WEBVTT 1 00:00:08.240 --> 00:00:15.000 You're listening to Redefining Energy. Your co hosts from Berlin Gerard red and from 2 00:00:15.080 --> 00:00:21.559 London Laurent Segalin Today on Redefending Energy Jod, we have the pleasure of receiving 3 00:00:21.600 --> 00:00:26.679 the grand master of energy storage, Alex. What's the second I know? 4 00:00:27.079 --> 00:00:32.520 Well, i'll tell you just after the world from Asponsor. This podcast is 5 00:00:32.560 --> 00:00:37.600 powered by Expo, an international leader in providing sustainable energy solutions for the future. 6 00:00:38.079 --> 00:00:41.079 What we were saying, Job, Alex, could you just tell me 7 00:00:41.119 --> 00:00:46.039 what Alex's family names? Okay, Job in theory, I could tell you. 8 00:00:46.359 --> 00:00:50.679 But remember two weeks ago we had a French guest and you could not 9 00:00:50.840 --> 00:00:57.560 pronounce his name. So I'm sorry. I have no idea. I mean 10 00:00:57.600 --> 00:01:03.000 I read something and I hear something else. So please Alex okanady, Alex 11 00:01:03.200 --> 00:01:11.799 okaneedy, but I read Alex oc need. By the way, my daughter, 12 00:01:12.040 --> 00:01:19.760 my daughter's called order and that's spelled or l a in Jaelk the spelling 13 00:01:19.000 --> 00:01:23.640 is all or l A I d H. Look, we're not going to 14 00:01:23.680 --> 00:01:27.840 make a podcast on the pronuncision of gay Leek. No. I'm looking forward 15 00:01:27.840 --> 00:01:33.599 to have the conversation with Alex about energy storage and the inspredible growth we've seen 16 00:01:33.680 --> 00:01:37.239 in the last few years, particularly the Ireland nations, in other words, 17 00:01:37.239 --> 00:01:42.159 Britain Ireland because they need it quickly and more than everybody. But I mean 18 00:01:42.200 --> 00:01:46.239 it's now gone global, right and Alex is at the forefront. What is 19 00:01:46.280 --> 00:01:49.239 pretty phenomenal is that if you look at his footprint is probably the only player 20 00:01:51.200 --> 00:01:57.200 was a footprint in California, Texas, Ireland, UK, Germany. So 21 00:01:57.319 --> 00:02:00.920 we'll be able to compare those different markets mature at the type of revenues, 22 00:02:01.480 --> 00:02:06.120 if it makes sense to have the same type of strategy or not. And 23 00:02:06.799 --> 00:02:15.919 I think we learned a lot. So let's bring Alex o o Ken Alex, 24 00:02:15.960 --> 00:02:17.960 welcome to the show. Thank you for having me. But Alex, 25 00:02:19.000 --> 00:02:23.479 I remember I met you, I don't know seven eight years ago and you 26 00:02:23.560 --> 00:02:29.479 were launching a new product from almost a telephone booth with your mobile phone and 27 00:02:29.520 --> 00:02:32.360 your laptop on your knees. And now you manage something like a gigawat of 28 00:02:32.439 --> 00:02:38.400 batteries. So it's the story of an entrepreneur. You've been recently celebrated Man 29 00:02:38.479 --> 00:02:40.919 of the Year of the storage energy storage industry. How do you see the 30 00:02:40.919 --> 00:02:47.599 past seven years? Probably very few times when new market entrants driven by entrepreneurs 31 00:02:47.639 --> 00:02:53.120 and myself and various other other folks can actually influence a really important industry. 32 00:02:53.639 --> 00:02:59.479 Energy storage, we believe is the critical asset and our energy transition gor streets. 33 00:02:59.479 --> 00:03:02.159 As you say, we started small, our first asset six megawatts, 34 00:03:02.199 --> 00:03:06.719 which we still own. When we had that commissioned in twenty seventeen, it 35 00:03:06.840 --> 00:03:10.360 was the largest privately omalythium ion in gb It was one of the largest assets 36 00:03:10.400 --> 00:03:14.560 doing quid balancing in the world. As you say, we have about one 37 00:03:15.000 --> 00:03:19.240 two hundred megawats in our portfolio in five different energy systems. I think we're 38 00:03:19.240 --> 00:03:23.000 probably the largest player, even including the utilities. But that has been driven 39 00:03:23.039 --> 00:03:28.120 by the absolute need for energy storage, which we identified back in twenty fifteen. 40 00:03:28.800 --> 00:03:32.199 Alex, I'm literally just back from our home country, Ireland, and 41 00:03:32.240 --> 00:03:36.159 what I got out of Ireland was the need for batteries. Can you talk 42 00:03:36.199 --> 00:03:40.439 about why there is a smith need in Ireland and the Great Britain compared to 43 00:03:40.479 --> 00:03:46.319 say, the continent where I'm living. Yeah, I'm talking to from Ireland 44 00:03:46.319 --> 00:03:50.479 actually today. It's interesting. The problem that we're trying to solve is that 45 00:03:50.520 --> 00:03:54.560 we have obviously, you know, incredibly difficult catastrophic situation with our climate. 