Speaker 1: With Laurent's segal end from London and Gerard read from Berlin.
Speaker 2: This is redefining energy Today. On redefining energy, we're going
Speaker 2: to talk about power trading, aren't we go on?
Speaker 3: Yes, but under the specific angles of hedge funds and
Speaker 3: algos inside power trading. But first of well, from our partner, A.
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Speaker 1: Back to the show, which of course are radically changing
Speaker 1: the way we actually buy and sell power on a
Speaker 1: wholesale markets.
Speaker 3: Right, yeah, exactly. For the past two decades, renewable energy
Speaker 3: investment was viewed as an infrastructure play, so it means
Speaker 3: you add pension funds, long term capital seeking, predictable most
Speaker 3: of the time, government back cash flows and now that
Speaker 3: the subsidies are phasing out investors in honorable get an
Speaker 3: increased exposure to wholesale prices the volatility. They are freaking
Speaker 3: out about the stability of the cash flow, and here
Speaker 3: there's a solution which.
Speaker 2: Is emerging exactly and a large part of accidata is
Speaker 2: actually also optimization of what I would call flexibility.
Speaker 3: So we brought amani Jas who's managing director of a
Speaker 3: startup in Germany called flex Power. And the very interesting
Speaker 3: thing is that they were purchased by none other than
Speaker 3: Citadel with the Global Hedge Fund. So you see how
Speaker 3: by operating at the intersection of short term power reading
Speaker 3: and butt optimization, you start building some long term position.
Speaker 3: It's absolutely fascinating.
Speaker 2: Well, let's bring him on the show, Amnie. It's really
Speaker 2: great to have you on the show. Thanks for having me.
Speaker 3: When I'm an annoying your coming, Lio Bimbo called me
Speaker 3: and say, I'm so sad that how Many left our
Speaker 3: company for you to go, but I'm so proud of
Speaker 3: what he has achieved. Your story is remarkable. Probably it
Speaker 3: starts even before your days at Eon. It starts at
Speaker 3: Next half work. How Many explained what was going on there.
Speaker 4: I started trading with Next Craftbacker at around twenty and fifteen,
Speaker 4: and that was still at a time where renewables played
Speaker 4: a role, but they didn't significantly move the market. And
Speaker 4: at next Calfbacker, we had an amazing story and it
Speaker 4: was a great company, and we became Germany's largest trader
Speaker 4: of commercial PV and also had the largest biogas pot.
Speaker 4: So we learned a lot about short term power trading
Speaker 4: and the growth of renewables and what it does to
Speaker 4: prices and what it does to volatility and build out.
Speaker 4: I think one of Europe's best trading desks, obviously with
Speaker 4: a focus on Germany with our assets, but we also
Speaker 4: moved prop trading all across Europe and with the biogas plans.
Speaker 4: We also had a lot of experience in AFARR, which
Speaker 4: is nowadays becoming more and more important when when you
Speaker 4: think about battery optimization. And then I left the company
Speaker 4: a little before COVID happened. I started up a trading
Speaker 4: desk at a company called prior Gen for short term
Speaker 4: trading in Germany, and then I went to Eon, became
Speaker 4: commercial lead of power and gas and was trading at
Speaker 4: Eon during the energy crisis. I doubt that Leo Bilmbaum
Speaker 4: knows my name. But in that time, obviously the market
Speaker 4: was very exciting and I learned about well how corporate
Speaker 4: structures work, which are very different than what I saw
Speaker 4: at next Claffwaku, which is a more entrepreneurial company. And
Speaker 4: in the meantime, Next Craftwaki got bought up by Shell
Speaker 4: and some of my former colleagues, you know, when I
Speaker 4: was super happy with the compliance that came in. And
Speaker 4: also next Craftwerk is green energy transition company, and I
Speaker 4: think it was difficult for the culture that you were
Speaker 4: suddenly making money for an oil major. So they also
Speaker 4: decided to jump ship. And I got a call from
Speaker 4: these guys asking, hey, should we start doing this on
Speaker 4: our own? And I was very excited about this. So
Speaker 4: we had a great start with our investors from CFP Energy.
