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Podcast S14E08

In conversation with… Steven Meersman, Zenobē Energy

In conversation with… Steven Meersman, Zenobē Energy

As our energy systems transforms and value chains are disrupted, there are brand new types of company emerging. Today we’re talking with one such company, Zenobe Energy, who are focusing on two fast-growing parts of the market – large-scale batteries and electric buses.

We’ll be exploring their role in the transition, what it’s like to be part of a young, fast-growing company in these sectors, and their experiences so far – as well as looking into the future with the Talking New Energy Crystal Ball. Jon Slowe is joined by Steven Meersman, Co-founder and Director at Zenobē Energy and Chris Matson, Partner at LCP.

To learn more about Zenobe >>

Episode transcript

[00:00:04.690] - Jon

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


[00:00:21.450] - Jon

Hello, and welcome to the episode. As our energy system transforms, value chains are disrupted and brand new types of companies are emerging. And today we're talking with one such company, Zenobe Energy, who are focusing on two fast growing parts of the market, large scale batteries and electric buses. We'll be exploring their role in the transition. What it's like to be part of a young, fast growing company in these sectors and their experiences so far as well as usual, looking into the future with the Talking New Energy Crystal Ball. I'm also joined by Chris Matson from LCP Energy, who Delta-EE are now part of. Chris, welcome to the podcast.


[00:01:07.470] - Chris

Thanks, Jon. Good to be here.


[00:01:09.570] - Jon

And Steven, welcome. So, Steven, you are a founding director at Zenobe Energy, can you give our listeners a short background on Zenobe for our listeners that haven't come across you before.


[00:01:22.640] - Steven

Yeah, sure. So Zenobe is an owner and operator of large grid scale storage and secondly, also a provider of turnkey solutions for large business fleets that want to go electric. So buses, trucks, last mile delivery vans. So we help with planning that journey, but then also building out the infrastructure, financing it, dealing with the risks, and also reusing the batteries when they come back off the vehicle in that grid scale storage portfolio I talked about earlier.


[00:01:58.350] - Jon

So, Steven, would you describe yourself as an infrastructure company or are you active in trading the flexibility from batteries or both? Do you fit neatly into a box.


[00:02:12.350] - Steven

In terms of we struggle with that, and it's not just because of what we do. I think, as you pointed out, that this sector is evolving so quickly and some sectors are emerging, some are breaking apart. So it's hard to work out what the boxes are. But in a way, we're doing a bit all of the above. We're an infrastructure provider, right? We fund things like an infrastructure provider would, but we perhaps take a bit more risk than others would taking operational risk away from companies, be that utilities, when we're on the large scale side of our business or on the fleet side, we take risk away from will these vehicles always be charged on time, et cetera, et cetera, and taking the asset risk away and saying, look, you want the benefit of an electric vehicle, but you might not want all the hassle associated with plugging it in, charging it, dealing with battery replacement, scheduling, training people on how to use them best, et cetera, et cetera.


[00:03:08.620] - Jon

And can you give us an idea of scale when you started some numbers around people or revenues or numbers of batteries? Whatever works?


[00:03:17.330] - Steven

So we started in early 2017, and since then we now own and operate about 660 electric buses, which I was recently told on a trip to New York is more than there are in the whole of North America. And we've got about 270mw of grid scale storage operation or nearly completed build. And we're active in the UK, Australia, New Zealand, Belgium, the Netherlands and also setting up in the US.


[00:03:51.030] - Jon

Okay. So aspirations to be global, is that too strong?


[00:03:56.370] - Steven

Well, we have to follow our customers. Australia, New Zealand are lovely places. Wouldn't have been my first choice when trying to expand abroad during a global pandemic, but we had to follow our customers. So we were working with a London based transport company, part of an Australian group, and they wanted help there as well, because obviously grid challenges, volatility in energy markets, reliability and air quality are big concerns. So there was a need for our services to really put all the different stakeholders together in a room and say, look, we're going to do this, we'll put our hand up. It's always our fault if something goes wrong, but we'll provide that, catching all the things that threaten to drop between the cracks, basically.


