flavour of how easy or hard it is to connect everything in the home together.

[00:01:35.580]

My first guest is Niklas Arpula, who looks after eMobility and smart energy for KEO an integrator for a standard known as EEbus. Hello, Niklas.

[00:01:47.850] - Niklas Arpula

Hi, Jon

[00:01:50.340] - Jon Slowe

Niklas, many of our listeners won't know what EEbus is or may have heard of it, but still don't understand exactly what it is.

[00:01:58.020] - Jon Slowe

Can you give us a super simple explanation, please, of what EEbus stands for and what it is?

[00:02:04.530] - Niklas Arpula

 Sure

[00:02:06.630] - Niklas Arpula

Well, a super simple explanation. That's, uh, that's a challenge. Well, the EEbus is the global language for energy. It's a standard to enable interoperable and manufacture independent communication between energy, relevant devices in the building. So, you have to imagine that if there are devices that your home could exchange information as easily as humans are doing. And think of me asking you, Jon, for example, or any other person, what is the current outdoor temperature?

[00:02:41.970] - Niklas Arpula

As long as you both use English, you know what I want without the necessity that we first agree on what is current, what is outdoor, what is temperature without talking about should it be Celsius or Fahrenheit?

[00:02:56.500] - Jon Slowe

Yeah.

[00:02:56.800] - Jon Slowe

Okay, so this would enable a temperature sensor to talk to a heat pump or a battery to talk to an EV charger, for example.

[00:03:08.220] - Niklas Arpula

Exactly. So that the devices understand each other as well as a human communication regardless. Is it then a communication through phone, email or letter? And this is really the aim of the EEbus initiative to make this machine to machine communication really easy.

[00:03:27.690] - Jon Slowe

And can you give our listeners a feel for how long EEbus has been around, how big it is, how many different manufacturers and organizations are using this language today?

[00:03:41.670] - Niklas Arpula

So, the initiative was officially founded, I think, in 2012 and has since then been growing from six member companies to almost 70 organizations.

[00:03:51.990] - Niklas Arpula

And there are involved utilities, device manufacturers from the heating industry, from eMobility industry. We have industry organizations such as the German Car Manufacturers Association or the heating industry or the organization defining the grid connection rules in Germany. And so, it's a very wide scope of companies, all with the interest to create the interoperability when it comes to communication about energy.

[00:04:23.190] - Jon Slowe

Okay. And you mentioned a couple of German associations there, you yourself are based in Germany. Is it stronger in Germany than other markets or how would you describe the geographical reach for want of a better word of EEbus?

[00:04:37.950] - Niklas Arpula

So, it started in Germany.

[00:04:40.530] - Niklas Arpula

And that means, of course, it is very strongly positioned in Germany, but the footprint is getting also stronger in Europe and also on an international level through, for example, research projects in Europe or also together with  players.

[00:04:58.050] - Jon Slowe

OK, and the last question about EEbus for now. You've mentioned some different segments of the new energy landscape. So, heating or eMobility, for example, would you say EEbus is stronger in certain segments than other segments, or which segment is it strongest in?

[00:05:17.350] - Niklas Arpula

And I would say that the moment the strongest focus points are in the integration of eMobility with the building and the grid, then, of course, our integration of the heating with the energy market, local energy management and of course the integration of the whole building with the grid side. So, to enable this interoperable communication between the smart grid and smart home.

[00:05:44.780] - Jon Slowe

OK, and Niklas, that's a great scene-setter for EEbus. My last question for you right now is your role at the company that pays your salary KEO because you don't work directly for EEbus?

[00:06:00.180] - Jon Slowe

Can you just give us a very quick summary of what you do at KEO?

[00:06:05.460] - Niklas Arpula

 So, we at KEO are a software company specialized in EEbus software means we make energy-relevant devices to speak EEbus. I'm a Key Account Manager there.

[00:06:14.520] - Niklas Arpula

Means I am busy mostly with sales and business development related activities.

[00:06:19.680] - Niklas Arpula

But a big part of my job is as today is just to spread the word about EEbus because the cool thing in working with EEbus is really that it brings together competitors and industries to collaboration.

[00:06:34.200] - Jon Slowe

OK, great. Niklas, thanks for that really clear introduction. We'll come back to you shortly. But let's go now to my second guest, Joscha Koellner, Director of Product Strategy, Business Development and Sales at Kiwigrid. Hello, Joscha.

[00:06:50.640] - Joscha Koellner

Hello, Jon.

[00:06:53.190] - Jon Slowe

Could you start by giving us an elevator pitch for Kiwigrid who Kiwigrid is? What you do? Where your based?

[00:07:01.080] - Joscha Koellner

Yes, sure. Yes, sure.

[00:07:02.520] - Joscha Koellner

So hard facts to start with. Kiwigrid is a company within the smart energy business for 10 years now. And I would say we are as smart energy platform operator connecting all the assets and the devices in the field, no matter if it's heating, eMobility or even electricity, and try to connect all the different markets both in this game and try to push the interaction between all the players to. Yeah, to enable, let's say, a new energy world and care for distributed energy to be accepted in the business, in the market.

[00:07:50.400] - Jon Slowe

OK, and who are your typical who do you typically work with or work for?

[00:07:56.700] - Joscha Koellner

 It's a mixture of OEM's, retailers, so utilities, of course, automotive, energy service providers and wholesalers as well.

[00:08:11.160] - Jon Slowe

OK, so your platform is helping these companies to connect different sets, devices from different manufacturers together in your platform.

[00:08:22.210] - Joscha Koellner

Exactly.

[00:08:22.530] - Joscha Koellner

And even from different use cases and perspectives. As an example, an automotive company has different use cases and goals and benefits for their end customers compared to a utility or an OEM. And we try to bring this together that all of the benefits for, let's say, the customers, the end customers can become true.

[00:08:52.110] - Jon Slowe

OK, and can you give us a feel for the size of your business? I don't know.

[00:08:56.830] - Jon Slowe

People or geographical footprint or type of clients?

[00:09:01.870] - Joscha Koellner

 Sure, so our focus area is focus market is the European market, mainly Germany, Nordics, France, Spain, Portugal, Austria, Italy and the UK. And currently, we are 150 employees in our company. And just to name some numbers about connectivity currently we operate several hundred thousand devices and assets all over Europe.

[00:09:40.300] - Jon Slowe

OK, so you've reached a really impressive scale already and still growing.

[00:09:47.290] - Jon Slowe

I imagine.

[00:09:49.180] - Joscha Koellner

 Yes, still growing. It's a challenge.

[00:09:54.430] - Jon Slowe

And I'm glad you listed the UK as part of your European footprint, Joscha because although we've left the EU very sadly, we still I still feel exactly.

[00:10:08.290] - Joscha Koellner

 How the business started for us in 2013 in the UK and no one was speaking about Brexit at this time.

[00:10:17.530] - Jon Slowe

Well, let's not go any further down that route. But my last question for you now to help our listeners understand how you relate to what Niklas introduced. Do you work with EEbus and how do you see EEbus amongst your job of connecting all these assets together on your platform?

[00:10:37.950] - Joscha Koellner

Yeah, thank you. So we are a member of the EEbus organization, and of course, we are involved in several research projects like a Niklas already mentioned.

[00:10:55.690] - Joscha Koellner

What is important to say from, let's say, from those operations point of view and this business point of view during the last 10 years, there's not so many devices that support the EEbus protocol. And so we need to be need to stay flexible, to integrate whatever comes. So, this EEbus and {illegible} cloud to cloud, connectivity. So, there's a huge bench of different connectivity options and we try to cover all of them, including EEbus.

[00:11:36.100] - Jon Slowe

OK, thanks, Joscha. We'll come back to you shortly. Let's now introduce my final guest, our Delta-EE expert Alix Weil. Hello, Alix.

[00:11:48.700] - Alix Weil

Hi, Jon.

[00:11:50.210] - Jon Slowe

So, Alix, you joined me on the HEM podcast with E.ON and Centrica and helped us understand the HEM landscape and set the scene there. Now we've got a more techie focus on the area of home energy management.

[00:12:07.540] - Jon Slowe

So, we've had very clear introductions from Niklas and Joscha in terms of their activities. But can you help us just step back a bit and understand the approaches that you're seeing in the market of connecting up lots of different assets, batteries, inverters, sensors, heat pumps, etc, in buildings? So, as you step back and look at the different approaches, what do you see?

[00:12:38.920] - Alix Weil

Well, it's a very complex space, but just to list you maybe a few of the mainstream approaches, the first one is simply that your devices are talking a common language as Niklas said. So, an open protocol that anyone can understand. But this is quite rare, actually.

[00:12:59.230] - Alix Weil

So, if it's not the case, then it means that the manufacturer and the third party trying to connect to the asset need to have some kind of agreement to speak a common language. So, a shared protocol or an API that they share together to understand each other. And if this is not possible either, then you have to come up with another solution, such as a kind of translator. And this often requires some kind of hardware on-site.

[00:13:29.000] - Jon Slowe

OK. And you said the, you referred to the manufacturer and a third party working together via an API, Joscha mentioned cloud to cloud approach.

[00:13:42.540] - Jon Slowe

Can you just expand on that a little bit more to help our listeners understand that?

[00:13:49.760] - Alix Weil

Yeah, absolutely.

[00:13:50.690] - Alix Weil

So basically, your asset is going to have some kind of interface presenting the language that it talks and this is the API and this API can be either closed, so only known and accessible by the manufacturer of the assets, or it can be open to some partners, such as a third party trying to connect to these assets and in general this condition happens in the cloud. So pretty much in the Internet where the interface is going to connect with the platform of the third party, which is doing the integration.

[00:14:29.820] - Jon Slowe

OK, and I guess if it's closed, that's where you need the bilateral agreement between the two parties to open up the API and allow them to speak to each other.

[00:14:41.520] - Alix Weil

Yes, absolutely.

[00:14:43.380] - Jon Slowe

OK, so a lot of different approaches in the market that you've described there and Joscha alluded to. Niklas, I'd like to come back to you and just look at EEbus in a little more detail. You gave a really nice, clear example in your introduction of the common language.

[00:15:07.410] - Jon Slowe

Can you speak a bit more about a use case or a project or real-life situation you're working on that really excites you where you're through EEbus, you're really unlocking the potential of two devices to exchange information, to talk to each other and the benefits that that brings.

[00:15:29.910] - Niklas Arpula

OK, there were many questions at once, so, uh, so what the EEbus is doing is, is bringing standardized use cases and standardize the data model available and then applications based on these specifications are then inherently interoperable and plug and play already.

[00:15:52.170] - Niklas Arpula

And companies already using this.

[00:15:56.820] - Niklas Arpula

We have, for example, SMA and Vaillant enabling a communication between their energy management system and heat pumps to really have this plug and play readiness without the user to have any extra fuss. Using their resources.

[00:16:15.510] - Jon Slowe

 So, let's just focus on that one for a second.

[00:16:17.310] - Jon Slowe

So, SMA make an inverter which is used in a PV system, Vaillant to make a heat pump. So, what are they actually doing together or how does that actually work?

[00:16:29.790] - Jon Slowe

Or what's a use case for that exchange of information between the inverter and the heat pump?

[00:16:37.410] - Niklas Arpula

When you use cases, of course, that you optimized the use of the heat pump with available solar energy or any self-produced energy. So, that means that the devices or the heat pump shares with the energy management system are easily the information that it can provide, the features and data points it can provide. And energy management connects to those points and is then, yeah, managing the energy according to its internal applications or algorithms. But there is no further agreement necessary because both devices are conforming to the specifications.

[00:17:17.690] - Jon Slowe

OK, so they're speaking the same language. So that optimization of self-consumption.

[00:17:22.960] - Niklas Arpula

Exactly.

[00:17:24.000] - Jon Slowe

Going forward.

[00:17:24.870] - Niklas Arpula

So, the end-user could exchange if his energy management system needs to be replaced, he can exchange it with any other EEbus system or the other way around. If there comes another heat pump or another EEbus device like EV charger in the household.

[00:17:42.030] - Niklas Arpula

And it's just the connecting and using.

[00:17:46.650] - Jon Slowe

OK, so you would have an energy manager either embedded in one of those products or sitting over the top of that, and that would pick up the same or that it would talk to those products and receive information in a common language. So, it's really, really plug and play, as you described.

[00:18:07.260] - Niklas Arpula

Definitely.

[00:18:07.560] - Niklas Arpula

And this is, of course, the reason why the major industries are like automotive and heat pump manufacturers are recommending EEbus and setting for that.

[00:18:17.940] - Jon Slowe

 Yeah.

[00:18:19.140] - Jon Slowe

OK, thanks, Niklas. Joscha, could you give us an example, a use case or project or a real-life situation and expand a bit more on that from your activities, maybe using EEbus, if you like, or a different way in which you're enabling assets to be connected together?

[00:18:41.310] - Joscha Koellner

Yes, maybe it's, let's say, an extension of the use case Nicklas was describing, and so one of our use case we are pushing right now and maybe this is a good example to get to, to which this what does it really mean, the interaction of the different market, world and market players.

[00:19:03.430] - Joscha Koellner

So, we are on several projects right now, care for aggregated flexibilities from homes. What this means is, of course, you have heating flexibilities. You have the PV, the storage system, even the flexibility from the car, bringing this together in one central system, not only from an energy management perspective but also from a regulations perspective. This is what several regulations wants to have.

[00:19:37.570] - Joscha Koellner

And so, we care for integrating, of course, the devices. And it's it depends how you do it. As I mentioned at the beginning, if it's cloud to cloud or if it's EEbus based or if it's models and so on, doing this together, we calculate what really happens in the next couple of hours on this household and we forecast the behaviour of the grid and what happens on the trading floors, bringing this together in the end to have one benefit for the end customer.

[00:20:14.280] - Joscha Koellner

And this is the best price for energy available on the market. It's not the wholesale price. It's not, let's say, which grid-related fees. It brings the distributed energy to the household and makes the best out of it.

[00:20:33.360] - Jon Slowe

OK, and you might have a platform, as you said, that's got very large numbers of assets feeding into that from very many households on that platform, presumably you've got to use a variety of approaches to connect those assets to your platform.

[00:20:52.320] - Jon Slowe

So, on a single platform, you might be using EEbus, Modbus, cloud to cloud, as you described. You have to work with whatever's necessary, is that correct?

[00:21:02.240] - Joscha Koellner

That's correct. That's correct. And to my experience in this field is it's not all about the connectivity itself. It's the biggest challenge for us, and this is a connectivity business, is the operations how to manage different firmware's overtime. Let's say 5 years, 10 years, all these assets will live, let's say 10, 20 years.

[00:21:29.600] - Joscha Koellner

And you need to maintain it.

[00:21:32.410] - Joscha Koellner

You need to care for it over, let's say, firmware generations. And that's a huge challenge. How to cope with it, how to test it, how to operate it.

[00:21:43.900] - Jon Slowe

OK, and to help our non-techie listeners, where you talk about different firmware generations, this is if I've got a heat pump, these are different updates, different operating systems for my not operating systems, different software systems for my heat pump. That would be updated at the time.

[00:22:02.250] - Joscha Koellner

Exactly. Exactly.

[00:22:04.050] - Joscha Koellner

So maybe new functionalities, new front ends, new data points about accessible and all of these changes in the firmware needs to be managed, that it interacts with all the other devices connected.

[00:22:19.490] - Jon Slowe

OK, and how well, you said that's your biggest challenge, so with my heat pump, if I have a firmware update, then you might have to do something to be able to still connect my heat pump to your platform. What would you have to do? Could you help our listeners understand a bit about what that actually might involve?

[00:22:39.740] - Joscha Koellner

Yeah, maybe just the simple explanation, as soon as you have new data points, or you change the protocol and even small changes, you need to adapt it and the controller and the gateway are in your, let's say, in the platform at the backend and align it with all the other data points in the system lets say a smart home system and so on. And this let’s say end to end quality needs to be assured and this needs to be tested, and, of course, it needs to be adapted as soon as we have changes.

[00:23:21.990] - Jon Slowe

OK. I'd like to ask all three of you about where you think this world of connectivity is going or connecting all different assets, so if we if the whole world adopted EEbus, then everything would be much simpler in that every device would be speaking the same language.

[00:23:46.600] - Jon Slowe

But how realistic is that, that we end up with a common protocol or a common standard? Niklas, let's start with you because I guess you're working with EEbus and then go to Joscha and then Alix on for your views.

[00:24:05.450] - Niklas Arpula

So, of course, I think it's not realistic to think that all device could support one common standard due to many reasons because there are always business models relying on proprietary solutions and lock in the application requires simply another protocol due to technical reasons. And of course, many established domain-specific protocols are also doing the job good enough. Nevertheless, the landscape of protocols will surely get smaller. If we think of Germany that the major industries we think of automotive and HVAC have really realized that EEbus is a future proof solution for the connectivity and it also enables this is greater integration of local resources.

[00:24:53.450] - Niklas Arpula

So, for a good example is that the Volkswagen Group is committed to EEbus. And that said that this interoperability and standardised communication interface.

[00:25:04.300] - Niklas Arpula

This is, of course, increasingly important due to the necessity to have transparency to the low voltage grid so DSO's also need that, but also to include the flexibilities behind the meter for, for example, peak shaving mechanisms or to provide variable tariffs.

[00:25:23.510] - Niklas Arpula

And this is the reason why, for example, here in Germany, the technical regulator {illegible} and also the regulator for the power grids has already included EEbus in the upcoming requirement specifications for the digital grid connection point.

[00:25:40.350] - Jon Slowe

OK, so some good momentum that you're gathering there, which will hopefully expand the number of OEM that are using EEbus.

[00:25:49.400] - Niklas Arpula

Definitely, it's pushing, but we will never have one protocol that rules them all. That is not realistic.

[00:25:56.180] - Jon Slowe

Joscha, you're not invested in any one standard or protocol, particularly you have to work with lots of them. What's your view on how much commonality we're going to get?