46 00:03:55.000 --> 00:04:00.000 Energy to transition is taking place to help solve that, and that transition is 47 00:04:00.120 --> 00:04:03.520 driven by building intermittent power, solar and wind power that produces electricity when the 48 00:04:03.520 --> 00:04:09.120 wind blows and the sunshines, and getting rid of baseload power a pasload power 49 00:04:09.159 --> 00:04:13.400 which is killing us coal and gas. That becomes a really difficult problem for 50 00:04:13.400 --> 00:04:16.560 the grid operators. The grid operators have a big problem trying to balance that 51 00:04:16.600 --> 00:04:20.120 intermittent power against the needs of the grid, and that's where energy storage comes 52 00:04:20.160 --> 00:04:25.360 in. But that problem is made even harder if you have island nations where 53 00:04:25.399 --> 00:04:30.639 you don't have strong interconnectors to other countries. So the reason that GB was 54 00:04:30.680 --> 00:04:34.879 the market leader from twenty sixteen on in energy storage was not only the fact 55 00:04:34.879 --> 00:04:39.759 that the national grid was very forward thinking in terms of setting in place auctions 56 00:04:39.759 --> 00:04:44.160 and alike where we could participate, but because GBS, an island nation, 57 00:04:44.639 --> 00:04:47.439 didn't have the ability to balance its needs against the rest of the continent as 58 00:04:47.480 --> 00:04:51.959 easily as for instance, France and Germany. Ireland's the same very low hydrocarbons, 59 00:04:53.000 --> 00:04:58.120 poor interconnectors into GB and to mainland Europe and a very significant build out 60 00:04:58.160 --> 00:05:00.120 of onshore wind and soon to come off shore wind, and all of those 61 00:05:00.519 --> 00:05:04.319 really spark the need for energy storage. When we look back and your first 62 00:05:04.360 --> 00:05:08.639 battery was a six megae wat and probably I don't know half an hour or 63 00:05:08.680 --> 00:05:12.199 an hour. What are the batteries you're building now, I guess that much 64 00:05:12.240 --> 00:05:16.079 bigger. We think about that six megawat up in North Yorkshire and participate in 65 00:05:16.079 --> 00:05:20.800 the first auctions of the national grid around the Enhanced Frequency Response, which is 66 00:05:20.839 --> 00:05:26.279 this auction to provide grid balancing services. As I said, one of the 67 00:05:26.360 --> 00:05:30.600 largest in the world doing grid balancing the time of commissioning. Our latest acquisition, 68 00:05:30.680 --> 00:05:35.079 Big Rock Californian four hundred megawatt hours right, a really significant piece of 69 00:05:35.079 --> 00:05:42.319 infrastructure for southern California in construction now will come online December twenty twenty four. 70 00:05:42.959 --> 00:05:46.399 That's the demonstration of both the size of the opportunity that's now been in front 71 00:05:46.439 --> 00:05:50.759 of us, but also the maturity We have assets which are really significant parts 72 00:05:50.920 --> 00:05:56.639 of our energy infrastructure providing that critical service. So it's really interesting to see 73 00:05:56.680 --> 00:06:00.600 how fast the sector has moved on and that out of course, has allowed 74 00:06:00.800 --> 00:06:03.160 players such as Gore Street to take a material part of that sector. It's 75 00:06:03.160 --> 00:06:08.279 better as an investor to be investing into these super high growth markets where one 76 00:06:08.319 --> 00:06:11.879 can take a position. Alex, I'm just quite taken back by that November 77 00:06:11.920 --> 00:06:15.040 from six to four hundred. Tell me what is that four hundred mega? 78 00:06:15.079 --> 00:06:20.000 What our battery actually doing and all the markets we're in and we're uniquely positioned. 79 00:06:20.079 --> 00:06:25.439 So gor Street made a decision back in twenty eighteen that we wanted to 80 00:06:25.480 --> 00:06:29.879 diversify our portfolio away from one energy system. So we moved into the Irish 81 00:06:29.959 --> 00:06:33.319 market in twenty nineteen. We moved into the Texas market early twenty twenty two, 82 00:06:33.600 --> 00:06:38.240 we moved into German market early twenty twenty two, and we moved into 83 00:06:38.279 --> 00:06:42.720 California early twenty twenty three. Right, So it's consistent deployment into new energy 84 00:06:42.720 --> 00:06:46.560 systems. Now, they will have different characteristics in terms of regulations and rules 85 00:06:46.560 --> 00:06:50.920 and counterparties, but in essence they are the same investment pieces. They're driven 86 00:06:51.000 --> 00:06:56.399 by large build out of renewable power, decommission out coal, gas and nuclear, 87 00:06:56.759 --> 00:07:00.720 and then problems in the grid caused by that transition. So our asset 88 00:07:00.759 --> 00:07:03.519 in California is going to be doing very similar things to our asset in Texas, 89 00:07:03.639 --> 00:07:09.319 Germany, Ireland and in GB it'll be balancing the grid. Our assets 90 00:07:09.319 --> 00:07:12.439 will be fifty percent full of electricity, so they can be a consumer or 91 00:07:12.560 --> 00:07:16.199 generator and they will act as a grid balancing mechanism for the grid operator who 92 00:07:16.199 --> 00:07:20.160 will ping it second by second and be a consumer, be a generator, 93 00:07:20.199 --> 00:07:25.000 be a consumer, be a generator, and for that service we'll charge them 94 00:07:25.160 --> 00:07:28.959 a price per hour over a certain length of contract. On top of that, 95 00:07:29.000 --> 00:07:31.560 though, is batteries are flexible, you know, in renewables in general, 96 00:07:31.600 --> 00:07:34.879 if you own solar and wind, you produce electrons and you sell electrons 97 00:07:35.319 --> 00:07:40.680 with batteries. Really we're more a service, so we fight grid balancing services, 98 00:07:40.720 --> 00:07:43.879 which I've talked about it. But we also do wholesale trading, so 99 00:07:43.879 --> 00:07:47.519 we're trading electricity trading that spread between day and night, and we're probably the 100 00:07:47.560 --> 00:07:51.959 