You're listening to Redefining Energy. Your co hosts from Berlin Girard Reid and from
London Lawrence Segalem Episode one or two and Ja Today on really Funding Energy,
will go live from Brussels where we have an exceptional interview with Lio Bionbaum,
the CEO of bion a new president of Your Electric, but first of all
from our new partner. This podcast is powered by Axpo, an international leader
in providing sustainable energy solutions for the future. In an ordex. AXPO has
been a pioneer within trading and origination services for the last twenty years. Yeah,
Axpo, we're really glad to have them as a partner and very robust
Swiss utility. We're very glad. So back to the conversation. We've been
invited by Christian Ruby and Bruce Douglass Emilio Lay, fantastic team of Your Electric.
Two have a podcast recording with Lio Bionbaum and to set up. It's
kind of strange because we're in the middle of this gigantic tour and taxi all
and we're in a fish tank. Yeah yeah, yeah, and that was
actually a cool fish tank because that particular day, oh my god, it
was warm and there was nowhere conditioning anywhere except where we were. There were
a lot of spectators but didn't put the lot speaker, so whatever we said,
so now you have the sound. You deserve the sound because that interview
was really fantastic. It was fun. I like Leo a lot. That
makes it easier when you like someone right when you get onward, because he's
very open with awesome. We were open and likewise for our American listeners who
don't know Europe, first, well, you're Electric, which is the association
who gathers all the production, distribution and everything of energy on the continent.
So it's a very very powerful business organization. And Leo is also the CU
of Eon, which is a gigantic German utility. Do you want to talk
a bit more about Ion. Well, Ion's the biggest retail chility in Europe
in terms of customers, and it's also a distribution grid operator across the continent,
mainly in the German markets, but also in other markets as well.
So it's a really interesting business it is. And of course, so what
we're going to talk about with Leo, Well, first we're going to start
at energy crisis with Ukraine and how did they react on a day to day
basis, because some energy Govenny did very well out of it and some very
poorly, and I would say beyond it pretty well. And then we'll come
around what is their three main access of work in the coming years? Well,
listen, why don't we listen to the interview. Welcome to really finding
Energy life from brusself with a fantastic guest, Lil bim Baum. My pleasure,
colleagues, Nice to be here. You got to see again absolutely pleasures
on my side. Long time since we met in this group exactly, so
it was two years ago you came on our podcast and since a lot of
things have happened in the energy sector. What's your first question? Yeah,
I'd love to hear your reflections on last year, actually the whole crisis that
we've come true, and how you see things going forward? Actually a short
question for the beginning. So first, how does one look at the last
year? It's horrific. We're going to talk about what it meant for the
energy sector, but in reality it's a tragedy what we have observed last year.
Now, in every negative, there's something positive. Europe has risen up
to a certain extent to this challenge which was inflicted upon us by the Russian
aggression against Ukraine. And we have shown in a surprising way, first that
Europe is the solution and not the problem. And so in that sense,
the first learning that we got together, we are stronger, and only together
can we actually manage challenges like the one which is being thrown into our direction
by the war. But it's the same is true for climate action. Also,
only together can we sort out the time election. So maybe it's even
you know, like the last year is even a test run what we should
be able to do. So the last year was a test outcome. We
are now much better prepared than we have been last year. Last year in
April March April, we didn't have processes, we didn't have systems, we
had an empty storage, we didn't know how to communicate. Partially, we
didn't have the legislation which we needed, so it was all in flux.
This year we have all of that. We have better storage, established processes,
communication, etc. So I think we are much better shaped than last
year. So I'm optimistic that we can manage the situation going forward. Now,
what has also happened is we only manage the crisis. We didn't structurally
solve it. Now this is the task now going forward, and this is
really what we need to discuss. How do we long term really solve the
issue and not only manage the crisis for one year, for two years and
for three years. But again, the progress since last year is remarkable,
Bill, and we can take encouragement from that in the way that we have
seen corporation, which I didn't believe before. So as a president of your
electric you have all your members, and some has done extremely well and some
have suffered a lot and have been bailed out. So it is a bit
of a redistribution of the cards. And of course, Ion, you're probably
gonna tell us if you find yourself stronger after the crisis, what's your interpretation.
