WEBVTT 1 00:00:08.119 --> 00:00:14.880 You're listening to Redefining Energy. Your co hosts from Berlin Gerard Reid and from 2 00:00:14.960 --> 00:00:21.839 London Laurent Segal. Today on Redefining Energy, we're going to talk about energy 3 00:00:21.839 --> 00:00:26.120 efficiency. Yeah, John, and it's a very interesting one because I think 4 00:00:26.160 --> 00:00:33.039 nobody talks about it and it's everywhere buildings, industrial transport, electrification, heat 5 00:00:33.039 --> 00:00:36.640 pumps. Really, it's all over the place. But it's not something you 6 00:00:36.679 --> 00:00:40.840 can see outside, you know, like a solar panel or a winter Buine. 7 00:00:41.479 --> 00:00:45.880 It's not sexy. No, it is because look, you can say 8 00:00:45.880 --> 00:00:48.679 to your neighbor, Look, I'm doing a bit for my environment. I've 9 00:00:48.679 --> 00:00:53.640 got a solar panel, I've got an electric car. How about guess what, 10 00:00:53.799 --> 00:00:57.840 Ln, I've got some insulation on my home. It doesn't sound the 11 00:00:57.840 --> 00:01:00.000 same, right, I feel the same, but I know it's incredibly important. 12 00:01:00.159 --> 00:01:03.760 First the word from our partner. E quit A Capital is a sustainable 13 00:01:03.799 --> 00:01:08.680 investment company headquartered in Hamburg, Germany. E quit A Capital investment realists such 14 00:01:08.680 --> 00:01:14.760 as clean energy, sustainable infrastructure, energy efficiency and growth private equity on behalf 15 00:01:14.799 --> 00:01:19.040 of its clients. Yes, not only it's important, but it's important that 16 00:01:19.200 --> 00:01:26.959 we adopt a business model where some infrastructure of funds intrust your specialists can apply 17 00:01:27.159 --> 00:01:33.760 to some method that we are doing for say win and solar two energy efficiency 18 00:01:33.840 --> 00:01:36.959 investment, and there are very few people who can do that. Yeah, 19 00:01:37.000 --> 00:01:38.519 no, no, I can great totally on this. And a lot of 20 00:01:38.519 --> 00:01:42.599 the projects and energy efficiency are small and they're not the same. It's not 21 00:01:42.640 --> 00:01:46.200 like a wind turbine where has to be clear. A lot of them. 22 00:01:46.200 --> 00:01:52.040 There's a small number of manufacturers and they're pretty standardized. Houses are not standardized. 23 00:01:52.079 --> 00:01:57.400 They come from different generations and we're always improving and changing stuffing in them. 24 00:01:57.439 --> 00:02:00.159 So it's difficult. Really, it's not that easy. That's why we 25 00:02:00.280 --> 00:02:07.200 brought it. Jonathan Maxwell is the founding partner and CEO of a two billion 26 00:02:07.239 --> 00:02:14.520 dollar phone called Sustainable Development Capital as DCL, and is one of the savviest 27 00:02:14.960 --> 00:02:19.599 investors in energy efficiency. Yeah, that's great to have him on the shoulder 28 00:02:19.599 --> 00:02:23.120 on. Let's bring him on. Jonathan, Welcome to the show. I'm 29 00:02:23.159 --> 00:02:27.960 really happy to be here. Thank you both for inviting me on. Great 30 00:02:27.960 --> 00:02:30.719 to have you. Well, let's jump right in. Let's talk about your 31 00:02:30.759 --> 00:02:36.080 book, The Edge, And in fact, the Edge is an acronym which 32 00:02:36.120 --> 00:02:42.879 is pretty phenomenal. An acronym for efficient and decentralized generation of energy. Oh 33 00:02:42.919 --> 00:02:47.479 my god. Well, you know, people accused the energy efficiency sector of 34 00:02:47.599 --> 00:02:51.800 being uncalled for many years, and so we're going to have to do something 35 00:02:51.800 --> 00:02:54.439 about that. And I'm not saying calling it edge is going to make all 36 00:02:54.439 --> 00:02:58.719 the difference, but I think it's a strategy. It's a different way of 37 00:02:58.759 --> 00:03:02.120 thinking about the energy system. The acronym was partly to do that leron, 38 00:03:02.159 --> 00:03:06.879 but it was also partly to do with the fact where the feature of energy 39 00:03:06.879 --> 00:03:12.919 at the moment underlies climate for sure, and economies for sure, particularly Gerard 40 00:03:13.280 --> 00:03:15.639 in Germany, but then where you were speaking from in the UK, where 41 00:03:15.680 --> 00:03:20.919 we had a cost of living crisis because prices went up so much recently after 42 00:03:20.919 --> 00:03:23.039 the Russian invasion of Ukraine. So it's about climate, it's about the economy, 43 00:03:23.159 --> 00:03:28.240 but it's also about security, and it's about energy security, but it's 44 00:03:28.280 --> 00:03:34.080 also about national security. And the edge also is the translation from Russian into 45 00:03:34.120 --> 00:03:38.719 English of Ukraine, which literally means on the edge. Wow. Wow wow, 46 00:03:39.080 --> 00:03:44.240 I didn't know that. Okay. The reason we wanted to do this 47 00:03:44.319 --> 00:03:52.120 episode is because at Cup twenty eight everybody was