WEBVTT 1 00:00:04.040 --> 00:00:07.599 With Laurent's segal end from London and Gerard read from Berlin. 2 00:00:08.080 --> 00:00:12.439 This is redefining energy Today. On redefining energy, we're going 3 00:00:12.480 --> 00:00:14.039 to talk about power trading, aren't we go on? 4 00:00:14.519 --> 00:00:19.160 Yes, but under the specific angles of hedge funds and 5 00:00:19.399 --> 00:00:24.079 algos inside power trading. But first of well, from our partner, A. 6 00:00:24.120 --> 00:00:27.359 B Loco Energy is Europe's premier leaser of ten food 7 00:00:27.440 --> 00:00:32.399 container mobile batteries built in Europe with COTL best LFP cells. 8 00:00:33.000 --> 00:00:38.280 A Bloco Energy serves fourteen European countries, including France, Germany 9 00:00:38.359 --> 00:00:41.560 and the UK. A Bloco's batteries can be leased for 10 00:00:41.600 --> 00:00:44.799 any duration between six weeks and six years, and they 11 00:00:44.840 --> 00:00:48.640 are monitored by the Dutch award winning platform school A 12 00:00:48.759 --> 00:00:52.759 Blocko Energy. Make your life easier, make your business more flexible. 13 00:00:53.000 --> 00:00:56.320 Back to the show, which of course are radically changing 14 00:00:56.560 --> 00:00:58.600 the way we actually buy and sell power on a 15 00:00:58.640 --> 00:00:59.439 wholesale markets. 16 00:00:59.479 --> 00:01:03.240 Right, yeah, exactly. For the past two decades, renewable energy 17 00:01:03.240 --> 00:01:07.760 investment was viewed as an infrastructure play, so it means 18 00:01:07.799 --> 00:01:13.079 you add pension funds, long term capital seeking, predictable most 19 00:01:13.120 --> 00:01:16.760 of the time, government back cash flows and now that 20 00:01:16.840 --> 00:01:21.040 the subsidies are phasing out investors in honorable get an 21 00:01:21.040 --> 00:01:26.040 increased exposure to wholesale prices the volatility. They are freaking 22 00:01:26.079 --> 00:01:29.640 out about the stability of the cash flow, and here 23 00:01:29.920 --> 00:01:31.400 there's a solution which. 24 00:01:31.200 --> 00:01:35.359 Is emerging exactly and a large part of accidata is 25 00:01:35.359 --> 00:01:38.760 actually also optimization of what I would call flexibility. 26 00:01:39.239 --> 00:01:43.680 So we brought amani Jas who's managing director of a 27 00:01:44.000 --> 00:01:48.159 startup in Germany called flex Power. And the very interesting 28 00:01:48.239 --> 00:01:51.439 thing is that they were purchased by none other than 29 00:01:51.599 --> 00:01:56.599 Citadel with the Global Hedge Fund. So you see how 30 00:01:56.799 --> 00:02:00.319 by operating at the intersection of short term power reading 31 00:02:00.359 --> 00:02:05.400 and butt optimization, you start building some long term position. 32 00:02:06.159 --> 00:02:07.599 It's absolutely fascinating. 33 00:02:08.159 --> 00:02:11.280 Well, let's bring him on the show, Amnie. It's really 34 00:02:11.360 --> 00:02:13.639 great to have you on the show. Thanks for having me. 35 00:02:14.280 --> 00:02:17.439 When I'm an annoying your coming, Lio Bimbo called me 36 00:02:17.520 --> 00:02:21.479 and say, I'm so sad that how Many left our 37 00:02:21.520 --> 00:02:24.240 company for you to go, but I'm so proud of 38 00:02:24.280 --> 00:02:28.680 what he has achieved. Your story is remarkable. Probably it 39 00:02:28.759 --> 00:02:31.879 starts even before your days at Eon. It starts at 40 00:02:32.039 --> 00:02:35.639 Next half work. How Many explained what was going on there. 41 00:02:36.479 --> 00:02:41.319 I started trading with Next Craftbacker at around twenty and fifteen, 42 00:02:42.159 --> 00:02:45.840 and that was still at a time where renewables played 43 00:02:45.879 --> 00:02:49.400 a role, but they didn't significantly move the market. And 44 00:02:49.479 --> 00:02:52.599 at next Calfbacker, we had an amazing story and it 45 00:02:52.599 --> 00:02:56.400 was a great company, and we became Germany's largest trader 46 00:02:56.560 --> 00:03:00.479 of commercial PV and also had the largest biogas pot. 47 00:03:00.879 --> 00:03:03.800 So we learned a lot about short term power trading 48 00:03:04.400 --> 00:03:06.879 and the growth of renewables and what it does to 49 00:03:06.960 --> 00:03:10.400 prices and what it does to volatility and build out. 50 00:03:10.639 --> 00:03:13.639 I think one of Europe's best trading desks, obviously with 51 00:03:13.680 --> 00:03:16.560 a focus on Germany with our assets, but we also 52 00:03:16.599 --> 00:03:21.240 moved prop trading all across Europe and with the biogas plans. 