One should not be too arrogant. In such a crisis. You also
need luck, and we were lucky, for example with the warm winter.
The warm winter actually meant that we managed to get through without spikes, cold
spells and so on, which would have been a real commercial disaster this year.
So one should be careful to say I did fine, but Ion did
fine. We are actually getting out of this crisis, I believe stronger than
we went into the crisis, but only because I think what we can take
credit for is that we started earlier. We started crisis meetings, daily crisis
meetings in November twenty one, so four months before the war broke out,
because we felt something is happening. Can I say just that because of the
changes in the gas markets or is it because of the fact that you sort
of got word from Russia UKRAINO. Because we looked at the markets, we
knew as much as anybody else, So we didn't have any insight that were
secretly conveyed to us. We had the same perspective. And then we start,
oh, something is happening. We need to prepare And if something is
happening, all that matters is speed. So we set up a crisis team
and we said we need now to get into a different discussion mode and different
reaction mode, different agility, and in the end, speed was what really
made the difference when the crisis really materialized. The second thing we said is
speed really means we need to be able to take decisions, I mean fundamental
decisions on a daily basis. It can't be that somebody makes a proposal.
It goes to the board and then it goes to the risk committee, and
then four weeks later we react if the crisis materializing, we need to be
faster. So that is the second thing we did. And then where the
two actions which really made the difference for Ian on the commercial side. And
then in the end we did much more things right than wrong. And every
mistake is triple digit million, but everything you do right is also triple digit
million, since we did more positive than negative. In the end, actually
our results were strong, so are we getting our stronger? I believe the
good companies must have an aspiration to get out stronger out of a crisis.
For them, a crisis is an opportunity and should be an opportunity. For
weaker companies who are not set up, the crisis will actually make them even
weaker. Can I ask them just to look at Ian. You would have
had learnings from us, And I suppose my question is, really, do
those learnings bring about changes in your strategy going forward or you're just saying no,
it's all about the same. We'll just keep executing what we planned before
the crisis. The big learning is speed. So the second learning is if
you have a weakness and you tolerate it. When times are good, that's
fine. Probably the weakness won't hurt you a lot. But when the crisis
hits you, a weakness is expensive. So if you need to do something,
just get it done. The faster you get it done, the better,
and if you get it done before the crisis, even better. So
that was my second learning. So we had some decisions whereas, ah,
we should have done that earlier. We knew that this was not our strong
but somehow other things. So don't tolerate weaknesses and be fast. So those
are my two big learnings from the crisis. On the strategy, no,
actually, what was our capital market story which we presented actually briefly before we
started our crisis meetings. It was we are looking at a decade of growth
which is driven by the quest for sustainability or decombanization, and it will require
full digitalization of all the systems and processes. This story is completely intact.
Actually it's even more true than before, and we have seen the requests and
the requirements for investments going up even more. Can I ask you one other
question, just on the strategy, which is the one change that I think
that's to come about? Sarah Laurent. The one change I think that's come
around, which is that now I think this energy transition has become about the
customer. So the question I'd ask is whether you're customer centric enough or do
you have to change the way you do things. How do you feel about
that relationship to the end customer. Now we have seen now in the last
months, maybe an increasing discussion what is it that customers really can manage,
can support? How much volatility can they be exposed to? And that is
something that needs to be on our mind. But the reality is in the
crisis, we felt as long as we really went the last mile to explain
what is happening, explain why we are struggling, customers really accepted it.
We were actually blamed less for high prices with the price level of twenty two,
then we were blamed for much lower prices years before. So to a
surprising extent, customers tolerated the outcome of the crisis that was number one,
and they even gave us credit for us trying to manage it, despite the
fact that it's a real hardship for many customers. But for example, if
you want, we hired an additional five hundred call agents just to explain the
stuff that we are doing, because the call volume which we got was just
increasing massively despite also the digital channels increasing massively, so they need to communicate
is massive. But if you do that, then actually customers understand that obviously
a crisis, a global crisis, cannot just be weathered off by a private
company. So you took about prices, and of course for ten years were
market prices anywhere between fifty and seventy Europe and making one hour. Everybody thought
that would be the end of historian. Of course, last August we climbed
to watch out one thousand euros eleven hundred, and of course, all of
a sudden the politician starts getting very agitated or right or wrong, and they
want to reform the market. And we've seen everybody coming with their brilliant idea,
and somehow we are into thinking about an energy market reform because of course,
why should the gas be the marginal pricing? And of course con webbles
and blah blah blah. I mean we heard a hundred times so and here
I'm talking about your electric and your position in general, what do you want
to say about all the attempts right now? At energy market design reform.