talking about tripling honorables, yeah, 48 00:03:52.159 --> 00:03:55.680 which is all good, But there was another part of the same sentence, 49 00:03:55.800 --> 00:04:01.039 the second part doubling energy efficiency. And if I look at the last 50 00:04:01.400 --> 00:04:08.599 IEE report, I see a pie of four hundred billion dollars a year of 51 00:04:08.800 --> 00:04:14.639 energy efficiency, which is as big as the level of the upstreme investment into 52 00:04:14.719 --> 00:04:19.639 oils. So what's your definition of energyfficiency? What's inside that four hundred billion 53 00:04:19.680 --> 00:04:24.360 dollar pa your pie? First way I'll describe it, Laura, is that 54 00:04:24.759 --> 00:04:27.759 why is the pie there in the first place? Like, what's going on? 55 00:04:28.000 --> 00:04:31.319 If there's an opportunity in investing in solutions to energy efficiency, what's the 56 00:04:31.360 --> 00:04:39.199 problem? So the problem must be inefficiency. So is the energy system inefficient? 57 00:04:39.759 --> 00:04:45.920 And the answer to the question is actually staggering because it's so staggeringly inefficient. 58 00:04:46.680 --> 00:04:48.680 Interult laughing. But one of the reasons I had to write the book 59 00:04:48.720 --> 00:04:53.439 is it's difficult to make the following statement and then not unpack it. And 60 00:04:53.439 --> 00:04:55.800 we're not going to have time to go to all of it today. But 61 00:04:56.560 --> 00:05:00.480 about seventy percent seven zero percent of the prime re energy in the United States 62 00:05:00.560 --> 00:05:03.399 is lost before it gets to the point of view, so about two thirds 63 00:05:03.439 --> 00:05:06.639 of it in Europe. I mean, it's a staggering number when you think 64 00:05:06.639 --> 00:05:12.079 that energy, as I said before, is defining climate is a key factor 65 00:05:12.120 --> 00:05:16.600 for any economic business performance, and it's frankly driving sorry national security challenges around 66 00:05:16.600 --> 00:05:20.279 the world geo politically. So what's going on is that can that possibly be 67 00:05:20.399 --> 00:05:26.480 right? And in a nutshell, it happens in a series of very specific 68 00:05:26.639 --> 00:05:30.839 areas along the value chain for energy, ten percent of energy primar energy gets 69 00:05:30.839 --> 00:05:34.600 lost just extracting and converting energy into centralized energy networks. Oil, gas and 70 00:05:34.639 --> 00:05:39.800 coals still eighty percent of the world's energy system, But the biggest part of 71 00:05:39.839 --> 00:05:43.199 the energy loss in the system is actually to do with the fact that we 72 00:05:43.279 --> 00:05:46.240 centralize energy generation. So for example, if you take a big combined cycle 73 00:05:46.279 --> 00:05:51.959 gas turbine or open cycle gas turbine, about half of the energy turns into 74 00:05:51.959 --> 00:05:58.079 electricity and the molecule that you put into this machine, thermodynamics limits the amount 75 00:05:58.160 --> 00:06:00.839 of electricity that can be made out of a molecule. So what happens to 76 00:06:00.879 --> 00:06:03.199 the rest of it, Well, the answer is, if you've built the 77 00:06:03.319 --> 00:06:06.199 energy system very far away from the point of use, the rest of it 78 00:06:06.240 --> 00:06:12.120 is heat that just gets dumped, and that actually the largest single loss in 79 00:06:12.160 --> 00:06:15.480 the global energy system, which is heat losses, and then you lose another 80 00:06:15.519 --> 00:06:18.079 ten percent getting it transmitted and distributed to the point of view. So this 81 00:06:18.279 --> 00:06:25.079 is the world's biggest problem with inefficiency, which is the supply side, and 82 00:06:25.120 --> 00:06:29.399 then there's a demand side problem as well, which is buildings, industry and 83 00:06:29.439 --> 00:06:33.160 transport seventy percent of the world's energy, they typically weighs twenty thirty percent of 84 00:06:33.199 --> 00:06:39.240 the energy they use. If that's the problem, what's the solution. And 85 00:06:39.279 --> 00:06:42.839 that's what I've been investing in actually for the last fifteen years. I wrote 86 00:06:42.839 --> 00:06:45.199 the book to make sure I'm on the right track, and I should spend 87 00:06:45.199 --> 00:06:49.240 the next fifteen years doing the same thing. And you can solve these problems 88 00:06:49.600 --> 00:06:55.160 by instead of building energy over here and it being used over there, build 89 00:06:55.240 --> 00:06:58.959 energy much closer to or right at the point of use. We've got the 90 00:06:59.040 --> 00:07:02.240 technology and the CEA systems to do that today, and that is a transformation. 91 00:07:02.399 --> 00:07:08.079 That's the D and edge that's decentralized, and then once the energy gets 92 00:07:08.079 --> 00:07:12.959 to the point of view. The E in edge efficiency is about reducing the 93 00:07:13.000 --> 00:07:15.279 amount of energy that the building's industry and transport need in the first place. 