53 00:03:21.240 --> 00:03:24.199 We also had a lot of experience in AFARR, which 54 00:03:24.240 --> 00:03:27.439 is nowadays becoming more and more important when when you 55 00:03:27.479 --> 00:03:31.560 think about battery optimization. And then I left the company 56 00:03:31.840 --> 00:03:36.039 a little before COVID happened. I started up a trading 57 00:03:36.080 --> 00:03:38.520 desk at a company called prior Gen for short term 58 00:03:38.520 --> 00:03:41.639 trading in Germany, and then I went to Eon, became 59 00:03:42.000 --> 00:03:45.840 commercial lead of power and gas and was trading at 60 00:03:45.879 --> 00:03:50.240 Eon during the energy crisis. I doubt that Leo Bilmbaum 61 00:03:50.400 --> 00:03:54.159 knows my name. But in that time, obviously the market 62 00:03:54.280 --> 00:03:58.000 was very exciting and I learned about well how corporate 63 00:03:58.039 --> 00:04:00.800 structures work, which are very different than what I saw 64 00:04:00.800 --> 00:04:04.680 at next Claffwaku, which is a more entrepreneurial company. And 65 00:04:04.719 --> 00:04:08.000 in the meantime, Next Craftwaki got bought up by Shell 66 00:04:08.560 --> 00:04:11.560 and some of my former colleagues, you know, when I 67 00:04:11.599 --> 00:04:14.159 was super happy with the compliance that came in. And 68 00:04:14.400 --> 00:04:18.680 also next Craftwerk is green energy transition company, and I 69 00:04:18.720 --> 00:04:20.879 think it was difficult for the culture that you were 70 00:04:20.879 --> 00:04:24.319 suddenly making money for an oil major. So they also 71 00:04:24.399 --> 00:04:26.720 decided to jump ship. And I got a call from 72 00:04:26.720 --> 00:04:29.480 these guys asking, hey, should we start doing this on 73 00:04:29.519 --> 00:04:33.319 our own? And I was very excited about this. So 74 00:04:33.759 --> 00:04:37.160 we had a great start with our investors from CFP Energy. 75 00:04:37.720 --> 00:04:41.480 They are a London based commodity trader and risk manager, 76 00:04:41.800 --> 00:04:44.519 and they gave us a helping hand in terms of 77 00:04:44.600 --> 00:04:46.920 starting capital to just you know, run the business, but 78 00:04:46.959 --> 00:04:51.160 probably more importantly for collateral. Then in the middle of 79 00:04:51.199 --> 00:04:53.360 the energy crisis, we went out and said we can 80 00:04:53.399 --> 00:04:55.079 do this on our own. It was very difficult to 81 00:04:55.079 --> 00:04:57.720 get a portfolio because people were worried about different things 82 00:04:57.720 --> 00:05:00.959 than giving four guys a renewable portfolio. And yeah, and 83 00:05:01.000 --> 00:05:03.600 then we grew this business from ninety megawats to two 84 00:05:03.639 --> 00:05:07.519 gigawards of WIM solar and batteries and started it up 85 00:05:07.560 --> 00:05:07.959 from there. 86 00:05:08.439 --> 00:05:10.920 You go out, you're a bunch of friends and your 87 00:05:10.959 --> 00:05:14.839 find sponsor. We know the SIVE Partner's Guide. They've been 88 00:05:14.879 --> 00:05:17.120 around for quite some time. They have an excellent res 89 00:05:17.240 --> 00:05:21.399 trading background. But you need to build systems because it's 90 00:05:21.399 --> 00:05:25.040 all about systems and data. So how fast can you 91 00:05:25.519 --> 00:05:26.720 ramp up your systems? 92 00:05:27.759 --> 00:05:31.360 Systems is one part. The second part is really getting 93 00:05:31.360 --> 00:05:34.360 a portfolio, which is difficult when nobody knows you're in 94 00:05:34.399 --> 00:05:37.959 the market. And when we were starting, I always refuse 95 00:05:38.079 --> 00:05:40.560 to call us a startup because we had a very 96 00:05:40.600 --> 00:05:43.560 clear idea of what we wanted to build. We are 97 00:05:43.639 --> 00:05:48.560 engaging in renewable physical power trading. So you need a portfolio. 