[00:26:09.920] - Joscha Koellner

So, I fully agree with Niklas what you see. You will never have one common standard, but what you will have more and more common standards, including {illegible}. And we see this in the C&I business, in the C&I segment, they are already established standards, let's say four or five standards that always comes up.

[00:26:36.580] - Joscha Koellner

And I strongly believe that we will have this development for the whole area of the residential business as well, low voltage business as well, since, of course, there will be more need for transparency and transparency in the low voltage grid, there is a need for more interaction to come to new business models like, I don't know, Energy Communities is one example. And of course, there is a need from the manufacturer's side to collaborate with all the different and additional market worlds, as I said, to bring the benefits to the end customer and to stay competitive.

[00:27:25.010] - Jon Slowe

And how, where are we now or do you think, Joscha, how quickly will that change in terms of reaching, for example, those fortified standards that we see in the commercial and industrial sector? How far away until we have those four to five for residential or are, we almost there?

[00:27:44.720] - Joscha Koellner

So the good thing is, there were some great developments from the regulative point of view in many different countries.

[00:27:58.190] - Joscha Koellner

Alix, you know this best and this helps us to bring in more business relevance and standardization.

[00:28:06.950] - Joscha Koellner

But there is a strong need to go this way.

[00:28:10.160] - Joscha Koellner

I would say currently it's still a mess. It's still got a lot to do to bring things together. But more and more standards come up. And the trend is clear that I would say in the next four to five years, most of the assets of the devices will talk at least one common standard.

[00:28:37.160] - Jon Slowe

OK, Alix, how do you see it? Because I know you've, we've talked about together and with manufacturers and other companies and the need to go to develop bilateral agreements to get cloud to cloud integration, having to go one by one to each car manufacturer, for example. How do you see this emerging convergence into a small number of standards?

[00:29:08.370] - Alix Weil

Well, I do agree with our guests they are obvious rising opportunities around HEM and not only for the end-user, but also to provide the grid with flexibility for communities, etc.

[00:29:23.280] - Alix Weil

And I think if manufacturers, grid operators and all the other players in the energy world want to be part of these new home markets and make value out of it, but also just not be left behind, there will be a need for some kind of standard protocols. And obviously, they will not be one. And I do agree with our guest on that point.

[00:29:51.710] - Jon Slowe

 Do you see much reluctance, Alix, between from some manufacturers where historically, everything's been closed and they see opening up as something a bit risky a bit uncertain, or they have to take a bet on a certain standard if there are a number of competing ones at the moment.

[00:30:12.150] - Jon Slowe

Which one do they go with? So it is hard for the manufacturers at the moment?

[00:30:17.630] - Alix Weil

 I think it is because they're betting a lot on choosing one standard and we see a lot of them actually picking a few of them to future proof their business, but no one is going to remain completely closed. I think you need to be a very large company to be able to do that and survive on your own. And I think the kind of stands is that are picked really depends on the segments that a company comes from, whether it's an automotive company, a HVAC etc.

[00:30:48.320] - Alix Weil

There's also the countries where it's operating because standards vary countries from countries.

[00:30:57.160] - Jon Slowe

Yeah, OK, so some may be gathering momentum, but maybe stronger in some markets, another. So, if you've got a car manufacturer from East Asia, it might have a different view from a car manufacturer in Germany to a US car manufacturer.

[00:31:09.440] - Alix Weil

Absolutely.

[00:31:12.610] - Jon Slowe

OK. Now that we've touched on this idea of open and closed, let's bring out the Talking New Energy crystal ball and today will set the dial to 2025. The question I'd like to ask all three of you to respond to is this. So imagine that we have a future where everything is completely closed or we need bilateral agreements between a company like Kiwigrid and a car manufacturer to access the state of charge of the battery. So if that's 0 out of 10 where everything's very closed and 10 out of 10 is completely open, interoperable an aggregator, a HEM company could easily access any heat pump, any battery, etc.

[00:32:07.980] - Jon Slowe

That's 10 out of 10, SO 0 out of 10 is everything's closed, 10 out of 10, everything's completely open and interoperable. Where will we be in 2025?

[00:32:19.320] - Jon Slowe

So, what score would you give the sector for 2025? Niklas let's start with you.

[00:32:28.620] - Niklas Arpula

OK, thank you. So, I'd say first that we'd have to look at the status quo. Now we are definitely not at zero at 10, but there are big, big gaps in interoperability.

[00:32:39.570] - Niklas Arpula

So, I would say maybe in five years we could be somewhere at six or seven. But I'm afraid that 2025 comes really quick, considering how slow at the end standardization is and collaboration between organizations and for many businesses is the pain because of due to lack interoperability.

[00:32:59.790] - Niklas Arpula

It's not strong enough. We have a lot of proprietary ecosystems also in five years. And then I also think that many, many of these global IoT platform providers will come from the entertainment domain also into the energy domain. But I think that the development is very good in Germany and Europe. That's I would say I'm optimistic and I say seven, seven out of ten.

[00:33:24.450] - Jon Slowe

OK, and where would you put us today?

[00:33:27.060] - Jon Slowe

You said a lot lower, presumably not at zero. But what mark would you give us today?

[00:33:32.430] - Niklas Arpula

I would say something like three.

[00:33:34.800] - Jon Slowe

Okay. Um, so making good progress but yeah 2025 will come around quickly. Joscha, how about yourself?

[00:33:45.990] - Joscha Koellner

So, looking at openness and interoperability of all the different devices and assets in five years, I would say. I would say maybe seven, but it's a negative seven. And this comes

[00:34:08.390] - Jon Slowe

What do you mean by that?

[00:34:12.000] - Joscha Koellner

 I mean, personally, of course, I'm enthusiastic that this will happen, but we see it all over, all over the world.

[00:34:20.280] - Joscha Koellner

We have special regions. I just pick out Japan or China even.

[00:34:26.930] - Joscha Koellner

And in all the different European countries, you have, let's say some let's say you have some challenges to get in there.

[00:34:39.960] - Joscha Koellner

And of course, standards help. And on the other side, standards, let's say, make it also difficult to bring in new business models. So this is one aspect that's something negative. The other thing what's positive here is I strongly believe from a manufacturing point of view or from the own point of view. Of course, all of the manufacturers will open their protocols or their interfaces, and there's a clear reason to do this because there will be a future business for them as well.

[00:35:15.450] - Joscha Koellner

So, there will be a data-driven business so first manufacturers come up and have a say an API they need to pay for. So, they want to participate in these emerging markets that comes up in the smart energy business. And of course, why not doing so? So, of course, that's a mixture of protectionism and new business, and that's why it's a seven. Of course, there's a chance, but of course, it won't be open all over the world.

[00:35:50.730] - Jon Slowe

Yeah, yeah.

[00:35:52.420] - Jon Slowe

OK, there's some really interesting points there, I think also about keeping enough open innovation and new business models. Yeah, if you jump too quickly to a standard, then potentially you make that harder, but also a standard will help to open that up in other ways.

[00:36:12.810] - Jon Slowe

Um, Alix, last but not least, where would you put us out of 10 or Joscha.

[00:36:18.710] - Jon Slowe

Sorry, where would you put us today out of 10 today.

[00:36:23.660] - Joscha Koellner

Today?

[00:36:23.660] - Jon Slowe

Yeah.

[00:36:26.860] - Joscha Koellner

You mean the standards or the openness?

[00:36:29.910] - Jon Slowe

Combination

[00:36:32.500] - Jon Slowe

Niklas put it at three out of ten, would you agree, Niklas? Or a bit higher, a bit lower.

[00:36:38.610] - Joscha Koellner

It's a bit lower because, of course, there are standards, but the standards are not the same. So how to interpret it and what's the standard behind? And of course, we see this every day, what is the challenge to bring this together.

[00:36:56.140] - Joscha Koellner

And it's not related to openness of the providers. It's more related to is it really compatible? Can you work with it? How, easy it is to manage it. And that's all it takes. Still poor.

[00:37:13.300] - Joscha Koellner

But as Niklas said, there's a clear trend that this will be better in the future.

[00:37:23.020] - Jon Slowe

Yeah, OK. Thanks. Alix, last but not least, what's your mark out of 10 for this combination of standards and openness today and in 2025?

[00:37:37.500] - Alix Weil

Well, today, I would say around three as well, I think it's a good number and five years is a very short amount of time.

[00:37:46.530] - Jon Slowe

Yeah.

[00:37:47.780] - Alix Weil

So maybe around six. I think a key driver for that would be like the working groups that are appearing at country levels, but also European levels or even international levels.

[00:38:01.740] - Alix Weil

And I think those have the possibility to push a little bit higher. But for now, I wouldn't be positive enough to go about that.

[00:38:14.520] - Jon Slowe

OK, so general agreement, I think that we're at two or three out of ten today, six or seven out of ten in five years’ time, and that's been a really insightful conversation on the techie world of connecting up the growing number of assets.

[00:38:33.360] - Jon Slowe

Devices in people's homes will play a huge role in the energy system going forward, but only if we can connect them together. So, lots of great examples, lots to do in this area as well. And we'll continue to look really closely at how the sectors emerging here.

[00:38:54.030] - Jon Slowe

Thanks very much to my three guests. Thanks to Niklas, Joscha and Alix its been a really insightful discussion. Thanks to all of you listeners for joining the podcast. I hope you enjoyed it and informative and look forward to welcoming you back next week. Goodbye.

[00:39:24.330] - 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.

[00:39:40.800] - 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

Jon Slowe, Director at Delta-EE
Dave Boundy, Chief Technology Officer and General Manager Europe at Innowatts;
Geraldine McBride, CEO at MyWave
David Trevithick. Principal Analyst at Delta-EE

 [00:00:23.190] - Jon Slowe

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

[00:00:24.870] - Jon Slowe

Bill Gates wrote recently in an essay for graduate students around the world, about three fields that he'd spend all this energy and passion on. If he was starting his career again and wanted to make a big impact on the world, the three sectors where artificial intelligence, clean energy and biosciences. Today, we're focusing on two of those three artificial intelligence and, of course, clean energy, exploring how AI is being used in the energy transition today and how it's going to be used more and more in the future.

[00:00:57.690] - Jon Slowe

The Google CEO Sundar Pichai says artificial intelligence is one of the most profound things we're working on as humanity. It's more profound than fire or electricity. And the last quote of my introduction from famous physicist and author Stephen Hawking, 'Success in creating AI would be the biggest event in human history.' But it does add a cautionary note. 'Unfortunately, it might also be the last unless we learn how to avoid the risks.' So, from those quotes, and I think most of you will agree in general, AI is going to have a huge impact on every industrial sector and energy will be the same.

[00:01:40.620] - Jon Slowe

It's already playing a role in the energy transition.

[00:01:43.650] - Jon Slowe

And today I'm joined by three guests to get below these big scene-setting quotes I've just shared with you and do what Talking New Energy does best get under the skin of exactly how the energy transition is unfolding and how AI is being used. So, let's introduce my guests first, Dave Boundy, who is Chief Technology Officer and General Manager Europe at Innowatts a software as a service provider to utilities. Before that, Dave had a long career at Intel, including leading global teams focused on AI and the internet of things.

[00:02:16.710] - Jon Slowe

Hello, Dave.

[00:02:18.300] - Dave Boundy

Hi, Jon. A pleasure to be here.

[00:02:21.580] - Jon Slowe

Thanks and thanks for joining us, Dave.

[00:02:22.790] - Jon Slowe

Dave, can you start by giving us an elevator pitch on Innowatts who you are and what you do?

[00:02:30.690] - Dave Boundy

Be delighted yeah, Innowatts is an AI-enabled SAS company. We provide a platform that enables energy retailers and network operators to provide do actionable insights based on analysis of their data. Today, with just over 40 million meters worth of data with customers based in four continents around the world, and we're key to our product is to enhance the gross margin of the retailers and network operators whilst improving the customer engagement experience with working with energy systems and improving the sustainability of the overall energy system.

[00:03:23.330] - Jon Slowe

OK, so you’re taking advantage. Well, maybe that's the wrong way to say it. You're creating value from those huge amounts of data that are coming out of the energy sector now. And can you give our listeners an example of how you're using artificial intelligence in doing that?

[00:03:41.810] - Dave Boundy

Sure. In terms of our platform, as I mentioned, we're ingesting data from our customers. Typically, it's meta-level data. So, we're taking maybe data from within the network itself. So, it could be SCADA data, could be smart meter data from residential buildings or commercial and industrial settings. We take that information. We combine it with lots of other data sets and analyse it to identify different insights. And they may range from providing highly accurate load forecasts through to risk management and through to customer engagement.

[00:04:28.220] - Dave Boundy

And the customer engagement, for example, might be that we're looking at the energy patterns and identifying suitable products that would help the customer improve their carbon intensity or help the customer manage their overall electricity consumption.

[00:04:49.220] - Jon Slowe

OK, so using AI to correct insights from those huge volumes of data that you're being fed from fed to from utilities, thanks Dave we'll come back to you shortly. My second guest is Geraldine McBride, CEO at MyWave. Now, loyal listeners may remember Geraldine from our first ever episode of Talking New Energy. Welcome back, Geraldine.

[00:05:16.100] - Geraldine McBride

Great to be back. Good to see you today.

[00:05:19.430]

So, Geraldine, when we talked well over a year ago, we were talking about my MyWave's work with auto-switching. Today, we're looking more generally at AI. But can you give us a refresher on MyWave who you are and what you do?

[00:05:35.010] - Geraldine McBride

 Yes well?

[00:05:35.600] - Geraldine McBride

We're also working in the field of AI and we've been doing that for the last five years. And we've actually evolved quite significantly from auto-switching. So, auto-switching was one of the first applications we did when we came into the UK. But since then, we've also advanced the technology further to help energy companies service their customers better. So, we've now become a global technology partner with SAP. So we have been endorsed and certified by them.

[00:06:10.670] - Geraldine McBride

We are essentially got an intelligent brain-based data model that learns about the customers and energy companies now are able to use that to be able to make sure that their customers are on the right energy plans to help make sure that they are giving them the right plan before they switch so, preventing customers from switching away. They're being used in what we call smart guided selling, which means that many energy companies are getting quad plays, triple plays, trying to sort of create a deeper, broader relationship.

[00:06:42.450] - Geraldine McBride

So, we are actually bringing the right types of offers and the right types of services to those customers in their homes. And then the other side of it is smart customer service, which means that we can offload between 30 and 50 per cent of volume of a contact centre, which then means that customers can be serviced, for example, as being applied, you know, with COVID many customers can't pay their energy bills right now. So, we can be you do AI-based payment plans.

[00:07:10.760] - Geraldine McBride

You know, you can just cut the customer can type I need a payment plan. We will be able to use the data around that credit history, you know, what they owe on their bill. And then within the rules guiding the algorithms of AI, we can then basically craft a payment plan and give that to the customer and like, you know, less than 30 seconds, which means then energy companies know that they're going to get paid their bills because you've spread those payments maybe two or three months to help get people through their winter energy bills.

[00:07:41.840] - Geraldine McBride

That's being applied in many ways, but mostly that sort of smart customer service and smart guided selling and customer engagement.

[00:07:49.670] - Jon Slowe

OK, thanks, Geraldine.

[00:07:51.140] - Jon Slowe

Dave talked about the huge volumes of metadata as an example of the, I guess, a call from the of the insight that Innowatts is generating in your case when you're talking about customer service, metadata will be one input but what other sorts of inputs are you using?

[00:08:10.730] - Geraldine McBride

Well, metadata is actually very useful because, you know, and again, you just take the COVID world we're in, a lot of us now working from home. So, our energy consumption patterns have changed entirely. And yet. I actually recently switched away from an energy company because I had this massive winter energy bill because my home is my office and I moved energy companies because they couldn't do anything about it. So, you know, if they'd be clever because I was a good customer, they would have seen my energy consumption pattern.

[00:08:41.330] - Geraldine McBride

Had changed using that energy data have suggested proactively, a better energy plan that was more relevant to the pattern that I was now on, as opposed to them expecting me to call them and try and get a better plan. And so, you know what, when you get a shock bill, the first thing you do is right it's time to shop around because clearly, I'm not on the right plan anymore.

[00:09:01.610] - Geraldine McBride

And in many countries, by regulation, if you're going to lose a customer, many, many countries have legislated you can't do win backs because once your customer is gone, they're gone. And so, it's very important to catch those valuable customers before they switch. And again, so that metadata is all is the heartbeat of what is going on in the home in terms of how energy is being consumed. And that's very useful data that can be used and in our and how our AI would recommend a different energy plan.

[00:09:39.110] - Jon Slowe

OK, thanks Geraldine, we'll come back to you again shortly. My final guest is our Delta-EE expert on data and generating insights from data, David Trevithick. Hello, David.

[00:09:50.990] - David Trevithick

Hello, Jon. It's a pleasure to be here.

[00:09:53.450] - Jon Slowe

And welcome back to one of your many contributions to our podcasts. Now, I'd like to start the discussion, actually, with all three of you by helping our listeners, who I'm sure some of you are thinking, well, I have an idea what AI is, but I'm not really sure. So, if I could ask each of you to give a one-sentence definition of AI and be very interested to see what you come back with me.

[00:10:21.240] - Jon Slowe

Dave let's start with you.

[00:10:24.650] - Dave Boundy

Sure, I think you could describe it as computing, aiming to replicate or simulate human intelligence.

[00:10:36.040] - Jon Slowe

Yeah, OK. Thanks, Geraldine. How about your one-sentence definition.

[00:10:41.260] - Geraldine McBride

 Of AI I think it's interesting.

[00:10:44.620] - Geraldine McBride

You opened today with Bill Gate's statement and also Stephen Hawking's. I think that AI is there to augment and help mankind not replace and take it over. So, in the same way, at the beginning of the century, you know, women used to have to wash their clothes and washing tub and wonder down to the river. We've automated many things. And so, AI has an ability to actually make all of humankind's lives much easier and remove the drudge tasks.

[00:11:14.290] - Jon Slowe

OK, thanks I'll let that qualify Geraldine as a long sentence. David, how about yourself?