94 00:07:15.399 --> 00:07:19.439 Just don't have old lights HVAC, heating, ventilation, air conditioning, building 95 00:07:19.519 --> 00:07:24.720 management systems, controls. Just get the right equipment in your buildings and industry 96 00:07:25.240 --> 00:07:29.319 and that will make that will cut ten to thirty percent in some cases more 97 00:07:29.600 --> 00:07:31.920 of the energy needed. And if that's the story, that's the size of 98 00:07:31.959 --> 00:07:35.079 the cake. That's your number that you just quoted to me. Because the 99 00:07:35.199 --> 00:07:41.800 energy system is worth unbelievable amounts of money and most of it being dumped, 100 00:07:42.480 --> 00:07:46.800 and investing in the solution to that problem is even bigger, more valuable from 101 00:07:46.959 --> 00:07:51.720 economic and carbon emission reduction perspective, even bigger and more valuable than adding more 102 00:07:51.800 --> 00:07:56.839 energy into a broken system. I just wanted to take up on what you 103 00:07:56.879 --> 00:07:59.800 said there in terms of solutions. I mean, for me, the obvious 104 00:08:00.360 --> 00:08:03.040 actually is to electrify as much as you can of the system, because by 105 00:08:03.079 --> 00:08:09.560 electrifying you're burning less fuels ultimately, And i'd be interesting here related to that. 106 00:08:09.600 --> 00:08:13.439 Then, I think the advantage of electricity is that you can control it 107 00:08:13.480 --> 00:08:18.199 easier, so it lends itself to digital technologies in and around us. So 108 00:08:18.199 --> 00:08:22.839 I'd love to hear your pod on that for we sort of dig a little 109 00:08:22.879 --> 00:08:24.959 bit deeper. Yeah, So, first of all, I will agree with 110 00:08:26.040 --> 00:08:30.800 you. However, I would also say that we have a big job to 111 00:08:30.879 --> 00:08:35.720 do, all of us investing, developing, or even making policy when it 112 00:08:35.759 --> 00:08:39.000 comes to electricity. They're just to put it into context. And this is 113 00:08:39.039 --> 00:08:43.960 another staggering number. Electricity is only twenty percent of the world's energy system today, 114 00:08:43.639 --> 00:08:48.519 right, so to green the twenty percent before you get onto displacing fossil 115 00:08:48.559 --> 00:08:52.440 fuels in the other eighty percent. And at the moment where it's working electricity, 116 00:08:52.600 --> 00:08:58.639 about thirty three maybe forty percent of energy is green in the electricity sector 117 00:08:58.120 --> 00:09:03.799 where it's working intermittance, it needs to be balanced as well. But to 118 00:09:03.879 --> 00:09:07.000 get that number up even to one hundred percent of electricity is going to take 119 00:09:07.159 --> 00:09:13.600 trillions and decades. Now, those trillions and decades will happen for sure. 120 00:09:13.639 --> 00:09:18.240 For the last two decades with the world has invested six trillion dollars in renewable 121 00:09:18.279 --> 00:09:22.159 power and three trillion dollars in grid upgrades. And you know, the trajectory 122 00:09:22.159 --> 00:09:28.279 of those numbers continues, and we're going to see enormous trillions of capital invested 123 00:09:28.320 --> 00:09:31.480 over the coming decades. But it's going to take time. Enormous amounts of 124 00:09:31.559 --> 00:09:37.639 money and of course it's going to take a lot of planning, consenting and 125 00:09:37.240 --> 00:09:41.559 grid infrastructure. So I think it's just about the reality, you know, 126 00:09:41.600 --> 00:09:45.399 how long, how much, how many of the resources is it going to 127 00:09:45.399 --> 00:09:48.519 take to get this done? And secondly, what do we do in the 128 00:09:48.559 --> 00:09:50.960 meantime. So I don't think it's a what if in the sense of what 129 00:09:52.080 --> 00:09:54.639 if we don't do it. I think the world will electrified, and it 130 00:09:54.679 --> 00:09:56.480 should. But we need to be extremely honest with ourselves. And I think 131 00:09:56.519 --> 00:10:00.600 this is really the wake up core. Yes, we to do that. 132 00:10:00.679 --> 00:10:03.519 But at the same time, Gerard, we have to stop wasting two thirds 133 00:10:03.559 --> 00:10:07.759 of the energy that's being generated in the first place. So it's not either 134 00:10:07.919 --> 00:10:11.440 or, it's and And just to follow one question, and that is if 135 00:10:11.480 --> 00:10:13.600 I take a step back and say, well, why are we building lots 136 00:10:13.639 --> 00:10:18.480 of solar and wind, why are we building eves, etcetera. That I 137 00:10:18.480 --> 00:10:20.320 can look at that and say it's sexy. I can show it to people. 