most active of all the listed peers in terms of wholesale energy trading. Not 101 00:07:53.040 --> 00:07:56.519 so much in GB, but in Ireland and Germany we're very active in a 102 00:07:56.560 --> 00:08:01.279 wholesale trading. And then we also have what's called CAPA, so we enter 103 00:08:01.319 --> 00:08:07.199 into capacity contracts with the utilities and the government to provide backup power at times 104 00:08:07.199 --> 00:08:11.480 of super high demand during the year. Wow, let me digest a bit 105 00:08:11.560 --> 00:08:16.360 this, and you're telling me that fundamentally your four hundred megaa our battery is 106 00:08:16.399 --> 00:08:20.920 not that different from your six megawab battery. Or you know, the suppliers 107 00:08:20.959 --> 00:08:24.759 have changed, the price have gone down. I mean, I don't know 108 00:08:24.839 --> 00:08:28.519 the chemistry has changed. So how do you see the technical evolution of those 109 00:08:28.560 --> 00:08:33.120 assets? At my fifty five collegues and Gore Street, the majority are engineers 110 00:08:33.159 --> 00:08:37.480 and the project managers, and they're all now in horror at the idea that 111 00:08:37.519 --> 00:08:41.000 their CEO is about to talk about engineering. But what I would say is 112 00:08:41.039 --> 00:08:46.039 that the supply chain remains deep. If I look at our portfolio, we 113 00:08:46.080 --> 00:08:50.919 have assets which have been built for us by LGCM, Samsung, nydek Fluence, 114 00:08:52.039 --> 00:08:54.679 byd Tesla. We have a large supply chain we manage, and we 115 00:08:54.720 --> 00:08:58.639 manage a large supply chain because we want best price discovery, right, we 116 00:08:58.639 --> 00:09:03.240 want better services. The battery chemistry has moved on, for sure. There's 117 00:09:03.279 --> 00:09:07.360 different types of chemistry in several of our batteries, some without nickel, some 118 00:09:07.440 --> 00:09:13.600 with nickel. We're constantly looking at new solutions from the Tier one manufacturers that 119 00:09:13.720 --> 00:09:16.600 might give us a cost advantage or could open up new services for our batteries. 120 00:09:18.360 --> 00:09:20.600 So you should take it that overall we're playing in the same supply chain. 121 00:09:20.960 --> 00:09:24.440 That supply chain is producing better and better product for us, which has 122 00:09:24.480 --> 00:09:30.480 slight differences in chemical makeup or the way it's organized, but they do allow 123 00:09:30.559 --> 00:09:33.000 us to do more or less as different the same set of services that we 124 00:09:33.080 --> 00:09:37.360 have been doing. What I would say, there has been price volatility in 125 00:09:37.399 --> 00:09:41.240 the supply chain for sure. When we started this journey looking at energy storage, 126 00:09:41.639 --> 00:09:46.879 we presumed that energy storage would develop in the supply chain rather like solar 127 00:09:46.879 --> 00:09:50.960 PV did. What do I mean by that? So I used to be, 128 00:09:50.000 --> 00:09:54.919 in a past life a very large investor in solar. If you look 129 00:09:54.960 --> 00:09:56.919 back in two thousand and seven, there was a really big build out by 130 00:09:56.960 --> 00:10:03.279 the Asian manufacturers building huge capacity in solar PV manufacturing, and that lowered the 131 00:10:03.399 --> 00:10:07.440 unit price very, very considerably. When we look in energy storage, we 132 00:10:07.480 --> 00:10:13.720 saw that same trend coming about. So the large agent manufacturers adding huge capacity 133 00:10:13.159 --> 00:10:18.120 not so much for energy storage, but to replace every internal combustion engine in 134 00:10:18.120 --> 00:10:22.120 a car with a battery. And that huge capacity growth and manufacturing led to 135 00:10:22.159 --> 00:10:26.440 a very significant decline in cost. Now sadly, twenty twenty one and twenty 136 00:10:26.440 --> 00:10:31.039 twenty two we saw big increases in cost in the inflationary world that we're living 137 00:10:31.080 --> 00:10:35.799 in through COVID and post COVID. That has now started to moderate and we 138 00:10:35.799 --> 00:10:39.559 see price declines again. Just on the pricing thing, can you talk about 139 00:10:39.600 --> 00:10:43.679 like prices per kilo water per kilo water today compared to when you actually started, 140 00:10:43.840 --> 00:10:46.840 just to give an idea of actually what has actually happened in terms of 141 00:10:46.879 --> 00:10:50.840 pricing. Oh yeah, we saw, you know, between about forty to 142 00:10:50.840 --> 00:10:54.360 fifty percent price decline. Now a lot of that came back up there in 143 00:10:54.360 --> 00:10:58.000 twenty twenty one and twenty twenty two, but we've now seen another good chunk 144 00:10:58.039 --> 00:11:03.960 of twenty twenty five decline. It is very driven by the lithium ion price, 145 00:11:03.240 --> 00:11:07.120 and that's very driven then by EV demand. So, for instance, 146 00:11:07.120 --> 00:11:11.279 this summer we saw a big decline in pricing driven by the fact that the 147 00:11:11.320 --> 00:11:16.200 Chinese government removed a subsidy for EV buyers in China, and that led to 148 00:11:16.240 --> 00:11:18.840 them more cells being available for the energy storage market, which led to then 149 00:11:18.879 --> 00:11:24.720 price decline. So it's a complicated supply chain one that gore streets invested in 150 00:11:24.799 --> 00:11:28.440 very heavily with our own procurement group and a very wide range of suppliers. 