Speaker 4: They are a London based commodity trader and risk manager,
Speaker 4: and they gave us a helping hand in terms of
Speaker 4: starting capital to just you know, run the business, but
Speaker 4: probably more importantly for collateral. Then in the middle of
Speaker 4: the energy crisis, we went out and said we can
Speaker 4: do this on our own. It was very difficult to
Speaker 4: get a portfolio because people were worried about different things
Speaker 4: than giving four guys a renewable portfolio. And yeah, and
Speaker 4: then we grew this business from ninety megawats to two
Speaker 4: gigawards of WIM solar and batteries and started it up
Speaker 4: from there.
Speaker 3: You go out, you're a bunch of friends and your
Speaker 3: find sponsor. We know the SIVE Partner's Guide. They've been
Speaker 3: around for quite some time. They have an excellent res
Speaker 3: trading background. But you need to build systems because it's
Speaker 3: all about systems and data. So how fast can you
Speaker 3: ramp up your systems?
Speaker 4: Systems is one part. The second part is really getting
Speaker 4: a portfolio, which is difficult when nobody knows you're in
Speaker 4: the market. And when we were starting, I always refuse
Speaker 4: to call us a startup because we had a very
Speaker 4: clear idea of what we wanted to build. We are
Speaker 4: engaging in renewable physical power trading. So you need a portfolio.
Speaker 4: You need a virtual power plant, which we contracted out.
Speaker 4: We didn't build us ourselves. You need tech people that
Speaker 4: understand the renewable energy market and the data flows that
Speaker 4: come with it. You need to be able to communicate
Speaker 4: with DSOs and with tsos because this is physical trading
Speaker 4: so you send new schedules every fifteen minutes. And when
Speaker 4: I look back at the business plan that we presented originally,
Speaker 4: is actually quite remarkable because we really just checked off
Speaker 4: these lists and we got operational within six months. So
Speaker 4: you need to register balancing groups, you need to register
Speaker 4: with the exchange, you need to get a portfolio. So
Speaker 4: we were super fast on this because we had a
Speaker 4: good idea of where we wanted to go and what
Speaker 4: we needed to do, and within six months we were trading. Obviously,
Speaker 4: the systems were glued together and not very sophisticated yet,
Speaker 4: and over the last three years we build operations that
Speaker 4: are partially fully running automated with algorithms. We have a
Speaker 4: trading desk, or we have a company of fifty five people,
Speaker 4: twenty four to seven operations around fifty people and Hamburg
Speaker 4: five people in New Zealand to cover the night shifts.
Speaker 4: So it's really about having a plan and knowing where
Speaker 4: you want to go and finding the right people and
Speaker 4: recruiting the right people to do this. That's part number one.
Speaker 4: That's just building a short term power business. But I
Speaker 4: think where vision came in is during the crisis, we
Speaker 4: saw the front gear trading at eight hundred euros and
Speaker 4: next GAFAC actually had a large portfolio of biogas and solar,
Speaker 4: and the biogas plans you could hatch them forward very
Speaker 4: very easily with baseload shapes, but the renewables, so the PV,
Speaker 4: it would take you three four months to do a
Speaker 4: PPA with them, and when you concluded, the ppa's price
Speaker 4: levels were down again. So we said, we need to
Speaker 4: be in a market where we can hedge renewables just
Speaker 4: like a baseload within two minutes. And that's what we
Speaker 4: built very early on with our power match platform, where
Speaker 4: we're now able to do a PPA from a renewable
Speaker 4: portfolio wind, solar, and even a battery within two minutes.
Speaker 4: And that's what I mean when I talk about the
Speaker 4: commoditization of renewables, Manie.
Speaker 2: Can you sort of exp and a little bit on
Speaker 2: that in the sense that what I'm really interested in
Speaker 2: when you talk about PPAs, you're talking really about short
Speaker 2: term PPAs. Yes, where I'm coming from is I'd be
Speaker 2: interested to hear your views on that and how you
Speaker 2: see that in terms of being able to go into
Speaker 2: long term PPAs. And the reason I'm saying that is,
Speaker 2: if I'm a finance person, I want to finance a
Speaker 2: solar park. It's all great to have a short term PPA,
Speaker 2: but actually I want to have a longer term PPA
Speaker 2: so that I can actually I can get that on
Speaker 2: my project, etcetera, etcetera. Right, So, how do you see
Speaker 2: that going forward? That market?