138 00:10:20.360 --> 00:10:24.000 I'm a politician, I can say look what I've done. Yeah, 139 00:10:24.080 --> 00:10:26.759 it's very difficult to do that when energy efficiency that makes it a little bit 140 00:10:26.799 --> 00:10:31.000 more difficult. Or how do you see that I would approach it in a 141 00:10:31.039 --> 00:10:35.440 slightly different way. And by the way, there's there's a statement I made 142 00:10:35.519 --> 00:10:39.000 in my book, which is that when I asked somebody years ago why energy 143 00:10:39.000 --> 00:10:41.799 efficiency really wasn't the focus, he said, real men build power plants. 144 00:10:46.320 --> 00:10:50.159 It's a perfect description, the kind of a bit of fashion. That's ourgynistic 145 00:10:50.279 --> 00:10:54.279 quay of thinking about the energy sector. But it was probably the best explanation 146 00:10:54.399 --> 00:10:58.240 I could give you. Actually, a lot of this solution I described in 147 00:10:58.320 --> 00:11:01.720 terms where the problem is mean that you need to build power plants or energy 148 00:11:01.759 --> 00:11:05.399 centers. Anyway, it's not just power, it's heat and the rest of 149 00:11:05.440 --> 00:11:11.360 it. And energy efficiency includes on site generation because that's much more efficient supply. 150 00:11:11.480 --> 00:11:13.919 So instead of getting the energy wasted before it gets to the point of 151 00:11:15.080 --> 00:11:18.320 use, build the energy center, but build it at the point of use. 152 00:11:18.600 --> 00:11:22.799 We've got in South Dublin one hundred megawat project coming out of the ground 153 00:11:22.919 --> 00:11:26.399 to serve data centers in South Dublin that have no grid capacity, have high 154 00:11:26.399 --> 00:11:30.639 carbon content if they are in the grid, and where energy costs a lot 155 00:11:30.639 --> 00:11:35.480 of money, so that to me is sexy. Another great example in the 156 00:11:35.600 --> 00:11:39.480 United States, in Indiana, we are a big energy provider to the Steel 157 00:11:39.519 --> 00:11:43.240 industry, the so called hard to abate sectors. And in that case, 158 00:11:43.559 --> 00:11:46.679 we've got two hundred and ninety eight megawatts of on site generation. Most of 159 00:11:46.679 --> 00:11:50.600 that is being fueled just by the waste heat and gases coming off of the 160 00:11:50.639 --> 00:11:54.360 steel mills. And to me, that's sexy. It's a big energy center. 161 00:11:56.039 --> 00:11:58.679 And last point I'll make solar is sexy. Then we're probably the sexier 162 00:11:58.759 --> 00:12:01.759 end of the solar market. So instead of building a solar panel in the 163 00:12:01.759 --> 00:12:05.159 middle of a field, not nothing wrong with that, why not build it 164 00:12:05.240 --> 00:12:09.440 on your rooftop, on the warehouse, on the data center, on the 165 00:12:09.480 --> 00:12:13.000 school. So you know, we've got tens hundreds of mega lots of these 166 00:12:13.039 --> 00:12:18.000 projects across the United States. And it's good business too. We've become one 167 00:12:18.039 --> 00:12:22.279 of the top three or five commercial industrial, rooftop and carport delivery companies in 168 00:12:22.320 --> 00:12:28.600 the United States. So these are sexy deals. Is it sexy to change 169 00:12:28.600 --> 00:12:31.200 all the light bulbs with Santander across the whole country, cut the energy foot 170 00:12:31.200 --> 00:12:35.799 print by fifty percent? I think? So. Is it sexy to put 171 00:12:35.879 --> 00:12:41.399 chiller replacements in panasonic and manufacturing facilities around the world? I think so. 172 00:12:41.039 --> 00:12:45.000 Beauties in the eye of the beholder Gerrard. But for me, this is 173 00:12:45.039 --> 00:12:52.080 beautiful. Doesn't rely on regulations subsidy pumping more energy system into a place where 174 00:12:52.080 --> 00:12:54.559 it's just going to leak back out again. Instead it's lower cost, lower 175 00:12:54.600 --> 00:12:58.320 carbon, more reliable. It's pretty good, Jonathan, Thank you for those 176 00:12:58.320 --> 00:13:03.759 examples. And and really I want to dig deep because your company is called 177 00:13:03.919 --> 00:13:11.600 Sustainable Development Capital, and not only your financier of talent, but you really 178 00:13:11.639 --> 00:13:16.679 have an industrial expertise. The question is you're going to have a certain number 179 00:13:16.679 --> 00:13:20.000 of subsectors as you say, so, it's going to be probably low great 180 00:13:20.080 --> 00:13:28.360 heat or data centers or on site generation. So is it bespoke an investment 181 00:13:28.559 --> 00:13:33.799 or can you learn from what you've done and scale repeated? How do you 182 00:13:33.879 --> 00:13:39.080 address investments? One thing I talk about christ a lot is the opereto principle 183 00:13:39.360 --> 00:13:45.200 eighty twenty rule in business. Actually, eighty percent of the opportunity or the 184 00:13:45.240 --> 00:13:48.879 market is in twenty percent of it. So you can be really quite focused 185 00:13:50.399 --> 00:13:54.720 going into my point seventy percent of energies used in buildings, industry and transport 186 00:13:54.759 --> 00:13:58.600 to start with, And if you then unpack each of those areas in industry, 187 00:13:58.879 --> 00:14:01.879 it's really about ill cement, chemicals and plastics, and then within steel, 188 00:14:01.879 --> 00:14:05.320 cement, chemicals and plastics, there's a limited number of mega players. 