WEBVTT 1 00:00:04.000 --> 00:00:07.559 With Laurent's segle end from London and Gerard read from Berlin. 2 00:00:08.039 --> 00:00:10.839 This is redefining energy today. 3 00:00:10.919 --> 00:00:14.640 On redefining energy, what are we going to do, Lauren, Oh, 4 00:00:14.679 --> 00:00:18.800 it's a fascinating subject. We're going to talk about balancing 5 00:00:18.879 --> 00:00:22.239 on settlement code. But first of all, from my partner. 6 00:00:22.440 --> 00:00:25.399 A b Loco Energy is Europe's premier leaser of ten 7 00:00:25.480 --> 00:00:29.800 foot container mobile batteries built in Europe with COTL best 8 00:00:29.920 --> 00:00:35.719 LFP cells. A Bloco Energy serves fourteen European countries, including France, 9 00:00:36.240 --> 00:00:39.920 Germany and the UK. A Bloco's batteries can be leased 10 00:00:39.920 --> 00:00:43.079 for any duration between six weeks and six years and 11 00:00:43.119 --> 00:00:46.439 they are monitored by the Dutch award winning platform school 12 00:00:47.079 --> 00:00:50.280 A block O Energy. Make your life easier, make your. 13 00:00:50.159 --> 00:00:51.240 Business more flexible. 14 00:00:51.479 --> 00:00:53.560 Back to the show, and for those who have a 15 00:00:53.679 --> 00:00:56.520 clue what that is, we're talking about the power markets. 16 00:00:57.000 --> 00:01:01.000 Yeah, exactly, and people talk about the all the time, 17 00:01:01.240 --> 00:01:04.200 but at some point and where not, at some point 18 00:01:04.319 --> 00:01:10.280 every day there is a central organization organize the payments exactly. 19 00:01:10.560 --> 00:01:13.040 Yeah, somebody has to settle everything and make sure that 20 00:01:13.079 --> 00:01:15.480 you get the money that you do and that you 21 00:01:15.560 --> 00:01:17.239 pay the money that you're meant to pay. 22 00:01:17.680 --> 00:01:21.560 And so that function is centralized. In most of the 23 00:01:21.599 --> 00:01:26.319 big system operator, it is done by the system operator. 24 00:01:26.560 --> 00:01:29.719 But as usual Great Britain has a bit of a 25 00:01:29.840 --> 00:01:33.959 very special system where a lot of those functions have 26 00:01:34.120 --> 00:01:38.799 been split into different companies. So you're going to hear 27 00:01:38.879 --> 00:01:41.920 a lot of acronyms. You're gonna hear a lot of 28 00:01:42.159 --> 00:01:46.760 different organizations. So let's try to list them for you. 29 00:01:47.680 --> 00:01:50.439 And this is relatively new because there's been a big 30 00:01:50.480 --> 00:01:54.400 reform two years ago. So we used to have something 31 00:01:54.439 --> 00:01:59.439 called National Grid, and National Grid, which had been privatized 32 00:01:59.480 --> 00:02:02.719 a long time ago, used to be the operator of 33 00:02:02.760 --> 00:02:07.920 the system, owning the wires, organizing the settlement of trades, 34 00:02:07.959 --> 00:02:11.800 and it has been split into different organizations. You still 35 00:02:11.840 --> 00:02:16.039 have National Grid that owns the infrastructure. But then now 36 00:02:16.080 --> 00:02:19.599 you're going to hear about nisso so jero, what's nisso. 37 00:02:19.639 --> 00:02:23.479 Well, that's what's called an independent system operator. Yeah, And 38 00:02:23.520 --> 00:02:26.120 an independent system operator is there really to have an 39 00:02:26.159 --> 00:02:30.159 overview of the whole system and also also to be 40 00:02:30.280 --> 00:02:32.919 separate from the ownership of the assets. And what that 41 00:02:33.000 --> 00:02:34.439 means is, you know, if you can imagine if you're 42 00:02:34.520 --> 00:02:36.599 running a grid, it could well be that you sort 43 00:02:36.639 --> 00:02:39.919 of say, you're incentivized oftentimes just to build grid. So 44 00:02:40.000 --> 00:02:42.639 the idea with having an independent system operator is you 45 00:02:42.759 --> 00:02:47.159 are independent and can make recommendations and decisions for the 46 00:02:47.199 --> 00:02:49.599 good of the whole system. 47 00:02:49.759 --> 00:02:53.400 Which itself is supervised by your body call of GENA. 48 00:02:53.759 --> 00:02:57.520 That's the government and then there is the police. There 49 00:02:57.599 --> 00:02:59.400 is a policy you're going to hear a lot about 50 00:02:59.800 --> 00:03:03.840 in the UK. It's called CP thirty and chard. CP 51 00:03:03.919 --> 00:03:04.960 thirty stands for. 52 00:03:05.560 --> 00:03:08.199 Stands for Clean Power by twenty thirty. 