Speaker 4: The short term PPAs have a different purpose than long
Speaker 4: term PPAs. So the short term PPAs have a purpose
Speaker 4: of Let's say you own a bunch of renewable plants
Speaker 4: and shipping the Baltic accidentally hits the pipeline to Norway.
Speaker 4: You can imagine what happens to gas prices, you can
Speaker 4: imagine what happens to power prices. And then we need
Speaker 4: some forward liquidity in the market. And if you have
Speaker 4: a renewable plant and the price goes up to five
Speaker 4: hundred euros, you can hedge with that and cash in
Speaker 4: quite nicely. And you're also dampening effect on the price
Speaker 4: level because there are people selling, whereas in the energy crisis,
Speaker 4: nobody was selling anymore because that liquidity wasn't there because
Speaker 4: we just didn't have that commoditization. And on the other hand,
Speaker 4: what we're doing with the short term PPAs is we
Speaker 4: can deliver hedges from renewables, which in the future will
Speaker 4: be a lot cheaper to industrials who just want to
Speaker 4: hedge their power positions. But here we're talking about risk
Speaker 4: and hedging for three years, so a trading disk like hours,
Speaker 4: we're not infrastructure fun. We don't look fifteen years into
Speaker 4: the future. And when it comes to financing a PPA
Speaker 4: for fifteen years, which is what an't invest in a
Speaker 4: new asset essentially needs, we're in a different market. But
Speaker 4: I think the standardization can help you to have a
Speaker 4: pricing benchmark, just like you have on oil and gas.
Speaker 4: In oiling gas, you would also use hot benchmarks to
Speaker 4: finance long term projects. So it's more about finding a
Speaker 4: p I think standards that you say this is how
Speaker 4: much solar is worth as like one number and not
Speaker 4: as an aggregate of one thousand PPAs that you might
Speaker 4: know or might not know.
Speaker 2: And Mannie, I think it's very important to explain to
Speaker 2: the listener how that power market works. Why if I
Speaker 2: have a solar asset, why I'm actually using your services
Speaker 2: at all? Right, So maybe just explain a little bit
Speaker 2: a bit of the background of how that power market works.
Speaker 2: So that people can understand readly why you're important and
Speaker 2: what you do.
Speaker 4: Then, stepping away from the PPAs for one second, if
Speaker 4: you own a solar farm or a wind farm, you
Speaker 4: usually do not know a lot about energy markets. Your
Speaker 4: project developer, you know about engineering, you know about financing,
Speaker 4: but you don't know about schedules to the tso you
Speaker 4: don't know how to connect your plan. You don't know
Speaker 4: how to trade it. So you need a service provider
Speaker 4: that gives you route to market access. That's number one.
Speaker 4: So that's that's a service where we say, hey, we
Speaker 4: connect you with the Dso we tell them this is
Speaker 4: your plant. If you want to read us batch, this
Speaker 4: is how you connect to it. We connect to the
Speaker 4: plant ourselves through a so called VPP so that we
Speaker 4: can forecast each renewable plant. So we do this every
Speaker 4: fifteen minute, each renewable asset gets a new forecast, so
Speaker 4: we can tell the TSO how much power they can
Speaker 4: expect to be coming into the grid. And then we
Speaker 4: sell this power usually largest part on the so called
Speaker 4: data head markets, and then the forecast errors that you
Speaker 4: inevitably have on the so called interday market. And for
Speaker 4: this we take what they call balancing risk. So we
Speaker 4: pay out to the renewable assets usually the day I
Speaker 4: had hourly price, but sometimes there's more or less solar.
Speaker 4: You might over underproduce, you hit by crazy interday prices
Speaker 4: or even more so crazy imbalance prices. And we are
Speaker 4: taking this risk away from the asset holder. And that's
Speaker 4: a service, and we charge us small fee for this.