98 00:05:48.920 --> 00:05:51.959 You need a virtual power plant, which we contracted out. 99 00:05:52.079 --> 00:05:55.720 We didn't build us ourselves. You need tech people that 100 00:05:56.079 --> 00:05:59.399 understand the renewable energy market and the data flows that 101 00:05:59.480 --> 00:06:03.399 come with it. You need to be able to communicate 102 00:06:03.639 --> 00:06:07.800 with DSOs and with tsos because this is physical trading 103 00:06:07.879 --> 00:06:11.839 so you send new schedules every fifteen minutes. And when 104 00:06:11.839 --> 00:06:15.079 I look back at the business plan that we presented originally, 105 00:06:15.720 --> 00:06:18.480 is actually quite remarkable because we really just checked off 106 00:06:18.519 --> 00:06:22.519 these lists and we got operational within six months. So 107 00:06:22.560 --> 00:06:24.959 you need to register balancing groups, you need to register 108 00:06:25.040 --> 00:06:27.639 with the exchange, you need to get a portfolio. So 109 00:06:27.680 --> 00:06:29.560 we were super fast on this because we had a 110 00:06:29.560 --> 00:06:31.800 good idea of where we wanted to go and what 111 00:06:31.879 --> 00:06:36.040 we needed to do, and within six months we were trading. Obviously, 112 00:06:36.079 --> 00:06:39.800 the systems were glued together and not very sophisticated yet, 113 00:06:40.199 --> 00:06:42.839 and over the last three years we build operations that 114 00:06:42.920 --> 00:06:47.199 are partially fully running automated with algorithms. We have a 115 00:06:47.240 --> 00:06:49.920 trading desk, or we have a company of fifty five people, 116 00:06:50.000 --> 00:06:53.240 twenty four to seven operations around fifty people and Hamburg 117 00:06:53.319 --> 00:06:55.800 five people in New Zealand to cover the night shifts. 118 00:06:56.839 --> 00:06:59.560 So it's really about having a plan and knowing where 119 00:06:59.600 --> 00:07:02.040 you want to go and finding the right people and 120 00:07:02.040 --> 00:07:05.399 recruiting the right people to do this. That's part number one. 121 00:07:05.399 --> 00:07:08.240 That's just building a short term power business. But I 122 00:07:08.240 --> 00:07:12.199 think where vision came in is during the crisis, we 123 00:07:12.240 --> 00:07:16.040 saw the front gear trading at eight hundred euros and 124 00:07:16.439 --> 00:07:20.800 next GAFAC actually had a large portfolio of biogas and solar, 125 00:07:21.240 --> 00:07:24.279 and the biogas plans you could hatch them forward very 126 00:07:24.360 --> 00:07:28.839 very easily with baseload shapes, but the renewables, so the PV, 127 00:07:29.079 --> 00:07:31.879 it would take you three four months to do a 128 00:07:31.879 --> 00:07:35.759 PPA with them, and when you concluded, the ppa's price 129 00:07:35.839 --> 00:07:38.439 levels were down again. So we said, we need to 130 00:07:38.439 --> 00:07:40.959 be in a market where we can hedge renewables just 131 00:07:41.079 --> 00:07:44.040 like a baseload within two minutes. And that's what we 132 00:07:44.079 --> 00:07:47.120 built very early on with our power match platform, where 133 00:07:47.120 --> 00:07:50.000 we're now able to do a PPA from a renewable 134 00:07:50.079 --> 00:07:53.160 portfolio wind, solar, and even a battery within two minutes. 135 00:07:53.199 --> 00:07:55.720 And that's what I mean when I talk about the 136 00:07:55.720 --> 00:07:58.800 commoditization of renewables, Manie. 137 00:07:58.839 --> 00:08:01.439 Can you sort of exp and a little bit on 138 00:08:01.519 --> 00:08:03.920 that in the sense that what I'm really interested in 139 00:08:03.959 --> 00:08:06.279 when you talk about PPAs, you're talking really about short 140 00:08:06.360 --> 00:08:10.600 term PPAs. Yes, where I'm coming from is I'd be 141 00:08:10.600 --> 00:08:14.040 interested to hear your views on that and how you 142 00:08:14.079 --> 00:08:16.040 see that in terms of being able to go into 143 00:08:16.079 --> 00:08:18.240 long term PPAs. And the reason I'm saying that is, 144 00:08:18.399 --> 00:08:20.279 if I'm a finance person, I want to finance a 145 00:08:20.319 --> 00:08:23.160 solar park. It's all great to have a short term PPA, 146 00:08:23.680 --> 00:08:26.120 but actually I want to have a longer term PPA 147 00:08:26.279 --> 00:08:28.439 so that I can actually I can get that on 148 00:08:28.519 --> 00:08:31.560 my project, etcetera, etcetera. Right, So, how do you see 149 00:08:31.600 --> 00:08:33.240 that going forward? That market? 