189 00:14:05.879 --> 00:14:13.200 The technology solutions are repeatable. We're finding they're repeatable, so waste heat recovery, 190 00:14:13.240 --> 00:14:16.720 waste gas recovery, and the steel industry or the cement industry, on 191 00:14:16.840 --> 00:14:22.240 site generation in the chemicals systems. These are projects that we're implementing, proving, 192 00:14:22.279 --> 00:14:24.960 commissioning, operating, and then we're able to go to customers and show 193 00:14:26.000 --> 00:14:28.639 them based on to be fair at ten fifteen, the attract record the ability 194 00:14:28.639 --> 00:14:33.759 to do it again. Data centers is a great example. Data centers are 195 00:14:33.759 --> 00:14:37.000 one of the largest, fastest growing markets, and demand basis for energy are 196 00:14:37.080 --> 00:14:41.120 hugely pressurized because how do you get it, what's the carbon content and what 197 00:14:41.159 --> 00:14:46.720 does it cost you measurement data centers in medwats not square feet. What's the 198 00:14:46.759 --> 00:14:50.600 solution, Gerard? The solution is building on site generation and reducing the amount 199 00:14:50.600 --> 00:14:54.000 of power you need not just to run the racks themselves, but also to 200 00:14:54.039 --> 00:14:58.879 cool them. So coming up with solutions to that problem and then to your 201 00:14:58.919 --> 00:15:03.480 point, Laurent, it repeatable so you can proved clients that it can be 202 00:15:03.519 --> 00:15:07.759 repeated time and time again. So you're right, we have an industrial capability. 203 00:15:07.159 --> 00:15:11.240 We're not just an investment group. In fact, the way that we 204 00:15:11.279 --> 00:15:13.440 make our investments first is to make them ourselves. We go out and we 205 00:15:13.480 --> 00:15:20.799 talk to data center operators, hospitals, universities, industrial facilities, and we 206 00:15:20.879 --> 00:15:24.799 designed solutions to those problems. But they are fundamentally repeatable. So back in 207 00:15:24.799 --> 00:15:28.919 twenty fifteen we developed and invested in the project for Citygroups data Center. It 208 00:15:30.000 --> 00:15:33.000 was a couple of mega wants. We did another one for them in New 209 00:15:33.080 --> 00:15:37.240 York that was about ten megaants. Fast forward to twenty twenty four and we've 210 00:15:37.279 --> 00:15:41.720 got a hundred megawats going up for one customer in Dublin. Fundamentally, it's 211 00:15:41.759 --> 00:15:48.000 the same approach to the same problem with a similar solution. But you're absolutely 212 00:15:48.080 --> 00:15:50.200 right. One of the characteristics of this market, which is why we've had 213 00:15:50.200 --> 00:15:56.399 to develop a very specialist expertise, is that each location, each building does 214 00:15:56.440 --> 00:16:02.440 have its own specific resource availability, specific channel. So while the basic blueprint 215 00:16:02.559 --> 00:16:06.279 broadly is the same, the way that you apply this but the solutions in 216 00:16:06.320 --> 00:16:10.759 each individual cases is actually quite bespoke. How much I said, do you 217 00:16:10.840 --> 00:16:15.519 have under management right now? In total across all of our family of funds 218 00:16:15.519 --> 00:16:18.840 and investment portfolios. It's about two and a half billion dollars. Wow, 219 00:16:18.360 --> 00:16:23.639 So you own the kit? Do you sell what electrons, molecule, mega 220 00:16:23.759 --> 00:16:26.799 jewels? I mean, what do you sell? What are your revenues and 221 00:16:27.399 --> 00:16:33.039 coalatively fuel risk? In terms of market prices? You know how much can 222 00:16:33.080 --> 00:16:37.200 you pass through? Please? Our projects take the form that would be very 223 00:16:37.240 --> 00:16:44.759 recognizable to any mainstream infrastructure investor. We have a project agreement with a client, 224 00:16:45.360 --> 00:16:48.720 let's call it a data center or a hospital. The project agreement says, 225 00:16:48.759 --> 00:16:52.480 design, build, finance, own, operate, and maintain an energy 226 00:16:52.639 --> 00:16:56.399 solution for us. The outcome of that solution will be, as you say, 227 00:16:56.480 --> 00:17:00.919 Laurent, delivering some form of energy service. It's energy or infrastructure as 228 00:17:00.919 --> 00:17:04.440 a service. So it's power, it's heat, it's light, it's cooling, 229 00:17:04.559 --> 00:17:08.799 but as a service, and under that contract, the client pays for 230 00:17:08.880 --> 00:17:14.319 that service as long as the key performance indications are being met, is it 231 00:17:14.359 --> 00:17:18.240 available, is it efficient? If it's light, are they shining brightly enough 232 00:17:18.240 --> 00:17:21.680 for the right temperature? And so on. So