Speaker 4: And this is the physical business. So this is what
Speaker 4: we call balancing services. And then the second step, and
Speaker 4: this is where the PPAs comes in, is if you
Speaker 4: see a price that you like in the next year,
Speaker 4: do you want to hedge your forward price expectation with
Speaker 4: an instrument such as this. So if you say, hey,
Speaker 4: I think renewable prices are even going to be lower
Speaker 4: next year. I saw a lot of negative prices last year.
Speaker 4: I'm scared of those. I think my value is dropping.
Speaker 4: I want to lock in my value right now. And
Speaker 4: this is where the PPA side comes in.
Speaker 3: That is fundamental. The secret of your company is honesting
Speaker 3: the balancing risk. And that's how you can somehow structure
Speaker 3: a product which is I'm not going to say synthetic,
Speaker 3: but relatively replicable. And then a portfolio effect. You need
Speaker 3: a lot of computer because you are managing the balancing risk.
Speaker 3: And if we look at the UK market, which is
Speaker 3: very dissimilar from the German market, but the balancing cos
Speaker 3: used to be like two billion pounds a year five
Speaker 3: six years ago and they went to eight billion, so
Speaker 3: the system is more imbalanced. A do you see the
Speaker 3: same thing in Germany and the are you confort able
Speaker 3: that if there is like both five standard deviation your
Speaker 3: old system is not going to blow.
Speaker 4: So I always think of ourselves in the power markets
Speaker 4: as the first responders. We are responsible for the dispatch
Speaker 4: on the last meters right a few minutes before delivery.
Speaker 4: We can still react, we can still trade out power.
Speaker 4: And I would like to dissect the question a little
Speaker 4: bit because we have one thing in Germany that we
Speaker 4: call the renewable balancing paradox or the renewable energy paradox,
Speaker 4: which is when you look at the system physically, you
Speaker 4: would expect that more renewables mean more volatility, means more
Speaker 4: in need for ancillary services. So back up power plants
Speaker 4: that balance this out. In the last second, just for
Speaker 4: the physics, right, because if you have fifty gigawad of
Speaker 4: solar in the cloud comes you easily have deviations four
Speaker 4: gigawa's up and down. So you would expect the cost
Speaker 4: of these ancillary markets to grow, and in Germany, actually
Speaker 4: they haven't. They haven't grown, they have shrunk. And the
Speaker 4: question on this is why. And the reason for this
Speaker 4: is that we've become a lot better on weather, so
Speaker 4: our forecasting capabilities are becoming increasingly great. And then in
Speaker 4: Germany we have a balancing price system that heavily punishes
Speaker 4: you if you have an imbalance on the wrong side.
Speaker 4: So traders like ourselves, we don't only forecast and trade,
Speaker 4: but we also actively manage the assets. And we often hear, oh,
Speaker 4: it's such a bad thing that renewable plants are getting curtailed.
Speaker 4: In a renewable system, curtainment is going to be one
Speaker 4: of the most important things that you do to balance
Speaker 4: the system in the short term in terms of overproduction.
Speaker 4: And then when the market is short so think about
Speaker 4: the evening peak you have an outage, all power plans
Speaker 4: are ramping up. You need traders in the market also,
Speaker 4: you need prop traders in the market that have a
Speaker 4: view on risk and prices to get that short term
Speaker 4: flexibility into the market very quickly and give them a
Speaker 4: price incentive to come on live and manage the system.
Speaker 4: And this has been working immensely well. So everything that
Speaker 4: is market based, everything that is short term price based,
Speaker 4: is the greatest innovation of the energy transition that we've
Speaker 4: actually done in Germany. Beyond the physics is really building
Speaker 4: this this amazing market that is balancing everything. To the
Speaker 4: last second, the problem where the costs are coming in
Speaker 4: is redispatch. So redispatch costs are going to explode, but
Speaker 4: that is more of a system problem and problem for
Speaker 4: lack of price signals that we have to shut down
Speaker 4: more and more wind in the north and ramp up
Speaker 4: power plants in the south. And this is really where
Speaker 4: in Germany, system costs are getting higher and higher and
Speaker 4: are probably going to explode if fre don't do.
Speaker 2: Something about it, okay, which is basically grid costs, that's
Speaker 2: what we're saying. So a lack of great you just can't
Speaker 2: move the wind or the soul or where it's needed,
Speaker 2: and a lack of price signals.