150 00:08:33.679 --> 00:08:36.120 The short term PPAs have a different purpose than long 151 00:08:36.159 --> 00:08:39.360 term PPAs. So the short term PPAs have a purpose 152 00:08:39.399 --> 00:08:42.840 of Let's say you own a bunch of renewable plants 153 00:08:43.399 --> 00:08:48.159 and shipping the Baltic accidentally hits the pipeline to Norway. 154 00:08:48.600 --> 00:08:50.759 You can imagine what happens to gas prices, you can 155 00:08:50.799 --> 00:08:53.639 imagine what happens to power prices. And then we need 156 00:08:53.679 --> 00:08:55.840 some forward liquidity in the market. And if you have 157 00:08:55.879 --> 00:08:57.879 a renewable plant and the price goes up to five 158 00:08:57.960 --> 00:09:01.879 hundred euros, you can hedge with that and cash in 159 00:09:02.159 --> 00:09:05.639 quite nicely. And you're also dampening effect on the price 160 00:09:05.759 --> 00:09:08.840 level because there are people selling, whereas in the energy crisis, 161 00:09:08.879 --> 00:09:12.399 nobody was selling anymore because that liquidity wasn't there because 162 00:09:12.399 --> 00:09:16.399 we just didn't have that commoditization. And on the other hand, 163 00:09:16.399 --> 00:09:19.200 what we're doing with the short term PPAs is we 164 00:09:19.279 --> 00:09:22.679 can deliver hedges from renewables, which in the future will 165 00:09:22.679 --> 00:09:25.120 be a lot cheaper to industrials who just want to 166 00:09:25.159 --> 00:09:28.120 hedge their power positions. But here we're talking about risk 167 00:09:28.159 --> 00:09:31.600 and hedging for three years, so a trading disk like hours, 168 00:09:32.240 --> 00:09:35.240 we're not infrastructure fun. We don't look fifteen years into 169 00:09:35.240 --> 00:09:40.000 the future. And when it comes to financing a PPA 170 00:09:40.080 --> 00:09:42.679 for fifteen years, which is what an't invest in a 171 00:09:42.720 --> 00:09:46.320 new asset essentially needs, we're in a different market. But 172 00:09:46.399 --> 00:09:50.159 I think the standardization can help you to have a 173 00:09:50.159 --> 00:09:53.039 pricing benchmark, just like you have on oil and gas. 174 00:09:53.639 --> 00:09:57.080 In oiling gas, you would also use hot benchmarks to 175 00:09:57.120 --> 00:09:59.799 finance long term projects. So it's more about finding a 176 00:09:59.799 --> 00:10:02.279 p I think standards that you say this is how 177 00:10:02.360 --> 00:10:05.519 much solar is worth as like one number and not 178 00:10:05.679 --> 00:10:09.039 as an aggregate of one thousand PPAs that you might 179 00:10:09.120 --> 00:10:09.960 know or might not know. 180 00:10:10.840 --> 00:10:12.799 And Mannie, I think it's very important to explain to 181 00:10:12.840 --> 00:10:16.840 the listener how that power market works. Why if I 182 00:10:16.919 --> 00:10:20.080 have a solar asset, why I'm actually using your services 183 00:10:20.080 --> 00:10:22.200 at all? Right, So maybe just explain a little bit 184 00:10:22.200 --> 00:10:24.519 a bit of the background of how that power market works. 185 00:10:24.559 --> 00:10:27.840 So that people can understand readly why you're important and 186 00:10:28.159 --> 00:10:28.600 what you do. 187 00:10:29.440 --> 00:10:32.799 Then, stepping away from the PPAs for one second, if 188 00:10:32.840 --> 00:10:37.000 you own a solar farm or a wind farm, you 189 00:10:37.480 --> 00:10:41.600 usually do not know a lot about energy markets. Your 190 00:10:41.639 --> 00:10:45.120 project developer, you know about engineering, you know about financing, 191 00:10:45.600 --> 00:10:48.080 but you don't know about schedules to the tso you 192 00:10:48.080 --> 00:10:49.919 don't know how to connect your plan. You don't know 193 00:10:49.919 --> 00:10:53.320 how to trade it. So you need a service provider 194 00:10:53.759 --> 00:10:57.039 that gives you route to market access. That's number one. 195 00:10:57.159 --> 00:11:00.279 So that's that's a service where we say, hey, we 196 00:11:00.360 --> 00:11:03.320 connect you with the Dso we tell them this is 197 00:11:03.360 --> 00:11:06.159 your plant. If you want to read us batch, this 198 00:11:06.200 --> 00:11:09.120 is how you connect to it. We connect to the 199 00:11:09.159 --> 00:11:12.320 plant ourselves through a so called VPP so that we 200 00:11:12.399 --> 00:11:16.000 can forecast each renewable