53 00:03:08.439 --> 00:03:12.080 Which is the UK strategic plan to decarbonize and of 54 00:03:12.120 --> 00:03:15.639 course gets a great ambition, but it's pretty difficult. You 55 00:03:15.719 --> 00:03:19.400 need investment, wires and so on. And one of the 56 00:03:19.520 --> 00:03:23.240 means is to develop more vulnerable and you're going to 57 00:03:23.319 --> 00:03:28.960 hear also AR seven and AR seven is the auction 58 00:03:29.360 --> 00:03:35.360 round number seven, which gives a CFD contract for difference, 59 00:03:35.960 --> 00:03:39.319 so the investors and mostly off Shot Wind will get 60 00:03:39.319 --> 00:03:42.199 a fixed price and the government will set up with 61 00:03:42.240 --> 00:03:45.960 the market price through Alexon, which is the company we 62 00:03:46.039 --> 00:03:47.400 are interviewing now. 63 00:03:47.840 --> 00:03:50.400 And I suppose really just to give you a little 64 00:03:50.439 --> 00:03:52.479 bit more in depth on what we've done, is we've 65 00:03:52.560 --> 00:03:55.840 invited Peter Stanley who is the CEO of Alexan to 66 00:03:55.879 --> 00:03:58.840 come on the show to give us really more background 67 00:03:58.879 --> 00:04:01.439 and to help us really understand power market. 68 00:04:02.199 --> 00:04:05.840 Alexon has been independent from National Grid for I would 69 00:04:05.840 --> 00:04:09.520 say two years. It's a non for profit and it 70 00:04:09.599 --> 00:04:13.639 is owned by the thirteen largest power company in GB. 71 00:04:14.360 --> 00:04:18.480 So it's really a very special type of organization. It's 72 00:04:18.519 --> 00:04:21.399 not owned by the government, it's owned by the main 73 00:04:21.439 --> 00:04:22.279 market actors. 74 00:04:22.879 --> 00:04:24.160 Well, let's bring them on the show. 75 00:04:24.560 --> 00:04:25.759 Peter, welcome the show. 76 00:04:26.199 --> 00:04:27.879 Well, thank you for having me so. 77 00:04:28.000 --> 00:04:32.199 Peter, you're the CEO of alexan independent company that is 78 00:04:32.920 --> 00:04:36.600 the accountant and the referee of the power market in GB. 79 00:04:37.160 --> 00:04:40.839 Can you give us an overview of exactly who intervened 80 00:04:40.839 --> 00:04:42.920 in the power market and what's your role in it? 81 00:04:43.560 --> 00:04:46.959 As you say, we're an independent manager of wholesale market 82 00:04:47.040 --> 00:04:50.720 arrangements in the GB market, and in practice, what that 83 00:04:50.839 --> 00:04:55.040 means is that we set the rules for how participants 84 00:04:55.040 --> 00:04:59.399 in that market trade and how we deal with either 85 00:04:59.439 --> 00:05:02.120 short trade or long trading in relation to either long 86 00:05:02.240 --> 00:05:06.720 term power purchase agreements or in today trading. So take 87 00:05:06.720 --> 00:05:11.160 the situation where a supplier purchases enough energy for their 88 00:05:11.199 --> 00:05:14.720 retail customers but on the day if they are short 89 00:05:14.920 --> 00:05:18.560 and the NISSO in the UK has then to balance 90 00:05:18.600 --> 00:05:21.079 in real time. There's a cost to that, and what 91 00:05:21.160 --> 00:05:24.040 Alexon does is it keeps track of those contracted positions, 92 00:05:24.560 --> 00:05:27.759 It takes account of the cost of the NISSO balancing 93 00:05:27.759 --> 00:05:31.240 in real time, and then it redistributes those costs according 94 00:05:31.279 --> 00:05:34.160 to who was short who was long, in order to 95 00:05:34.160 --> 00:05:37.800 provide an incentive for the partitionant in the market to 96 00:05:38.079 --> 00:05:42.160 self balance, which of course never happens closer than others. 97 00:05:42.319 --> 00:05:45.160 But we keep track of all those transactions and then 98 00:05:45.519 --> 00:05:49.079 handle all the payments on a daily basis to generators 99 00:05:49.240 --> 00:05:50.040 as suppliers. 100 00:05:50.600 --> 00:05:53.040 Peter, can I maybe just jump in and just ask 101 00:05:53.040 --> 00:05:56.240 could you expand there on this balancing market and how 102 00:05:56.240 --> 00:05:59.920 it works on why it's really critical in every power market. 