Speaker 4: So let me give you an example. So the German
Speaker 4: government is very resistant on splitting Germany into several price zones,
Speaker 4: which in my view is the only thing that would
Speaker 4: help this, but on a day like today is a
Speaker 4: holiday in Germany right now, or at least in northern Germany,
Speaker 4: and so we don't have a lot of demand. If
Speaker 4: we have a lot of wind in the north, we
Speaker 4: can't transport it down. So what do they do. They
Speaker 4: shut down wind in the north and probably ramp up
Speaker 4: a gas picker in the south. And this needs to
Speaker 4: be paid for now. If we have a lot of renewables,
Speaker 4: we might be at a price level that is at
Speaker 4: zero or at negative prices. And because as a trader,
Speaker 4: I'm not seeing the grid, I'm only seeing Germany as
Speaker 4: a whole, I might actually curtail or shut down renewable
Speaker 4: plants in the south. So I'm curtailing a solar plant
Speaker 4: in the south while we're lacking energy in the south.
Speaker 4: And that is a systematic problem that you can only
Speaker 4: solve if you have different price signals in different regions,
Speaker 4: and if.
Speaker 2: You had different zones. What you would also do would
Speaker 2: also incentivize putting in storage and stuff like that, which
Speaker 2: are present. You don't have that incentive.
Speaker 4: Yes, especially putting storage into the right place and having
Speaker 4: storage react to the right price signals. So storage might
Speaker 4: do exactly the same as I just told you. So
Speaker 4: in a situation where you have low prices and a
Speaker 4: lot of redispatch and you can transport power to the south,
Speaker 4: you might actually have a storage asset taking a lot
Speaker 4: of energy from the grid in the south, which you
Speaker 4: really don't want it to do. So it's about giving
Speaker 4: the right price signals to the right assets so that
Speaker 4: they can react in the right way. This is on
Speaker 4: the dispatch side, and what nobody ever talks about is, well,
Speaker 4: what about the investment side. You also want to give
Speaker 4: an investment incentive to build the assets in the right place,
Speaker 4: and currently have none of this in Germany. We have
Speaker 4: this in Texas and Aircot they figured it out, but
Speaker 4: in Europe we're kind of running blind here.
Speaker 2: Minie, can I ask you a little bit about the
Speaker 2: two things really that I've seen in the market that
Speaker 2: I think are quite impactful in terms of changes. One
Speaker 2: is we've moved from so called gate closure of one
Speaker 2: hour to fifteen minutes across Europe, so maybe you could
Speaker 2: explain that. And the second thing I'd love to ask
Speaker 2: you to talk about is the role is storage and
Speaker 2: what this how you see this and what this means
Speaker 2: going forward?
Speaker 4: We have moved the standard trading product from one hour
Speaker 4: to fifteen minutes. That happened a couple of months ago.
Speaker 4: So right now we're trading in fifteen minute blocks and
Speaker 4: not in one hour blocks anymore, which is a good
Speaker 4: evolvement because renewables have pretty steep ramps and those ramps
Speaker 4: need to be covered, and so it is good if
Speaker 4: we have a your wide price signal on these fifteen minutes.
Speaker 4: So we had fifteen minute products before and intra day,
Speaker 4: but we didn't have across European market on it, and
Speaker 4: across European market on this just faster competition and better
Speaker 4: allocation of resources. So this is good in terms of
Speaker 4: gate closure times. This really depends on every market and
Speaker 4: also in the exchanges. So we can trade across Europe
Speaker 4: one hour before delivery. In Germany we can trade nationwide
Speaker 4: until half an hour before delivery, and then we can
Speaker 4: trade within the tears over until five minutes before the delivery.
Speaker 4: And the further you come to delivery, the smaller the
Speaker 4: volumes that you can trade, but the higher the volatility.
Speaker 3: So you're smart, you're growing, and all of a sudden,
Speaker 3: a gigantique US edge fund arrives and knock at your
Speaker 3: door and say what you do is very interesting, we
Speaker 3: like to acquire you. So explain the process and how
Speaker 3: you came now to be a company owned by Citadel.