[00:11:25.900] - David Trevithick

I might sit as two sentences as well. I've got a dry definition and perhaps an example or two to bring it to life. So, my dry definition is around the technology that enables a machine, a computer to learn by taking information from its surroundings and then performing tasks that typically require human intelligence. But it is all around us and I think some common examples around being so navigating a route home, for instance, product suggestions based on sort of past experiences and sort of facial recognition for accessing your homes.

[00:12:03.070] - David Trevithick

Lots also sort of visual examples in our daily lives and all the stuff behind the scenes in diverse categories from fraud detection of our financial transactions, CV screening or even spam filters, all email. So, it is infiltrating parts of our lives.

[00:12:19.540] - Jon Slowe

OK, and in terms, David, sticking with you for a moment, when you're looking at energy companies across Europe and beyond and how they're using AI, how would you characterize that? Can they be grouped and be placed into different buckets of activity are there some distinct areas in which the energy sector is starting to use?

[00:12:47.260] - Jon Slowe

AI already.

[00:12:49.720] - David Trevithick

 Yeah. And I think there are different ways of categorizing it so sort of the buckets I put them into is certainly around sort of customer interaction. And secondly, this is it in the energy space around the energy assets and asset utilization and thirdly around the energy demand and generation analysis.

[00:13:10.950] - Jon Slowe

 OK, and those assets, I guess, are probably 10, 20 years ago, they would have been traditional utility assets we'd have been thinking of.

[00:13:18.950] - Jon Slowe

But now that includes remote border diagnostics, smart thermostats, EV chargers and a whole host of new energy assets on the customer side of the meter.

[00:13:30.910] - David Trevithick

Yeah, totally I mean it's on both the customer side and on the system side of the meter, in fact, the meter itself, you know meter readings can be processed through {illegible} character recognition and learning techniques that are either a consumer or a meter reader can then do that through reducing human error and wasted time. But, yeah, normally on the customer side of the meter, you've got to use it in different things, different ways.

[00:13:59.090] - David Trevithick

So for the individual home, you've got, for instance, asset identification such as EV charge points or solar PV through sort of low profile recognition or satellite image recognition, and you could use it for acquisition, sort of targeting potential people. So solar PV, for instance, customers looking at their roofs from satellite imagery and looking at the energy bill savings they could get from that, for instance, and not just home but obviously non-residential spaces even more value to be had.

[00:14:32.510] - David Trevithick

 I think, from so fault detection and predictive maintenance from the business side.

[00:14:39.380] - Jon Slowe

Sure. OK, thanks.

[00:14:40.640] - Jon Slowe

Those three buckets, I think are useful to keep in our mind’s customer interaction, assets and then demand or consumption or generation analysis.

[00:14:50.330] - Jon Slowe

Dave and Geraldine, let's come back to you both now and I'd like to start by drilling down a bit into how are you using AI so what sort of things can you do with AI that you couldn't do without AI? Can you give us some sort of stark examples to help bring to life the ways in which AI is enabling you to do things now that you couldn't have done before? Dave, we'll start with you.

[00:15:21.160] - Dave Boundy

Yeah. So, I think firstly to look at kind of the transition of AI that we're seeing. I mean, it's been around for quite a long time, at least theorized since the 1950s. But it's really only in the last number of years that we're really starting to see the exponential growth or the start to the exponential growth in AI so what we're seeing today is really just the tip of the iceberg in terms of what is possible. But if I take some of the work that we're doing in Innowatt's today, we use, we aggregate huge amounts of data.

[00:15:57.220] - Dave Boundy

So, we're dealing in over four billion data points per hour. We're analysing that. And we're then able to see many different and deliver many different insights. And they include. So, for example, what is the general pattern of EV adoption at a postcode or zip code level as a general insight that we can provide to our customers so they can understand, okay, this is what's going to go through this particular transformer this year and actually map it out for the next 15 years.

[00:16:32.770] - Dave Boundy

So that's underlying all of this really is the exponential growth in the power of compute that we've been seeing that has enabled this in the last number of years and the commoditization of data centres through the many cloud service providers that we have.

[00:16:52.990] - Dave Boundy

So, they're underlying fundamental aspects of it.

[00:16:56.800] - Jon Slowe

And I guess without AI there's no way that that four billion data points per hour, AI gives you the capability to do that and to look at those patterns, generate those insights. Without AI there's no way you could scale a business with that volume of data.

[00:17:15.820] - Dave Boundy

Yeah. I mean, correct. It's as I say, it's really that combination of the compute and AI the coming together and the advances that we can now make in AI that enable us to, as you said, analyse four billion data points in an hour. And in fact, we're doing more than just analysing those four billion data points. We're slicing them and dicing them and looking at different ways that we're analysing them, maybe multiple different times, different services.

[00:17:42.910] - Dave Boundy

But, you know, some of the things that we are doing there are being able to in similar ways that Geraldine was mentioning, being able to identify patterns that an individual consumers level and understand what their future energy demand is going to be, be able to send them proactive notifications that based on patterns in their consumption that we're seeing combined with other environmental factors and macroeconomic data, that we see that their energy bill is going to rise in the near future.

[00:18:17.920] - Dave Boundy

In fact, one of the key areas that we provide a lot of insights around was around the impact of COVID, again, something that wouldn't have been possible with without AI and we were able to actually proactively provide adjustments into our demand forecast that enabled our customers to more rapidly adapt their forecasts as people went into lockdown. And now as we look at regional lockdown's, they could adjust their forecasts more rapidly than via any traditional approach.

[00:18:52.150] - Jon Slowe

So, Dave, I would imagine you're not short of ideas for use cases and propositions that you can develop for your utility customers from all of this data.  How challenging is it to develop those with your customers or to take an idea, a use case, a proposition from all of that data and then turn that into something that you're actually taking forward with your utility customers? Is it hard to get utility customers comfortable with this where the real challenge in growing these use cases?

[00:19:33.400] - Dave Boundy

Well, there's multiple challenges, but I think, you know, so be that from obviously the mindset of the industry that we're working in, the speed of adoption, the rate of change, you know, there challenges in of themselves. But then there's also access to quality data is a key element as well, enables you to deliver these insights again, so that being able to deal with that data in high volume, be able to deal with the data engineering aspect of it, which is just the how can we assure the quality of the data as it arrives in real-time so that it's going to feed into the to the services that we provide and provide meaningful, valuable insights to our customers?

[00:20:31.380] - Dave Boundy

Because the old saying rubbish in rubbish out know is critical here. So, in terms of providing that to our customers, the key thing is what we provide as a starting point, as a platform and a suite of services which they can adopt day one. And then, you know, beyond that, it's a case of obviously we can partner together to develop new insights and provide additional value.

[00:21:00.900] - Jon Slowe

OK, thanks. Thanks, Dave, Geraldine in terms of that challenge around the data in, I was interested you remarking that you are partnering with SAP. Presumably, that's driven, by the way, that a lot of companies organize their data and store their data and manage their data today is through SAP. So that makes it easier for you to get access to that data and then generate insights from that.

[00:21:28.260] - Geraldine McBride

Correct. Although there are lots of different types of AI so you've got deep machine learning AI where you know, you're taking huge data sets and you're gaining insights, incredibly valuable AI.

[00:21:42.180] - Geraldine McBride

Then our type of AI is actually well, what do you do with that data? And so what we do is we turned we use data and turn that into what we call intelligent actions and outcomes. So, you know, and you start to look at AI it's a very broad field. And if you can look at them, they're almost like you imagine lots of little robots doing lots of different things. You know, on the one side, you will have, you know, a set of algorithms that are analysing data sets in order to derive insight and over billions of lines of data and reanalysing that.

[00:22:15.030] - Geraldine McBride

We use that data, but we also learn as we go and we call it recursive learning, and that is often centred on the individual customer, also with the customer having an input and also permission on how that data can be used in useful ways. And so even in banks, even with open banking data, you know, banks now have insight that my energy bill go back to energy. My energy bill is higher than normal. So, banks are also wanting to provide smart checking accounts.

[00:22:45.630] - Geraldine McBride

So, based on the insight that my energy bill is higher than normal, probably because of COVID and I'm working from home going back to that example, the bank then has the insight that your energy consumption is higher. They then can go out to an aggregator who actually may very well have energy plans to be able to find better energy plans. And then the energy consumption pattern data can come together. So, then you've got three data points that then we drive the action and outcome and orchestrate that either with the bank.

[00:23:16.860] - Geraldine McBride

All right. To make sure that the customer is always on the right plan being helped or with the energy company because the energy company is now going to be much smarter. And how they using data and not just being traditional, you know, relatively lazy provision of energy utility, but really thinking about providing the services to those customers. And then many utilities are wanting to get into what they call cross and up-sell of other services because you know making money out of energy is difficult today.

[00:23:45.000] - Geraldine McBride

So they want to move into telco, broadband and other services. So this is where, you know, where our technology comes in because we are able to take those data points, learn more about that customer and then turn those into useful, meaningful actions and outcomes for that customer.

[00:24:04.380] - Geraldine McBride

And so that's and SAP to go back to your earlier point that, you know, they've got great data, but then lots of different there are lots of great data sets out there.

[00:24:14.820] - Jon Slowe

And coming back to the question I asked Dave about the challenges you see for utility or energy companies adopting the types of services that MyWave and InnoWatts are offering. What's your perspective on that? What's stopping more adoption?

[00:24:32.010] - Geraldine McBride

I think adoption is happening slowly. I think that there is a natural inertia. I would categorize energy companies into three categories, innovators who are only 25 per cent of energy companies that are already out there doing exactly what we're talking about. Actually, funnily enough, some of the banks are also doing that. So, you're starting to see that banks and energy companies actually do have things in common and then mainstream is slowly coming along and then there is laggards, and that's the other 25 percent.

[00:25:04.520] - Geraldine McBride

So, the laggards are well behind. So, it's a classic adoption cycle. And I would say we're in the first twenty-five percent of the innovators who are jumping onto this early. And I'm seeing this in Australia and New Zealand, the UK you know, different parts of the world. And in fact, you know, from I guess all of us sitting on this podcast today, we're probably all working with the innovators as opposed to the laggards.

[00:25:32.090] - Jon Slowe

David Trevithick, how would you when you look across Europe and these options, particularly around maybe energy insights, Geraldine's characterisation of that bell curve of 25 percent innovators, 50 percent mainstream, 25 percent laggards, where would you see the adoption of energy insights on that curve?

[00:25:48.260]

[00:25:51.170] - David Trevithick

 The adoption of energy insights is quite broad. Some of it covers, AI some of it doesn't, but I think that's perhaps more advanced stage than some of the other areas and in the industry. But, yeah, it's still got a long way to go. I think it's perhaps past the early adopters is getting more mainstream, you we've got 30-million downloads across Europe of Energy Insights apps, for instance. But you know the energy sector as Geraldine said there's a bit risk-averse. There might be other issues, perhaps with some of the energy data, with missing data and collecting estimates data that perhaps isn't so apparent.

[00:26:26.990] - David Trevithick

In other sectors to overcome and then, of course, you've got customer trust and profit margins are low relative to other industries, which might hamper some of the investment. But it is happening, but perhaps not quite as quickly as we might hope for.

[00:26:43.030] - Jon Slowe

OK,

[00:26:46.140] - Jon Slowe

David, in terms of your work in AI, you've been involved for many years. Is there one lesson or observation you can share with us from what you've learned about using AI in the energy sector over the last years?

[00:27:03.450] - Dave Boundy

Yeah, sure. So, first thing obviously with the energy sector is paramount is trust. And trust is based on security. It's based on execution. It's based on the ability to deliver as to what you've said. And also, obviously critical is GDPR when you're dealing with the customer data. So the way in which the system is set up and managed and being at the highest levels of security and compliance, plus ensuring that we can provide the services at the right service level, expectations of our customers and a consistent day in, day out basis is really the critical part, because when you're dealing with large amounts of data, the transversing trend across different systems, et cetera.

[00:27:58.110] - Dave Boundy

Being able to do that with whilst meeting those parameters that I mentioned is really key. And it brings back again to the point I mentioned earlier, rubbish in rubbish, outright? So if you're if your platform isn't set up in such a way that number one, it can self-monitor itself and understand the status of all of the different workloads that are being executed, including ingestion of data. And to be able to monitor that data in of itself and ensure that the quality of that data as it streams in is good and be able to handle discrepancies in real-time.

[00:28:40.560] - Dave Boundy

That really is one of the key challenges.

[00:28:44.630] - Jon Slowe

OK, so the more ways in which you can build trust, the more success you have.

[00:28:50.420] - Jon Slowe

Geraldine, how about you if you can look back at one lesson you've learned over the last years?

[00:28:57.270] - Geraldine McBride

 I think that's the key thing is, you know, the people think AI means many different things. And this is why I sort of made that comment at the beginning on we need to be very clear about what the AI is designed to do, because, as I said, they're like robots. So, part of the thing that I have been learning is actually how you can describe clearly to an energy company, you know, how we solve problems for them in a very pragmatic way.

[00:29:31.080] - Geraldine McBride

So, it isn't just about also giving them a data insight, but how can they use that to drive down the cost to serve customers, to improve their revenues, to get better customer outcomes? How do we now apply data and AI to delivering better outcomes for people and making their employees lives easier? So really that's what we've been learning to do and we've now been doing that now for several years and getting even better and better as companies start to see, you know, that this is not difficult and that they should be doing it right now because it moves the needle on revenue and profit.

[00:30:11.850] - Jon Slowe

 OK, one more question before we bring out the Talking New Energy crystal ball. So I'm curious on all three of your views, I might be able to guess Dave and Geraldine your views a bit, but to what degree do you think energy companies will bring that AI will become a core competence and an in-house skill for energy companies or what do you.

[00:30:38.820] - Jon Slowe

To what degree do you think that will never be the case? And because of the specialism, the investment, the skills required, there will be AI specialist such as Innowatt's and MyWave that provide that service to energy companies so basically will it become an in-house part of energy companies or will it be provided as an outsource service or software as a service by companies such as yourselves? Dave, we'll start with you and then Geraldine and then David.

[00:31:06.940] - Dave Boundy

Yeah, I don't necessarily see it as an either-or but rather a partnership. And in some instances, yes, it will be 100 percent outsourced to companies such as Innowatts and MyWave. But in many instances, you've got inherent expertise within the business that they've already invested in. And what we see with some of our customers is they want to keep that. They see it as potentially a competitive advantage. I think over time that.

[00:31:42.060] - Dave Boundy

Desire will diminish to keep people in the house as they realize, actually, yes, we can have a data scientist who can do certain tasks. And obviously, they'll want platforms such as Innowatts, which enables them to define their own models and to tweak those models and tune them as needs be within a platform that will obviously handle all of the data quality and the plumbing complexities.

[00:32:15.120] - Dave Boundy

Yeah.

[00:32:15.820] - Jon Slowe

So, I think it's upfront. It's both scenarios.

[00:32:22.350] - Dave Boundy

As I said, we'll see. But I think over time that will transition more to an outsourced model with the expertise consolidated in platforms such as the ones you mentioned.

[00:32:36.510] - Jon Slowe

OK, Geraldine, how about yourself what's your view?

[00:32:41.100] - Geraldine McBride

Well, I think that you've got to look at what business you're in. And energy companies are in the business of actually providing great energy and other home services. And obviously, you can have data scientists. I've seen examples where, you know, IT departments will go and take a chatbot a platform and try and create an intelligent tool. And those are all good and nothing wrong with that at all. But they can't replace other people who do this full time for a living, you know, innovators.

[00:33:11.760] - Geraldine McBride

And so, what they need to do is find the right partners to partner with. And all the innovation doesn't just happen you know, the few big, you know, sort of companies that everybody knows about in the world as well. There are a lot of great small and mid-sized companies also out there doing amazing things. So it's about finding the right partners to come in and collaborate and then using those platforms too because they become innovation platforms for your people to innovate, you know, and use data for your customers.

[00:33:42.240] - Geraldine McBride

And which case then in the end, why do you do all of this in order to create value for your customers and create value for your shareholders? And so, in the end, that's what it all comes down to. And so that's really why companies like ours exist to help create better outcomes for their customers, their shareholders and their employees.

[00:34:01.660] - Jon Slowe

Yeah, yeah.

[00:34:02.280] - Jon Slowe

My question was a bit stark, I guess, in-house or outsource it. It will be partnerships and a degree of both.

[00:34:08.180] - Jon Slowe

As both of you described, David, from your point of view, anything to add to that?

[00:34:14.910] - David Trevithick

 Similarly

[00:34:16.050] - David Trevithick

I think, you know, I think there is space to both, and I think that will continue. And I think some big energy companies have data science teams and prefer to retain control of processes internally. But, you know, there's a cost to upskilling recruiting and maintaining that in-house capability. So, others will prefer to bring in expert partners there's always a role for them, just as in any other field where there could also be the hybrid approach.

[00:34:39.330] - David Trevithick

So, you've got your in-house team, but actually, they bring in other sort of skills where needed to develop their AI thinking.

[00:34:48.650] - Jon Slowe

OK, well, we certainly see looking across Europe, some energy companies trying to build this is a core in house skill, some have even made acquisitions or investments in firms to do that. So it would be very interesting to see how that unfolds. Now, let's bring out the Talking New Energy crystal ball. And I've got a new feature to it, a dual date setting.

[00:35:09.400] - Jon Slowe

So I'm going to ask my guests for predictions for 2025 and 2030. And the question is this how would you characterize how well the energy sector is capturing the potential of AI? So, let's give it a mark out of 10 where one is very poor and 10 is fantastic. So out of 10, how well does the energy sector capturing the potential of AI? And let's go for a rating today, 2025 and 2030. Dave, we'll start with you.

[00:35:47.110] - Dave Boundy

I think today, and I'd almost break it down into the different segments of the industry and I'll focus just on the distribution and retail side. So from a distribution side, I’d probably score one or two space today. And on the retail side, maybe it's in two or three. In fact, it’s kind of reflects the early adopters. You know, percentage-wise, as we move to 2025, I think we'll see the networks probably moving to a two the retail side pushing up to four or five.