that's kind of the project 233 00:17:21.680 --> 00:17:25.519 agreement. We have a project company to own the project agreement, and then 234 00:17:25.519 --> 00:17:30.039 we have contracts in place with construction and operational firms to build and then subsequently 235 00:17:30.039 --> 00:17:34.079 to operate that system, and we have appropriate arrangements in place to make sure 236 00:17:34.119 --> 00:17:38.799 that it is available for use in order to meet the project agreement specifications with 237 00:17:38.839 --> 00:17:44.880 the client. So it's very similar actually to the project finance or infrastructure project 238 00:17:45.279 --> 00:17:49.359 investment techniques that have been employed for the last decades. That was my heritage. 239 00:17:49.400 --> 00:17:53.440 I came from a very large club infrastructure fund. That's what we've been 240 00:17:53.480 --> 00:17:59.319 doing really in the energy efficiency sector, which is simplifying the contractual approach, 241 00:18:00.079 --> 00:18:03.480 making it consistent with what capital markets expect to see when they make investments in 242 00:18:03.559 --> 00:18:07.559 projects. For the customer's perspective though, Lauren, this is kind of where 243 00:18:07.599 --> 00:18:11.680 we've been able to industrialize this. To make your point, when a client, 244 00:18:11.720 --> 00:18:15.559 a customer works with us, like a hospital, a data center, 245 00:18:15.559 --> 00:18:19.359 a steel mill, they're facing off against the company that's delivering a solution to 246 00:18:19.400 --> 00:18:23.880 them as far as they're concerned, will design, will develop, will deliver 247 00:18:23.960 --> 00:18:27.799 a project, and then they pay for that project as a service, provided 248 00:18:27.799 --> 00:18:33.480 it's working over a contracting period, and the price that they pay for that 249 00:18:33.599 --> 00:18:37.440 project should be cheaper than the grid lower carbon the grid and more reliable than 250 00:18:37.440 --> 00:18:41.839 the grid. Well, I presume you must have been a really see period 251 00:18:41.680 --> 00:18:45.720 in terms of growth phase going forward. And the reason I say that is 252 00:18:45.759 --> 00:18:48.000 just because of the whole Ukrainian crisis. Yeah, and the impact that it's 253 00:18:48.000 --> 00:18:52.279 had in Europe. So maybe talk a little bit about that and what would 254 00:18:52.279 --> 00:18:56.039 impact that's had on your business and how you see it going forward. As 255 00:18:56.039 --> 00:18:57.759 I said at the beginning, there are kind of three key features to this. 256 00:18:59.000 --> 00:19:03.799 It's security, as climate, and it's the economy. Basically all three 257 00:19:03.839 --> 00:19:07.279 of those factors are flashing green or red lights, depending on you want to 258 00:19:07.279 --> 00:19:11.319 look at it for this sector. If we start with the security point a, 259 00:19:11.359 --> 00:19:15.759 Europe really didn't talk about energy security until about February twenty twenty two when 260 00:19:15.839 --> 00:19:19.519 Russia invaded Ukraine. But in fact they did, they'd just forgotten about it 261 00:19:19.519 --> 00:19:25.839 if you remember when last invaded Ukraine or so to speak, annexed Crimea. 262 00:19:26.000 --> 00:19:30.200 Actually the European Commission at that point in twenty fourteen said for every unit of 263 00:19:30.599 --> 00:19:34.160 natural gas we don't use is two and a half units we don't need to 264 00:19:34.160 --> 00:19:37.200 buy from Russia. So there was an element of that and it led onto 265 00:19:37.240 --> 00:19:41.559 a policy in Europe that was mumbled for a number of years but became very 266 00:19:41.599 --> 00:19:45.279 serious only a year and a half ago, which was energy efficiency first. 267 00:19:45.359 --> 00:19:48.400 That's where that came from. But think up until that point February twenty two, 268 00:19:48.640 --> 00:19:55.319 energy security just wasn't on the radarsk But it took catastrophic geopolitical event in 269 00:19:55.440 --> 00:19:59.799 order for that to really force change, and it really has force change for 270 00:19:59.799 --> 00:20:04.400 ever we are only six months later. The European Commission mandated reductions in gas 271 00:20:04.480 --> 00:20:10.079 use by fifteen percent electricity use by five percent, not by twenty thirty like 272 00:20:10.160 --> 00:20:12.440 we have here in the UK, but immediately. By the way, security 273 00:20:12.480 --> 00:20:17.119 is really what's driven as in America too, it's just that not because of 274 00:20:17.160 --> 00:20:19.640 invasion, it's hard to invade America, but because of the weather. So 275 00:20:19.720 --> 00:20:25.440 you've had very serious natural disaster risk and events over the course of the last 276 00:20:25.920 --> 00:20:27.680 ten twenty years that have really forced a lot of change, and you've seen 277 00:20:27.839 --> 00:20:33.079 energy decentralized, so instead of people