Speaker 1: With Laurent's segle end from London and Gerard read from Berlin.
Speaker 2: This is redefining energy today.
Speaker 3: On redefining energy, what are we going to do, Lauren, Oh,
Speaker 3: it's a fascinating subject. We're going to talk about balancing
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Speaker 4: Back to the show, and for those who have a
Speaker 4: clue what that is, we're talking about the power markets.
Speaker 3: Yeah, exactly, and people talk about the all the time,
Speaker 3: but at some point and where not, at some point
Speaker 3: every day there is a central organization organize the payments exactly.
Speaker 2: Yeah, somebody has to settle everything and make sure that
Speaker 2: you get the money that you do and that you
Speaker 2: pay the money that you're meant to pay.
Speaker 3: And so that function is centralized. In most of the
Speaker 3: big system operator, it is done by the system operator.
Speaker 3: But as usual Great Britain has a bit of a
Speaker 3: very special system where a lot of those functions have
Speaker 3: been split into different companies. So you're going to hear
Speaker 3: a lot of acronyms. You're gonna hear a lot of
Speaker 3: different organizations. So let's try to list them for you.
Speaker 3: And this is relatively new because there's been a big
Speaker 3: reform two years ago. So we used to have something
Speaker 3: called National Grid, and National Grid, which had been privatized
Speaker 3: a long time ago, used to be the operator of
Speaker 3: the system, owning the wires, organizing the settlement of trades,
Speaker 3: and it has been split into different organizations. You still
Speaker 3: have National Grid that owns the infrastructure. But then now
Speaker 3: you're going to hear about nisso so jero, what's nisso.
Speaker 2: Well, that's what's called an independent system operator. Yeah, And
Speaker 2: an independent system operator is there really to have an
Speaker 2: overview of the whole system and also also to be
Speaker 2: separate from the ownership of the assets. And what that
Speaker 2: means is, you know, if you can imagine if you're
Speaker 2: running a grid, it could well be that you sort
Speaker 2: of say, you're incentivized oftentimes just to build grid. So
Speaker 2: the idea with having an independent system operator is you
Speaker 2: are independent and can make recommendations and decisions for the
Speaker 2: good of the whole system.
Speaker 3: Which itself is supervised by your body call of GENA.
Speaker 3: That's the government and then there is the police. There
Speaker 3: is a policy you're going to hear a lot about
Speaker 3: in the UK. It's called CP thirty and chard. CP
Speaker 3: thirty stands for.
Speaker 2: Stands for Clean Power by twenty thirty.
Speaker 3: Which is the UK strategic plan to decarbonize and of
Speaker 3: course gets a great ambition, but it's pretty difficult. You
Speaker 3: need investment, wires and so on. And one of the
Speaker 3: means is to develop more vulnerable and you're going to
Speaker 3: hear also AR seven and AR seven is the auction
Speaker 3: round number seven, which gives a CFD contract for difference,
Speaker 3: so the investors and mostly off Shot Wind will get
Speaker 3: a fixed price and the government will set up with
Speaker 3: the market price through Alexon, which is the company we
Speaker 3: are interviewing now.
Speaker 2: And I suppose really just to give you a little
Speaker 2: bit more in depth on what we've done, is we've
Speaker 2: invited Peter Stanley who is the CEO of Alexan to
Speaker 2: come on the show to give us really more background
Speaker 2: and to help us really understand power market.
Speaker 3: Alexon has been independent from National Grid for I would
Speaker 3: say two years. It's a non for profit and it
Speaker 3: is owned by the thirteen largest power company in GB.
Speaker 3: So it's really a very special type of organization. It's
Speaker 3: not owned by the government, it's owned by the main
Speaker 3: market actors.
Speaker 2: Well, let's bring them on the show.
Speaker 3: Peter, welcome the show.
Speaker 4: Well, thank you for having me so.
Speaker 3: Peter, you're the CEO of alexan independent company that is
Speaker 3: the accountant and the referee of the power market in GB.
Speaker 3: Can you give us an overview of exactly who intervened
Speaker 3: in the power market and what's your role in it?
Speaker 5: As you say, we're an independent manager of wholesale market
Speaker 5: arrangements in the GB market, and in practice, what that
Speaker 5: means is that we set the rules for how participants
Speaker 5: in that market trade and how we deal with either
Speaker 5: short trade or long trading in relation to either long
Speaker 5: term power purchase agreements or in today trading. So take
Speaker 5: the situation where a supplier purchases enough energy for their
Speaker 5: retail customers but on the day if they are short
Speaker 5: and the NISSO in the UK has then to balance
Speaker 5: in real time. There's a cost to that, and what
Speaker 5: Alexon does is it keeps track of those contracted positions,
Speaker 5: It takes account of the cost of the NISSO balancing
Speaker 5: in real time, and then it redistributes those costs according
Speaker 5: to who was short who was long, in order to
Speaker 5: provide an incentive for the partitionant in the market to
Speaker 5: self balance, which of course never happens closer than others.
Speaker 5: But we keep track of all those transactions and then
Speaker 5: handle all the payments on a daily basis to generators
Speaker 5: as suppliers.
Speaker 2: Peter, can I maybe just jump in and just ask
Speaker 2: could you expand there on this balancing market and how
Speaker 2: it works on why it's really critical in every power market.