[00:36:28.480] - Dave Boundy

And by 2030, you know, it's probably the network operators will have realized that they'll have to have made a significant change and it will be forced upon them. In fact, I think, you know, if you look at you look at all other industries which are adverse to digital adoption and let the disruptors come, I don't necessarily see that the network or the energy industry as a whole obviously is not going to be immune to that disruption.

[00:37:02.380] - Dave Boundy

And you mentioned there's some companies in Europe and other parts of the world who are energy companies who have adopted. There have been heavy adopters of technology, yet they're more likely to succeed. The same will apply in the network space. So, by 2030, I think the network operators will have somewhat had to have caught up with the retail side of the industry or otherwise they'll find what happens with those who are disrupted.

[00:37:30.730] - Dave Boundy

They'll die.

[00:37:32.020] - Jon Slowe

 Or the regulators will force it upon them.

[00:37:34.450] - Dave Boundy

Exactly

[00:37:36.280] - Jon Slowe

So, for the retail sector by 2030, you're sounding quite optimistic then if it's four or five by 2025, you're pushing up to higher marks in that for 2030.

[00:37:44.890] - Dave Boundy

Yeah, it's probably six or seven there. Right.

[00:37:47.740] - Dave Boundy

So, you know.

[00:37:51.890] - Dave Boundy

 I should say sorry, Jon, just to say there, obviously, that's all related to kind of where AI stands today. As we move forward in the next decade, we're going to see exponential growth in.

[00:38:07.110] - Jon Slowe

Yeah, more and more will be possible.

[00:38:10.650] - Jon Slowe

Geraldine how about yourself?

[00:38:12.490] - Geraldine McBride

Look, I agree with David's view, and in fact, I was in fact, it's funny that your ratings are almost identical to how I would be rating it. I think the other thing as well is that you're starting to see because of the opening up of data and this is happening in banks, the ability for energy companies to make good revenues and margins and continue to grow is becoming harder and harder and the cost to serve those customers is becoming also an issue.

[00:38:39.240] - Geraldine McBride

So, the use of technology and then you've got combined with that, you know, the next generation of millennials who are you know, there's a massive shift in terms of them as your customers. If you don't make your changes now and start to sort of look at where does your energy company sit on the spectrum of innovation versus laggard or, you know, whether you're mainstream, I'd really urge that the energy companies move sooner rather than later. You don't have to go buy it.

[00:39:09.450] - Geraldine McBride

There are lots of great companies out there to partner with. And in fact, even, you know, like other technologies that I'm involved in, you know, we don't take the data away. It actually becomes your innovation platform and your customer data. And, you know, these become very powerful tools to help you move your business forward. So I don't understand the inertia other than the fact that you know, people have been sitting in the same jobs for an awful long time and they just look at the world through what they see today.

[00:39:35.610] - Geraldine McBride

And we all know five years goes very fast. Just look at how quickly the last six months has gone.

[00:39:40.260] - Jon Slowe

I know it goes very fast. And I think your point about the poor margins and commodity and the need to do this may be actually that will force the marks higher than both you and Dave or Dave put forward, because the laggards may not exist by 2025, 2030. So, we may be left with the one's that adopted this. David, last but not least.

[00:40:05.940] - Jon Slowe

How about your scores?

[00:40:10.200] - David Trevithick

My scores are similar actually I've put us right now at the start of the journey around just two out of 10, perhaps then moving forward to 2025. I thought we’d be at the halfway mark and then edging up to a six or seven in 2030 and seeing, AI making a big contribution to address climate change.

[00:40:31.350] - Jon Slowe

So, agreement between all three of you. But I think what's also very clear from the discussion is the direction in which the sector is moving. And my view is that things can be frustrating, particularly if you're in a business trying to develop these kinds of areas. So progress can be frustrating, but things can move very quickly. And I think this will become a necessity and something that is a core part of energy companies’ activities in the future.

[00:41:03.150] - Jon Slowe

So, Geraldine, Dave and David, thanks so much for sharing your views with us and getting under the skin of AI and how it's been used in the energy sector today. Listeners I hope you found that interesting and valuable and you enjoyed the episode and look forward to welcoming you back next week. Thanks very much and goodbye.

[00:41:37.830] - Jon Slowe

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

[00:41:54.300] - 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

Jon Slowe, Director at Delta-EE

Andreas Ballhausen, Managing Director at Viessmann Solutions and Services

Nicolai Kipp, Chief Consultant at Dansk Fjernvarme

Roxanne Pieterse, Heating Business Service Manager at Delta-EE

[00:00:04.560] - Jon Slowe

Welcome to Talk in New Energy about the new energy experts 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 today's episode, we're looking at heat at the service which is emerging across the European heating market, loyal listeners will know we've previously looked at this topic featuring guests ranging from large incumbents such as Engie to start-ups such as Thermondo and THE FCTR E.

[00:00:41.360] - Jon Slowe

And we're looking at it again today because in my view, this is a really important trend in the heating market, it's the macro trends, the trend from products to services that you can see in many industries and in Europe, it's now starting to pick up more and more momentum in the heating sector. It's a way to help open up the market for high efficiency, but higher cost heating appliances and more sophisticated controls. And it's starting to cause some disruption to the relatively conservative heating industry.

[00:01:13.370] - Jon Slowe

So today, I'm delighted that we're looking at it again, featuring some of the disruption from the leading edge in Denmark and Germany from the perspective of industry heavyweight Viessmann and the hugely successful Danish district industry now branching out into heat as a service with individual heat pumps. Of course, our usual Delta-EE expert to guide us through the topic. So, let’s say hello to our guests. First, Andreas Ballhausen, Managing Director of Viessmann Solutions and Services. Hello, Andreas.

[00:01:47.570] - Andreas Ballhausen

Hello, Jon.

[00:01:51.590] - Jon Slowe

Andreas, Viessmann is famous for being one of Europe's leading manufacturers of heating appliances. And the bulk of your business is doing exactly that, making appliances and selling appliances for installers. So, tell us a bit about the solutions and services business and what you're doing with heat as a service today.

[00:02:15.400] - Andreas Ballhausen

Yeah, thank you, Jon, I'm delighted to give you some background, so we see that heating as a service is one of the megatrends in the energy market. We see that in a lot of other business, that we see a conversion from selling product to selling services.

[00:02:36.040] - Andreas Ballhausen

So, we looked at Viessmann how to copy this for the heating market and introduced the product MVP status in 2018 and in 2019 the ramp-up by offering three main products. The first product is the Viessmann basic, which is just installing the device, financing the device and operating the device over a period of 10-15 years. The second product is the Viessmann flex, where we also deliver the energy and the third one it's the Viessmann green plus where we use natural gas, biogas, and also give the customer the opportunity to use smart heating devices like smart thermostats.

[00:03:31.570] - Jon Slowe

OK, so you've got a spectrum of offerings from the first one you described it sounds more like a lease or finance package through to something that's more of a complete heat as a service offering.

[00:03:45.090] - Andreas Ballhausen

Yeah, that's correct.

[00:03:45.940] - Andreas Ballhausen

So, the first one is not just leasing that's very important. It's the combination of leasing and servicing otherwise, we would have problems with the German regulation.

[00:03:56.320] - Andreas Ballhausen

Correct.

[00:03:56.590] - Andreas Ballhausen

And so, we use in these products or different technologies so customers can decide for gas boilers, for oil boilers and heat pumps as well.

[00:04:10.270] - Jon Slowe

And you said the ramp-up started in 2019 so last year, I imagine this is still a relatively small part of your business. Are you able to give us any sense of whether this is really taking off or you also deliberately go slowly to learn or roughly where you're at with heat as a service?

[00:04:33.640] - Andreas Ballhausen

Oh, we are very happy with the results, but for sure it takes time. What is/are time-consuming. So first we have to train all our distribution partners, which are many of the installers, and this needs time to get that recognition in the market. But nevertheless, we are very proud of the increase in sales we have. And I believe we are one of the best performing companies now already in Germany in this business area.

[00:05:14.200] - Jon Slowe

OK, and what if I'm a householder in Germany, do I buy a heat of a service contract from the installer? Do I buy it from Viessmann, or do I buy it via the installer from Viessmann?

[00:05:27.090] - Jon Slowe

How does it work from a customer's perspective?

[00:05:30.630] - Andreas Ballhausen

We do it in a multi-channel way.

[00:05:32.770] - Andreas Ballhausen

And so, on the one hand, for sure, we really support our traditional sales channel that the installer can offer purchasing the heating device as an alternative. They can also offer heating as a service. And in this case, the customer signs the contract between the end customer and Viessmann Solution Services. So the installer has the role as an agent. But in addition, we have also a lot of online activities which become more and more relevant. So, they take really relevant share of what we generate online leads and sell via our installers.

[00:06:23.760] - Jon Slowe

OK, are you doing this with what range of products? With traditional boilers, with heat pumps? How wide is the product portfolio in your heaters service as an activities?

[00:06:37.250] - Andreas Ballhausen

As mentioned, and so the customer can choose and I guess this is one of the key issues, you know, the right technologies depending on the building of the customer. And so, we mainly use gas boilers currently in heating as the service of a couple of oil boilers, but this is not really significant.

[00:07:03.460] - Andreas Ballhausen

And we see a growth in the heat pumps right now. We still have a restriction on the funding side here in Germany. That the end customer gets higher funding if we purchase boiler then signing a service contract. So that's the reason why heat pumps are not as successful as we would like to see.

[00:07:26.870] - Jon Slowe

OK, Andreas, thanks very much that gives us a really good introduction to what Viessmann is doing in this area. Let's move on to, we'll come back to you shortly but move on to our second guest, Nicolai Kipp, who is chief consultant at the Danish District Heating Association.

[00:07:44.630] - Jon Slowe

Hello, Nicolai.

[00:07:46.520] - Nicolai Kipp

Hello Jon.

[00:07:49.430] - Jon Slowe

Nicolai, Denmark's famous, as many listeners I'm sure know for district heating.

[00:07:57.050] - Jon Slowe

You're working for the District Heating Association, who is getting involved in heating homes on an individual basis with heat pumps. So, can you tell us a bit about why the District Heat Associations are getting involved with individual heating systems and how it's doing that?

[00:08:17.130] - Nicolai Kipp

Yeah, I think, first of all, as you mentioned, the district heating is covering the last part of the heating demand. In Denmark, it's more than 50 percent. I think close to 60 percent of the demand is covered by the district heating. And in my point of view, the district is really heat as a service. So heat as a service is not something that district heating can see themselves do. As you mentioned, the difference between the individual heating and the district heating.

[00:08:55.700] - Nicolai Kipp

And I think it's two main reasons why we're doing this now. One is, there's a big push from the Danish government to phase out all fossil fuels by 2030 in the heating sector and also with the large part of district heating here today, it's pretty clear there's a lot of areas where district heating won't come up.

[00:09:25.330] - Jon Slowe

Yeah.

[00:09:26.110] - Nicolai Kipp

End users out there typically have an oil boiler, gas boiler or wood pellets. And it's difficult to get them into the transition to heat pumps.

[00:09:39.660] - Nicolai Kipp

It has been for so many, many years and didn't work and a lot of different models have been tried out. And so, what we are offering now is it's just like they would be part of a district heating company. You've become part of a consumer-owned corporation where the corporation owns heat pump at your house and corporation make sure it's the right time for your house and the instalment is right any service and maintenance is taken care of for a fee you pay per year or every month.

[00:10:18.390] - Nicolai Kipp

And then when the time comes, the heat pumps will be taken out in a new model will be installed. So we're trying to give the same experience as if you were a district heating customer. You don't really have to worry about where your heating is coming from.

[00:10:38.050] - Jon Slowe

OK, so as a customer, if I'm on a heat pump, heat as a service contract, is my contract quite similar to the contract I'd have if I was connected to a district heating scheme?

[00:10:49.830] - Nicolai Kipp

Yeah, more or less, the district heating you pay per kilowatt-hour heat your using. That's a bit expensive to do individually with the heat pump. So, we're looking at different schemes to do this, but more or less you pay peruses of heat yeah.

[00:11:15.690] - Jon Slowe

OK.

[00:11:16.700] - Jon Slowe

And how mature or widespread is this? Is this something new? Is it growing? Has a model being proven and it's a matter of rolling out further?

[00:11:29.100] - Nicolai Kipp

It's in a district heating point of view. It's relatively new. It started up two years ago, but a small district heating company in Denmark started it up. And now we're working with them and taking the model on a national wide scale. And it hasn't started up yet. It will probably early next year. It's the model as it is now is available all over Denmark. But it's a small-scale model. It's run by a relatively small company and they don't have the resources really to handle a large demand of heat pumps.

[00:12:15.900] - Jon Slowe

OK, Nicolai, thanks for that introduction.

[00:12:18.690] - Jon Slowe

That is a really clear picture of what you're doing in Denmark.

[00:12:21.730] - Jon Slowe

And fascinating, I can understand the logic now as to how district heating companies are moving into this area. Our third guest today

[00:12:32.220] - Jon Slowe

Is our heat as a service expert at Delta-EE Rox Pieterse.

[00:12:38.160] - Jon Slowe

Hello, Rox.

[00:12:40.410] - Roxanne Pieterse

Hi Jon

[00:12:44.430] - Jon Slowe

Rox, heat as a service sounds simple, but as you unpack it, there's a whole load of complexity underneath and you've got a nice way of simplifying complexity. So, can you help us understand the different spectra for heat as a service in terms of the different risks that are involved in and who takes them?

[00:13:04.790] - Roxanne Pieterse

Yeah, so for us, heat as a service is about transferring risks from customers to service providers, there's the financial risk obviously of offering a leasing or rental of an appliance or providing a customer with credit.

[00:13:19.220] - Roxanne Pieterse

There's the technical risk of maintaining and repairing the appliance there's the performance risk, which then comes in if you're charging on the basis of heat produced or warmth provided. So you care how efficient the appliances operating and there's also the energy supply risk. So if you're covering the cost of energy you consume, then depending on how you pass that onto the customer. And then, of course, the behavioural risk which would come in if you're providing an outcome since that will be impacted by the timing of demand and behaviours like open windows.

[00:13:57.200] - Roxanne Pieterse

And then, of course, also regulatory risks, which is true for any business model.

[00:14:02.450] - Jon Slowe

So that's quite a lot of risk that a service provider could take. And I guess that's why we see a spectrum of heat as a service offering that take different amounts of risk.

[00:14:14.240] - Jon Slowe

Is anyone taking all of those risks that you've seen or is that heat as a service nirvana that we might hit at some point in the future?

[00:14:23.240] - Roxanne Pieterse

Only in trial stages currently are suppliers taking on all of those risks. In practice, the commercial office generally don't take on that behavioural risk because that's the one where you need to have a lot of data in order to price it correctly. But I think it's something that we'll see more and more in the future.

[00:14:45.570] - Jon Slowe

OK, and we've heard from Andreas and Nicolai about their activities and how I alluded to the heat as a service sector growing, gathering momentum across Europe.

[00:14:57.820] - Jon Slowe

How widespread is it? Are we at the very beginnings of this? Are we a year or two after the beginning of it? Can you give our listeners an idea of how widespread heat as a service is at the moment?

[00:15:10.710] - Roxanne Pieterse

And so, in terms of sales, the base is very low today, but yes, certainly a lot of momentum. We're seeing more and more providers offering contracting in Germany, where it's not that new finance and maintenance models are starting to take off in France for the last two years or so. And then in the Netherlands boiler rentals are actually already fairly common and that's getting extended to heat pumps now.

[00:15:36.180] - Roxanne Pieterse

And all of this is kind of paving the way for more advanced low carbon heating models like we've heard about from Eneco, in one of our podcast episodes last season.

[00:15:49.900] - Jon Slowe

OK, so numbers, still small, but number of companies active in this growing quite quickly.

[00:15:56.890] - Roxanne Pieterse

Yes, certainly.

[00:15:59.630] - Jon Slowe

 Andreas, Nicolai. I'd like to come back to you now, and you've both been working on this topic for some time. I'm really interested in what you've learned from your customers, because this is well, with individual heating appliances, a new offering for customers.

[00:16:17.720] - Jon Slowe

And what have you learned from your customers over the last year or two? And what's been really hard about developing this new business area. Andreas, maybe start with you and then go to Nicolai.

[00:16:30.980] - Andreas Ballhausen

Yeah, so for sure, the first touchpoint is in the {illegible} with our customers, and I guess in the spirit of the customer journey, the hardest thing is to explain that heating as a service is not financing a heating device.

[00:16:53.420] - Jon Slowe

And is that something customers automatically think? Have you found that that's what they jump to?

[00:16:59.960] - Andreas Ballhausen

So they go to the bank and say, OK, they are getting an interest rate of X, Y, and if I sign for the service contract, I have to pay double for the heating device. And then you have to explain. Yeah, it's included maintenance it includes repair chimneysweeper financing for sure. And you have to explain the cost elements. The customer understands this, but it takes time and this is something you don't want to have in your sales pitch.

[00:17:32.570] - Andreas Ballhausen

So this is, let's say, the biggest challenge we have actually in the acquisition process.

[00:17:40.210] - Jon Slowe

How do you deal with that, how can you deal with that or how can you overcome that?

[00:17:45.360] - Andreas Ballhausen

We are very transparent in our costings. So, we try to mirror the customer, his real expenses. He would have if you purchased a boiler. So, we try to explain the cost for maintenance, repair for the chimney sweeper and compare it with our offer.

[00:18:08.910] - Andreas Ballhausen

So, this is the way how we do it.

[00:18:11.430] - Andreas Ballhausen

In addition, we have also agents, customer agents who are able to explain the situation on the phone.

[00:18:22.990] - Jon Slowe

OK, and does that, how does that, it sounds like the sales. The lead time could be quite long for that. So is that difficult if someone's got a boiler that's failing or a heating system that's failing and needs to be replaced quickly? How does that or can you know, I don't really work with people who have got more time to think about it.