Speaker 4: Yeah, you explained it very well. We were not at
Speaker 4: all in the market to sell this business. We wanted
Speaker 4: to build a renewable energy trading company for the long
Speaker 4: term and we still do. But last year we got
Speaker 4: an email and a call from Citadel Commodities. And when
Speaker 4: the most sophisticated, in my view, best commodity trader in
Speaker 4: the world, knocks on your door, you have that conversation
Speaker 4: and they had a very clear idea of what they
Speaker 4: wanted and what they were looking for, and this process
Speaker 4: moved extremely fast. And on our side, we thought about
Speaker 4: if this makes strategic sense for what we want to build,
Speaker 4: and it does make a lot of strategic sense, and
Speaker 4: now I'm really convinced that it's an ideal partner for
Speaker 4: a bunch of reasons. One is with them we can
Speaker 4: access trading sophistication in terms of weather models, modeling the market,
Speaker 4: and just having great talent that understands commodities and especially
Speaker 4: power in Europe very very deeply, which will also help
Speaker 4: us in our short term operations, and two is with
Speaker 4: our power Match Liquid Ppa platform, we were coming on
Speaker 4: limits because our balance sheet was just too small to
Speaker 4: do deals for a large volume and also for longer tenors.
Speaker 4: And now with Citadel, we're looking to push the tenors
Speaker 4: beyond the three years and come into a place where
Speaker 4: we can hopefully offer tolling agreements to batteries. And that
Speaker 4: space right now is owned by a bunch of utilities
Speaker 4: and we would like to break that place open. And
Speaker 4: if you want to do that, you need to have
Speaker 4: the kind of balance sheet that Citadel does, So in
Speaker 4: that way, they're really really an I deal partner. And
Speaker 4: I've just been impressed with the people I got to
Speaker 4: know over the last weeks and months and the intelligence
Speaker 4: and working with them is going to be very exciting
Speaker 4: for us.
Speaker 2: A Manni back to the German power market, I'd love
Speaker 2: to hear your view on the need for gas, and
Speaker 2: in particular new gas in the system.
Speaker 4: When you look at our own portfolio, it's kind of
Speaker 4: a microcosm of what we think the future of the
Speaker 4: German energy system is. So we have a couple hundred
Speaker 4: megawad of industrial offtake that flexibly responds to prices. We
Speaker 4: have two gigawatts of wind and solar, and we have
Speaker 4: a bit of a battery capacity to fill the gaps
Speaker 4: when the wind doesn't blow and the sun isn't there.
Speaker 4: If you want it to power the system with that,
Speaker 4: you would have a hard time because obviously there are
Speaker 4: times where there is no wind and no sun, so
Speaker 4: you need something to fill these longer term gaps, and
Speaker 4: long term storage probably isn't there fully to do it
Speaker 4: right now. So am I one of the people that
Speaker 4: says we don't need any gas at all. No, we'll
Speaker 4: need some gas speakers, or if we see it more
Speaker 4: strategically and not from a climate perspective, there probably will
Speaker 4: also be a political discussion to let call run a
Speaker 4: bit longer. However, the point where we're at right now
Speaker 4: is that the German government, which which I think is
Speaker 4: still pushed by the fossil fuel lobby, is advertising twenty
Speaker 4: gigawards of gas build out and that should be fully subsidized.
Speaker 4: That is quite a ridiculous statement that a company is
Speaker 4: too scared to build a gas peaker based on market prices.
Speaker 4: We have in the US. We have companies, private companies
Speaker 4: shooting rockets into space with private money, and RWE is
Speaker 4: saying it is too much risk to build a gas
Speaker 4: peaker based on short term power prices and they can't
Speaker 4: hedge this, so they need a capacity market or a
Speaker 4: subsidy to get these things built. And I think that's
Speaker 4: a little bit ridiculous. And everything is there in the
Speaker 4: market for gaspeakers to just be built out of the
Speaker 4: market if government made a commitment not to have a
Speaker 4: capacity market, and then it would come at a size
Speaker 4: where the market decides and not political bureaucrats decide. That
Speaker 4: obviously have their models and they're trying to do their best,
Speaker 4: but forecasting the drop and battery costs and what new
Speaker 4: technologies might be coming and to what extent demand might
Speaker 4: be able to respond to two peak prices that they're
Speaker 4: definitely going to make errors on this, And if you're
Speaker 4: a government official, you're probably always going to error on
Speaker 4: the side of security. So this is the recipe to
Speaker 4: get overcapacity and to the market, which might crowd out
Speaker 4: technologies that are just a lot cheaper. So I don't
Speaker 4: like the way this discussion is going at out.