I'll try to answer without now getting into the details of the daily discussion,
which is then outdated by tomorrow. So Number one, the European market has
saved us if you wouldn't have had a European market, right. The French
got their tricity from the European market, which they didn't have. The Germans
got the access to infrastructure which they didn't have. The Eastern Europeans were depending
on us anyway on the West, supplying to the East, and so the
European market was key. The first insight is we need to preserve the European
market now. The second comment at prices. If one thousand, one hundred
or whatever the prices are, the market will break apart because that's an unsustainable
price level. I can't hatch at one thousand euros Permega one hour because I
would just be locking in positions which I couldn't charge to my customers. You
know, the debt would rise to a level which would be impossible to bear
for all the retailers. So if that price level would have persisted, the
market would have broken apart. Therefore, number three is clear that the discussion
around the market design reforms or were started and triggered by this. It got
luckily into and let me call it better environment prices went down significantly in September,
and so we got now a reasonable consultation what could we do to amend
the market to make it stronger going forward? And we got a very reasonable
consultation by the EU Commission exactly in that direction. And fourth, the Commission
then made a reasonable proposal for amendments. We as your electric set, the
glasses are full. That makes sense. And fifth, this is never the
end of the story in Europe because then even if the proposal is reasonable,
then the trilogue starts, the EU Parliament comes in, and now we're in
the middle of seeing whether the final outcome of this whole process will really strengthen
the market or will introduce elements which are detrimental for the development of the market.
Both are actually still possible outcomes. We will see how this works out
in the next weeks. We're going to talk about the future now, and
you just published a manifesto. Nobody talks about manifesto. I mean Colt Marsi
the manifesto at some point, okay, so whatever, okay, whatever,
But if people talk about my manifesto in one hundred and fifty years, I
would be positively surprised. Can you summarize the key points you see in that
manifesto because there is okay, there is the classic thing about humanizations, stabilizations
on, but there are some new things which have a really interesting, a
bit innovative. So let's talk about what's new. Yeah, and maybe just
to start, we had a strong focus, as you're electric, always on
the story that electrification is really the path forward and the solution, and so
we had previous manifestos which were really emphasizing this point electrification is the solution.
Now, what we are saying in this manifesto is three things. Number one
is security of supply is back on the agenda. It was not considered a
critical target or whatever. It was taken as a given, and we are
saying, no, it's not a given. It's back on the agenda.
And electrification done in the right way is one way of producing the securitive supply
and the decombonization. So we should just accelerate on the pass which we have
been on. But we should be mindful of securative supply as an issue and
not just take it for granted. So there's number one, and that requires
also appropriate market design, long term incentive signals, all the good stuff which
we need for the development of an electrified future which includes much more renewables,
etc. So there's number one. Number two we said, we have to
be clear that the new bottleneck is grids are the new permitting. The infrastructure
on which this energy transition happens needs to be strengthened. We are going to
hit constraints if we accelerate immobility, which immobility happens in the infrastructure, in
the low voltage infrastructure. Actually, if we actually electrify heat now massively as
we are discussing, if we integrate mass safely more renewable at a speed which
is completely unprecedented, So we need to make sure that we actually provide the
infrastructure for that. And that is not a given anymore because we have eaten
through the reserves which we had in the infrastructure. So we have second focus.
We really need to look at a much more strength and fully digitized infrastructure.
And the third point is we said we need to look at fairness,
and we consciously chose fairness because you know, affordability that becomes a price discussion
competitiveness becomes a difficult discussion between sectors. We said, no, it's about
the fairness. There's a distribution of burden and opportunities between investors, customers and
for example, the state. If the state takes some risks, and we
need to make sure that we get a fair distribution to make viable businesses so
that the market which we want to work really can work. And it's not
just about protecting vulnerable customers. That's part of it, but it's also about
protecting investors so they keep the confidence and continue to provide huge amounts of capex.