103 00:06:00.720 --> 00:06:03.360 As you've made reference to, the balancing mechanism is the 104 00:06:03.560 --> 00:06:06.879 means by which need say both trades in terms of 105 00:06:06.959 --> 00:06:10.000 its needs for energy in real time. But there are 106 00:06:10.040 --> 00:06:13.079 also many other services that it needs to provide in 107 00:06:13.199 --> 00:06:16.360 order to keep the system stable. So there are a 108 00:06:16.439 --> 00:06:19.839 number of products that it's trading beyond just balancing. Typically 109 00:06:19.920 --> 00:06:22.519 we would call those ancillary services. So it's looking at 110 00:06:22.560 --> 00:06:25.959 things like inertia. It's looking at dealing with constraints on 111 00:06:26.000 --> 00:06:29.519 the network. So it looks at how it deals with 112 00:06:30.000 --> 00:06:33.360 constraints and certainment and makes the appropriate payments and then 113 00:06:33.399 --> 00:06:35.680 brings on power elsewhere within the system in order to 114 00:06:35.720 --> 00:06:38.279 make sure that the system is not only balanced, but 115 00:06:38.439 --> 00:06:41.000 the power is coming across the network taking account of 116 00:06:41.000 --> 00:06:44.399 those constraints. So the sort of cost of that within 117 00:06:44.439 --> 00:06:48.399 that balancing mechanism is what Alexon then redistributes in order 118 00:06:48.519 --> 00:06:52.319 that supplies and generator is true up against demand and supply. 119 00:06:53.120 --> 00:06:56.519 So every twenty four hours, you close the book and 120 00:06:56.639 --> 00:06:59.720 you say this guy or that guy our much And 121 00:07:00.040 --> 00:07:02.720 it's a bit of a clearing function. Is it just 122 00:07:02.800 --> 00:07:04.759 the accounting or you move the cash as well. 123 00:07:05.519 --> 00:07:07.800 We do the accounting and we move the cash. So 124 00:07:07.920 --> 00:07:11.240 we deal with all the cash imbalances across the day, 125 00:07:11.279 --> 00:07:13.680 but on a thirty minute basis, So we're dealing with 126 00:07:14.480 --> 00:07:18.079 the calculation of that position on a forty eight settlement 127 00:07:18.120 --> 00:07:21.000 periods within the day. We move the money on a 128 00:07:21.120 --> 00:07:23.959 daily basis based on forty eight positions. 129 00:07:24.759 --> 00:07:28.000 How many companies are in your system right now, and 130 00:07:28.240 --> 00:07:30.360 maybe compared to a few years. 131 00:07:30.120 --> 00:07:33.560 Ago, companies have remained pretty stable. As you know, back 132 00:07:33.600 --> 00:07:37.399 in twenty twenty two when we had the energy crisis 133 00:07:37.680 --> 00:07:40.800 as a result of the invasion of Ukraine, where we 134 00:07:40.839 --> 00:07:44.720 saw gas prices significantly spike. We did see about twenty 135 00:07:45.079 --> 00:07:47.399 suppliers exit the market back at that point, but it's 136 00:07:47.399 --> 00:07:50.279 pro remained pretty stable at about six hundred. What we 137 00:07:50.360 --> 00:07:52.839 have seen over the last few years is an increase 138 00:07:52.879 --> 00:07:56.360 in cost of balancing the network. And those imbalanced charges 139 00:07:56.399 --> 00:07:59.279 that we were distributing were totally about one point seven 140 00:07:59.319 --> 00:08:03.439 billion pound perannum. We now see that rise to about 141 00:08:03.480 --> 00:08:09.079 eight billion pounds perannum, and because of catailment costs, that's 142 00:08:09.199 --> 00:08:12.800 forecast to increase significantly over the next five to ten 143 00:08:12.920 --> 00:08:16.560 years unless there is a significant amount of infrastructure investment 144 00:08:16.600 --> 00:08:18.439 to overcome those network constraints. 145 00:08:18.800 --> 00:08:21.040 So Peter, maybe you could talk a little bit about that. 146 00:08:21.079 --> 00:08:23.839 How do you incentivize those infrastructure investments. 147 00:08:24.600 --> 00:08:27.120 The business case is driven by the fact that investment 148 00:08:27.160 --> 00:08:31.040 in infrastructure will reduce balancing costs. All of those costs 149 00:08:31.120 --> 00:08:35.679 balancing costs, but also increasingly network build and also renewal 150 00:08:35.720 --> 00:08:40.240 subsidies are being placed back onto wholesale price of electricity 151 00:08:40.279 --> 00:08:43.440 and therefore is becoming a more dominant factor in the 152 00:08:43.480 --> 00:08:46.720 total cost of energy compared with the past, where that 153 00:08:46.759 --> 00:08:50.559 would probably driven much more largely by the commodity cost itself. 