151 00:11:28.960 --> 00:11:31.720 We are the cost leader. So if I look at our list of peer 152 00:11:31.759 --> 00:11:35.240 comparison, our assets are getting built at the same quality for a considerably less 153 00:11:35.360 --> 00:11:39.799 than our peers. And that's really important because energy storage is smack in the 154 00:11:39.840 --> 00:11:45.200 center of renewables. It's all about capex. The cost of running these assets 155 00:11:45.279 --> 00:11:50.000 is a pretty low percentage of your revenue, so it's all about minimizing capex 156 00:11:50.000 --> 00:11:54.639 to protect your irore When we talk about energy storage and the capex, the 157 00:11:54.639 --> 00:11:58.480 pure battery is only one element of the overall cost. And then you've got 158 00:11:58.480 --> 00:12:05.720 your those you've got your antifier system and for instance, out of fire legislation 159 00:12:05.039 --> 00:12:09.879 the same of kind of equivalent in all your jurisdiction, or some are much 160 00:12:09.919 --> 00:12:13.879 more stringent than others, because there's always one our story. But of course 161 00:12:13.919 --> 00:12:18.240 the oil and gas industry is to appy to promote it. You know, 162 00:12:18.320 --> 00:12:20.559 some batteries sticking fire? Do you want to talk about that a bit? 163 00:12:22.559 --> 00:12:26.720 All our assets operate to the highest level of our safety, So regardless of 164 00:12:26.759 --> 00:12:31.399 the individual countries regulations, our assets are operating at best in class level. 165 00:12:31.879 --> 00:12:37.480 Course, Street takes far safety incredibly seriously to the extent we have in house 166 00:12:37.519 --> 00:12:41.440 initiatives around how we become best in class, and we believe we are operating 167 00:12:41.480 --> 00:12:46.200 best in class. One good example of that and the software monitoring system we 168 00:12:46.240 --> 00:12:50.600 implemented called lion Tamer, which monitors the composition of the air internally in the 169 00:12:50.639 --> 00:12:56.360 containers and gives us advanced warning of any composition change which might indicate that there 170 00:12:56.360 --> 00:13:01.039 is a problem with one of the cells. We're very strict that it's our 171 00:13:01.080 --> 00:13:03.960 responsibility to our shareholders, to our employees, and to our local communities. 172 00:13:05.200 --> 00:13:07.519 And today we have an excellent safety record. Can I ask you a little 173 00:13:07.519 --> 00:13:11.840 bit about your trading strategies, because I can imagine with an asset like this, 174 00:13:13.080 --> 00:13:16.799 you can do a huge amount of things and some could be hyph for 175 00:13:16.840 --> 00:13:20.759 looten and complicated, or you could just do it pretty simply. And I 176 00:13:20.759 --> 00:13:24.720 would like to hear how you see that and how you see that developing going 177 00:13:24.759 --> 00:13:28.080 forward. So we have our own commercial group. Commercial group is in charge 178 00:13:28.200 --> 00:13:33.840 of deciding what contracts our assets should be in it any time. If I 179 00:13:33.919 --> 00:13:35.879 kind of go back to the start of the conversation. There's three things you 180 00:13:35.879 --> 00:13:39.120 can do with these assets, really three buckets. You can do grid balancing, 181 00:13:39.399 --> 00:13:43.000 So you're an assets of fifty percent full of electricity, consume, generate 182 00:13:43.039 --> 00:13:48.240 depending on what problems the grid has. That's about overall across our portfolio is 183 00:13:48.279 --> 00:13:52.320 probably about seventy percent of our revenue. And within our portfolio there's probably twenty 184 00:13:52.360 --> 00:13:56.919 types of contracts within grid balancing, depending on different types of duration or speed 185 00:13:56.919 --> 00:14:01.360 of response or the different energy system they're in. Then there's this capacity contract. 186 00:14:01.480 --> 00:14:07.080 The's a long term usually fifteen years in some case index linked where we 187 00:14:07.120 --> 00:14:09.720 are available for times of high demand in the energy system. That's usually, 188 00:14:09.759 --> 00:14:15.240 for instance, in gb that's winter hours between six and nine pm. Our 189 00:14:15.279 --> 00:14:18.480 assets will be one hundredercent full of electricity, ready to deploy electricity if and 190 00:14:18.519 --> 00:14:22.559 when the system needs it. And then that's about fifteen percent fifteen to twenty 191 00:14:22.559 --> 00:14:26.399 percent of revenue. Big Rock actually in California will be about fifty percent of 192 00:14:26.399 --> 00:14:30.919 revenue. It's a really interesting contract. It gives a big counterpoint to the 193 00:14:31.039 --> 00:14:35.919 portfolio. And then finally kind of wholesale trading, where it's about five to 194 00:14:35.960 --> 00:14:39.519 ten percent of revenue in Ireland it's about thirty percent of revenue. In Germany 195 00:14:39.519 --> 00:14:43.279 it's about thirty percent of revenue. And a lot of cases that's looking at 196 00:14:43.279 --> 00:14:46.840 the day ahead market and saying what's the energy price going to be tomorrow, 197 00:14:46.559 --> 00:14:50.679 dropping out of our grid, balancing contracts, buying electricity at two am, 198 00:14:50.799 --> 00:14:54.320 and selling electricity at the peak. So it's a complex pattern, but it's 199 00:14:54.399 --> 00:14:58.480 what's really interesting. There's lots and lots of different ways for us to make 200 00:14:58.519 --> 00:15:01.720 money. Now you need to build the and capital up, be able to 201 00:15:01.759 --> 00:15:05.399 correctly organize yourself to be able to put your assets in the right of contract. 