plant. So we do this every 201 00:11:16.039 --> 00:11:19.080 fifteen minute, each renewable asset gets a new forecast, so 202 00:11:19.159 --> 00:11:22.759 we can tell the TSO how much power they can 203 00:11:22.879 --> 00:11:25.600 expect to be coming into the grid. And then we 204 00:11:25.679 --> 00:11:28.919 sell this power usually largest part on the so called 205 00:11:28.960 --> 00:11:31.960 data head markets, and then the forecast errors that you 206 00:11:32.120 --> 00:11:36.720 inevitably have on the so called interday market. And for 207 00:11:36.759 --> 00:11:41.360 this we take what they call balancing risk. So we 208 00:11:41.399 --> 00:11:44.320 pay out to the renewable assets usually the day I 209 00:11:44.360 --> 00:11:48.360 had hourly price, but sometimes there's more or less solar. 210 00:11:48.799 --> 00:11:52.120 You might over underproduce, you hit by crazy interday prices 211 00:11:52.200 --> 00:11:55.240 or even more so crazy imbalance prices. And we are 212 00:11:55.279 --> 00:11:58.840 taking this risk away from the asset holder. And that's 213 00:11:58.879 --> 00:12:00.759 a service, and we charge us small fee for this. 214 00:12:01.440 --> 00:12:03.679 And this is the physical business. So this is what 215 00:12:03.799 --> 00:12:07.039 we call balancing services. And then the second step, and 216 00:12:07.080 --> 00:12:10.000 this is where the PPAs comes in, is if you 217 00:12:10.080 --> 00:12:12.360 see a price that you like in the next year, 218 00:12:12.840 --> 00:12:18.039 do you want to hedge your forward price expectation with 219 00:12:18.120 --> 00:12:20.559 an instrument such as this. So if you say, hey, 220 00:12:21.360 --> 00:12:24.080 I think renewable prices are even going to be lower 221 00:12:24.159 --> 00:12:27.039 next year. I saw a lot of negative prices last year. 222 00:12:27.360 --> 00:12:29.759 I'm scared of those. I think my value is dropping. 223 00:12:30.159 --> 00:12:32.159 I want to lock in my value right now. And 224 00:12:32.200 --> 00:12:33.879 this is where the PPA side comes in. 225 00:12:34.600 --> 00:12:39.559 That is fundamental. The secret of your company is honesting 226 00:12:39.799 --> 00:12:44.679 the balancing risk. And that's how you can somehow structure 227 00:12:44.799 --> 00:12:47.360 a product which is I'm not going to say synthetic, 228 00:12:47.480 --> 00:12:52.759 but relatively replicable. And then a portfolio effect. You need 229 00:12:52.799 --> 00:12:56.039 a lot of computer because you are managing the balancing risk. 230 00:12:56.080 --> 00:12:58.399 And if we look at the UK market, which is 231 00:12:58.960 --> 00:13:03.080 very dissimilar from the German market, but the balancing cos 232 00:13:03.159 --> 00:13:06.200 used to be like two billion pounds a year five 233 00:13:06.320 --> 00:13:09.840 six years ago and they went to eight billion, so 234 00:13:09.919 --> 00:13:13.360 the system is more imbalanced. A do you see the 235 00:13:13.399 --> 00:13:17.240 same thing in Germany and the are you confort able 236 00:13:17.440 --> 00:13:20.840 that if there is like both five standard deviation your 237 00:13:20.840 --> 00:13:22.200 old system is not going to blow. 238 00:13:23.080 --> 00:13:26.240 So I always think of ourselves in the power markets 239 00:13:26.279 --> 00:13:31.120 as the first responders. We are responsible for the dispatch 240 00:13:31.600 --> 00:13:34.279 on the last meters right a few minutes before delivery. 241 00:13:34.440 --> 00:13:37.000 We can still react, we can still trade out power. 242 00:13:38.000 --> 00:13:40.200 And I would like to dissect the question a little 243 00:13:40.240 --> 00:13:43.080 bit because we have one thing in Germany that we 244 00:13:43.159 --> 00:13:46.679 call the renewable balancing paradox or the renewable energy paradox, 245 00:13:47.279 --> 00:13:50.240 which is when you look at the system physically, you 246 00:13:50.279 --> 00:13:55.360 would expect that more renewables mean more volatility, means more 247 00:13:55.360 --> 00:13:59.000 in need for ancillary services. So back up power plants 248 00:13:59.200 --> 00:14:02.399 that balance this out. In the last second, just for 249 00:14:02.480 --> 00:14:05.279 the physics, right, because if you have fifty gigawad of 250 00:14:05.320 --> 00:14:09.240 solar in the cloud comes