154 00:08:50.639 --> 00:08:53.440 So if you take the situation of large scale wind 155 00:08:53.519 --> 00:08:58.279 generation in gbmarket, now they're under being by the contract 156 00:08:58.320 --> 00:09:01.679 for different scheme where the you're effectively getting a stripe price. 157 00:09:02.320 --> 00:09:05.360 Interesting Alexon also manages that scheme on behalf of the 158 00:09:05.399 --> 00:09:08.639 Low Carbon Contract Company, which is a government organization looking 159 00:09:08.679 --> 00:09:12.840 at levees and subsidies for both CFD market and also 160 00:09:12.879 --> 00:09:16.200 the capacity market. So we handle those schemes and do 161 00:09:16.240 --> 00:09:19.159 all the calculations for the transactions that are required there 162 00:09:19.200 --> 00:09:23.720 as well. So in a situation with wind generation or 163 00:09:23.759 --> 00:09:26.799 as the zero cost of fuel, but the dominant cost 164 00:09:26.919 --> 00:09:29.639 there is which is placed back into the wholesale price, 165 00:09:29.720 --> 00:09:32.679 is coming from the strike price agreed through the various 166 00:09:32.720 --> 00:09:36.799 RAMS auctions and the CFD schemes themselves. So increasingly sort 167 00:09:36.840 --> 00:09:39.240 of a complicated picture if you like, in terms of 168 00:09:39.320 --> 00:09:44.039 what's driving wholesale prices. Still marginal cost of gas for 169 00:09:44.159 --> 00:09:46.840 many of the settlement periods is the dominant factor, but 170 00:09:47.360 --> 00:09:50.320 so over time this is now switching to be driven 171 00:09:50.360 --> 00:09:54.480 by significant investment in infrastructure and other levee schemes. 172 00:09:55.440 --> 00:09:59.200 You're really tracking all those balancing issues, which, as you said, 173 00:09:59.320 --> 00:10:02.919 is going to I fold in the past years. But 174 00:10:02.919 --> 00:10:07.679 there's been a lot of investment into batteries, and we 175 00:10:07.759 --> 00:10:11.840 hear also that the battery manager complained that the system 176 00:10:12.039 --> 00:10:14.080 does not really know what's going on, so they are 177 00:10:14.120 --> 00:10:15.960 not called where they should be. I mean, there's a 178 00:10:16.000 --> 00:10:19.480 lot of debate going on as of today. Have you 179 00:10:19.519 --> 00:10:23.159 seen the impact of those batteries on balancing coos are 180 00:10:23.159 --> 00:10:23.919 not really. 181 00:10:24.519 --> 00:10:27.120 As you rightly point out, the number of assets now 182 00:10:27.159 --> 00:10:32.720 including battery storage, being attached to often times the local 183 00:10:32.759 --> 00:10:37.279 distribution networks creates challenges around visibility and number one, but 184 00:10:37.440 --> 00:10:41.879 also many many more smaller assets now are part of 185 00:10:42.200 --> 00:10:46.120 the options for balancing, and that creates challenges around the 186 00:10:46.159 --> 00:10:50.000 ability to dispatch them in order to get the most 187 00:10:50.039 --> 00:10:54.080 economic outcome. So ANISSO has been implementing something called the 188 00:10:54.120 --> 00:10:57.679 Open Balancing Platform, which is automating the way it stacks 189 00:10:58.039 --> 00:11:02.279 assets in order to create balancing. There has been some 190 00:11:02.279 --> 00:11:05.919 criticism I think in the past that oftentimes batteries are 191 00:11:05.960 --> 00:11:09.320 being overlooked for more conventional generation options, and I think 192 00:11:09.440 --> 00:11:14.120 NISSO always has to balance security supply and risk of 193 00:11:14.159 --> 00:11:16.720 the actions that it takes. There's also in some part 194 00:11:16.759 --> 00:11:19.000 of cultural change that's happening in the TB market at 195 00:11:19.039 --> 00:11:21.879 the moment, which is getting used to the idea that 196 00:11:22.480 --> 00:11:26.799 big levers such as interconnectors or large scale generators attached 197 00:11:26.799 --> 00:11:30.320 to the transition network may not necessarily always be the 198 00:11:30.320 --> 00:11:32.879 optimal solution for how the system's balanced. So I think 199 00:11:32.919 --> 00:11:35.639 that's a very life transition that we're going through at 200 00:11:35.639 --> 00:11:37.960 the moment in terms of understanding how you can achieve 201 00:11:37.960 --> 00:11:43.159 the same outcomes but with much more granular, small scale assets. 