[00:04:43.090] - Jon

Okay. Steven I will come back shortly. I want to ask you and dig into about your business. Chris, would you like to just give a few words about what you do at LCP?


[00:04:56.730] - Chris

Yeah, sure. So I'm part of the LCP Energy analytics practice, and I guess there's two parts to our practice. One is very short term based, so helping optimizers and traders and analysts understand what's happening in the energy market in real time. So the balancing market, but the area I focus on is the other side. So looking rather than the next couple of hours looking at the next couple of decades. So providing kind of long term market forecasts and analysis to support businesses and the electricity market. So particularly in GB and Ireland. And I guess a lot of our focus in the last 18 to 24 months has been helping battery storage developers and investors, providing them with forecasts for the kind of revenue stack associated with those with those assets.


[00:05:47.040] - Jon

And long term forecasting of revenues from batteries. Lots of unknowns in that. Can you give our listeners a bit of a feel for the challenges or how you go about looking at what a battery can earn over the next ten or 20 years?


[00:06:04.890] - Chris

Yeah, sure. So I guess the modelling that we do is very much granular and very much kind of fundamentals based. So one thing I think you can't do at the moment is look at the past and then try and extrapolate anything forward, because what's happening right now is not going to be very indicative of what the market looks like in five or ten years time. So huge amounts of renewable generation coming into the system. But those sort of fundamentals around the drivers of how those half hourly prices are being set in the market will remain the actual volatility and the shapes of those prices will through the day will change a lot. So it's sort of doing that kind of fundamental base modelling, bringing in layering on the different assumptions around how much renewable penetration we expect to see how demand shapes expect to change, and then putting into that the battery storage assets, and then essentially trying to simulate what will actually happen in reality. So trying to kind of optimise their behaviour across the day and across multiple markets to see what sort of revenue streams, what sort of revenue levels they'll be able to capture in the longer term.


[00:07:13.710] - Jon

And Chris, this might be too crude a way to think about it, but broadly, revenues, would they be curves going ever steeper upwards? Are they relatively flat in the modelling? Do they tail off? Are we in the good period now, or can you give a lesson as a feel for broadly the outlook for batteries?


[00:07:41.070] - Chris

Our focus is in the GB market, but I guess this is probably true across most markets. The moment is that revenues are very high at the moment. So as a result of very high gas prices and very high electricity prices, there are big spreads available. There's also been lots of very high levels of revenue available from sort of these nascent frequency response markets, which in GB have been under supplied. So we've had frequency response prices being kind of set at the kind of caps, price caps for those markets because there's been an under supply, revenues over the past twelve to 18 months have been very high. So the kind of medium term is probably downwards from that. As the market kind of reaches a level where there's more competition and more kind of as, we expect electricity prices to return to some level of normality over the next few years. But I guess the long term fundamentals are very positive, with more renewables coming in the system and everything else. So although I would sort of caution against, as I said, sort of saying extrapolating forward what revenues are today, that the long term revenues are still positive.


[00:08:53.390] - Steven

We've seen that as well. I mean, the energy system is very much like a balloon, right? You squeeze one end of value, move somewhere else, and it's just about being able to follow that as you go along on the evolution next few years.


[00:09:07.790] - Jon

Steven, what's that like when you're financing batteries? I mean, presumably you're not financing as well.