[00:18:46.790] - Andreas Ballhausen

No, no. That's not the way I guess it doesn't consume time, but it has an effect on the conversion rate for sure, because not every customer goes into the dialogue and wants an explanation on the cost. So we have also a lot of customers who really have cold unit at home and decide in one or two days. But to be honest, also the cycle time from lead to sales for heating as a service, in general, is shorter than our colleagues have in purchasing the boiler.

[00:19:27.460] - Jon Slowe

OK.

[00:19:28.150] - Jon Slowe

OK, Nicolai, how does that compare to your experience in terms of what you've learned about customers? Is it a bit easier in Denmark because there's more familiarity with district teaching, or do you have the same or different challenges to Andreas?

[00:19:43.260] - Nicolai Kipp

Yeah, I'm not sure if it's easier or not, but the challenges are very similar in getting customers to understand the basics of the business model and that there's a difference between the B2B segments and B2C segments where a business owner is probably more likely to understand this.

[00:20:08.040] - Nicolai Kipp

And if you can provide them with a cheaper heating, he's interested in the private customers. That's a different story. In general, I think heating is very low key interest point for anyone.

[00:20:34.290] - Nicolai Kipp

And so if you live in a house and your heating works well and I think it takes some very good arguments to get anything in that's to replace that heating. There's been a lot of analysis of this one from Denmark. There's a lot of gas customers in this analysis. And they were asked if you could to save this much money, would you change your gas boiler?

[00:21:10.950] - Nicolai Kipp

And if they could save roughly around nine hundred euros per year, one-third of the gas customers would change their installation.

[00:21:28.470] - Jon Slowe

That's quite a big saving to achieve, isn't it?

[00:21:29.640] - Nicolai Kipp

Yeah, that corresponds to the yearly savings if someone gives you a heat pump for free. So it's really hard to get the private customers interested in this. It helps a bit with the green transition and the CO2 reductions, but it's still a large area, especially the energy come with a new model they haven't really thought about.

[00:21:54.990] - Nicolai Kipp

So

[00:21:56.700] - Jon Slowe

So I guess, Nicolai, your trying to do two things at the same time, you're trying to get customers from gas boilers to heat pumps and onto a heater as a service contract. Andreas, you're changing one thing at a time with your where you're selling a new gas boiler, Andreas, do you think, from what you've learnt. How niche an offering is heat as a service, do you think? Because I talk to some people and they say, yes, the vast majority of people will want to own their heating appliance, they're not going to be interested in this.

[00:22:30.480] - Jon Slowe

And I talk to others who believe that over time, the subscription or service model will grow and grow and grow. How big do you see?

[00:22:37.930] - Jon Slowe

Do you think the addressable market is here for heat as a service?

[00:22:45.210] - Andreas Ballhausen

I would say today if you say the majority wants to purchase a boiler you are right. And the market share of heating a service currently is very low.

[00:22:57.030] - Andreas Ballhausen

So, but my experience based also on my former jobs, is that today I guess you have the potential to sell roughly at 10 percent of our customers heating contract.

[00:23:15.360] - Andreas Ballhausen

But at the same time, I'm very convinced that the market share will increase in the next years. So, there are some obvious drivers.

[00:23:29.250] - Andreas Ballhausen

On the one hand, the people learn on that heating as the service is an attractive product. They learnt it when they leased a car. So why shouldn't they learn it when they lease a heating device? So, and in the car business, there are roughly 30 to 40 percent of the cars purchased by a leasing agreement.

[00:23:52.680] - Andreas Ballhausen

So on the second point is that we go more and more for renewable systems and the initial cost, the investment costs are much higher for these systems. So, and so with a service contract, we can keep more or less the running costs for the customers. So, he can avoid the initial cost very easy.

[00:24:16.800] - Andreas Ballhausen

And, you know, some of our customers are still very careful with the new technologies.

[00:24:25.680]

{Cross talk}

[00:24:26.010] - Andreas Ballhausen

But, yeah, with the service contract, you give 10- or 15-year guarantee on the device.

[00:24:33.830] - Jon Slowe

Yeah, Rox.

[00:24:35.910] - Jon Slowe

How does that compare to the customer research that you've carried out on the appeals of heat as a service? Have you found that the interest, generic interest in heat as a service is niche, potentially significant parts of the market?

[00:24:53.370] - Roxanne Pieterse

I mean, we've done several focus groups and customer surveys on this, and concerns do, of course, come up about being tied to an expensive contract for a long time or not being able to control the heating or just being confused by the description because it's a new sort of concept.

[00:25:11.600] - Roxanne Pieterse

But if you can address those issues and also obviously help the customers to see the benefit, which is something that we tried to do in that last survey, then you find that actually, the majority of people do find this appealing. It's not just an issue. I think an online survey, we had about 60 percent of respondents saying that they found the concept of somebody else taking all these risks for them appealing.

[00:25:34.630] - Jon Slowe

OK, well, we'll come on to how big it might get when I get the crystal ball out at the end of the podcast.

[00:25:41.270] - Jon Slowe

I'd like to turn your attention to risks back to Rox your framework of financial, technical, performance risk, energy price risk and even behaviour risk.

[00:25:51.830] - Jon Slowe

So Andreas and Nicolai, how hard is it for you to take on these risks? And how do you make the business model work for your companies, for the service provider when you're taking on these risks? How challenging is that? Andreas maybe start with you and then go to Nicolai.

[00:26:13.700] - Andreas Ballhausen

Yeah, so if you divide into technical and financial risk, I think the technical hurdles are not too high. You know, we are a manufacturer, we have a service team in our company, and we kind of have a lot of experience about potential repairs and so on.

[00:26:33.340] - Andreas Ballhausen

So, I guess here we can make a tick in the box. This is really not too difficult to handle. So then we have the financial risk and these are more or less, from my point of view, related to potential insolvency of our customers so that they are not able to pay this for sure we have to reflect.

[00:27:03.130] - Andreas Ballhausen

But on the other side, the heating has a very strong relation to the building. And even if the house owner is not able to pay, you have access to the building. And in most of those cases, the ownership of the building will change, and you have the opportunity to find your next customer there. So, the situation that you have to write off an appliance is really very unlikely.

[00:27:37.840] - Andreas Ballhausen

And so, you have to calculate this kind of risk in your product calculation.

[00:27:44.470] - Jon Slowe

OK, and have you had situations where the customer isn't able to pay? Are you learning about how big that risk is still through as your portfolio grows?

[00:27:54.640] - Andreas Ballhausen

No, we didn't have that situation so far, but to be honest for sure, with Corona, everything is a bit more complex.

[00:28:05.680] - Andreas Ballhausen

Yes, but I can tell you, no unit is at risk so far.

[00:28:12.610] - Jon Slowe

OK, and what about the hardware performance risk, even energy price risk? Do you think there are limits to how much risk you can take? Are you learning where to draw that line or do you think you'll be able to overtime take on more and more risk from the customer?

[00:28:31.450] - Andreas Ballhausen

Yeah.

[00:28:31.780] - Andreas Ballhausen

So to be honest, at the moment we meter the energy at the gas meter. So, the efficiency performance risk is, to be honest, at the customer. We don't like it, but we ask our customer, what do you prefer to have an installation of a heat meter for decent cost instead of having the efficiency risk? And they really said, no, please avoid this heat meter, because, on the one hand, these additional costs and on the other hand the quality of the heat meters are not the same as the gas meter.

[00:29:15.250] - Andreas Ballhausen

And our surveys say that our customers prefer this. I guess this topic becomes more relevant for heat pumps.

[00:29:25.310] - Jon Slowe

Yes, I guess so. So on that Nicolai, how do you manage that? Or which risks do you take particularly, I guess, around the performance risk? Are you taking that risk around the heat pump or are you is the customer taking that risk?

[00:29:43.270] - Nicolai Kipp

Yeah, I totally agree that the performance risk is the highest risk when it comes to heat pumps. And I've been working on this for quite some years now. And I started off in a start-up where we took the performance risk. And it's not really a problem doing that. But you have to be slightly conservative in your calculations. So it probably ends up with customers paying too high a price for the heating because the company takes the risk and depending on the building, the performance can be 20, 30 percent different.

[00:30:35.590] - Nicolai Kipp

So, in my experience, the performance risk, if you put that on the company and you end up charging too much for the heat for quite a large part of your customer. So, in what we're doing, now from district heating we, the actual performance of the heat pump, is the risk of that is being put on the end customer. And what we offer is, we give them a heat pump that is installed correctly. So, they get the performance of the heat pump, that they should in the house.

[00:31:14.090] - Jon Slowe

OK.

[00:31:15.080] - Jon Slowe

And how do you see that evolving? Because with more connectivity, with more sensors, you can learn more about the building physics of the houses that you're heating at relatively low cost. Can you see that in time you might be more comfortable taking that performance risk? Or do you think that's always going to be hard? Because there are things that you can't control and therefore things that you need to price in to take that risk?

[00:31:43.400] - Nicolai Kipp

Yeah, yes and no. I think it would be easier in time to take the risk, but I still think it will be too expensive for a large part of the end-users. If you have several thousand customers, you can't really operate with several thousand different prices. So, you have to sort of have some similarities there. Also, I think it depends very much on the price of electricity and in Denmark, we've seen that more or less all the taxes on electricity use for heating is gone from next year.

[00:32:22.870] - Nicolai Kipp

So, the price of electricity that you use for the heat pump is relatively low.

[00:32:29.030] - Jon Slowe

OK, so that might make it easier to take the risk.

[00:32:31.860] - Nicolai Kipp

Yeah, yeah, yeah. So, it doesn't have the same impact. If your performance drops by 10 percent to 15 percent, it's, yeah.

 

[00:32:43.840] - Jon Slowe

 Andreas,

[00:32:44.470] - Jon Slowe

Just briefly from you, what's your view about the future? Do you can you see that the performance risk is a risk that customers might want you to take in the future? Or do you think you'll keep it roughly where it is today?

[00:32:57.190] - Andreas Ballhausen

 I believe for heat pumps they want to get rid of the risk and I believe in future we can offer our products with this feature because step by step, you got all the data from the heat pump.

[00:33:20.330] - Andreas Ballhausen

So the question is, how do you create your pricing? On the one hand, you have the electricity cost, which makes it price sensitive, but they can use pricing formulas, and this is fully accepted by the customer. The second point is the temperature of the heating system there you've got measurers from the heat pump device and I guess you have to reflect this temperature of, let's say, the situation of the secondary heating system in Germany in your pricing, and then it will work.

[00:34:03.330] - Andreas Ballhausen

But we are not there at the moment.

[00:34:05.360] - Andreas Ballhausen

Yeah,

[00:34:06.150] - Jon Slowe

Well, I think it's a fascinating area.

[00:34:07.940] - Jon Slowe

As electrification of heat grows and as heat as a service grows, I think there'll be lots of exciting propositions around this and the performance risk in the future. And now it's time to bring out the Talking New Energy crystal ball. This week, I'm setting the dial to 2030, so 10 years ahead.

[00:34:29.690] - Jon Slowe

And let's see whether this could be the decade for heat as a service. So, I'll ask each of you how widespread you think heat as a service will be by 2030. I'll leave it up to you.

[00:34:43.250] - Jon Slowe

How you express that, whether it's a percentage, a number or just a description of how widespread that's going to be.

[00:34:50.540] - Jon Slowe

And very briefly, because we're running out of time, the biggest challenge to getting to this point by 2030.

[00:35:01.160] - Nicolai Kipp

Nicolai let's start with you. How widespread will heat of the service be in 2030?

[00:35:09.230] - Nicolai Kipp

In a Danish perspective, I think it will be very widespread, as I mentioned, district heating is per say heat as a service, also I think a big push for this will be the green transition. And I'll put it this way. If we successfully replace the oil boilers and some of the gas boilers and wood pellets with heat pumps, I believe a large part of those instalments will be heat as a service. The biggest challenge is, I think, keeping the security for the end customers.

[00:35:47.990] - Nicolai Kipp

They know what they have today. And so far, it's mainly been in start-ups introducing a new business model, and that creates some uncertainty for the end customer. There's a few thousand heat as a service instalment today in Denmark, and most of them are made by a Danish oil company, which is {illegible}. And they have the security problems. It's a well-known brand in Denmark so it gives you some security. And I think you need to probably get some of the maybe the electricity companies, the producers, get them more involved as well.

[00:36:25.730] - Nicolai Kipp

To create that sense of security.

[00:36:29.410] - Jon Slowe

OK, thanks Nicolai and let's hope that it gets their interest, Andreas, from your perspective.

[00:36:39.000] - Andreas Ballhausen

Yeah, first the question is in which market, Germany, Denmark, Italy?

[00:36:46.040] - Jon Slowe

Pick Germany to keep it simple.

[00:36:48.200] - Andreas Ballhausen

Yeah, so my comparison is in 2030, the model is well known, and we will reach comparable market share to car leasing.

[00:36:58.850] - Andreas Ballhausen

So I'm quite sure because we see that also in other areas like PV, renting subscription models, we are getting closer and closer to that level. So why not with the heating device?

[00:37:15.980] - Andreas Ballhausen

For us, the biggest challenge to come to that level is today the funding regime, so in the heating as a service situation, we need at least the same funding from the state as the private customer gets if you purchase the unit. This is not the case at the moment. And but we hope that the situation will change and then we can put our focus on the renewable market, which is the future, especially in 2030.

[00:37:49.310] - Jon Slowe

Well, good luck with your lobbying activities Andreas to get those regulations changed. Last but not least, Rox, how about yourself? And you've maybe got a harder job because you're looking Europe wide, but how would you answer the question?

[00:38:03.980] - Roxanne Pieterse

So, I think realistically, by 2030, more sort of widely across Europe, we could probably see around 15 percent of heating systems sold in service contracts, obviously a lot more in some countries and perhaps fitness and others. And in terms of challenges, I think there's probably enough customer demand and certainly enough drive from the industry. But for me, the biggest barrier will be regulations and whether or not those regulations allow suppliers to bundle all of these products and services together and at a sort of reasonable cost for both the suppliers and the customers.

[00:38:43.610] - Jon Slowe

So more lobbying to be done as well in other countries.

[00:38:47.800] - Roxanne Pieterse

 Yep.

[00:38:50.270] - Nicolai Kipp

Well, if I could just add to that in a European perspective, I did a study a couple of years ago looking at prices in different countries in Europe and all of Europe in my little study, they showed that the price of heating is cheaper with the fossil fuels, oil and gas than heat pumps the only place where heat pumps, comes out better is in fact in Denmark so and that's due to the low prices of fossil fuels and relatively low taxes on fossil fuels and then also a high tax on your electricity in most of Europe.

[00:39:31.280] - Nicolai Kipp

And in Denmark, we have a real low and next year, no tax really on electricity for the heat pumps. And I think that has to change because if you look at it from a  company's perspective if you need to invest in fossil fuel, the heating source, you would need some security for that. And everyone is expecting this to change within the next 10 years to a greener transition. So, I think the framework needs to support that.

[00:40:00.540] - Nicolai Kipp

The renewable options are the cheapest. Before the heat as a service will really kick off in Europe.

[00:40:07.100] - Jon Slowe

Well, I think there's a lot of people very jealous of the changes that you're making in Denmark on electricity taxes for heating Nicolai! We better finish there time for the better of us.

[00:40:18.110] - Jon Slowe

It's been a fascinating discussion for a really important topic. I think so thanks very much to my guests. Thanks. Andreas, Nicolai and Rox and thank you for listening and look forward to welcoming you back next week. Thanks, and goodbye.

[00:40:48.460] - Jon Slowe

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

[00:41:04.900] - 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

Jon Slowe, Director, Delta-EE

Alex Cirlan, Founder of E.ON Home, and Director of Product Development and Software at E.ON Group

Neal Coady, Director of Product, HEM, at Centrica

Alix Weil, Analyst, Delta-EE

[00:00:16.670] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition. Hello and welcome to the podcast, we're looking again today at the topic of home energy management and today looking at it from the perspective of two large European energy retailers, Centrica and E.ON in the next weeks we'll also be looking at the topic from a few different angles.

[00:00:41.090] - Jon Slowe

Why so much attention on home energy management or HEM? Well, I think most of you listening will agree that in the long term, we'll have an energy system with many millions of assets across people's homes compared to today's system, which is optimized top-down the future energy system will be increasingly optimized bottom-up and managing energy flows in the home will be a big part of that. I think predicting the long term with HEM is relatively easy but predicting the growth of home energy management in the next years and in the medium term is much harder.

[00:01:17.720] - Jon Slowe

And as I often say on these podcasts, the energy geeks amongst us need to keep an eagle eye on the customer. What propositions, services and offerings around home energy management will appeal to them? Well, to explore all this, I'm joined by three guests, two from Centrica and E.ON and our own in-house expert here at Delta-EE. Let's Say Hello. First, Alex Cirlan, Founder of E.ON Home and Director of Product Development and Software at E.ON Group. Hello, Alex.

[00:01:50.470] - Alex Cirlan

 Hi Jon

[00:01:52.030] - Jon Slowe

Alex, tell us a bit about your work with Home Energy Management at E.ON, what is it you're doing or involved in? And can you summarize some of E.ON's current HEM activities for us?

[00:02:04.810] - Alex Cirlan

Yeah. So maybe I would start by saying that a few years ago E.ON decided to enter residential solutions space, particularly solar heating and eMobility. Currently, we are selling the solutions in 11 countries and E.ON home energy management platform is just one year old because that's something we added later. And we already connect thousands of customers homes in four countries, six by the end of this year. And we plan to add another four by the end of next year.

[00:02:38.000] - Jon Slowe

And to make that tangible for our listeners, what does this platform do? So if you're in one of those four countries, what as a homeowner householder might be able to do or what can E.ON do for me?

[00:02:52.070] - Alex Cirlan

Yeah, so we interconnect the product categories I mentioned. So solar and batteries, heating or cooling devices, any more eMobility to create the energy network in the house and to better optimize the energy flows like enhancing and optimizing the consumption and saving money or reducing the environmental impact.