getting knocked off the grid like happened to 278 00:20:33.119 --> 00:20:36.680 New York in twenty twelve for Super Song Sandy, or have we seen so 279 00:20:36.799 --> 00:20:41.799 often in superstorms or natural disasters hurricanes over the course of the last three years, 280 00:20:41.799 --> 00:20:47.720 Texas, Louisiana, Florida, America instead started to decentralize energy and people 281 00:20:47.799 --> 00:20:49.480 wanted to put energy closer to the point of use, not just because of 282 00:20:49.480 --> 00:20:52.559 the lower carbon, lower cost aspects, just because if the grid went down 283 00:20:52.640 --> 00:20:57.400 they didn't. So it's security is really driving this now and we're seeing it 284 00:20:57.400 --> 00:21:00.799 in Asia as well as in Europe. That's not going away. I don't 285 00:21:00.799 --> 00:21:06.599 think we're going back to pre twenty twenty two geo political framework. So you're 286 00:21:06.680 --> 00:21:11.319 right, availability and security is a big driver of this policy business and thefore 287 00:21:11.359 --> 00:21:15.519 our business. The second is carbon. What I can tell you is when 288 00:21:15.559 --> 00:21:18.160 I started Sustainable Development Capital, I was able to buy the name to start 289 00:21:18.200 --> 00:21:23.480 with, so nobody was really looking at sustainable development investment in the same scale. 290 00:21:25.279 --> 00:21:27.000 When I started the business in two thousand and six seven, we didn't 291 00:21:27.000 --> 00:21:32.480 have iPhones. It was a slightly different world, right, But now carbon 292 00:21:32.559 --> 00:21:36.440 really matters, especially in the last three to five years, if governments have 293 00:21:36.599 --> 00:21:40.400 been going backwards and forwards on it. My observation is corporates are very serious 294 00:21:40.480 --> 00:21:45.160 about decarbonization. You know, they may be slightly nervous about talking about it 295 00:21:45.200 --> 00:21:48.680 because of greenwash, accusations today, so there's kind of a green hash movement 296 00:21:48.759 --> 00:21:52.680 now. But my direct experience of working with corporates is that they've made public 297 00:21:52.680 --> 00:21:56.240 commitments to decarbonize and therefore they have to try and find a way to do 298 00:21:56.279 --> 00:22:00.559 it. An energy efficiency is the lowest cost, fastest, greenest way to 299 00:22:00.599 --> 00:22:04.160 get there. And then the last point is on cost, and this is 300 00:22:04.200 --> 00:22:11.160 something that is not a fashion item. It's always around and that is if 301 00:22:11.279 --> 00:22:18.039 energy costs can be mitigated or eliminated, then that's good business. And you 302 00:22:18.079 --> 00:22:22.160 asked about the Russian invasion of Ukraine. We all remember when natural gas prices 303 00:22:22.160 --> 00:22:26.920 in Europe went up six times, and we also know the catastrophic impact that 304 00:22:26.960 --> 00:22:32.119 the availability and price of natural gas has had on industry across Europe. Price 305 00:22:32.200 --> 00:22:36.000 matters a lot in the data center market and other areas, and it's because 306 00:22:36.000 --> 00:22:38.519 of that that energy efficiency comes to the fore because if you can cut your 307 00:22:38.519 --> 00:22:41.960 cost and do the same job, or even do a better job, that's 308 00:22:42.000 --> 00:22:47.359 what efficiency is about. So maybe just to conclude there, maybe you can 309 00:22:47.400 --> 00:22:49.480 talk a little bit about how you see the next three to five years with 310 00:22:49.680 --> 00:22:55.359 STCL. The last three to five years we've grown a lot. Actually and 311 00:22:55.400 --> 00:22:59.920 we've got a large listed investment company on the London Stock it's change called CEA 312 00:23:00.039 --> 00:23:03.000 at the SECR Energy Efficiency in Come Trust. It's got to work about one 313 00:23:03.039 --> 00:23:06.440 and a half billion pounds of assets in it. We launched a new private 314 00:23:06.559 --> 00:23:11.559 fund back at the end of last year which is investing already in development and 315 00:23:11.559 --> 00:23:17.319 construction of projects. We've also started a small but what we hope is going 316 00:23:17.359 --> 00:23:22.480 to be a fast growing private equity platform here at STCL. So most of 317 00:23:22.519 --> 00:23:26.480 our investments have been the overwhelming majority of our investments so far have been in 318 00:23:26.480 --> 00:23:33.680 infrastructure projects. But by building that capability and portfolio, we've also started to 319 00:23:33.720 --> 00:23:38.000 see where there are technologies and companies coming through that are going to make a 320 00:23:38.000 --> 00:23:42.759 big difference. So if you can provide high temperature process heat and store it, 321 00:23:44.559 --> 00:23:48.519 if you can provide rare earth motors, if you can cool data centers 322 00:23:48.559 --> 00:23:52.240 without using so much energy and water, then