[00:09:13.560] - Steven

We're running them as well. We have been operating about 80 MW for the last five years, and obviously portfolio has now grown. And being active in those markets, it's all about optionality, as you want to have the technical capability to be active in as many markets as possible and then as a portfolio optimiser, move capacity in the different markets where you see value. But financing from a financing perspective, we always determined we didn't just want to put our own equity in it. We wanted banks to come along with us to bring the cost of capital down so the cost of our services could go down and getting them comfortable with a mix of merchant revenue streams where you say, well, actually these are the five revenues I've got today, these are the seven I might have tomorrow and the prices are all going to do this is a challenging story, but we have seen banks get a lot more comfortable with that since we did the first non recourse loan with Generation IM. And then later mainstream bank Santander in 2018. I want to say there's been a lot more who've now stepped in and gotten comfortable with that.


[00:10:26.240] - Steven

Now that there's a bit more track record of an understanding of what's going on the market, I'd say the biggest thing is also developing your sort of proprietary view of where is their value to you compared to other technologies and participants in the market, because you run a gas plant different from a battery plant, even though far are technically merchant assets.


[00:10:49.470] - Jon

Okay, the electric buses or electric fleets part, on one hand, people might think, well, that's very different from a battery. On the other hand, it's a battery on wheels in another way. So can you talk a bit about why those two on one hand, different parts of the market and your strategy around being in electric fleets as well as large scale stationary batteries?


[00:11:17.620] - Steven

Yeah, I might start with the sort of the high level picture and then come down to a few of the tactical considerations or pragmatic consideration along the way that cause us to be involved on the high level, as you pointed out, a bus or a truck might have half a megawatt hour on board and charge anywhere between 7kW and 350kW. So they're both a large energy user, but also their storage in there as well, because you can change how quickly you charge. And in some cases you're talking about bi directional, which I guess at some point in the future will make sense in certain markets. But at a high level, if you look then at the number of vehicles there are in the UK, 40,000 buses, half of that again in coaches, and maybe ten times that when you start looking at trucks and vans, there's a huge reservoir of energy consumption there that is actually quite flexible because what the customer or the operator cares about is that their vehicle is ready to go on the road when they need it. They don't really care whether you charge it in five minutes, in an hour, in 2 hours, as long as you stay within the operational window they've got available.


[00:12:32.190] - Steven

So it's a bit similar to what's true for the energy market in general is that a small segment of the market is actually most of the consumption and most of the flexibility. Looking at industrial load versus residential again.


[00:12:48.060] - Jon

Could you then say that this might be too stark, but if you want to be in the storage market, then you've got potential to access a lot of storage that's built into buses, into fleets, into heavy vehicles. And if you're not accessing that, you're only ever going to be in part of the storage market.


[00:13:12.150] - Steven

I think they all play in the same market, but in the same grid services markets or trading markets, et cetera. But I think the point I'm trying to make is that the energy network and the transport network are emerging. Right. If you look for a school bus in America is parked up 17 hours a day and barely does 30 miles, right. So that's actually a battery that once in a while carries kids, a bus in London that runs on 24 hours. It's more the inverse, but there's no longer the stark black and white difference between the two. It's getting a lot more grey, depending on the usage patterns. Now, for us, how we got into this was we started as an owner and operator of grid scale storage. We started writing our own dispatch logic dispatch software, analytical models to optimise these assets. And we realise that rather than solving just macro bottlenecks on the transmission or the high level distribution grid, there's a lot of local bottlenecks in the grid with large energy users, and particularly future large energy users, such as the fleets, for the reasons I just mentioned. So we started putting small batteries in bus depots, adapting our software as well, running an inverter with some batteries attached to it.


[00:14:22.860] - Steven

When a bus or a truck is plugged in electrically, that looks quite the same. It's again, an environment where high uptime and reliability is very important. So we found that there were a lot of parallels between the two. We can then also use our grid services capabilities from our large scale portfolio and the resources we had available to pool with these smaller batteries in the bus depots, or potentially even the flexible loads in those depots to generate additional income. And that, then again, means that we could lower the cost of the energy transition for the fleet operators. So you get sort of a positive effect from that. The second positive effect, or link between the two businesses, was that we worked out a way to reuse the batteries from the buses in stationary applications afterwards. So then the bus is helping to make the energy storage device more competitive. So you get the sort of positive snowball effect. Now, we didn't really find that there were lots of individual companies doing all these different things, so in a way, out of sheer misery, we decided to do it all within our own business.