[00:03:16.810] - Jon Slowe

OK, thanks, Alex. We'll come back to you shortly and learn more about the activities you've talked about. Next, let's say hello to Neal Coady, Director of Product of Home Energy Management at Centrica. Hello, Neal.

[00:03:33.350] - Neal Coady

Hello Jon,

[00:03:35.360] - Jon Slowe

Neal, can you tell us a bit about where Home Energy Management sits at Centrica, many of our listeners will know about Centrica's Hive connected home business, does home energy management sit there or is it something different?

[00:03:49.750] - Neal Coady

Well, obviously, this is a debate we've been having within Centrica. And so, we decided to bring effectively it all together into one place. So, Hive, British Gas and also our optimization arm in Centrica Business Services. So, it's all coming together for home energy management and EV we see EV very closely related to home energy management from a product perspective as well as a technical one. So, we're in the process of reorganizing right now to bring them under one umbrella.

[00:04:30.070] - Jon Slowe

OK, and in terms of what you're doing with home energy management, are you able to share some highlights of your home activity?

[00:04:39.500] - Neal Coady

Yes, so I think were we've been focused, I guess, more slightly on the separate parts, so one of the things that we've been doing is some grid optimization a trial in Cornwall, where we're using residential batteries to in the national grid frequency response market. So, helping there and then more the customer sort of level, commercial level, we're selling smart water heaters from a company called Mixergy.

[00:05:15.680] - Neal Coady

Again, the water heater plays in the grid response markets. So that's not only saving customers money on their water eating, but they're actually helping the grid. And we're also starting a hybrid heat pump trial very shortly, as well as doing a lot of work, bringing together electric vehicles and the high ecosystem that we already have around device management in the home.

[00:05:52.290] - Jon Slowe

OK, it's interesting to hear, Alex, you mentioned solar storage and maximizing self-consumption. And Neal, you talked a bit there about services for National Grid, the TSO. So in a way, two sides to HEM optimizing it at there for the benefit of the householder, but also optimizing things for the benefit of the wider electricity system.

[00:06:20.120] - Jon Slowe

We'll unpack that a bit further.

[00:06:22.060] - Jon Slowe

But let's go no further without introducing my final guest, my Delta-EE colleague and HEM expert, Alix Weil.

[00:06:29.610] - Jon Slowe

Hello, Alix.

[00:06:31.170] - Alix Weil

Hi, Jon.

[00:06:33.930] - Jon Slowe

So, Alix, I'll ask you a couple of questions shortly. But first of all, a question for all three of you. And it sounds like a very simple question. I'd like each of you to give me a one-sentence description or definition of home energy management. Sounds simple, but I know it's far from simple.

[00:06:52.590] - Jon Slowe

So, I'm looking forward to seeing what each of you says. Alex, would you like to go first from your perspective?

[00:07:02.310] - Alex Cirlan

Yeah, in one sentence, I would say that we empower the customer to be in control of the clean energy they produce, how they use it and how they reduce the and environmental impact.

[00:07:16.610] - Jon Slowe

OK, thank you.

[00:07:18.440] - Jon Slowe

Neal, how about you?

[00:07:22.180] - Neal Coady

 For me, it's making all your home heating, cooling and electric mobility investments work together flexibly to increase comfort, reduce carbon footprint and cost.

[00:07:36.600] - Jon Slowe

Right now, you're both managing to lever in a number of aspects there into your one sentence.

[00:07:42.430] - Jon Slowe

And Alix, how about yourself?

[00:07:45.640] - Alix Weil

Well, my sentence is probably a little bit shorter, and it's the definition that we use at Delta. So far as home energy management is the dynamic and intelligent management of energy flows within the home.

[00:08:01.490] - Jon Slowe

OK, so. That's interesting to hear, Alex and Neal, we both talked about, Neal, you mentioned specifically assets like heating, cooling EV, you didn't mention batteries or solar, Neal, is that I guess not a deliberate omission, but just reflecting the emphasis of the U.K. market or your current activities or focus.

[00:08:23.410] - Jon Slowe

It's the current emphasis rather than any deliberate omission, and it's also to make the sentence shorter.

[00:08:34.930] - Jon Slowe

OK, Alex, you mentioned clean energy produced. So that's, I guess, implies solar, but Neal highlighted electric vehicles and mobility. Is that an area you're looking at or focusing on at the moment?

[00:08:52.800] - Alex Cirlan

Yes, of course.

[00:08:53.590] - Alex Cirlan

And one of our goals in-home energy management is to connect the two, the energy source from your solar roof, which consuming the energy to charge your car and optimizing this is part of the enabling higher self-consumption from the customer or the where the energy is produced, rather than buying from the grid or putting additional pressure to the networks.

[00:09:22.120] - Jon Slowe

Yeah. OK, so this I guess what you've both highlighted there is the growth in things like hybrid heat pumps Neal which have electric heating as part of them, solar and storage, cooling, electric cooling, electric vehicle charging. And in some countries, there are not so many of these assets in place today they're growing that from a small base. Alix, can you help us understand how many European households already have these large electric loads or potentially PV systems that could in principle be optimized by a home energy management system?

[00:10:05.830] - Jon Slowe

Are we talking small numbers? Are there already big numbers of assets in homes across Europe?

[00:10:12.400] - Alix Weil

Well, I would say pretty big numbers. So first off, Europe has a very high penetration of electric base heating or cooling for space and hot water purposes. So, I'm talking about heat pumps, air conditioning and things like that.

[00:10:30.160] - Alix Weil

But also the PV, EV and battery markets are growing and will grow even more push by government incentives just to put this as a number, we estimated last year that nearly 30 million homes have at least one large electrical load to optimize.

[00:10:52.890] - Jon Slowe

OK, so that's quite a big market to go for already, but I guess it gets really interesting when you have more than one or one big load plus PV. So that's only going to grow as PV and storage and electric vehicles grow.

[00:11:10.860] - Jon Slowe

And how new a market is this Alix? When you look across Europe, are there just a handful of companies like E.ON and Centrica optimising assets or many more than that?

[00:11:25.650] - Alix Weil

Well, it's a very interesting question that I have received from several subscribers. And we have recently tried to list all the companies active in the HEM space. And while I would say it's a pretty recent activity, we ended up with more than 50 companies active.

[00:11:44.030] - Jon Slowe

Wow.

[00:11:45.110] - Alix Weil

Yeah.

[00:11:48.140] - Jon Slowe

And those companies, I guess, we've two of them on the podcast today, E.ON and Centrica, but are they mainly energy retailers or is it really what mix?

[00:11:58.290] - Alix Weil

Well, many of them are services or commodity suppliers because I think they're trying to leverage their existing customer base. But I guess our guests can tell us more about that. But we also see electrical OEMs and control manufacturers becoming very active in the space and also an increasing number of asset manufacturers, especially HVAC and charge point manufacturers, are starting to develop their own solutions. So, I would say it's an interesting mix.

[00:12:31.620] - Jon Slowe

OK, Alex and Neal, I'd like to bring in your perspective at this point.

[00:12:37.280] - Jon Slowe

So, Alix mentioned there the range of companies active from an energy retailer or energy service provider or solutions provider point of view.

[00:12:48.980] - Jon Slowe

How do you see your position in the HEM market or how are you approaching the HEM market compared to maybe product manufacturers or control companies who approach it from a different point of view?

[00:13:01.790] - Alex Cirlan

Yep, so if I may start, E.ON connect 50 million houses across Europe. But for the moment, just a fraction of the seats connected with the smart meter and the smart meter, even if it doesn't look like it's an important piece of energy management. Because if we would add this just to be part of our energy management system will increase the price and will reduce the benefits of optimizing the energy so that the rapid growth of smart meter implementation and rollout in all the countries is crucial.

[00:13:41.650] - Alex Cirlan

And it enables not only energy management and local optimization between devices like solar charging, solar cooling or aligning, I don't know, water tanks to be warm to during day from solar power, but also smart tariffs with dynamic tariffs, which will enable having energy or green energy during night or cheaper prices to charge your car because, in the end, it's less important to charge the car when you arrive home at 6:00 and rather to have it ready in the morning when you go back to work.

[00:14:23.110] - Alex Cirlan

If Corona will allow us and I think this is a very important part, and aligning smart metering with tariffs, with energy tariffs and most of them dynamic with the devices we sell, install and optimizing the houses all these orchestrations should work in.

[00:14:50.500] - Alex Cirlan

An orchestrated way.

[00:14:51.090] - Jon Slowe

Does that help to put an energy retailer like E.ON in a strong position to do this, Alex?

[00:15:00.150] - Jon Slowe

Because

[00:15:01.180] - Alex Cirlan

 This is what we believe.

[00:15:02.510] - Jon Slowe

Yeah, yeah.

[00:15:03.010] - Alex Cirlan

That's why we invest significantly in growing the platform. And you would see later on, probably in the discussion what we did.

[00:15:15.310] - Jon Slowe

Yeah. OK, Neal what's your view on that from because I guess Centrica has developed a smart home business, so you've got a slightly different angle potentially on this. How do you see Centrica's position compared to the range of other companies that are increasingly active in this area?

[00:15:35.370] - Neal Coady

Well, I think it's really, Centrica sort of a leading position in the U.K., for smart metering and I'd echo Alex's points around smart metering, it's a foundation technology that you need to get the economic and technical sort of underpinnings of all of this in terms of a retailer.

[00:15:56.610] - Neal Coady

It's important to have the energy retail that gives you the access to customers, but it's also important to have some kind of service or maintenance capability as well. That's really important if you're installing things in people's homes as well as some kind of grid optimization piece as well to help some of the economics, the longer run economics as well.

[00:16:23.290] - Neal Coady

So, for Centrica is really about bringing all of those different pieces together into one sort of easy to understand, easy to use product for the customer.

[00:16:35.910] - Jon Slowe

OK, so there's three things I think you mentioned there being an energy retailer, having that service capability and then being able to leverage some of the grid infrastructure benefits. And which of those I mean, you are a retailer. The other two service isn't that new to Centrica. You're already in people's homes.

[00:17:02.530] - Jon Slowe

I guess, infrastructure you're active a bit.

[00:17:06.100] - Jon Slowe

So, do you feel particularly well-positioned or where do you think the challenges for Centrica around those three or other elements of what you need?

[00:17:15.620] - Neal Coady

I think it's around sort of joining it up and so we have three thousand electrical engineers, for example, in the UK who can go into homes and do electrical work. And so, if we were to say, well, let's scale up heat pumps, for example, in the UK, then there'd be some training for them.

[00:17:36.840] - Neal Coady

But it's within their kind of wheelhouse.

[00:17:41.550] - Neal Coady

We've also got six million devices in homes as well through Hive as we know how actually, one thing that often gets overlooked in the home energy management domain is it's actually quite difficult to have devices in people's homes and have them remain connected 24/7, 365. It's quite difficult technical environment to play in, and that's something that's often overlooked. So, it's really about bringing all of that together into a coherent product and a robust offering for customers.

[00:18:25.760] - Jon Slowe

Alex, what's your take on that in terms of those three legs of the stool of energy, retail service provision and grid infrastructure or the balancing on ancillary services? Is that how you see it or do you have a different take on it?

[00:18:43.380] - Alex Cirlan

I cannot agree more with Neal.

[00:18:47.650] - Jon Slowe

Ah, that's really disappointing

[00:18:47.940] - Jon Slowe

I was looking for a bit of debate, a disagreement.

[00:18:50.910] - Alex Cirlan

 Maybe. Maybe the fight will come later. I don't know. Now, I need to fully agree that it's very hard to maintain hundreds of thousands of millions of devices working properly, always connected, transmitting data in real-time. What I would like to say is that people perception, customer perception was changed 15, 20 years ago when mobile phones started to be connected and to offer us real-time connectivity to everything.

[00:19:24.270] - Alex Cirlan

And now the expectation of our customers is that the same is applied to their gas boiler or heat pump or air conditioning or car charger or solar panels, or battery they want everything to be now ready even if they don't use it. They want to know that it's ready for them to use or to access or to transparently see what's happening in the house.

[00:19:48.000] - Jon Slowe

Do they want it to work together? Do you think, Alex?

[00:19:50.460] - Jon Slowe

So because,

[00:19:51.360] - Alex Cirlan

 Yes

[00:19:51.540] - Jon Slowe

I will come to my home in the future, I've got a hybrid heat pump.

[00:19:55.260] - Jon Slowe

I've got PV and I'm hopefully this year getting an electric car.

[00:19:59.670] - Jon Slowe

I could get you know, they could be connected separately and I could receive separate services around that connectivity, but I guess you would argue there are benefits to optimizing the three of them together?

[00:20:13.070] - Alex Cirlan

Yeah, certainly. Certainly, this is the situation. Most of the devices are getting better individually, are getting better are optimized the gas boiler, got condensation or some other nicer, I don't know, even sensors on the outside to manage the load curve based on the temperature. But the beauty comes when we interconnect elements and you start using.

[00:20:42.050] - Alex Cirlan

In orchestration and alignment between when the car charging versus when the heating is used and when the availability of power or cheaper power from the grid is coming or it's forecasted to be generated from your roof, so you get to the next level of energy optimization only by connecting multiple devices.

[00:21:06.520] - Jon Slowe

Yeah. OK.

[00:21:11.500] - Jon Slowe

So, if we can't get some disagreement, maybe let's get some excitement. My next question is about excitement. I'd like all three of you to share a bit about what propositions you're excited about or. Yeah, what propositions probably from Alex and Neal, your point of view that you have in the market that you're developing, maybe expanding on what you mentioned earlier and Alex, from looking across Europe, which HEM propositions you're most excited about.

[00:21:45.020] - Jon Slowe

Alex let's start with you from looking across Europe and then go to Neal and then Alix.

[00:21:50.940] - Alex Cirlan

Yeah, so maybe the most exciting is solar storage, which is also enabled by us in a virtual way. So virtual solar cloud as we call the product, which allows the customer to store the excess energy in a virtual battery and they can use it any time later. Of course, there are variations of this product enabling multiple customers to do this and I hope in the near future to launch it as well.

[00:22:24.170] - Alex Cirlan

But probably the rapid growth is coming from electric mobility, and this is accelerating, even more, I think, this year, and we see everywhere the growth in number of electric cars sold and all of them needs to be charged somewhere.

[00:22:41.370] - Alex Cirlan

Most of the time daily. And that's why having propositions which are allowing customers to charge at home and on the go, it's something which we are proud to have enabled across Europe. And we even have we call it electric highway from north to southern and Europe covering thousands of charging points.

[00:23:03.450] - Jon Slowe

And I guess that could be integrated with your solar and storage offerings. So, I could park my excess solar on the grid and use it to charge my car later as well.

[00:23:11.550] - Alex Cirlan

Yes, some propositions are available now. Some are on in our sandbox testing and it will be launched soon. But yeah, pretty much that's the direction.

[00:23:21.930] - Jon Slowe

OK, Neal, what are you excited about?

[00:23:26.820] - Neal Coady

Well, yet, again, I'm going to agree with Alex around the EV side of it. So we’re pushing very hard on the electric mobility side. And we have relationships with many large car manufacturers. And I guess what excites me is that there's various different. Kinds of opposition that are related to each car manufacturer, of course, but it's just building the infrastructure into the lease of the car building that in and what we're finding as well, which we can't, you know, I suppose everybody knew but is if you get electric car it's like a gateway to getting a load of this other like solar or battery perhaps, or maybe a heat pump, that people then start becoming a lot more interested in their energy use.

[00:24:30.730] - Jon Slowe

OK, do you see that already in terms of sales or in interest or seeing the first little shoots in that interest?

[00:24:37.870] - Neal Coady

I think definitely in interest and it makes sense. It might be because the currents, the people that are leasing and buying EVs right now, are sort of they are the early adopters. But we would expect that to move into too fast followers fairly, fairly quickly as EVs come down in cost.

[00:25:03.790] - Jon Slowe

Yeah, Alix, what about you? What are you excited about? What catches your eye when you're looking across Europe?

[00:25:14.350] - Alix Weil

And I think any proposition bringing not only value to the end customer, but also to the grids is really interesting to me. I think you mentioned that today's energy system is optimized top-down, but in the future will be more bottom-up and we've seen that Europe is really on the track of electrifying transport, heating big incentives are our produced these days. So, I feel like having some kind of proposition able to cope with this increasing amount of appliances.

[00:25:52.580] - Alix Weil

And I agree when our guests say that EV is probably going to be a big thing, but also heating, electric, heating, anything that can help support the grid while providing comfort to the customer is really the thing to keep an eye on.

[00:26:09.260] - Jon Slowe

And I guess if you could package all that up in one simple proposition, it might be a tariff, it might be a fix bill, then it really simplifies it for the customer, potentially makes it much more easy for them to understand and access.

[00:26:25.400] - Alix Weil

Yeah, absolutely.

[00:26:26.180] - Alix Weil

You always have to keep the customer journey in mind. They probably don't want to know exactly how their heat pump can provide flexibility to the grid, but you can still bring them value and make them happy with a package bringing value to the grid.

[00:26:46.340] - Jon Slowe

OK, well, we've got excited by these propositions, by the way, the market's going particularly around electric vehicles. I'd like to quickly talk about challenges before we get the crystal ball out. So, Neal and Alex, I'd like you to think about challenges.

[00:27:05.010] - Jon Slowe

Maybe it'll be interesting to hear any of that specifically apply to a mass-market energy retailer. And Alix, one or two generic challenges for the sector. Alex, let's start with you from E.ON's perspective, what's your number one or number one or number two challenges in this area?

[00:27:27.240] - Alex Cirlan

Yeah, I think one big challenge is the fragmentation of technology and lack of standardization, which put a lot of pressure on our side to when we interconnect different devices from different brands through to standardize and align all this it's taking a lot of effort. That's one. And maybe I would also call here the regulation, which is still not align at European level, sometimes is uncertain and with sudden changes, which is not really enabling medium long term thinking or stability in the business cases because everything requires huge investments on our side.

[00:28:15.810] - Jon Slowe

And I imagine those challenges won't go away quickly. We're not going to see rapid progress in standardization. And I can also imagine we'll see uncertain regulation because it's hard for regulators to get their heads around.