you easily have deviations four 251 00:14:09.279 --> 00:14:12.720 gigawa's up and down. So you would expect the cost 252 00:14:13.000 --> 00:14:16.879 of these ancillary markets to grow, and in Germany, actually 253 00:14:16.879 --> 00:14:20.960 they haven't. They haven't grown, they have shrunk. And the 254 00:14:21.080 --> 00:14:24.639 question on this is why. And the reason for this 255 00:14:24.720 --> 00:14:28.080 is that we've become a lot better on weather, so 256 00:14:28.360 --> 00:14:33.159 our forecasting capabilities are becoming increasingly great. And then in 257 00:14:33.200 --> 00:14:37.240 Germany we have a balancing price system that heavily punishes 258 00:14:37.320 --> 00:14:39.720 you if you have an imbalance on the wrong side. 259 00:14:40.240 --> 00:14:43.639 So traders like ourselves, we don't only forecast and trade, 260 00:14:44.080 --> 00:14:48.360 but we also actively manage the assets. And we often hear, oh, 261 00:14:48.399 --> 00:14:51.080 it's such a bad thing that renewable plants are getting curtailed. 262 00:14:51.480 --> 00:14:53.919 In a renewable system, curtainment is going to be one 263 00:14:53.919 --> 00:14:56.919 of the most important things that you do to balance 264 00:14:56.919 --> 00:14:59.320 the system in the short term in terms of overproduction. 265 00:15:00.240 --> 00:15:02.919 And then when the market is short so think about 266 00:15:02.960 --> 00:15:06.759 the evening peak you have an outage, all power plans 267 00:15:06.799 --> 00:15:10.399 are ramping up. You need traders in the market also, 268 00:15:10.440 --> 00:15:13.039 you need prop traders in the market that have a 269 00:15:13.159 --> 00:15:16.440 view on risk and prices to get that short term 270 00:15:16.480 --> 00:15:20.000 flexibility into the market very quickly and give them a 271 00:15:20.039 --> 00:15:23.279 price incentive to come on live and manage the system. 272 00:15:24.000 --> 00:15:28.240 And this has been working immensely well. So everything that 273 00:15:28.320 --> 00:15:30.840 is market based, everything that is short term price based, 274 00:15:31.559 --> 00:15:35.320 is the greatest innovation of the energy transition that we've 275 00:15:35.320 --> 00:15:38.240 actually done in Germany. Beyond the physics is really building 276 00:15:38.279 --> 00:15:41.279 this this amazing market that is balancing everything. To the 277 00:15:41.399 --> 00:15:44.159 last second, the problem where the costs are coming in 278 00:15:44.240 --> 00:15:47.919 is redispatch. So redispatch costs are going to explode, but 279 00:15:48.039 --> 00:15:52.279 that is more of a system problem and problem for 280 00:15:52.519 --> 00:15:55.559 lack of price signals that we have to shut down 281 00:15:55.639 --> 00:15:58.159 more and more wind in the north and ramp up 282 00:15:58.159 --> 00:16:00.159 power plants in the south. And this is really where 283 00:16:00.159 --> 00:16:03.120 in Germany, system costs are getting higher and higher and 284 00:16:03.120 --> 00:16:05.200 are probably going to explode if fre don't do. 285 00:16:05.200 --> 00:16:08.840 Something about it, okay, which is basically grid costs, that's 286 00:16:08.879 --> 00:16:10.759 what we're saying. So a lack of great you just can't 287 00:16:10.799 --> 00:16:13.159 move the wind or the soul or where it's needed, 288 00:16:13.919 --> 00:16:15.320 and a lack of price signals. 289 00:16:15.559 --> 00:16:17.919 So let me give you an example. So the German 290 00:16:17.960 --> 00:16:22.120 government is very resistant on splitting Germany into several price zones, 291 00:16:22.159 --> 00:16:24.320 which in my view is the only thing that would 292 00:16:24.360 --> 00:16:27.639 help this, but on a day like today is a 293 00:16:27.679 --> 00:16:30.480 holiday in Germany right now, or at least in northern Germany, 294 00:16:30.840 --> 00:16:33.279 and so we don't have a lot of demand. If 295 00:16:33.320 --> 00:16:36.159 we have a lot of wind in the north, we 296 00:16:36.279 --> 00:16:38.559 can't transport it down. So what do they do. They 297 00:16:38.960 --> 00:16:41.960 shut down wind in the north and probably ramp up 298 00:16:42.000 --> 00:16:43.720 a gas picker in the south. And this needs to 299 00:16:43.759 --> 00:16:47.240 be paid for now. If we have a lot of renewables, 300 00:16:47.399 --> 00:16:49.399 we might be at a price level that is at 301 00:16:49.519 --> 00:16:53.320 zero or at negative prices. And because as a trader, 302 00:16:53.480 --> 00:16:56.559 I'm not seeing the grid, I'm only seeing Germany as 303 00:16:56.600 --> 00:17:00.000 a whole, I might actually curtail or shut down renewable 304 00:17:00.240 --> 00:17:03.759 plants in the south. So I'm curtailing a solar plant 305 00:17:03.799 --> 00:17:06.559 in the south while we're lacking energy in the south. 