Speaker 3: Wow, Okay, let's jump into another topic that certainly make headlines,
Speaker 3: which is algo trading. What you want to say about
Speaker 3: how good training.
Speaker 4: On short term markets, If you look at the orders
Speaker 4: being executed, we're already in Germany at around eighty five
Speaker 4: percent of orders being executed through algoes, or it might
Speaker 4: even be more, but the volume on those is quite small.
Speaker 4: And when we're talk in terms of volumes, it's something
Speaker 4: like two thirds of volumes are executed by algos. And
Speaker 4: when you think about a battery that is optimized on
Speaker 4: inter day, we have single assets that have over a
Speaker 4: thousand trades allocated to them. So this is not a
Speaker 4: job for a human to sit there and click for
Speaker 4: trading a battery. That's physically impossible. But I think a
Speaker 4: mistake that many people make is that they think, Okay,
Speaker 4: this is now AI revolution done, or the algos have
Speaker 4: figured out everything, you don't need human traders anymore. In
Speaker 4: our experience, that's not at all the case. Most of
Speaker 4: the risk decisions and most of the real intelligence is
Speaker 4: often still coming by humans. We have algos and humans
Speaker 4: trading also, both in risk taking positions. And while the
Speaker 4: algos are doing great and I do see some future there,
Speaker 4: humans are still outperforming algos because especially in short term markets,
Speaker 4: Lots of things happen that are very difficult to predict,
Speaker 4: that are very difficult to back test, and you run
Speaker 4: into situations where you don't want an algo life that
Speaker 4: has trained on data that looks completely differ than this.
Speaker 4: So to my surprise, humans are still alive in Kicking,
Speaker 4: and I think they will be for the next five
Speaker 4: years because risk taking is still something that's that's very
Speaker 4: difficult for algorithms to do.
Speaker 2: So speaking of five years, let's go to twenty thirty.
Speaker 2: I want to talk about how you see the German
Speaker 2: energy transition, because for me, it's paradoxical. The paradox is
Speaker 2: that Germany can't even put smart meters in so one level,
Speaker 2: they can't digitalize at all. And then at the area
Speaker 2: that you're working is, which is the power market. It's
Speaker 2: the most digital power market in the world, it's the
Speaker 2: most liquid power market, the most innovative. Give me a
Speaker 2: view of twenty and thirty and how you see the
Speaker 2: energy transition in Germany and what it looks like.
Speaker 4: As an entrepreneur, I'm a natural optimist and I actually
Speaker 4: think the things that we need to fix in Germany
Speaker 4: are not that big. We need to get some regulations
Speaker 4: out of the way to get the smart media rollout done.
Speaker 4: If we do this well, it should be possible to
Speaker 4: get this done in two three years. The situation is ridiculous.
Speaker 4: I absolutely agree with you. We need some better regulation
Speaker 4: in place. When it comes to redispatch, I think we
Speaker 4: need price zone split, and then we need to push
Speaker 4: for the build out and not slow down, and be
Speaker 4: strategic and make sure that we have energy prices that
Speaker 4: allows industry to stay in Europe. All of these things
Speaker 4: can happen, so I hope that we'll be in an
Speaker 4: energy system where we have around eighty eighty five percent
Speaker 4: renewables and the biggest export that I think the German
Speaker 4: energy transition has for the rest of the world is
Speaker 4: how to build this system and how to make the
Speaker 4: system work. And we are relatively still a rich economy,
Speaker 4: so when you think about it in terms of climate,
Speaker 4: I think it is on us to make some of
Speaker 4: these mistakes and pay some of these prices to then
Speaker 4: hopefully arrive at a system where others say this is
Speaker 4: actually working. We're copying this, And to use one of
Speaker 4: one of the words that I've been hearing on your podcast,
Speaker 4: I really hope will be in electro state by the
Speaker 4: time of twenty thirty.