[00:28:31.620] - Alex Cirlan

Yeah,

[00:28:33.630] - Jon Slowe

Neal, how about you? Biggest challenge or top two challenges?

[00:28:38.980] - Neal Coady

 Well, regulators like to see evidence, don't they, which is fair, and so I think some things will be solved over time as long as we give the regulators the right evidence.

[00:28:55.540] - Neal Coady

So one example, I think, is we're running a hybrid heat pump trial to provide evidence to the UK government that we can run them in a way that doesn't emit as much carbon as they think they do. So that's an example of having a regulatory problem and then and then trying to solve it other kind of more, I suppose, policy or economic drivers out there. Is the fundamentals around the difference in price between gas and electricity?

[00:29:38.320] - Neal Coady

Certainly in the UK, so in the Netherlands, for example, it's gas is about half the price of electricity, whereas in the UK it's a quarter that just makes heat pumps very difficult to go up against gas citizen fundamentals there. And I think the technical barriers, some of those will be overcome with time. So, as we've seen with the national grid there, they need very expensive equipment to go onto the batteries, to go into there, to go into the national grid pools.

[00:30:17.740] - Neal Coady

But over time, they'll trust that the individual batteries are okay. They're going to work when they're called upon and they won't need expensive equipment. So, I think some of the technical barriers will be solved with time.

[00:30:31.900] - Jon Slowe

So, I guess the emphasis of what you've been saying Neal is that this is new. Some people will see uncertainty in it, but over time that uncertainty, people will get comforted they'll understand it more and that uncertainty will decrease.

[00:30:46.930] - Jon Slowe

Exactly.

[00:30:48.900] - Jon Slowe

Alix, from your perspective, the companies that you're talking with, what challenge would you draw out?

[00:30:57.480] - Alix Weil

Well, probably the one that was mentioned by Alex around standards. There is a real lack of standards in the energy industry in general, not just in-home energy management. And it makes things really difficult when companies want to put together a HEM solution, integrating different assets, different appliances from different manufacturers, because those assets are usually not interoperable. So far as that's the largest barrier, the industry needs some kind of standards.

[00:31:33.000]

{Cross talk}

[00:31:33.090] - Neal Coady

If I could come in there on that one, so in the UK, there's a casually titled Pass 1878 Standard, and I sit on that group, which is an attempt to standardize the exposure of flexibility of energy via devices in the home.

[00:31:54.480] - Neal Coady

So, it's not finished yet. It's too early to say whether it be successful, but it's sponsored by the UK government and I think it's a good attempt to address some of these problems. And it should enable you to change your flexibility provider as well. Once you've got all this equipment, you can go to different people to effectively kind of run it for you.

[00:32:21.100] - Jon Slowe

OK, so try to make it plug and play, I guess, Neal.

[00:32:24.820] - Jon Slowe

Yes. Now, whether it gets that far. But I suspect this is a step in the right direction.

[00:32:31.200] - Jon Slowe

Well, we're planning an episode soon on this whole topic because I think it's if we start to unpack, it will be here for another half hour.

[00:32:42.780] - Jon Slowe

So now let's bring out the Talking New Energy crystal ball and set the dial to 2025. And I'm going to use my house as an example. So even in a cold, cloudy, rainy Glasgow where I live, I've got PV panels on my roof. I've recently installed a hybrid electric heat pump gas boiler system. And I'm planning to buy or subscribe to an electric vehicle this year.

[00:33:14.190] - Jon Slowe

No plans for a battery yet, but let's see. So, in 2025, what sort of proposition will I be able to sign up to from a large energy retailer? So let's see what E.ON and Centrica could offer me and Alix, what you think I'll be able to buy on the market or get from the get on the market from energy retailers and try and make it your description as customer-centric, I guess, around the proposition, as you can.

[00:33:45.900] - Jon Slowe

Alex let's start with you. What would I what might I'll be able to get from E.ON in 2025 or a company like E.ON.

[00:33:53.460] - Alex Cirlan

Yeah.

[00:33:53.610] - Alex Cirlan

So, it's 2025 time passes. So, I would like to buy a product which can adjust to my needs, preferences and circumstances. What do I mean with that is sometimes you need more heating or more cooling or more energy to charge your car, and these preferences are changing because sometimes you are on holiday, sometimes you are on a working from home or you have a day off.

[00:34:22.590] - Alex Cirlan

And if circumstances change as well, because you have the car and so on and so forth and I want the tariff to be dynamic and to adjust to my needs.

[00:34:30.410] - Jon Slowe

Would it do automatically for me?

[00:34:33.260] - Alex Cirlan

Yes,

[00:34:34.420] - Jon Slowe

OK

[00:34:36.330] - Alex Cirlan

I want as a customer; I would also want to buy a specific type of energy. So, Echo, it's nice and now most of the companies, including E.ON, it's offering echo tariffs and all our customers are enjoying this already, but I would like maybe to be more specific and to buy hydro energy or solar or wind, and this should be also able I want to share my excess power access power with friends and family or why not to donate it?

[00:35:10.520] - Alex Cirlan

I want to be able to use my energy, which I generate during summer, in the winter, where the darker period is not sufficient enough to generate electricity for my house. And I want to monetize devices. I want to monetize my car because the car is connected to my charger 15 hours per day maybe, and I want to make money with it. I would like to make with extra money with my battery, which initially I acquired back in 2020 quite a bit to store my energy.

[00:35:52.850] - Alex Cirlan

But now it's 2025, and I want to sell some of the energy when the grid needs instead of starting some coal-based power plants which are polluting. So, I think the flexibility of how to use and how to engage with my products should be the key. And I want to be in a very easy to understand way because most of the time it's cryptic and only the engineers or early adopters would understand how to use and why to use certain features. I want to be mass market.

[00:36:27.920] - Alex Cirlan

I want everyone to be able to do this.

[00:36:32.130] - Jon Slowe

OK, well, that's a really exciting vision you've outlined, Alex.

[00:36:36.210] - Jon Slowe

I think that we'll. Well, I was going to say turn the energy system on its head, but would very, very much moving from this top-down system to a bottom-up system.

[00:36:47.770] - Jon Slowe

So, I'm looking forward to E.ON's offer in 2025 and what you described, Neal how about from your perspective, what would a company like Centrica be able to offer me in 2025?

[00:37:02.900] - Neal Coady

Well, as you already have some home energy management equipment, we'd be able to come in and maybe analyse your smart metering data and then make you an offer and say, OK, Jon, pay us this set amount every month and for that, you get all of your energy effectively.

[00:37:32.230] - Neal Coady

We will look after everything we'll maintain everything, make sure it's working. If anything goes wrong, we'll fix it immediately. And then we can also do things like, well, we can take your hybrid heat pump and make sure that we run that the lowest CO2 impact possible if that's what you'd like. We'll also do some tight integration, depending on the EV manufacturer that you've decided to go for.

[00:38:05.740] - Jon Slowe

Still debating that one Neal.

[00:38:07.480] - Neal Coady

Well, yeah depending on our relationship with them, we might be able to say, ah ok, well, the car is 100 miles away, the car is just told the home actually it's 100 miles away it's going to come back with roughly this amount state of charge and then we'd optimize the home for you and run the heat pump and what have you based on that and the battery based on that information. We could probably also offer you a battery, as you say.

[00:38:39.520] - Neal Coady

That's something you haven't got either for the same amount every month. But you just sign a longer contract with us, so we'd amortize that over the over the length of that contract. Some people like that, some people don't. Or you, of course, you could just go for the purchase. But the idea would be you have just one overarching service that just looks after everything we do a lot of the optimization of those optimizations that Alex was talking about.

[00:39:13.360] - Neal Coady

We'd do all that and the background for you.

[00:39:15.910] - Jon Slowe

So, a simple all-in package.

[00:39:18.510] - Neal Coady

Yeah.

[00:39:19.730] - Jon Slowe

OK, thanks Neal and, Alix, what would, what do you think I'll be able to get? I mean, maybe the same as what Alex and Neal have just described or anything additional, you'd like to highlight?

[00:39:32.180] - Alix Weil

I think you could actually get a peace of mind package. So, it would include some kind of home energy management system, optimizing your different appliances together and matching your preferences in terms of green energy supply or something else, and what sort of things that you would like to do with the different appliances. But you would also have in this package everything to be at peace at home. So it would be maintenance if you need to maintain your appliances or even your home and you would have insurance in that and commodity provision or peer-to-peer energy trading if you'd like to have it.

[00:40:18.260] - Alix Weil

So pretty much everything in one package.

[00:40:21.810] - Jon Slowe

OK, um, well, I don't think I think I'm right in saying that I can't get this today, although I'm sure someone's going to message me and correct me. I probably can't get this actually from one or two closed ecosystem providers. But having already got a PV system and a hybrid heat pump and I'll get a charger and car soon, I'm looking forward to the time when someone can come in and help me optimize all of these to work together in a way that all three of you have described.

[00:40:52.390] - Jon Slowe

So, I think that's a really optimistic and exciting note to end on. We're entering a new paradigm in the energy system and home energy management will very definitely be a central part of that. So, thank you so much to Alex, to Neal and to Alix for joining me today and sharing your perspectives. Alex and Neal wishing you the best of luck and success in your activities with E.ON and Centrica.

[00:41:24.160] - Jon Slowe

Thank you, as always to everyone for joining the podcast today and listening. If you liked it, then please do rate it or send messages with suggestions for episodes you'd like to see in the future and look forward to welcoming you back to the episode next week. Thanks, and goodbye.

[00:41:55.990] - 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.

[00:42:12.460] - 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

Jan Rosenow, Director of European Programmes, RAP

Zsuzsanna Pató, Senior Advisor, RAP

Richard Sedano, President and CEO, RAP

Jon Slowe, Director, Delta-EE

 

[00:00:16.670] - Jon Slowe

Welcome to Talking to Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition. Hello and welcome to the episode. Today, we're looking at the topic of regulation and the role it plays in the transition from old to new energy, although many aspects of markets have been liberalised in the energy sector, in many countries and maybe every country, energy is certainly not a completely free market.

[00:00:42.390] - Jon Slowe

Regulation plays a critical role, both with the competitive markets and the networks, which are more like natural monopolies. So regulation and policies underpinning them are critical, and they've typically been built around old energy and now need to evolve and facilitate or even lead the way to new energy. So regulation important, maybe not as exciting as some shiny new business models, but really critical. So I'm delighted to be joined today by three members of the Regulatory Assistance Project or RAP for short.

[00:01:21.240] - Jon Slowe

So, let's say hello to each of you and I'll ask each of you to pick out one aspect of regulation and the energy transition that really excites you or an example of best practice that you'd like to share. So, first of all, Chief Executive of RAP, Rich Sedano. Hello, Rich.

[00:01:38.970] - Rich Sedano

Hello, Jon.

[00:01:39.570] - Rich Sedano

Yes, this is Rich Sedano. And I guess the aspect of the energy transition that excites me the most is bringing energy decisions down to individuals, activating and enabling people to make choices on how they consume and also how they might produce energy and to contribute to the larger grid.

[00:02:07.500] - Jon Slowe

And I guess that's a radical change from regulation, as it maybe was, I don't know, 10 years ago or maybe even still it's in some parts of the world.

[00:02:18.260] - Rich Sedano

I don't think it's overstating to say that the origins of regulation come from kind of a paternalistic approach to providing service to people and expecting people to just appreciate what they get. And we're activating people on the other end the citizens to make their own choices and to design the service that they want.

[00:02:43.560] - Jon Slowe

And Rich, for our listeners, that don't know the Regulatory Assistance Project or RAP in a nutshell, what does RAP do?

[00:02:51.540] - Rich Sedano

Sure. Let's give you a short tour. We're an independent non-government organisation that was founded in 1992 by some former United States utility regulators who wanted to provide regulators with some policy services that from an organisation that was oriented toward regulators and not organisations that are mostly serving industry or advocates. So, we provide policy advice to governments and we've been doing that in the US since 1992 and in China since 1999, and in India and Europe since 2009.

[00:03:34.860] - Rich Sedano

And I think it's fair to say that when governments ask us for help, it's because they think that clean energy is underrepresented and they want to look at what they do and change what they do in order to strike a better balance.

[00:03:50.960] - Jon Slowe

Fantastic.

[00:03:51.300] - Jon Slowe

Well, really looking forward to hearing some of your experiences as we get into the discussion. We're also joined by European Programme Director Jan Rosenow. Hello, Jan.

[00:04:03.510] - Jan Rosenow

Hi, Jon. Great to be here on your podcast.

[00:04:06.180] - Jon Slowe

Thanks for joining. Jan, what aspect of regulation or example really excites you? What would you like to share with us?

[00:04:14.610] - Jan Rosenow

Since I started working for RAP, what I found is that in Europe, most countries are still really playing catch up when it comes to regulation, with advances in technologies and the increasing potential for the demand side, for example, to play a much bigger role. And with the advent that we now see of electric vehicles and you had many episodes on your podcast before about what that means for the energy system, but also the electrification of buildings, there is now ample opportunity to really take advantage of this inherent flexibility that we're adding to the system.

[00:04:50.130] - Jan Rosenow

But regulation in Europe is too often, as you say, designed for the old energy system and sometimes even prevents and makes it more difficult for flexibility, for demand-side services, to access markets and to provide services that would actually, you know, better the energy system to the advantage of all consumers. So that's something that I observed in Europe since I've worked for RAP. Is this divergence between what technology is and industry is and their regulation is.

[00:05:21.850] - Jon Slowe

Yeah, and how quickly do you see that gap closing Jan or is that your day job is working away to try and close that gap?

[00:05:32.740] - Jan Rosenow

Exactly. And we see some signs that that is happening. I think regulators increasingly understand the challenges and the opportunities that these changes bring, and they are looking into ways of addressing that. So, we see some positive signs. And also, at European Union level, there's new EU regulation, new laws, and we can talk about that later, perhaps, that requires more innovation in regulation and how we deal with the energy system. So, I think there are signs to be hopeful.

[00:06:03.730] - Jan Rosenow

It's the pace that we're worried about. It's not quick enough. We need to accelerate that.

[00:06:08.420] - Jon Slowe

Yeah, great. Thanks, Jan. And last but not least, hello. Zsuzsanna Pató, Senior Associate at RAP. Welcome to the podcast.

[00:06:21.190] - Zsuzsanna Pató

Thanks, Jon. Thanks a lot for having me here.

[00:06:25.430] - Jon Slowe

You're based in Europe as well. What aspect of regulation would you like to highlight or what example would you like to share?

[00:06:34.270] - Zsuzsanna Pató

Yes, I'm based in Europe as well I'm in Hungary, so you'll have to excuse me if I am, you know, answering questions for Central/Eastern European {illegible} in energy because things change really rapidly and many triggers provided in the past by public policy towards a cleaner energy system, for example, in the form of renewables support is no longer needed. I think the energy transformation has now a life of its own.

[00:07:04.000] - Zsuzsanna Pató

Technologies evolved quite a lot, and consumers as well are gradually learn how to live with all the upcoming opportunities. And I'm sure that this will act quickly as well. So, the exciting aspects of regulation for me keep up with the pace of change, which is all around us. I have an open mind to solutions that, you know, traditionally we would pull out of the box, but they are not out of the box anymore and we need the solutions pretty much.

[00:07:33.730] - Zsuzsanna Pató

And by an open mind, I mean a willingness to take risks in regulation by this sandbox {illegible} and motivate companies, especially regulated companies, financially to explore these new options of containing the costs and the social support for this transition.

[00:07:52.630] - Jon Slowe

And these sandboxes that you mentioned and the idea of regulators taking risk, that risk is always there to some degree, but taking risks, actively taking risk is maybe a bit scary for many regulators, the sandbox is a good experiment, ways to play and test new ideas. How widespread do you see this appetite for risk or sandboxes or innovation across Europe, Zsuzsanna? Is it in one or two countries or do you see a real trend towards regulatory sandboxes and experiments and innovation?

[00:08:32.940] - Zsuzsanna Pató

Well, I don't see a trend. I mean, here and there and usually it's in the western part of Europe and in general regulators they don't have a big appetite for risk. So, this is something they have a cognitive shift in this. I mean, you have to risk otherwise the cost would be very high.

[00:08:53.010] - Jon Slowe

Yeah.

[00:08:54.150] - Jon Slowe

Um. And on that theme, I'm sure we have some regulators, maybe ex regulators listening to the podcast. I think regulators have got a really tough job because their mandate is to protect customers. They don't want to be a brake on innovation. They want to facilitate the energy transition, but they're not incentivized, or they don't have the mindset of taking risks. So, I think it's really hard. They've got lots of challenges. And my first question for the three of you is how do you think regulators should balance out these risks, these risks of being conservative, on one hand, protecting customers, but on the other hand, going with the way the industry is changing, taking some risks and not being a brake on innovation.

[00:09:52.950] - Jon Slowe

Who'd like to go first with that?

[00:10:00.180] - Rich Sedano

Well, Jon, this is Rich. And what I'll say as a non-European in this conversation is that one of the challenges for government generally and for regulatory organisations, in particular, is, as Zsuzsanna said, to keep up with rapid changes is hard. But they have to try to do it because one solution for managing risk is to get more information. And another solution for managing risk is to engage in a collaborative way to use the term sandbox.

[00:10:42.930] - Rich Sedano

But my interpretation is to engage the community, to bring them into the problem and bring them into this search for the solution. I think when regulators are isolated and don't have enough information and don't know how the community will react to opportunities, it's easy for them to fall back to business as usual. But when they see the opportunity for progress and get educated about it and also engage the stakeholders around them, it gives them the opportunity to have more confidence, to make a decision that might be risky, but might also have some very clear opportunities for benefit and how and to see how those risks can be managed and perhaps minimized.

[00:11:44.070] - Rich Sedano

So, I think there are ways of managing in an environment like this where there is a lot of change. And I think regulators can take advantage of those ways more than they do.