202 00:15:05.799 --> 00:15:09.639 But if you look at our results ourselves, then demonstrate how well we've 203 00:15:09.679 --> 00:15:13.320 done. By far, we have the highest revenue per meguat among our peer 204 00:15:13.360 --> 00:15:16.960 group. I think we have the highest absolute level of revenue and ebit as 205 00:15:16.960 --> 00:15:20.080 well, so we're over it. We're doing very well. Our assets are 206 00:15:20.120 --> 00:15:26.200 averaging about nineteen pounds per megua prior twenty four to seven. A lot of 207 00:15:26.200 --> 00:15:30.080 that is due to our diversification strategy. If we had been gb only, 208 00:15:30.600 --> 00:15:33.000 our assets will be making about six pounds fifty per hour. So by our 209 00:15:33.519 --> 00:15:39.399 diversification, by the internalization of the commercial team, we're generating three extra revenue 210 00:15:39.440 --> 00:15:43.039 we would be if we'd stay just in the GB market. If I look 211 00:15:43.080 --> 00:15:48.360 at the statistic of a company which are like a lot which is Modo Energy 212 00:15:48.399 --> 00:15:54.279 and you know is tracking every batteries in GP and now in Texas, it 213 00:15:54.360 --> 00:15:58.120 looks like the revenue are very location dependent. And of course all the batteries 214 00:15:58.159 --> 00:16:03.120 which are the border between says Scotland and England are performing much better than the 215 00:16:03.279 --> 00:16:10.000 Nezuela. So when you decide to implement a new battery, how can you 216 00:16:10.399 --> 00:16:15.879 analyze the value of the location? And other developers need like you, So 217 00:16:15.120 --> 00:16:19.480 there's going to be competition on those sides. So how does it work? 218 00:16:21.480 --> 00:16:23.399 In general? Gore Street's been able to do any deal we wanted to do. 219 00:16:23.960 --> 00:16:27.480 We're the market leader. We created this asset class for the public investors 220 00:16:27.759 --> 00:16:32.320 the first IPO and back in May twenty eighteen, and we have a large 221 00:16:32.360 --> 00:16:36.440 track record of successfully completing transactions, so we have a lot of transaction security 222 00:16:36.480 --> 00:16:40.720 to developers. Of course, we're looking for best price and we're looking for 223 00:16:40.759 --> 00:16:44.200 best location, and there's a lot goes into that. It's what's the cost 224 00:16:44.240 --> 00:16:47.759 of land, what's the cost of the grid connection. How far away is 225 00:16:47.799 --> 00:16:52.440 that grid connection date. A lot of the services you provide are not location 226 00:16:52.519 --> 00:16:56.000 dependent, So a lot of the grid balancing services are not location dependent, 227 00:16:56.399 --> 00:17:00.399 but there is other things which are. So for instance, we have assets 228 00:17:00.399 --> 00:17:03.840 in Scotland, they're very profitable for us. We also have a very large 229 00:17:03.840 --> 00:17:07.839 asset which we'll go into construction late next year in Middleton up in the north 230 00:17:07.839 --> 00:17:14.240 of England, an interesting place given the decommissioning that's scheduled around a nuclear power 231 00:17:14.279 --> 00:17:15.319 plant up there, right, So that will take out a whole load of 232 00:17:15.359 --> 00:17:21.359 baseload power from that region, and so other services become available to us. 233 00:17:21.799 --> 00:17:26.200 So we're constantly looking for other ways that we can make money from our existing 234 00:17:26.240 --> 00:17:29.480 portfolio and our future assets. And a lot, yes, a lot to 235 00:17:29.519 --> 00:17:32.880 do is do with location, but also a lot to do with the configuration 236 00:17:32.960 --> 00:17:36.440 of the battery, right and how you're thinking about managing that through software, 237 00:17:36.640 --> 00:17:41.039 how it spits into the overall portfolio. You talk about the revenues, and 238 00:17:41.240 --> 00:17:45.920 you made the point that because you've got your geographical diversification, there is a 239 00:17:45.079 --> 00:17:48.960 certain year where this country is going to be better and that country is going 240 00:17:49.000 --> 00:17:53.680 to be But let's fay see to twenty two was bumper a year, if 241 00:17:53.720 --> 00:17:59.839 not an exceptional year for everybody owning a battery, and probably too. Twenty 242 00:18:00.079 --> 00:18:03.440 three we go back to normal and you need to be much more granular, 243 00:18:04.200 --> 00:18:07.839 and it's a bit in relation to banking and being able to have access to 244 00:18:07.920 --> 00:18:12.799 banking finances about you know, the stability of revenues. I read somewhere and 245 00:18:12.839 --> 00:18:18.079 you're going to tell me if I'm wrong that batteries in a normal well supplied 246 00:18:18.640 --> 00:18:22.039 environment are going to do not much, But then there's going to be certain 247 00:18:22.119 --> 00:18:26.960 days and in certain days you can make a month. So it's really about 248 00:18:26.599 --> 00:18:32.279 the intermitency in a certain way of revenue. So or am I just babbling 249 00:18:33.079 --> 00:18:34.920 now? No, not