202 00:11:43.639 --> 00:11:48.120 So increasingly we're seeing aggregated electric vehicles participating now in 203 00:11:48.120 --> 00:11:50.840 the capacity market compared with in the past it would 204 00:11:50.840 --> 00:11:54.320 have been dominated by gas fire Dean. That's true of 205 00:11:54.519 --> 00:11:59.519 increasingly granular and more small scale assets participating now connected 206 00:11:59.559 --> 00:12:03.480 into the tribution networks creates a much more complex challenge 207 00:12:03.480 --> 00:12:06.000 I think for system operators to dispatch that in an 208 00:12:06.000 --> 00:12:06.639 optimal way. 209 00:12:07.559 --> 00:12:09.120 One of the things I do like about the UK 210 00:12:09.279 --> 00:12:11.799 market is the fact that you've got a huge amount 211 00:12:11.799 --> 00:12:14.519 of innovation there. So it was from the European perspective, 212 00:12:14.519 --> 00:12:16.159 it was really the first to go and put large 213 00:12:16.159 --> 00:12:18.799 scale batteries in and now I thought was very interesting 214 00:12:18.799 --> 00:12:21.039 what you said is that we're now looking at virtual 215 00:12:21.080 --> 00:12:24.639 power plants in and around EV charging. So maybe expand 216 00:12:24.679 --> 00:12:26.879 on that and talk a little bit about how you 217 00:12:26.919 --> 00:12:28.919 see that developing then in the next few years. 218 00:12:29.639 --> 00:12:30.000 You're right. 219 00:12:30.039 --> 00:12:32.159 I mean, if you look at the Clean Power twenty 220 00:12:32.200 --> 00:12:36.440 thirty targets in GB market, which is intended to largely 221 00:12:36.519 --> 00:12:41.039 decarbonize the system in the next five years, flexibility and 222 00:12:41.080 --> 00:12:44.200 flexible assets are going to key heart in that. The 223 00:12:44.240 --> 00:12:47.679 first move is there are, as you say, aggregated EV 224 00:12:48.159 --> 00:12:50.159 to grid as part of a solution for that, but 225 00:12:50.200 --> 00:12:54.600 we're also seeing separate side of battery combinations that are 226 00:12:54.639 --> 00:12:57.720 available to provide the sort of flexibility you need to 227 00:12:57.759 --> 00:13:00.480 manage stability on the grid. As a result, a lot 228 00:13:00.480 --> 00:13:04.320 of high renewable penetration in GB market that's set to 229 00:13:04.360 --> 00:13:06.840 grow up the figures of the moments that makes up 230 00:13:06.840 --> 00:13:09.879 about EV's about two point three percent at the moment. 231 00:13:10.320 --> 00:13:14.279 That's set to grow significantly, and of course one of 232 00:13:14.279 --> 00:13:17.720 the keys to that growth is to ensure the consumers 233 00:13:17.799 --> 00:13:22.039 feel the benefit of providing those flexible services in their pocket. 234 00:13:22.279 --> 00:13:24.240 And at the moment, a lot of that is driven 235 00:13:24.279 --> 00:13:27.759 by a flexible time of use tariffs, but increasingly that 236 00:13:27.840 --> 00:13:30.679 will need to reflect the total system cost or the 237 00:13:30.679 --> 00:13:35.360 system value of having access to those evs or that flexibility. Yes, 238 00:13:35.399 --> 00:13:37.240 it's set to grow, and one of the key enables 239 00:13:37.240 --> 00:13:40.960 for that has to be smart metering and the ability 240 00:13:41.000 --> 00:13:43.200 to be able to sort of meter and take account 241 00:13:43.240 --> 00:13:46.240 of those transactions at the half hour level. Only now 242 00:13:46.440 --> 00:13:50.279 we introducing through a half hourly settlement the ability to 243 00:13:50.360 --> 00:13:53.480 see meters domestic meters at the half hourly level. So 244 00:13:53.919 --> 00:13:56.279 getting visibility of that and being able to understand and 245 00:13:56.279 --> 00:13:59.480 trup those transactions is going to be key to ensuring 246 00:13:59.519 --> 00:14:02.480 that the money flows are correct. So it's quite a 247 00:14:02.519 --> 00:14:05.960 complex picture. But going back to CP twenty thirty, that 248 00:14:06.200 --> 00:14:10.320 set to increase some flexibility is by about fivefold. So 249 00:14:10.360 --> 00:14:12.519 I think at the moment we've got about seven gigawats 250 00:14:12.519 --> 00:14:16.080 of battery storage on the system. That needs to increase 251 00:14:16.159 --> 00:14:20.039 to twenty five to twenty seven gigawats by twenty thirty. 