Speaker 2: And Annie, thank you very much, absolutely great having you
Speaker 2: on the show and I wish you all the best
Speaker 2: in the future.
Speaker 4: Thank you so much for having me so job.
Speaker 2: What do you think what is in an area of Roman.
Speaker 2: I've been doing a lot of work in the last
Speaker 2: few years, you know, so I'm very very clear that
Speaker 2: what we're seeing in the whole renewable and infrastructure space
Speaker 2: is a change and power and value ad from used
Speaker 2: to be the developers with a high value adds sort
Speaker 2: of profitable guys, and then you had at the other
Speaker 2: roend you had the acid infrastructure players, which were you know,
Speaker 2: had to have huge scale because the margins and if
Speaker 2: you'd like to say the years were very very low.
Speaker 2: But now I look and I say, well, all the
Speaker 2: values in the middle, and that's where somebody like this is.
Speaker 3: There's a moment during the conversation where I say, oh
Speaker 3: my god, this guy is so good when he told
Speaker 3: I have five guys in New Zealand, so they work
Speaker 3: at night and there's somebody on the phone twenty four
Speaker 3: hours a day, and that tells you what it takes
Speaker 3: to monitor twenty four to seven. You need to have
Speaker 3: five guys in New Zealand. So when it's night in Germany,
Speaker 3: that's their day and they continue to monitor the market.
Speaker 3: It's absolutely crazy. Yeah, and you listen.
Speaker 2: If you don't do it, you're not compared to overall.
Speaker 3: Yeah, but I don't know when we or EON's going
Speaker 3: to open an office in New Zealand or in Australia.
Speaker 3: Now there are fifty guys, Okay, their structure as of course, Okay,
Speaker 3: let's say five million a year and the amount of
Speaker 3: capital they were allocated is below twenty million. And so
Speaker 3: with twenty million terms of colleto and everything, they are
Speaker 3: to make more than five million a year just to
Speaker 3: pay for the structure and certainly make money if they
Speaker 3: were quite bive Citadel. So do you imagine the profitability
Speaker 3: of that capital? The investment must have returned thirty to
Speaker 3: forty percent a year. And that's what trading is all about.
Speaker 3: I would say, at least because I think all the values.
Speaker 2: Again, I say all the values now in the middle, Yeah,
Speaker 2: you can see this developer prices are falling and as
Speaker 2: I said, then you've got yields on the asset ownership
Speaker 2: side going down and risks going up. So there you go.
Speaker 2: You got the guy in the middle, and he's really
Speaker 2: needed going forward. Can't get away with this, you can't
Speaker 2: be If you really want to have value as a developer,
Speaker 2: you need to be able to understand how that paler
Speaker 2: market element, because it's not just about selling. I've got
Speaker 2: the rights to build five megawatts of solar or in
Speaker 2: East Germany, that's not enough anymore. And then on the
Speaker 2: other side, the guy who owns the asset, he looks
Speaker 2: and goes, oh my god.
Speaker 3: I've got negative prices.
Speaker 2: What am I going to do? So I either you
Speaker 2: outsource it to these guys, you partner with them, or
Speaker 2: you try to do it yourself. So it's a very
Speaker 2: very interesting moment in the whole renewable space, and this
Speaker 2: whole area of power trading and optimization is critical.
Speaker 3: And when the which fund guys are really going to invest,
Speaker 3: you're going to see a level of optimization that we
Speaker 3: have no idea right now because they are used to liquidity,
Speaker 3: which is something that is relatively new in our energy system. Okay, job,
Speaker 3: We thank Amani for coming on the show. Those guys
Speaker 3: and all the one who came from Next Craft K.
Speaker 3: They only came from Next Craft that was a seminal company.
Speaker 3: It sure was. Yeah, I wish them the best, but
Speaker 3: they really know what they're doing. Yeah, the shadow Okay,
Speaker 3: Joab was an interesting conversation and I talk to you
Speaker 3: next week looking forwards.
Speaker 1: Thank you for listening to Redefining Energy.
Speaker 2: Don't forget to rate the show and subscribe on Apple Podcast, Spotify,
Speaker 2: or the platform of your choice.