at all. You know, we were wrong on 250 00:18:36.000 --> 00:18:38.920 the upside in twenty one and twenty two. We did not think revenues would 251 00:18:38.920 --> 00:18:42.720 be that high in GB I know some of our peers absolutely did think that. 252 00:18:42.960 --> 00:18:48.680 We believed that rationally economic actors with similar costs of capital will build more 253 00:18:48.720 --> 00:18:53.039 assets and therefore revenues and grid bouncing will go down. But what we found 254 00:18:53.039 --> 00:18:57.319 in twenty one and twenty two was that our competitors had a hard time building 255 00:18:57.319 --> 00:19:02.480 assets, getting the grid connections and therefore as the incumbent, we absolutely really 256 00:19:02.519 --> 00:19:07.839 benefited in GB revenues have come down pretty steeply in twenty twenty three, absolutely 257 00:19:07.880 --> 00:19:11.400 on trend for what we presumed will happen. But our job as a good 258 00:19:11.440 --> 00:19:15.480 investors in building a diversified portfolio was to reduce that volatility in revenue by through 259 00:19:15.519 --> 00:19:19.880 diversification. We did the regression analysis recently because we're kind of those kind of 260 00:19:19.880 --> 00:19:23.440 geeky people, and if I look at what we see in terms of our 261 00:19:23.519 --> 00:19:29.440 revenue versus a GB only strategy, we reduce volatility by about fifty percent, 262 00:19:29.839 --> 00:19:33.799 so our revenues are having much less volatility than our peers. Interestingly enough, 263 00:19:33.960 --> 00:19:38.279 our revenues are also three x at our peers because other markets are at different 264 00:19:38.279 --> 00:19:42.640 points in the cycle. Each of these markets are not correlated, so GB 265 00:19:42.960 --> 00:19:48.599 and ours revenues are not correlated. In Ireland, we make money in grid 266 00:19:48.640 --> 00:19:52.599 balancing. We make more money if there's more wind on the system. Why 267 00:19:52.720 --> 00:19:55.480 is that because the grid operator is paying you for value. If there's more 268 00:19:55.480 --> 00:20:00.240 wind generation on the system, the balancing issue becomes more and more pronounced for 269 00:20:00.559 --> 00:20:03.079 we add more and more value, so they pay us more. If there's 270 00:20:03.079 --> 00:20:06.960 more wind generation. This summer, for instance, there was high winds across 271 00:20:07.000 --> 00:20:11.640 Ireland and that is not usually it's higher winds in winter. That was driven 272 00:20:11.640 --> 00:20:15.480 by climate change. There was higher temperatures in the Atlantic and that generated much 273 00:20:15.519 --> 00:20:18.079 more storms and therefore there was much more wind generation. We made much more 274 00:20:18.119 --> 00:20:22.480 revenue. That is not a market mechanism. That is in GB, so 275 00:20:22.680 --> 00:20:27.319 uncarlided markets, but right beside each other. Texas we make the majority of 276 00:20:27.319 --> 00:20:30.799 our revenues in summer. Again, overall it's driven by two things. It's 277 00:20:30.839 --> 00:20:34.559 driven by climate change, so very high heat, which in the Texas contexts 278 00:20:34.680 --> 00:20:40.359 drops out gas generators. They can't cope, so they lose generation and huge 279 00:20:40.359 --> 00:20:45.160 amount of solars producing a lot of electricity, and there the balancing issue becomes 280 00:20:45.200 --> 00:20:49.240 harder. But also everybody's running electricity really hot because they're running air conditioning. 281 00:20:49.559 --> 00:20:52.480 And so during the summer for a few months we were making one hundred and 282 00:20:52.519 --> 00:20:57.640 fifty pounds per megua per hour twenty four to seven against six pounds in GB. 283 00:20:59.480 --> 00:21:03.720 So really very very significant revenues and again not correlated to our GB revenue. 284 00:21:04.039 --> 00:21:07.640 Germany we're doing well, probably about ten to twelve pounds per Maguat. 285 00:21:08.000 --> 00:21:12.359 A lot of that revenue is driven by volatility on the energy system coming from 286 00:21:12.400 --> 00:21:17.200 the war in Ukraine, a very significant, huge transition that Germany is trying 287 00:21:17.200 --> 00:21:21.240 to undertake in a very fast way. Another way to think about it, 288 00:21:21.279 --> 00:21:23.559 and I'd like this tagline, and I hope it doesn't sound kind of to 289 00:21:23.680 --> 00:21:30.119 kind of give, but investors in this portfolio are investing in volatility. We're 290 00:21:30.240 --> 00:21:33.680 long volatility on the energy system. The more volatile the energy system is, 291 00:21:34.000 --> 00:21:40.160 the more assets energy storage assets, stabilization assets will accrue value. That's what 292 00:21:40.200 --> 00:21:44.079 these assets are doing. They're balancing the grid. They're moving electricity from times 293 00:21:44.079 --> 00:21:47.920 of low demand to times of high demand. They're providing certainty to the grid 294 00:21:47.960 --> 00:21:49.759 that there is electricity there at times of super high demand during the year. 295 00:21:51.519 --> 00:21:55.839 So they're all stabilization activities. So the more volatile the grid, the more 296 00:21:55.920 --> 00:22:00.559 these assets will accrue revenue. And volatility is not going away because our transition 297 00:22:00.920 --> 00:22:06.759 absolutely puts volatility into the grid. Can I ask you just to really give 298 00:22:06.799 --> 00:22:08.640 us a glimpse of how you see the future of energy storage, and I'd 299 00:22:08.640 --> 00:22:11.279 also like you to talk a little bit about how you see the role of 300 00:22:11.599 --> 00:22:15.079 what I call decentralized storage and going forward, how do you see it. 301 00:22:15.720 --> 00:22:19.880 I'll talk about the decentralized bit first because I think there's some really interesting things. 