252 00:14:20.919 --> 00:14:24.039 Earlier this year there was the conclusion of a huge 253 00:14:24.399 --> 00:14:28.320 work which was called REMA. Now for the non British listener, 254 00:14:28.480 --> 00:14:33.360 it's the Review of Electricity Market Arrangement, which came out 255 00:14:33.399 --> 00:14:37.720 with a certain decisions, decisions to implement some things and 256 00:14:37.960 --> 00:14:42.879 decisions not to implement others. Proposed reform like nodle pricing. 257 00:14:43.519 --> 00:14:46.799 What's your assessment of the result, and especially if we 258 00:14:47.480 --> 00:14:49.200 compare with other countries. 259 00:14:50.279 --> 00:14:54.000 REAMA has been ongoing now for many years across quite 260 00:14:54.039 --> 00:14:57.120 an ambitious scope of that review, looking at all aspects 261 00:14:57.120 --> 00:15:00.559 of the whole, whole set electricity market. The course of 262 00:15:00.600 --> 00:15:04.440 the review, it's looked at the fundamental reforms in relation 263 00:15:04.519 --> 00:15:07.559 to each aspect of that the last of which, as 264 00:15:07.600 --> 00:15:10.679 you say, was looking at whether the GB market should 265 00:15:10.720 --> 00:15:14.559 go down nodal or even zonal markets as opposed to 266 00:15:14.639 --> 00:15:17.120 sticking with its historic national pricing. 267 00:15:17.679 --> 00:15:19.039 Last year ruled. 268 00:15:18.759 --> 00:15:21.120 Out nodal pricing, and I think a lot of that 269 00:15:21.440 --> 00:15:24.679 was driven by the need for stability. So looking at 270 00:15:24.679 --> 00:15:28.039 the CP twenty thirty targets, it requires significant investment in 271 00:15:28.080 --> 00:15:32.080 both infrastructure and also renewable generation, I think there was 272 00:15:32.080 --> 00:15:35.639 some real concern that a fundamental shift in those markets 273 00:15:35.840 --> 00:15:39.799 could create sufficient uncertainty that that investment wouldn't follow. The 274 00:15:39.919 --> 00:15:43.440 timeline also for implementing that would be well in excess 275 00:15:43.519 --> 00:15:46.720 of twenty thirty, So all ways round, it was going 276 00:15:46.759 --> 00:15:50.120 to be a very difficult decision to take. Having said 277 00:15:50.120 --> 00:15:53.559 that retaining a national market doesn't necessarily mean that that 278 00:15:53.639 --> 00:15:58.039 won't incur further reform. Government now is working with industry 279 00:15:58.120 --> 00:16:02.159 around what they call the review of National Pricing, with 280 00:16:02.279 --> 00:16:04.600 the intent that it can bring about many of the 281 00:16:04.600 --> 00:16:08.000 benefits that zono markets would have brought without the uncertainty 282 00:16:08.039 --> 00:16:12.600 and disruption to investment, including looking at tinuous charging, So 283 00:16:12.720 --> 00:16:15.679 that's looking at network use of system charging and how 284 00:16:15.720 --> 00:16:18.639 to take account of the constraints I talked about earlier, 285 00:16:19.559 --> 00:16:23.720 how to properly incentivize generation to be connecting at the 286 00:16:23.759 --> 00:16:26.480 right place in the network where there's sufficient capacity already, 287 00:16:26.799 --> 00:16:30.399 which was one of the key building blocks of zono markets. 288 00:16:30.840 --> 00:16:34.080 So that, coupled with nisso's own spatial planning role, now 289 00:16:34.200 --> 00:16:37.240 means that through national pricing you can still get some 290 00:16:37.320 --> 00:16:40.039 of those benefits. In other words, sit the renewables where 291 00:16:40.080 --> 00:16:41.559 they need to be on the network in order to 292 00:16:41.559 --> 00:16:45.320 optimize network investment, and also looking at things like shorter 293 00:16:45.360 --> 00:16:49.320 settlement periods to sharpen wholesale market prices, and particularly to 294 00:16:49.360 --> 00:16:52.679 give much greater visibility into flexibility actions so that they 295 00:16:52.679 --> 00:16:55.720 can be settled. Because clearly, even though forty eight to 296 00:16:55.799 --> 00:16:59.559 thirty minute blocks is reasonably granular. The actions we're talking 297 00:16:59.600 --> 00:17:03.200 about on the network are very in sub thirty minutes, 298 00:17:03.240 --> 00:17:07.039 and therefore if you're providing freakany response services from your 299 00:17:07.119 --> 00:17:10.359 EV then you need to be rewarded for the actions 300 00:17:10.359 --> 00:17:13.359 within that thirty minute period. So there's a lot still 301 00:17:13.359 --> 00:17:16.759 to go on under the banner of what was now 302 00:17:17.039 --> 00:17:20.119 reform of national pricing. So over the next few years 303 00:17:20.359 --> 00:17:24.160 we should see continued reform, but without necessarily the disruption 304 00:17:24.279 --> 00:17:27.519 to the investment required. Over the next few years. 