306 00:17:06.599 --> 00:17:10.000 And that is a systematic problem that you can only 307 00:17:10.279 --> 00:17:13.480 solve if you have different price signals in different regions, 308 00:17:13.759 --> 00:17:14.160 and if. 309 00:17:14.079 --> 00:17:16.720 You had different zones. What you would also do would 310 00:17:16.720 --> 00:17:19.319 also incentivize putting in storage and stuff like that, which 311 00:17:19.319 --> 00:17:21.559 are present. You don't have that incentive. 312 00:17:21.640 --> 00:17:24.559 Yes, especially putting storage into the right place and having 313 00:17:24.559 --> 00:17:27.400 storage react to the right price signals. So storage might 314 00:17:27.440 --> 00:17:30.359 do exactly the same as I just told you. So 315 00:17:31.119 --> 00:17:33.319 in a situation where you have low prices and a 316 00:17:33.319 --> 00:17:36.000 lot of redispatch and you can transport power to the south, 317 00:17:36.240 --> 00:17:39.000 you might actually have a storage asset taking a lot 318 00:17:39.039 --> 00:17:41.000 of energy from the grid in the south, which you 319 00:17:41.079 --> 00:17:43.559 really don't want it to do. So it's about giving 320 00:17:43.640 --> 00:17:45.920 the right price signals to the right assets so that 321 00:17:46.039 --> 00:17:48.359 they can react in the right way. This is on 322 00:17:48.440 --> 00:17:51.519 the dispatch side, and what nobody ever talks about is, well, 323 00:17:51.559 --> 00:17:54.279 what about the investment side. You also want to give 324 00:17:54.440 --> 00:17:59.160 an investment incentive to build the assets in the right place, 325 00:17:59.200 --> 00:18:02.160 and currently have none of this in Germany. We have 326 00:18:02.279 --> 00:18:05.000 this in Texas and Aircot they figured it out, but 327 00:18:05.279 --> 00:18:07.279 in Europe we're kind of running blind here. 328 00:18:08.359 --> 00:18:10.640 Minie, can I ask you a little bit about the 329 00:18:10.799 --> 00:18:12.960 two things really that I've seen in the market that 330 00:18:13.039 --> 00:18:16.519 I think are quite impactful in terms of changes. One 331 00:18:16.640 --> 00:18:19.160 is we've moved from so called gate closure of one 332 00:18:19.200 --> 00:18:22.640 hour to fifteen minutes across Europe, so maybe you could 333 00:18:22.640 --> 00:18:24.400 explain that. And the second thing I'd love to ask 334 00:18:24.440 --> 00:18:27.559 you to talk about is the role is storage and 335 00:18:27.680 --> 00:18:29.759 what this how you see this and what this means 336 00:18:29.839 --> 00:18:30.400 going forward? 337 00:18:31.240 --> 00:18:35.720 We have moved the standard trading product from one hour 338 00:18:35.759 --> 00:18:39.480 to fifteen minutes. That happened a couple of months ago. 339 00:18:39.599 --> 00:18:42.680 So right now we're trading in fifteen minute blocks and 340 00:18:42.759 --> 00:18:47.119 not in one hour blocks anymore, which is a good 341 00:18:47.319 --> 00:18:51.319 evolvement because renewables have pretty steep ramps and those ramps 342 00:18:51.440 --> 00:18:53.880 need to be covered, and so it is good if 343 00:18:53.920 --> 00:18:56.920 we have a your wide price signal on these fifteen minutes. 344 00:18:56.960 --> 00:18:59.480 So we had fifteen minute products before and intra day, 345 00:18:59.759 --> 00:19:02.440 but we didn't have across European market on it, and 346 00:19:02.480 --> 00:19:06.759 across European market on this just faster competition and better 347 00:19:06.799 --> 00:19:09.839 allocation of resources. So this is good in terms of 348 00:19:09.880 --> 00:19:13.119 gate closure times. This really depends on every market and 349 00:19:13.160 --> 00:19:17.720 also in the exchanges. So we can trade across Europe 350 00:19:18.039 --> 00:19:22.000 one hour before delivery. In Germany we can trade nationwide 351 00:19:22.119 --> 00:19:24.880 until half an hour before delivery, and then we can 352 00:19:24.920 --> 00:19:28.839 trade within the tears over until five minutes before the delivery. 