302 00:22:21.440 --> 00:22:25.440 I'm lucky enough to be a research fellow up in the Cambridge Energy Policy 303 00:22:25.440 --> 00:22:29.160 Research Group, and recently he was about a year ago they put a paper 304 00:22:29.160 --> 00:22:33.720 out around ev using evs to balance the grid when everybody whenever it sticks their 305 00:22:33.759 --> 00:22:37.200 car and to be charged, the battery is sitting there and available to do 306 00:22:37.319 --> 00:22:41.599 things. So I think there's really interesting things one can do with spare capacity 307 00:22:41.599 --> 00:22:45.440 in our system. I think the problem is is the technology leap the ability 308 00:22:45.440 --> 00:22:51.359 for the grid operator to manage millions of decentralized systems to solve the big kind 309 00:22:51.359 --> 00:22:55.240 of macro problems they have, and the energy system is very very difficult and 310 00:22:55.279 --> 00:22:59.079 we're I think, decades away from that. So that's why our focus is 311 00:22:59.200 --> 00:23:03.920 very much on large scale utility systems which can contract with the grid operator to 312 00:23:03.920 --> 00:23:08.000 provide this really material service at points of difficulty. Where do I see the 313 00:23:08.039 --> 00:23:12.359 future. I've been investing renewables since back in two thousand and seven because I'm 314 00:23:12.400 --> 00:23:17.480 old, so I've been doing this for a while. Solar wind or shore 315 00:23:17.519 --> 00:23:22.680 on shore solar, pb CSP waste energy. I by far believe that energy 316 00:23:22.720 --> 00:23:26.839 storage is both the most intellectually challenging as an investor, given the multitude of 317 00:23:26.839 --> 00:23:32.680 revenue streams one needs to manage, but also the most important. Without proper 318 00:23:32.799 --> 00:23:36.319 energy storage on our grids, we just frankly won't be able to hit the 319 00:23:36.359 --> 00:23:40.960 targets we need to hit as the society. And so we're dealing with a 320 00:23:41.319 --> 00:23:45.839 market which has got undergoing really significant changes. Six megwats to two hundred megwats 321 00:23:45.839 --> 00:23:49.759 is Gore Street on its own. Banks are now lending in, Manufacturers are 322 00:23:49.759 --> 00:23:55.039 producing better and better product, you know, better supply chains, pricing coming 323 00:23:55.119 --> 00:23:57.640 down, and the need for storage continues to increase. I think there's really 324 00:23:57.680 --> 00:24:02.160 interesting things that are going to happen on long duration in terms of building very 325 00:24:02.200 --> 00:24:06.519 long dated systems to kind of move electricity from day to day even from season 326 00:24:06.599 --> 00:24:11.680 season. But there's also just really interesting things happening second by second to make 327 00:24:11.720 --> 00:24:15.599 our grids better and better. So we have a large pipeline in all the 328 00:24:15.599 --> 00:24:18.960 markets that are operating in and we're very focused on completing the build out over 329 00:24:18.000 --> 00:24:22.759 one two hundred megawatts. But this is an investment team for us, which 330 00:24:22.799 --> 00:24:29.359 we believe is decades to run. Alex. Sometimes we have pugnicious podcasts, 331 00:24:29.519 --> 00:24:33.240 but this one, I can't tell you, was just a long and pleasant 332 00:24:33.279 --> 00:24:37.400 surf and they are very happy about our conversation. And you know the light 333 00:24:37.519 --> 00:24:41.720 you shed on the not only the energy storage, but you know also around 334 00:24:41.759 --> 00:24:48.160 the entrepreneurship, the grit, the commando thinking, and this is why you 335 00:24:48.160 --> 00:24:52.240 are succeeding and big larger and Cubans are struggling. So thank you very much. 336 00:24:52.519 --> 00:24:56.119 Thank you guys. It's been great, really enjoyed it. Thanks Alex, 337 00:24:56.160 --> 00:25:00.799 good seeing you well. Job. I still can't his name, but 338 00:25:00.839 --> 00:25:04.279 I can tell you is the ultimate rock star. There is so much to 339 00:25:04.400 --> 00:25:08.240 digest from this interview, right, agree with you? Toking of that where 340 00:25:08.240 --> 00:25:15.759 would you start? Number one vertical integration and the fact that now is almost 341 00:25:15.799 --> 00:25:19.680 is on EPC and he used a lot of different suppliers. The fact that 342 00:25:21.079 --> 00:25:26.279 he has his own trading operations so it doesn't rely on thought party optimization, 343 00:25:26.160 --> 00:25:33.759 The value of geographical diversification, the impact on the ivysur plus, on the 344 00:25:33.799 --> 00:25:37.039 price of batteries which has been going down. I mean, I could go 345 00:25:37.079 --> 00:25:41.759 on for quite some time we could. Absolutely no, he's at the forefront 346 00:25:41.839 --> 00:25:45.680 of a revolution. Is We've been saying that for years, but in a 347 00:25:45.720 --> 00:25:52.960 way, alex epitomize what we've been saying is in this world of intermittency