[00:12:01.860] - Jon Slowe

Rich that sounds logical. Very logical from what you've explained from your last comment, why are they not doing more of that? What's stopping them or what's holding them back from that? In your experience?

[00:12:18.630] - Jan Rosenow

Perhaps I could jump in that, Jon, if you don't mind.

[00:12:23.060] - Jan Rosenow

I think that's an important difference in terms of the remit and the mandate that regulators have in different parts of the world and in Europe. You know, when you compare what regulators traditionally have done and are allowed to do, it's more restricted, for example, compared to the US where Rich is based. So regulators in Europe understand themselves mainly as economic regulators, I would say, and less willing to interfere in other areas where in the US I think you have more willingness and more powers meeting with the regulators that allow them to do that, and which could probably elaborate on that point.

[00:13:03.300] - Jon Slowe

Okay, but Jan, what you're saying there about less willing to interfere and using the example you said earlier on about demand-side flexibility and how you integrate that into the electricity system, is that a mandate to interfere or is that a mandate to remove barriers or is that a mandate to redesign the market? Or does it all boil back to the economics and doing things at the lowest cost for the customer?

[00:13:31.690] - Jan Rosenow

Well, I think if there's a clear perspective for the regulator to also contribute to the whole net-zero agenda in Europe, that would require possibly a change in the mandate, at least in some countries, to allow the regulator to be more creative.

[00:13:49.860] - Jan Rosenow

And we have seen good examples in other parts of the world and even in Europe, in some of the member states where change is happening, and regulators are willing to do more. But I think so far we have seen baby steps, but we haven't seen the steps that are required to really accelerate the transition.

[00:14:09.030] - Jon Slowe

OK, and can you give us a, I don't know, an example of where, you know, the baby steps, Jan that you think are really good or steps that are really progressive?

[00:14:19.870] - Jon Slowe

And then alongside that, what's stopping regulators in other countries doing that, whether maybe they've got the mandate, you're encouraging them, the industry is encouraging them. Why are they not moving forward more quickly?

[00:14:35.740] - Jan Rosenow

So on the first point, what a good example. We've actually done a bit of research on that about a year ago and which Zsuzsanna has led. And one of the places in Europe that has probably gone the furthest is actually the United Kingdom, often with a real framework.

[00:14:53.440] - Jan Rosenow

You know, it's not perfect, but essentially means that we focus more on outcomes and not on inputs. And real in theory allows often to direct regulated entities to deliver a whole range of outcomes, including low carbon outcomes that we want. So, I think that's an example of progressive and innovative regulation. It's not perfect and it's in transition. And, of course, it's just being reviewed currently. But there's a lot of potential with that kind of regulatory framework to do more.

[00:15:26.770] - Jan Rosenow

Your second question, what's holding regulators back? I think there's a whole combination of factors at play. I think risk we talked about already, but I think it's also to do with regulatory cultures and the kinds of people who work for regulators have been trained to do regulation in a certain way. So, I guess there's a whole set of barriers that has to do with the way how we have done regulation in the past and then transitioning away from that is a significant step for how we do regulation.

[00:15:56.620] - Jan Rosenow

And that's not always easy to do for institutions.

[00:16:00.750] - Jon Slowe

Yeah, it's a real institutional treacle we have to wade through, that change in culture is really hard in sticking with Europe for now or Jan or Zsuzsanna, what could be done specifically to help with that, or where are you encouraging how are you encouraging regulators to change that mindset or that culture? And I think of things like knowledge sharing from one market to another market or giving them confidence.

[00:16:30.780] - Jon Slowe

How can you overcome some of this institutional treacle?

[00:16:36.880] - Zsuzsanna Pató

 Well knowledge sharing is always very good, and I think is not that intensity, it should be. And I guess some regulators already have some experience even within Europe. So, in some member state and some member states are really looking for, you know, experiences around to have at least a sense of a lower risk. And going back a little bit to the risk, I think one of the problems is a risk of change is by the regulators.

[00:17:06.630] - Zsuzsanna Pató

But the risk of inaction, it's not so clear there is a risk involved in not.

[00:17:14.940] - Zsuzsanna Pató

And I think that's a cognitive problem.

[00:17:19.170] - Zsuzsanna Pató

Regulators with all of us.

[00:17:21.930] - Jon Slowe

Yeah, OK, so they're using the example of demand-side flexibility, the risk of not unlocking that resource is higher balancing costs or even a less stable system that doesn't have the same flexibility resources that you'd have if you have that demand for flexibility. So really reframing the argument Zsuzsanna is that what you mean?

[00:17:46.600] - Zsuzsanna Pató

Yeah. Plus, you know, in some countries, this urge to have more flexibility is stronger in some countries lower, depending on what your capacity makes, you know, the national circumstances. So even though the European system requires all national regulators to change the regulations, but some regulators like it's a more pressing problem, and for others, it's not so much a big problem in the future. But regulators usually like to follow certain problems.

[00:18:19.180] - Jon Slowe

OK, Rich, if we go back to the US, the regulatory set up is quite different there. How do you see the differences between the US and Europe? And given that most of our listeners are in Europe? Are there particular things you think Europe could learn from the US?

[00:18:41.320] - Jon Slowe

When it comes to regulation?

[00:18:44.550] - Rich Sedano

Jon, you highlight an important difference in the willingness of some US regulators. And it would be right to say that there's a spectrum of different attitudes across the US about this, but the willingness of regulators to loosen up their processes and to open them up to more of a collaborative and engaging type of process. We've tended to be invited into helping states like Oregon and North Carolina on really energy transition collaboratives that engage many people.

[00:19:32.060] - Rich Sedano

I don't want to say hundreds, but certainly many dozens of people to participate in a series of meetings over many, many months, sometimes multiple years. To try to work out what are the priorities that are most important and one of the important things, Jon, is to get people off of their talking points, people start with a position and you want them to advocate for their interests. But and that's what happens in the regulatory process is people's state, their positions very clearly.

[00:20:10.810] - Rich Sedano

But in a collaborative, you're forced to deal with other people's positions. And eventually, you have to if you're going to participate sincerely, you have to reflect on how your position matches up or can be in some way resolved with the positions of others in the community, recognizing that the only way you're going to get what you want is if other people get what they want. And so that kind of synthesis creates new opportunities for solutions that doesn't necessarily present easily in the traditional regulatory process.

[00:20:53.380] - Rich Sedano

And I think in an environment characterised by innovation and I think what we're talking about really is, how innovation has imbued the regulatory marketplace into the power sector today is imbued with innovation. It is, I think, essential for the people responsible for decisions to hear from many people in a synthetic way, as opposed to the evidence-based approach that has characterised regulation for many decades. So, I think that's what we're starting to see in the US that's working.

[00:21:34.270] - Rich Sedano

And I would like others to figure out how to implement their own ways.

[00:21:40.200] - Jon Slowe

That's really interesting it's almost how you approach it because regulators will consult a lot of the time, I guess, consult and collaborate are really different things, have you call an example, Rich I guess can you highlight something specific or a process or make it real for our listeners to see how that might work or what it resulted in?

[00:22:07.420] - Rich Sedano

In the state of North Carolina, the new governor came into office with a decarbonization agenda, but that he presented that agenda in a state that was not used to talking about climate change at all. And so what we helped the administration to do in that situation is to create a process that would engage utility, the advocate's cities, other local and NGO organisations to come together to talk about what this will mean for North Carolina and to make it real to go from the large scale objective that the governor laid out to how might we do this.

[00:23:01.720] - Rich Sedano

And that has led to a series of meetings that have happened over the course of a couple of years that has raised the level of conversation there and is, I think, going to lead to significant changes. These things don't happen fast. That's one other thing that sometimes troubles people. They want to see an administrative process, a government act very quickly. And we listen to Greta Thunberg and we are motivated to do something. But the fact is, is that if the government can move as fast as it can, as slow as it might appear, that's excellent.

[00:23:46.480] - Rich Sedano

So I think my admonition to government is do the best you can. And that means engaging with the sense that you're going to act at the end. And the state of Oregon, they were challenged to basically say how might we change the way utilities are compensated? And in a collaborative process that we were involved with, they came up with ways to do that and now they're going to be implementing a performance system of regulation there. So when you're in it, it takes a lot of time, but when you get through with it and the process works quite a bit better, then you can see all the benefits that the gold standard for this.

[00:24:36.430] - Rich Sedano

And I won't say that it’s even met all of its own expectations. The New York, reforming the energy vision process that's been the most ambitious process of this kind and it has made many, many reforms, it has changed the utility culture. People are still unhappy with areas of progress that have not been achieved. But it is, I'd say, in the US the most ambitious of these kinds of things.

[00:25:06.880] - Jon Slowe

Yeah, I guess Rich regulation is never going to move fast enough for some innovators in the market. But as I say, as fast as it can is all you can ask.

[00:25:20.300] - Jon Slowe

And Jan, looking at Europe, you Zsuzsanna, you mentioned the idea of sandboxes and we talked earlier about innovation to gather more information, to understand risk better or minimize risks. How well do you see that the concept of sandboxes working in Europe? Because on one hand, I think they're absolutely fantastic. On the other hand, they could be used just to show, look, we're doing something. But then to translate the outcome of the sandbox into something tangible can be harder.

[00:25:53.210] - Jon Slowe

So, I'm quite curious to see what do you think about how sandbox are being used and the potential for sandboxes to really facilitate and drive change?

[00:26:05.390] - Zsuzsanna Pató

Well, my feeling is that simply we are still in the you know, having more sandbox stage.

[00:26:12.680] - Zsuzsanna Pató

So, I mean, my understanding is that there are only a few and even those results, of those sandboxes is not made public. Maybe these are still ongoing things. So, I think we are still in the days when we need more and more sandboxes in various national settings because one country is not the same as another country. So, having sandbox resides in one country is not directly applicable to another one.

[00:26:41.510] - Zsuzsanna Pató

So, I {illegible} talk about how to make sandbox level trials to commercial operation as a power plant generator would say.

[00:26:55.440] - Zsuzsanna Pató

It was too early, I guess.

[00:26:57.720] - Jon Slowe

Yeah, OK, so we're seeing some activity, but difficult to see what tangible is coming out of that yet and it's early in the process.

[00:27:06.310] - Jon Slowe

Jan, anything you'd like to add to that?

[00:27:09.620] - Jan Rosenow

Yeah, I think in addition to sandboxes, which are great to test and trial new ways of doing things, I think we should not forget as we move into the next decade, we also have a completely refreshed energy and climate policy framework at European Union level, which, of course, will have a big impact in Europe.

[00:27:28.580] - Jan Rosenow

And there's a lot of interesting innovations in there. It's not perfect by any means, but there's a lot of good things in the new framework that will require and incentivize regulators and policymakers to change things, you know, for example, to open up markets for demand-side flexibility. That's one of the areas that is in that package or to introduce better tariffs that reflect network costs and benefits if they shift consumption outside of the congested areas at the peak hours.

[00:28:07.070] - Jan Rosenow

So that's, I think what we should also keep in mind that there's a new framework that would drive change in addition to the sandboxes, which are important. But I don't think they by themselves can accelerate the change to the extent that we need to see.

[00:28:22.170] - Jon Slowe

And how do you see the link between the frameworks coming out at the European level and then the national action? Because innovators will get terribly excited by these frameworks and then tear the hair out sometimes at the national implementation of the frameworks. So, we've talked about speed a few times. Do you think that will be fast enough or how fast will it be?

[00:28:43.640] - Jan Rosenow

Well, I think you put your finger on that really important point that not just in the regulatory space, but in many, many other areas in Europe where there are different speeds of implementations and also different quality of implementation. And I think we’re going to see that in the next decade again.

[00:29:05.090] - Jan Rosenow

But I'm optimistic and I think we will see more countries that will take the lessons learned from other countries and progress. But yes, there will be parts of Europe that, if they're not careful, might miss out on some of the innovation that will take place. And will need to take place given, you know, we talk about it at the beginning, the new technologies that are now being used and customers wanting to be much more engaged. So, I'm optimistic, but I think you're right that implementation is always the hard bit agreeing on the framework.

[00:29:37.670] - Jan Rosenow

Is the easy part.

[00:29:40.040] - Jon Slowe

OK, keeping on time. So we had a potential discussion point, which I don't think we'll have time for about the role, what you can leave to the market and what has to be decided through policy and regulation, which is probably a bit of a large esoteric question to bite off in a minute or two. So, we'll save that for another podcast discussion and move on now to crystal ball time. So, bringing out and dusting off after its summer break, the Talking New Energy crystal ball and set the dial to 2025 so five years’ time or well, times.

[00:30:22.430] - Jon Slowe

flying by so nearly four and a bit years’ time.

[00:30:24.950] - Jon Slowe

And I'd like to ask each of you to give an example. It might be building on something we've talked about of a really progressive regulation you'd like to see and that you think's got a reasonable chance of being in place by 2025 and you can pick your country or your region or your state.

[00:30:45.860] - Jon Slowe

So, Rich, let's start with you. What would you love to see in place by 2025?

[00:30:53.480] - Rich Sedano

Well, we haven't really talked about wholesale power markets. I think that what I'd like to see is a robust market for flexible resources, flexible resources on the grid side, and but also flexible resources that come from customers that can balance the variable generation from wind and solar in an economically efficient way and a market that is that draws the most cost-effective sources of that flexibility. So, I think that you talk about the kind of wonky behind the scenes thing. This is a very wonky behind the scenes thing.

[00:31:35.730] - Rich Sedano

It could really change everything.

[00:31:37.550] - Rich Sedano

So, that's what I would like to see fully, fully developed in perhaps many wholesale markets in Europe and the United States by 2025.

[00:31:48.950] - Jon Slowe

And I didn't say this in the press, but which country or state or region or wholesale market region do you think would you put your money on or who's making good progress or who's a good candidate for that?

[00:32:05.430] - Rich Sedano

This is a Kentucky Derby with horses in the race, and I probably would bet the field, I think all of them will be thinking about this.

[00:32:17.560] - Jon Slowe

Yeah.

[00:32:18.220] - Rich Sedano

If I had to judge, I'd say one of the Northern European RTOs and perhaps Texas and the New England market in the US.

[00:32:34.210] - Jon Slowe

OK, thanks.

[00:32:37.540] - Jon Slowe

Jan, how about you? 2025, what would you love to see in place in four and a bit years’ time?

[00:32:44.860] - Jan Rosenow

So, I pick electrification that is smart as an area where I want to see more progress. We talked about this earlier on, but we are adding all that new load to the system and we still install, you know, charging infrastructure for electric vehicles in many countries.

[00:33:03.970] - Jan Rosenow

We still install heat pumps in buildings, but we don't have smartness built into them. And that's really something that could be fixed relatively easily by requiring a certain functionality of smartness, which then, in turn, enables the kinds of things that Rich talked about markets to actually procure some of those services. But we got to make sure that the technology we roll out is actually smart and is ready to provide the services. And that's why I would like to see regulation to make inroads and to be much more consistent and give clear signals to industry as well so they know what they have to plan for and which countries will be leaders in that area.

[00:33:44.410] - Jan Rosenow

I guess it's those countries that are pushing ahead the fastest with the electrification of the transport system, of the buildings that they have and remains to be seen which countries those are. I mean, the Nordics talked about a lot, but I think there's a race going on and we don't know yet which countries will emerge as leaders in that.

[00:34:03.880] - Jan Rosenow

So, I'm keeping my bets open for now.

[00:34:07.800] - Jon Slowe

Yeah, Jan,

[00:34:08.920] - Jon Slowe

I've just installed a heat pump at my house, a hybrid heat pump along with a gas boiler. And what tipped my choice on the brand of heat pump and I won't say which branch was the smartness and openness of the control. So hopefully my heat pumps will be able to fit into demand for flexibility markets in the not too distant future.

[00:34:30.520] - Jan Rosenow

That's good to hear.

[00:34:31.360] - Jan Rosenow

Jon, one of the avantgarde doing this. And I'm in the same boat. I'm doing the same thing with my own pump.

[00:34:40.020] - Jon Slowe

Yeah.

[00:34:42.350] - Jon Slowe

And Zsuzsanna from your point of view, what would you love to see from a regulation perspective in 2025?

[00:34:51.280] - Zsuzsanna Pató

Well, I would like to see companies to explore a wide range of options much wider than today, they can serve their customers. You know, for example, for network is not only confined to the siting of new station, whether we put it here or there but including alternative ways to deal with congestion. Let's say in the low wattage level, suppose that the consumers, managers and of course, them knowing it.

[00:35:21.270] - Zsuzsanna Pató

So, what I would like to see that these regulated companies, the companies that are bringing new solutions and they do together. So, make winners, I would say the winners would be those who essentially very, very successful in third parties, so new actors to the otherwise quiet traditional stage of energy policy and energy system actors. So non-energy actors, I think that’s the trick.

[00:35:58.330] - Jon Slowe

OK, an example of a I guess one of those third parties or a country where you see this happening or is it too early to say?

[00:36:06.810] - Zsuzsanna Pató

Well, I would say that the natural coupling would be lots of I.T. companies moving to the energy sphere, which is already happening in many of the states, especially in the US.

[00:36:20.070] - Jon Slowe

Great. Well, let's keep ours.

[00:36:23.320] - Jon Slowe

Well, I was going to say keep our fingers crossed that we see these things in 2025, but I guess that will be down to the hard work of all of you at the Regulatory Assistance Project, of regulators themselves and that of people working with regulators and so on.

[00:36:39.640] - Jon Slowe

So, thanks so much to Rich, Jan and Zsuzsanna for joining us. It's been a pleasure. Thank you, as always, to you for listening to the podcast. We hope you found it interesting.

[00:36:56.540] - Jon Slowe

I think personally, regulation is sometimes put in the hard but less exciting box but is an absolutely critical part of the jigsaw for the energy transition. And I hope we've given you a good taste of what's happening across Europe and the US today. So, thanks very much for joining us. Thanks to my guests. And look forward to welcoming you back to the next episode next week. Goodbye.

[00:37:35.840] - 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.

[00:37:52.280] - Jon Slowe

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