[00:15:32.710] - Jon

I can see the buses gives you the synergies you outlined very clearly. And when we think of grid services, it's easy to think of national grid services. But in the next years, I think we're going to need more and more demand for local grid services at lower levels of the distribution network. That's where smaller batteries at bus depots or whatever will come into their own, I guess. Chris, you're looking at the storage market a lot. Do you see lots of other Zenobes or new companies moving into the space? There's existing big vertically integrated utilities that are in this space as well. How diverse is it at the moment?


[00:16:20.750] - Chris

I think it's very diverse. The work I'm doing, we're often dealing with the kind of developers and investors, and I mean, the range of the types of companies that are getting involved in the UK storage market is quite wide. So you've got, as you say, the traditional sort of big six, vertically integrated. You've got both international and domestic developers of more traditional power generation. So renewable developers and developers getting into the storage market. You've got all sorts of private equity money. You've got kind of large industrial companies who are looking at putting onsite they've got on site demand and generation and adding a battery to that mix at different factories across the country, for example. And then you've got these sort of new companies, such as Zenobe, these kind of infrastructure, kind of the full value chain of the storage asset. And then I guess going further down the value chain, then you've got the actual operators and optimizers and some of these investors and developers that are doing that job as well. But some they're also companies who are specialising in the operation and optimization of these assets. So it's obviously very complex hourly basis.


[00:17:35.610] - Jon

So they're less infrastructure companies, they're more trading optimization companies. Steven, how do you see that playing out? I mean, I'm sure you see a big role for Zenobe in the future, but how do you see that ecosystem that Chris described all those different types of companies in the future? Do you think it will consolidate a lot, or do you think you'll have some companies specialising in certain parts, certain activities, others covering the full value chain?


[00:18:06.630] - Steven

Well, the first thing I know, the topic was sort of crystal ball. I'll try and avoid phrases associated with that, but it is very difficult to forecast how this is all going to shake out. I think we're in a tremendous transition in area of market growth. I think in the short term, mid term, there'll be a role for a lot of experimentation, different business models, et cetera. But I do think over time you will see some consolidation, which can happen in a variety of ways, which is certain people going very deep and becoming specialists in their part of the value chain or a particular customer or a particular product, while others might actually orient themselves slightly differently. But I do think the scale piece is again important here, because one challenge that we saw, for instance, with the aggregator model, which was one of these business models still around, actually was in 2016/17. They had to do a lot of the education and the work to get customers and other people to develop a stationary storage project. And in the end, they only ended up with a tiny sliver of the value chain.


[00:19:19.820] - Steven

So that's actually quite a challenging model to scale and to grow. And you also see more players such as ourselves as they got scale to bring some of those capabilities in house selectively. We're also seeing OEMs, in some cases, try to develop in software and then realise running a factory is very different from running a team of project managers and mans and vans that need to go to sites and build infrastructure. So I think the models, yes, it's too early to tell what models will be successful, but I do think you'll start to see more integrated models because there's a huge need for customers to have partners that help them in their transition who can sort of be that one point of contact to deal with the wild new world while they focus on their core operations. So I do believe that that will be key, and I believe that Zenobe will be one of the players doing that.


[00:20:19.030] - Jon

What have you found hardest so far in your journey? What's been the biggest challenge or the hardest thing to do?


[00:20:29.930] - Steven

Well, the mountain you have yet to climb always looks the biggest than one you just climbed, doesn't it? But I'd say some of the harder things. It's always we like doing hard things and we like doing things first, so we're the first with these charging as a service on fleets first, put second life batteries back into charging infrastructure, et cetera, et cetera. And the first project is always the hardest. But what I do find is that the speed with which the market evolves and the speed at which we're now being asked to grow is a challenge, because the challenge is not finding the opportunity. The focus has to be ruthlessly on execution. Right? I mean, the biggest thing is you want to make sure that as you scale up and as you grow that everyone continues to have the same smooth experience that people had when, say, the company was smaller. So I would say.