353 00:19:29.559 --> 00:19:32.559 And the further you come to delivery, the smaller the 354 00:19:32.640 --> 00:19:35.279 volumes that you can trade, but the higher the volatility. 355 00:19:36.000 --> 00:19:39.480 So you're smart, you're growing, and all of a sudden, 356 00:19:39.839 --> 00:19:43.799 a gigantique US edge fund arrives and knock at your 357 00:19:43.839 --> 00:19:47.359 door and say what you do is very interesting, we 358 00:19:47.599 --> 00:19:51.920 like to acquire you. So explain the process and how 359 00:19:52.039 --> 00:19:54.960 you came now to be a company owned by Citadel. 360 00:19:55.960 --> 00:19:59.359 Yeah, you explained it very well. We were not at 361 00:19:59.400 --> 00:20:02.599 all in the market to sell this business. We wanted 362 00:20:02.640 --> 00:20:05.759 to build a renewable energy trading company for the long 363 00:20:05.880 --> 00:20:10.240 term and we still do. But last year we got 364 00:20:10.279 --> 00:20:14.920 an email and a call from Citadel Commodities. And when 365 00:20:14.960 --> 00:20:18.599 the most sophisticated, in my view, best commodity trader in 366 00:20:18.640 --> 00:20:21.160 the world, knocks on your door, you have that conversation 367 00:20:22.039 --> 00:20:26.279 and they had a very clear idea of what they 368 00:20:26.359 --> 00:20:31.279 wanted and what they were looking for, and this process 369 00:20:31.279 --> 00:20:34.839 moved extremely fast. And on our side, we thought about 370 00:20:34.920 --> 00:20:38.279 if this makes strategic sense for what we want to build, 371 00:20:39.200 --> 00:20:41.160 and it does make a lot of strategic sense, and 372 00:20:41.519 --> 00:20:44.160 now I'm really convinced that it's an ideal partner for 373 00:20:44.200 --> 00:20:48.119 a bunch of reasons. One is with them we can 374 00:20:48.200 --> 00:20:52.880 access trading sophistication in terms of weather models, modeling the market, 375 00:20:53.119 --> 00:20:57.519 and just having great talent that understands commodities and especially 376 00:20:57.559 --> 00:21:00.480 power in Europe very very deeply, which will also help 377 00:21:00.559 --> 00:21:04.200 us in our short term operations, and two is with 378 00:21:04.319 --> 00:21:08.759 our power Match Liquid Ppa platform, we were coming on 379 00:21:08.880 --> 00:21:11.440 limits because our balance sheet was just too small to 380 00:21:11.519 --> 00:21:14.640 do deals for a large volume and also for longer tenors. 381 00:21:15.200 --> 00:21:18.960 And now with Citadel, we're looking to push the tenors 382 00:21:19.000 --> 00:21:22.480 beyond the three years and come into a place where 383 00:21:22.519 --> 00:21:26.519 we can hopefully offer tolling agreements to batteries. And that 384 00:21:26.640 --> 00:21:30.039 space right now is owned by a bunch of utilities 385 00:21:30.559 --> 00:21:32.759 and we would like to break that place open. And 386 00:21:32.799 --> 00:21:34.480 if you want to do that, you need to have 387 00:21:34.559 --> 00:21:37.759 the kind of balance sheet that Citadel does, So in 388 00:21:37.799 --> 00:21:40.160 that way, they're really really an I deal partner. And 389 00:21:40.799 --> 00:21:42.839 I've just been impressed with the people I got to 390 00:21:42.880 --> 00:21:46.359 know over the last weeks and months and the intelligence 391 00:21:46.519 --> 00:21:49.039 and working with them is going to be very exciting 392 00:21:49.039 --> 00:21:49.319 for us. 393 00:21:50.079 --> 00:21:53.039 A Manni back to the German power market, I'd love 394 00:21:53.039 --> 00:21:57.000 to hear your view on the need for gas, and 395 00:21:57.039 --> 00:21:59.200 in particular new gas in the system. 396 00:22:00.119 --> 00:22:02.799 When you look at our own portfolio, it's kind of 397 00:22:02.799 --> 00:22:06.039 a microcosm of what we think the future of the 398 00:22:06.039 --> 00:22:09.400 German energy system is. So we have a couple hundred 399 00:22:09.440 --> 00:22:15.079 megawad of industrial offtake that flexibly responds to prices. We 400 00:22:15.160 --> 00:22:18.480 have two gigawatts of wind and solar, and we have 401 00:22:18.519 --> 00:22:21.039