It's about the state, which shouldn't provide free lunches. But on the
other side, you know, like needs probably to take some of the risks.
And so those are the three elements. Securitive supply is back on the
agenda, pushes the old agenda of electrification, stronger and more digital infrastructure and
a fair deal for all parties that need to deliver. Can I jump on
digitalization because the last time we spoke, I mean, you really got emotional
about smart meters, right about smart meters in Germany, to be more exactly
smart meters in Germany. But I think one of the other reflections I have,
and I see all these minus prices in the markets almost every second week.
Now you're sort of, oh, we need flexible tariffs in this we
need much more flexibility. And that flexibility for me, is about digitalization.
But that's how i'd see it, lot, how you'd see it, and
how important you see that. Absolutely, we talk a lot about capacity mechanisms.
I would say we need flexibility mechanisms. Yeah. Yeah, capacity is
like power stations. So I think flexibilities demand responds demand side management. It's
integration. And it's absolutely clear if you think about it. Millions of participants
participating in this market bidding not bidding. We can do that only if our
systems are fully transparent at any moment in time, and if we have them
under full digital control. And so anybody who just believes that we can even
run manually the systems of the future, no way, no way. So
digitization is an absolutely requirement for our let's call it flexibility, reserve markets,
or whatever you want to call it. We like it. We like it.
We like it a lot. To pursue on the same theme, there
is a concept which we didn't have two years ago. Is that twenty four
seven trust ability, energica, granularity. Everybody has a different name for that,
but it's the it's the capacity to track every electrons, where they come
from, where they we're emitted. So when all those companies say oh,
yeah, we're super green, they need to prove it not once a year,
but by the hour. How do you see that movement evolving. Well,
that's another one again which you can only solve a view digitize the whole
thing. And we have such efforts in the automotive industry, you know,
where they want to then be able to trace their supply chain. Katina X
is a big effort supported by the German government and the cow industry and SAP
and others. And we have the same requirements here. So we as Eon,
we're trying with an industry consortia to actually set up something exactly like that
voluntary carbon credits because there, for example, we need to be able to
establish a standard and then to show and improve that standard. So that is
just another requirement as are like, it's not that our task is getting more
difficult by the day. On top the request for transparency etc. Is increasing,
So just one more reason to use as much as digitization AI and whatever
you can get as possible. It's some time to conclude job. I'd love
to just talk about mobility and if I look at mobility, for me,
what we really need to do is make sure as much intelligence as possible in
the whole mobility charging area. And you've got vehicle to grid coming etc.
And you've made a big push in this area. So I'd love to hear
your views on it and how you see the future. In general terms,
that's one of the sources of flexibility that we're getting. It's clear if you
get immobility in that is one source of flexibility, and for example, is
one of the big debates which we're having right now in Germany. So do
we need, for example, in the grid to provide whatever requirements in power
at any point in time at any place or can we actually control and steer
that and then maybe do trade offs in the cap investments that we are making.
Personally, I think this flexibility which we need as grid is surprise for
a fast rollout of the energy transition. The fast that we move, the
more compromises we need to make. And if then anybody says I don't accept
any bottleneck at any point in time, anywhere. Then it just means we
need to invest like hell at the speed which we can't cope with. So
flexibility, in the end will be the solution for that, not only for
a security of supply, but also for the speed at which we can drive
the energy transition. So flex is really a word which has multiple angles under
which you have to actually look at it. That's exactly what Jigasa said on
IPIS at one hundred. If we said yes to everybody, we would need
to invest three times, and I believe we can invest one point eight times,
which is already going to be a lot. But we compromise us that
we need to be done because we can't see yes to everyone. Just share
one experience. I did a field visit in one of my great areas,
and we discuss that we get actually a bigger change in the medium voltage than
in the low voltage. Yes, in low voltage, we get the vault
boxes and so on, and we get all these new connections and the rooftop
PV. It's all fine, But what really changes is all, I mean
really all the medium voltage transformers. Why because right now no customer has any
incentive to actually optimize for the capacities requesting. So if we have somebody in
Germany under the current regulation who's building an apartment block, he just puts on
every parking spot a charger, and then he says, I need twenty two
kV for every charger, and that is a new medium voltage transformer that we
need. Then, so actually we need to get smarter because otherwise we will
really run into trouble. The same is true, by the way, like
the same transformer who's supplying to one thousand people, let's say a megawat or
so, and then we put a small transformer there. When they all built
their rooftop PV, the same transformer in one direction still needs one mega what
in the other direction needs six mega what. And so all of a sudden,
it means we need to replace every single asset already today. If we
now do that in a reckless way, then actually we'll just not be able
to cope up with the speed that is developing. So it's essential. Flexibility
and smart changes of the system are crucial. Can I ask the governments and
regulators listen to here. Let's say we have good dialogues and then we hope
in the end that they listen more often than they don't listen. Well,
that's an excellent way to conclude. Leo, thank you so much for coming
on our show. You're a great guest, and we thank you Electric in
this beautiful to run taxi house to let us this great place to record because
we are the only guy with acclimatization here. Yeah, it has been a
pleasure. Thanks well, John. I would love all our interview to be
as smooth as this one. And it was live, and it was live,
yeah, which is a tough exercise. It is because one of the
things we pride ourselves with is that we want the people that were interviewing to
be open with us. And sometimes they've been in the past too old.