[00:21:30.270] - Jon

To bring it to life. Have you got an example of one or two of those execution challenges or any war stories of the last year as well?


[00:21:39.450] - Steven

If we talk about a wider topic, the lack of standardisation in the market still. Right. If you look at OCPP and other communication protocols or DNP3 on the utility side, these are all vague standards, like more like guidelines. I wouldn't even use VHS or Betamax comparison because it's even worse than that. So that causes a lot of work required and heat and friction rather than forward momentum when you're integrating a vehicle or a battery storage system with a new control system, et cetera, et cetera. And we are doing that effort. The OEMs are doing those integration efforts. Other people are doing those efforts. There's a whole lot of energy from the sector that is sort of evaporating in duplicating efforts just because we've got full standards and regulation, et cetera. So I think those are some of the big challenges that we have had and that I expect to see going forward.


[00:22:40.190] - Jon

And if you had to highlight particular skills and competencies, Zenobe spans a lot of different we talked at the beginning, it doesn't fit into one of these neat boxes. What are the hardest competences to develop or recruit?


[00:22:59.850] - Steven

I think it's translating deep sector expertise to something a data scientist or a software engineer or an electrical engineer does something with. Right. Because if you look at putting charge points in very tight bus deposits where it might have been designed for 100 buses, there's currently 150 diesel buses. You now need to find space for charging infrastructure and play Tetris with 18 tonne vehicles at night to get them to a charger. And at the same time then translate that to a software problem that works rain or shine. Right. And that also can be used easily by people across the organisation with different training backgrounds. So that whole communication aspect and being able to translate from one to the other is a challenge. And I'd say if you look at the people we tend to hire electrical engineers, data scientists, legal pragmatic, legal professionals, et cetera. These are all people that are very difficult to find in the current environment. But I think the way you make the difference is by attracting them with very complicated and challenging problems. And the story. Right. We're trying to do something that has meaningful impact, not just in the sort of grand net zero scale, but in the small local community benefit scale as well.


[00:24:19.530] - Steven

And I think that's what makes the difference in trying to tackle that problem. And we try to say compete with Google and others to attract this kind of talent.


[00:24:27.610] - Jon

Okay. Thanks, Steven. Chris, from your perspective, the work you do analysing the market forecasting, supporting companies in the market, what do you see as the biggest challenges in the storage market at the moment?


[00:24:49.790] - Chris

So there are lots of hard problems in the storage market. So I think I heard someone say that storage has made power market analysis interesting again, I think I would agree, but it also has made it very complex as well. So I think the day to day optimization problems are very complex and challenging, but I feel like they're at least a bit of a contained problem. I feel like the kind of analysis, when you're looking kind of further into the future, it's more around. It's just a very constantly evolving. Not only is what the world looks like tomorrow or the next day a bit uncertain, but where we're going to be in five or ten years time is very uncertain because of constantly evolving kind of government targets and regulatory environments. And those sorts of things. All of that navigating, all of that is really challenging, I think, for companies, the kind of actual financing of these assets, which is something Steven got touched on earlier in the podcast, is very challenging. And working out a good structure of where risk sits across the different parties that are involved. But there are lots of hard problems to be solved.


[00:26:01.370] - Steven

Yeah. I think on the regulatory side, if I just add one thing is you've got all these different departments. Right. That are suddenly interfering with each other. Right. You've got BEIS, you got Ofgem, you've also got the Department for Transport, the treasury, and they're all trying to work out who's exactly accountable for this.


[00:26:19.250] - Jon

I'm sure it's not a UK problem. I'm sure you see that in the Netherlands, Belgium, Australia, every place you go.