305 00:17:27.599 --> 00:17:32.440 The first of October continued to past fifteen minutes settlement 306 00:17:32.680 --> 00:17:36.200 compared to an hour, so everything has been multiplied by four. 307 00:17:37.039 --> 00:17:39.480 Have you started to see impact of that reform? 308 00:17:40.400 --> 00:17:42.759 So I don't think we've seen that impact in gb 309 00:17:42.880 --> 00:17:46.039 markets as a result of the European reform. Going back 310 00:17:46.079 --> 00:17:49.279 to pre Brexit, we were always set to be on 311 00:17:49.400 --> 00:17:53.680 that same trajectory, so under what was called European harmonization. 312 00:17:53.839 --> 00:17:57.680 I think back in twenty twenty we were looking at 313 00:17:57.680 --> 00:18:01.160 harmonizing to fifteen minute settlement as well. As you know, 314 00:18:01.200 --> 00:18:05.400 the Australians have already moved to fifteen and five minute settlement, 315 00:18:05.480 --> 00:18:08.119 and we're keeping a very close eye on how that's 316 00:18:08.200 --> 00:18:12.119 worked for them. We've built the systems within Alexon to 317 00:18:12.200 --> 00:18:14.680 cope with much shorter settlement period so that we can 318 00:18:14.759 --> 00:18:17.480 scale for that when it comes in, and we would 319 00:18:17.480 --> 00:18:20.000 assess that we are going down a very similar trajectory. 320 00:18:20.079 --> 00:18:23.119 But there's still the business case to look at across 321 00:18:23.160 --> 00:18:26.279 the industry to understand exactly where the benefits of that 322 00:18:26.359 --> 00:18:26.839 will fall. 323 00:18:27.640 --> 00:18:30.359 Peter, So, surely the benefits are pretty simple. What you've 324 00:18:30.400 --> 00:18:33.640 got is you've just got the market now that basically 325 00:18:34.279 --> 00:18:37.400 the market working as best as can down to that 326 00:18:37.480 --> 00:18:40.599 gate closure of fifteen minutes, which means lots of competition 327 00:18:40.839 --> 00:18:44.119 to how would I say, you know, removing efficiencies. 328 00:18:44.759 --> 00:18:47.160 The benefits are clear. I think what's not clear at 329 00:18:47.160 --> 00:18:49.880 the moment is the cost of the transition to that 330 00:18:49.920 --> 00:18:52.680 within the GB market. And so my mi ndstanding is 331 00:18:52.720 --> 00:18:55.759 that the business case that was done was some time 332 00:18:55.799 --> 00:18:58.240 ago and so there will need to be a refresh 333 00:18:58.240 --> 00:19:01.079 of that. But yeah, from a system perspective, we clearly 334 00:19:01.079 --> 00:19:04.680 see the benefit of sharpening those wholesale market signals and 335 00:19:04.799 --> 00:19:07.480 also our ability then to understand what's happening at a 336 00:19:07.519 --> 00:19:10.519 sub thirty minute level in order to trie up those transactions, 337 00:19:10.599 --> 00:19:14.720 particularly from flexibility from balancing in that shorter time frame. 338 00:19:15.720 --> 00:19:17.759 Peter, maybe you talk a little bit about how do 339 00:19:17.839 --> 00:19:21.759 we incentivize in particularly renewable build out, but also other 340 00:19:21.920 --> 00:19:24.720 forms of generation inclusive batteries going forward. 341 00:19:25.279 --> 00:19:29.400 That in the GB market has been substantially underpinned for 342 00:19:29.440 --> 00:19:32.759 many years now through contracts of different scheme and also 343 00:19:32.799 --> 00:19:37.759 the capacity market, so both doing slightly different things. Capacity 344 00:19:37.799 --> 00:19:43.039 market providing confidence that capacity will be there for generation 345 00:19:43.400 --> 00:19:46.359 that the NISSO can be can rely on in particular 346 00:19:46.440 --> 00:19:49.480 areas of or times of system stress. But in terms 347 00:19:49.519 --> 00:19:53.319 of long term investment signals in renewables, the contract for 348 00:19:53.440 --> 00:19:58.000 different scheme is really critical in that. So that's providing 349 00:19:58.319 --> 00:20:02.799 guaranteed strike price the energy price volatility that we might 350 00:20:02.920 --> 00:20:06.119 see in order that that decisions can be taken around 351 00:20:06.400 --> 00:20:10.720 return on capital over the