of 348 00:25:53.039 --> 00:25:59.640 vulnerables, the one who are winning are those who are harnessing space and time. 349 00:26:00.720 --> 00:26:04.119 So space design interconnectors and we'll talk about it in another episode, but 350 00:26:04.200 --> 00:26:10.599 here it's all about time and it's training strategy, which I love is what 351 00:26:10.640 --> 00:26:15.759 I call long flex short vel. You have a long position in flexible assets 352 00:26:15.000 --> 00:26:19.559 so you can sell volatility on the market and the market is very thirsty for 353 00:26:21.039 --> 00:26:26.000 volatility. Wonderful success story, and it's a success story of entrepreneurship, grit 354 00:26:26.799 --> 00:26:32.119 and the mastering of a new technology. You're absolutely right. We got a 355 00:26:32.119 --> 00:26:37.000 lot of absolutely The one thing we didn't talk about is that what's the best 356 00:26:37.240 --> 00:26:41.039 financial vehicle to manage these assets? Because what alex as is are very is 357 00:26:41.039 --> 00:26:47.119 going to pure play vehicle manage batteries, and I suppose I wonder is that 358 00:26:47.160 --> 00:26:49.440 the right vehicle going forward, because I think what's going to happen with batteries 359 00:26:49.480 --> 00:26:52.440 is that they're going to be everywhere, but they're going to be part of 360 00:26:53.000 --> 00:26:56.559 automobiles, so it's going to have to manage them. It's going to be 361 00:26:56.640 --> 00:27:00.200 part of the generation of somebody who the soul rats. They're going to have 362 00:27:00.200 --> 00:27:03.039 them as well. Sot of therese is it long term? That's the right 363 00:27:03.119 --> 00:27:06.559 vehicle? And maybe I'm just thinking about it round Maybe I should be just 364 00:27:06.599 --> 00:27:08.559 thinking, Jared, my god, you're just do mean too analytical about the 365 00:27:08.599 --> 00:27:11.319 whole thing, you know, But I'm I'm thinking what's the right home for 366 00:27:11.400 --> 00:27:15.319 batteries and storage going forward? I think it sort of ends up being part 367 00:27:15.359 --> 00:27:22.599 of a wider generation portfolio or Okay, that's the view. My view is, 368 00:27:22.079 --> 00:27:26.160 you have twenty different type of revenue, and if you don't have the 369 00:27:26.319 --> 00:27:33.960 expertise to play one against another and optimize permanently, you're not going to extract 370 00:27:33.960 --> 00:27:37.240 all the value from the batteries and the guys. Would you know, they 371 00:27:37.279 --> 00:27:40.160 have a behind the metal battery. They're gonna okay, they're going to do 372 00:27:40.200 --> 00:27:45.119 a bit of a load shedding, a bit of arbitrash, but that's going 373 00:27:45.200 --> 00:27:49.000 to be the end of it. So I believe that the central portfolio management 374 00:27:49.279 --> 00:27:53.759 extract much more value. Okay, So let's follow up and follow on that, 375 00:27:55.279 --> 00:27:57.599 I agree with you, I would say, okay, So the question 376 00:27:57.799 --> 00:28:06.039 for me still is whether that's part of a larger centralized generation strategy or a 377 00:28:06.279 --> 00:28:12.599 stand alone until the market are saturated, and some might be soon. Standalone 378 00:28:12.599 --> 00:28:18.400 makes sense, and again just from a human expertise point of view, it 379 00:28:18.519 --> 00:28:25.240 is a totally different expertise than win or solar and everything. Ultimately, his 380 00:28:25.440 --> 00:28:30.960 secret source will be scattered. Hopefully by that time you will have gone into 381 00:28:30.359 --> 00:28:37.440 new dimensions. But so far I believe the standalone has been a correct formula. 382 00:28:37.079 --> 00:28:40.400 Okay, But I just said I don't believe that going forward because I 383 00:28:40.519 --> 00:28:47.319 believe that you cannot own generation without having storage around it. True, I'm 384 00:28:47.319 --> 00:28:52.599 talking about intimate and generation and even old world generation. I'm talking about you 385 00:28:52.640 --> 00:28:55.039 know, if you think about like, let's assume you have a hydro power 386 00:28:55.079 --> 00:28:57.640 plant, Okay, if you put a battery beside that, you increase the 387 00:28:57.799 --> 00:29:03.200 flexibility in it and around with that power plant. And honestly, that's that's 388 00:29:03.240 --> 00:29:06.400 where I'm calling from, right listen, But listen, we're talking about the 389 00:29:06.440 --> 00:29:08.559 future. He's done a great job. What it means is because he's got 390 00:29:08.559 --> 00:29:15.400 this great storage asset across the world. He's got massive flexibility to do other 391 00:29:15.480 --> 00:29:18.839 things based on storage. Right, So that's that's what I conclude. Excellent 392 00:29:18.880 --> 00:29:25.480 conclusion. So we thank Alex, We thank Axpo, our partner. And 393 00:29:25.680 --> 00:29:32.599 three weeks ago we were invited in Copenhagen for a very nice conference and we 394 00:29:32.680 --> 00:29:36.839 did a live episode which was never recorded, so nobody will ever listen to 395 00:29:36.880 --> 00:29:40.720 it, and chard I took to you in two weeks time, look forward 396 00:29:40.759 --> 00:29:52.240 to my friend. Thank you for listening to Redefining Energy. Don't forget to 397 00:29:52.279 --> 00:29:57.880 read the show and subscribe on Apple Podcast, Spotify, or the platform of 398 00:29:57.920 --> 00:30:02.160 your choice.