But the advantage is being that because we're not live, we can take out
what they've said. If they've said something which is goes against you know what
I legal, that's something we can take an out and we will say no
more not. We've had a few incidents, but you have to be careful
and Ian, as I said, I know you a many years at this
point in time. So it's it's a really lovely conversation and it was great,
excellent, So I'm going to share a little fun fact. I don't
know if it was before or after, but somebody heard my voice and it
comes to me and say, oh, you're the podcast guy. You're the
podcast guy. I say yea, yeah, I am so job. And
I say no, I'm not job. They say, oh, you're the
other guy. I mean, it's great. It's a bit of a dose
of humility. If we go back to the interview, the need foss P
the energy companies are very slow moving animals. But when sorry shifted the fan,
which was the case, if you didn't react fast, if you didn't
make daily decision, what you would have made those decisions in weeks or months,
if you allow any weakness, all of a sudden, they take huge
proportions. And at the same time forward looking digitization, security of supply,
which now is the big theme decobanization. There's a lot of things to take
away from that great interview. What I took away from it was this need
for speed and to be really brave, especially in critical moments. And also
what's important is to make sure that you have the information to be able to
make the correct decisions. And I tell you Aron, what happened after.
I won't say the name of this particular utility, But there's another European utility
who after the interview, I was in conversation with this particular ecutive and I
was telling about the conversation with Leo and the fact that Leo was saying that
it was all about information and not reactive but being proactive, and this other
particular utility executive they didn't do that, and their share prices collapsed. And
I wasn't criticizing him. I said, the issue is you didn't have the
right information, and actually he said, you're absolutely right. We didn't have
the right information. And in other words, they didn't understand what was going
on in the gas markets in particular, while Leo was given the information beforehand,
which was listen, we think there's something going on here, which led
them to sort of come up with internal crisis teams before really we had this
full crisis, so they were able to prepare for it. And I thought
that was really, really, really interesting. And by the way, if
you look at the share price of EAN, it recently hit a five year
high. So there you go, and there's many a utility in Europe where
you know, the share price are nowhere near where they were five years ago,
and that says some part he have like edf exactly. You know it's
true though, isn't it right? So I really thought, wow, well
done again. Share prices say a lot. Let's be clear, share prices
saying does more. Journey speaking. If you look at the European industry,
it's great that you have such a great manager at the top of the European
electricity industry. And by the way, you need to have a great team
to do that, because he can only be a great manager if he's given
the necessary information to make those decisions. We don't get any money from me
on so we just we just we just say that. Really it's a really
what with him? Okay job. I like to thank again you're electric for
organizing. I think we'll be invited next year for Athens, which is going
to be in May, and I guess we're going to go. I like
the idea of Athens and the house sent me. Now, like I Gene,
I'm never invited again, but here I guess we're doing a good jobs
if we are reinvited. I like to thank our new partner XPO. Really
very nice guys. You need to work more with AXPO because I believe they
are excellent trader and analysts and also probably one of the best hydro specialists in
Europe. So very interesting company and job I took to you in two weeks
time, look forward to us. Thank you for listening to Redefining Energy.
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