duration of those assets. And 352 00:20:10.799 --> 00:20:14.440 what we're seeing is an extension of the CFD now 353 00:20:14.720 --> 00:20:18.960 out to twenty year contracts, which is really sort of 354 00:20:19.039 --> 00:20:22.680 underpinning the capital investment needed to build an undercertainty required 355 00:20:22.720 --> 00:20:26.440 to build those renewables. We're also seeing very similar games 356 00:20:26.519 --> 00:20:29.680 now with nuclear, so size we'll see is being underpinned 357 00:20:29.680 --> 00:20:31.640 by what we call the regulatory asset base, which is 358 00:20:31.680 --> 00:20:34.519 another lowy scheme which elects on runs on behalf of 359 00:20:34.839 --> 00:20:39.799 the local contracts company. So again that's guaranteeing that in 360 00:20:39.920 --> 00:20:44.160 undertaking sizeable investment in nuclear, that the return on capital 361 00:20:44.240 --> 00:20:47.119 is going to be achieved, so reducing the cost of 362 00:20:47.200 --> 00:20:49.079 capital for those investments. 363 00:20:49.759 --> 00:20:53.720 Basically, what you're saying is that the market per se 364 00:20:54.400 --> 00:20:59.160 does not provide signals for investment, and that whether it's 365 00:20:59.200 --> 00:21:03.000 offshore wind so it's going to be CfDS, nuclear is 366 00:21:03.039 --> 00:21:05.200 going to be what I call a blank check, let's 367 00:21:05.240 --> 00:21:08.279 face it. And then for a lot of long duration 368 00:21:08.400 --> 00:21:12.079 here as you storage or interconnectors who are into cap 369 00:21:12.160 --> 00:21:17.440 and floor regimes. So in fact, the government intervenes indirectly 370 00:21:17.960 --> 00:21:20.720 in the investment in any new type of capacity. Is 371 00:21:20.720 --> 00:21:22.519 it the correct understanding. 372 00:21:22.799 --> 00:21:26.440 Yeah, in conjunction with with a NISO, Yeah, sending the 373 00:21:26.559 --> 00:21:30.799 right signals to ensure that the right investments are made 374 00:21:30.880 --> 00:21:34.480 in the right sorts of renewable technology. You rightly, it's 375 00:21:34.519 --> 00:21:38.759 not just wind generation, so that's offshore wind generation, onshore 376 00:21:38.799 --> 00:21:43.680 wind generation, nascent technologies like a floating offshore wind and 377 00:21:43.799 --> 00:21:48.200 long term storage. So whether that be investment in longer 378 00:21:48.279 --> 00:21:52.319 term battery technology or whether that's in from hydro. Yeah, 379 00:21:52.440 --> 00:21:55.440 the mix of that is now being determined through the 380 00:21:55.480 --> 00:21:58.920 auction processes, the next one of which is AR seven 381 00:21:59.200 --> 00:22:03.400 and right, prices will be agreed across those different technologies 382 00:22:03.440 --> 00:22:06.759 in order to give certainty on return and investment and 383 00:22:06.839 --> 00:22:08.000 reduce the cost of capital. 384 00:22:09.119 --> 00:22:12.599 I love pumpeirol and I'm sure you know a few 385 00:22:12.640 --> 00:22:15.079 can be done in Scotland. But let's face it, with 386 00:22:15.200 --> 00:22:19.400 the pace of development of batteries and the cost going 387 00:22:19.440 --> 00:22:25.079 down like bananas bananas, Because I started investing in batteries 388 00:22:25.119 --> 00:22:27.680 two years ago. Now I see prices divided by four 389 00:22:28.480 --> 00:22:30.960 in two years, and I can tell you when I 390 00:22:31.000 --> 00:22:34.440 started looking into batteries, it's okay, one hour battery, then two, 391 00:22:34.759 --> 00:22:39.519 then four and eight, And it means for me, the 392 00:22:39.559 --> 00:22:42.720 longertion energy starage is like an ice bag on the 393 00:22:42.720 --> 00:22:47.279 tropical sea. It's just gonna melt away because cleture my 394 00:22:47.279 --> 00:22:50.200 own battery can take up to twelve hours, you know, 395 00:22:50.279 --> 00:22:54.000 without any problem. So the question is I understand the 396 00:22:54.079 --> 00:22:59.000 long term policy of governments, but the arrival of batteries 397 00:22:59.160 --> 00:23:02.759 is gonna put us certain number of supposedly future of 398 00:23:02.799 --> 00:23:08.519 technology to be obsolete. How do you give sufficient flexibility 399 00:23:08.599 --> 00:23:13.200 in those long term plans to accommodate technological innovation, which 400 00:23:13.240 --> 00:23:14.880 is really difficult question. 401 00:23:14.960 --> 00:23:17.759