those are the types of companies 323 00:23:52.279 --> 00:23:56.480 we get very excited about. We've started to make some investments through our public 324 00:23:56.480 --> 00:24:00.960 companies see it, but that is an area that we really want to grow 325 00:24:00.000 --> 00:24:06.000 out. In terms of our private equity capabilities, we see much bigger scale 326 00:24:06.039 --> 00:24:11.240 happening now to your point about the drivers of change in our sector security, 327 00:24:11.279 --> 00:24:14.720 cost and carbon in Europe and North America, but there are also some other 328 00:24:14.759 --> 00:24:19.319 markets where we see huge growth opportunities, like other geographies like Asia. I'm 329 00:24:19.359 --> 00:24:23.039 excited about the next three to five years. The biggest problem in the energy 330 00:24:23.079 --> 00:24:26.920 system is that most of it's wasted. We can do something about it, 331 00:24:26.960 --> 00:24:30.680 and that's what we intend to do. Well. Johnath Dan, thank you 332 00:24:30.799 --> 00:24:36.240 very much for this speak panorama of a sector which is huge but not talked 333 00:24:36.240 --> 00:24:38.480 about enough. And that's one of the reasons we've brought you on the show. 334 00:24:38.519 --> 00:24:44.440 And itwas a very pleasant, very very informative job. Jonathan, very 335 00:24:44.440 --> 00:24:47.799 informed. Thanks for coming on the show. Laurent Gerra, thank you so 336 00:24:47.920 --> 00:24:52.000 much for having me on job. Actually I'm going to start aron, what 337 00:24:52.000 --> 00:24:56.440 do you think? What's your conclusions and reflections? Well, first reflection, 338 00:24:56.359 --> 00:25:03.759 Janatan speaks much better English than the tw of us. We're gott have to 339 00:25:03.799 --> 00:25:07.559 take over the show from us. He's smart. I think it's smarter than 340 00:25:07.599 --> 00:25:11.480 we are. Second, is a very pretty man. I'm in love with 341 00:25:11.559 --> 00:25:15.920 him. Okay, let's put it this way, but it's very no Actually, 342 00:25:15.920 --> 00:25:19.319 what you what you're saying is incredibly articulous. Yeah, in terms of 343 00:25:19.359 --> 00:25:23.960 his ability to actually and he actually does he you know, to make sexy 344 00:25:25.079 --> 00:25:30.039 a difficult topic and to make it accessible to a much broader audience. Absolutely 345 00:25:30.079 --> 00:25:34.599 brilliant. He is trying to crack the code of scaleability. This is what 346 00:25:34.759 --> 00:25:40.000 professor or Benfleiberg in How Big Things Get Done or Our Book of the Year 347 00:25:40.119 --> 00:25:45.359 and everybody's Book of the Year, has proven that the success in any industrial 348 00:25:45.440 --> 00:25:49.039 sector is scalability. And the fact that he's trying to replicate the fact that 349 00:25:49.039 --> 00:25:55.279 he's using the same contract, the fact that he's even starting his vertical integration 350 00:25:55.480 --> 00:25:59.240 with p Funds where he's going to invest in certain of his suppliers, I 351 00:25:59.240 --> 00:26:03.240 think that's absolutely brilliant. I agree with you. It's badly needed because as 352 00:26:03.240 --> 00:26:07.400 I said, it is energy efficiency. You can finance it, but it's 353 00:26:07.519 --> 00:26:14.039 hugely, very expensive to finance that type of project, and that's obviously you 354 00:26:14.039 --> 00:26:18.039 know, it makes that projects on economic is a great pioneer. I would, 355 00:26:18.160 --> 00:26:21.359 in fact, I would like other people to imitate Team because what he's 356 00:26:21.400 --> 00:26:25.319 doing it is this year is really brilliant. And let's face it, we 357 00:26:25.400 --> 00:26:30.279 need capital for energy efficiency it's a tough one one and we're very grateful to 358 00:26:30.319 --> 00:26:33.160 Jenaton to drag the code and liston. As we go back to the McKinsey 359 00:26:33.319 --> 00:26:37.359 carbon debatement carve many years ago, we're talking about the mega wark rather than 360 00:26:37.359 --> 00:26:42.200 the megawat right. It's much easier to say that extra unit of energy than 361 00:26:42.240 --> 00:26:45.759 it is to build another unit of energy, and it's also cheaper, so 362 00:26:47.079 --> 00:26:48.680 we do need to focus, focus, focus on it. And you look 363 00:26:48.680 --> 00:26:53.200 at any of the road maps going forward, whether it's the IA or any 364 00:26:53.240 --> 00:27:00.680 of these NGOs, energy efficiency is critical good. We like to congratulate Jonathan 365 00:27:00.759 --> 00:27:06.119 for everything he's doing. We thank Aquila Capital, who's that back. Thank 366 00:27:06.160 --> 00:27:10.440 you guys, good to have you back, and John I talk to you 367 00:27:10.480 --> 00:27:22.400 next week, look forward to Thank you for listening to Redefining Energy. Don't 368 00:27:22.400 --> 00:27:27.759 forget to read the show and subscribe on Apple Podcast, Spotify, or the 369 00:27:27.799 --> 00:27:30.160 platform of your choice.