[00:26:25.430] - Steven

Yes. But what's interesting is that they're all asking the same questions. Right. It's a whole sort of dilemma of cost, reliability and green. And how do you get all three. Right. Which is challenging, but perhaps there's more dialogue needed, as you said, Jon, between the governments here and the government there to sort of see how have you solved those challenges, and can we learn from each other other and try to reinvent the wheel locally?


[00:26:57.410] - Jon

Yeah, I do feel that at the moment that whether it's energy storage, whether it's decarbonisation of heat, whether it's the future pressures on low voltage distribution networks, it's the same challenges with slightly different circumstances, but everyone is facing the same challenges. Let's bring up the talking new energy crystal ball now and look forward. We've been looking forward a bit in the discussion, but let's look firmly forward now to five years time. Set the door to 2027. Steven, can you describe your vision for Zenobe in five years time? We've talked a bit about challenges, but if you want to add a particular challenge to getting to that vision and Chris, can you give us a view for storage in, let's say in Great Britain, that's your focus for now in five years time, and the biggest challenge to reaching that future for storage. Steven, let's start with you and Zenobe.


[00:27:59.270] - Steven

Yes. What I would like to see five years from now, looking back, is that we've managed on a national level, but on all the regions where we operate, that we've managed to outperform the decarbonisation targets in those countries, and that we've been a big part of achieving that not just as Zenobe individually, but as a sector as a whole, with lots of new and interesting business models. That's one thing I would like to see in five years. Looking back, the second thing, what I do believe I do believe that that is generally possible with the technologies we've got today, the capital that's available in the market today, and the experience that's being gotten in the market. I do think it's generally possible to show that a lot of these ambitions that we've got today are not ambitious enough and can be outperformed.


[00:28:49.970] - Jon

You said at the beginning of the podcast in terms of metrics, 270MW grid scale storage, 660 electric buses. Would you be hoping to put a zero on the end of that in five years time? A couple of zeros. How fast can you get?


[00:29:09.110] - Steven

Doubling tripling every year is what we've been doing. So I'd like to keep that going for another five years if possible.


[00:29:18.510] - Jon

Chris, how about you and the storage market in Great Britain in five years time? What will we see in the next five years?


[00:29:26.010] - Chris

I mean, it will have developed a long way. There's probably six gigawatts of storage that's committed through capacity market contracts of battery storage plus, and that's only out takes you through probably three and a half years into the future. So there's probably looking at eight, nine, even something like that gigawatts of battery storage, standalone grid scale battery storage in the UK in five years time. But it's needed. Right. So there's huge amounts of offshore wind coming online over that time period. National Grid wants to be able to operate the power system for certain hours in a net zero with completely net zero technologies by 2025, which is only three years away. So all of that battery capacity is needed to kind of be able to achieve that sort of decarbonisation target. So that's a huge transition from where we are now with less than two gigawatts on the system. And the UK is definitely a market leader in that space.


[00:30:32.130] - Jon

Yeah. Well, it sounds like the storage market has definitely moved from being experimental to really commercial and fast moving. Lots of contracts, as you described, Chris. Steven, you described the market as a bit not messy at the beginning, but lots of different companies playing different roles in the market. And I'm sure that will shake down over the next years. But there's real momentum now. I think Great Britain is showing in many ways it can have a leading role in integrating the amount of renewables we've got coming on stream. And it's really, really exciting to hear, Steven, what you've been doing with Zenobe what your vision is. And Chris, thanks for your views on the market. So, Steven, thanks for joining us today.


[00:31:24.090] - Steven

Great to be here. Thanks for the invite, Chris.


[00:31:27.870] - Jon

Thanks. And look forward to you joining future podcasts as we work closer together. And as always, thanks to everyone for listening and look forward to welcoming you back to the episode next week. Thanks and goodbye.


[00:31:42.630] - Jon

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


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