Speaker 5: As you've made reference to, the balancing mechanism is the
Speaker 5: means by which need say both trades in terms of
Speaker 5: its needs for energy in real time. But there are
Speaker 5: also many other services that it needs to provide in
Speaker 5: order to keep the system stable. So there are a
Speaker 5: number of products that it's trading beyond just balancing. Typically
Speaker 5: we would call those ancillary services. So it's looking at
Speaker 5: things like inertia. It's looking at dealing with constraints on
Speaker 5: the network. So it looks at how it deals with
Speaker 5: constraints and certainment and makes the appropriate payments and then
Speaker 5: brings on power elsewhere within the system in order to
Speaker 5: make sure that the system is not only balanced, but
Speaker 5: the power is coming across the network taking account of
Speaker 5: those constraints. So the sort of cost of that within
Speaker 5: that balancing mechanism is what Alexon then redistributes in order
Speaker 5: that supplies and generator is true up against demand and supply.
Speaker 3: So every twenty four hours, you close the book and
Speaker 3: you say this guy or that guy our much And
Speaker 3: it's a bit of a clearing function. Is it just
Speaker 3: the accounting or you move the cash as well.
Speaker 5: We do the accounting and we move the cash. So
Speaker 5: we deal with all the cash imbalances across the day,
Speaker 5: but on a thirty minute basis, So we're dealing with
Speaker 5: the calculation of that position on a forty eight settlement
Speaker 5: periods within the day. We move the money on a
Speaker 5: daily basis based on forty eight positions.
Speaker 3: How many companies are in your system right now, and
Speaker 3: maybe compared to a few years.
Speaker 5: Ago, companies have remained pretty stable. As you know, back
Speaker 5: in twenty twenty two when we had the energy crisis
Speaker 5: as a result of the invasion of Ukraine, where we
Speaker 5: saw gas prices significantly spike. We did see about twenty
Speaker 5: suppliers exit the market back at that point, but it's
Speaker 5: pro remained pretty stable at about six hundred. What we
Speaker 5: have seen over the last few years is an increase
Speaker 5: in cost of balancing the network. And those imbalanced charges
Speaker 5: that we were distributing were totally about one point seven
Speaker 5: billion pound perannum. We now see that rise to about
Speaker 5: eight billion pounds perannum, and because of catailment costs, that's
Speaker 5: forecast to increase significantly over the next five to ten
Speaker 5: years unless there is a significant amount of infrastructure investment
Speaker 5: to overcome those network constraints.
Speaker 4: So Peter, maybe you could talk a little bit about that.
Speaker 4: How do you incentivize those infrastructure investments.
Speaker 5: The business case is driven by the fact that investment
Speaker 5: in infrastructure will reduce balancing costs. All of those costs
Speaker 5: balancing costs, but also increasingly network build and also renewal
Speaker 5: subsidies are being placed back onto wholesale price of electricity
Speaker 5: and therefore is becoming a more dominant factor in the
Speaker 5: total cost of energy compared with the past, where that
Speaker 5: would probably driven much more largely by the commodity cost itself.
Speaker 5: So if you take the situation of large scale wind
Speaker 5: generation in gbmarket, now they're under being by the contract
Speaker 5: for different scheme where the you're effectively getting a stripe price.
Speaker 5: Interesting Alexon also manages that scheme on behalf of the
Speaker 5: Low Carbon Contract Company, which is a government organization looking
Speaker 5: at levees and subsidies for both CFD market and also
Speaker 5: the capacity market. So we handle those schemes and do
Speaker 5: all the calculations for the transactions that are required there
Speaker 5: as well. So in a situation with wind generation or
Speaker 5: as the zero cost of fuel, but the dominant cost
Speaker 5: there is which is placed back into the wholesale price,
Speaker 5: is coming from the strike price agreed through the various
Speaker 5: RAMS auctions and the CFD schemes themselves. So increasingly sort
Speaker 5: of a complicated picture if you like, in terms of
Speaker 5: what's driving wholesale prices. Still marginal cost of gas for
Speaker 5: many of the settlement periods is the dominant factor, but
Speaker 5: so over time this is now switching to be driven
Speaker 5: by significant investment in infrastructure and other levee schemes.
Speaker 3: You're really tracking all those balancing issues, which, as you said,
Speaker 3: is going to I fold in the past years. But
Speaker 3: there's been a lot of investment into batteries, and we
Speaker 3: hear also that the battery manager complained that the system
Speaker 3: does not really know what's going on, so they are
Speaker 3: not called where they should be. I mean, there's a
Speaker 3: lot of debate going on as of today. Have you
Speaker 3: seen the impact of those batteries on balancing coos are
Speaker 3: not really.
Speaker 5: As you rightly point out, the number of assets now
Speaker 5: including battery storage, being attached to often times the local
Speaker 5: distribution networks creates challenges around visibility and number one, but
Speaker 5: also many many more smaller assets now are part of
Speaker 5: the options for balancing, and that creates challenges around the
Speaker 5: ability to dispatch them in order to get the most
Speaker 5: economic outcome. So ANISSO has been implementing something called the
Speaker 5: Open Balancing Platform, which is automating the way it stacks
Speaker 5: assets in order to create balancing. There has been some
Speaker 5: criticism I think in the past that oftentimes batteries are
Speaker 5: being overlooked for more conventional generation options, and I think
Speaker 5: NISSO always has to balance security supply and risk of
Speaker 5: the actions that it takes. There's also in some part
Speaker 5: of cultural change that's happening in the TB market at
Speaker 5: the moment, which is getting used to the idea that
Speaker 5: big levers such as interconnectors or large scale generators attached
Speaker 5: to the transition network may not necessarily always be the
Speaker 5: optimal solution for how the system's balanced. So I think
Speaker 5: that's a very life transition that we're going through at
Speaker 5: the moment in terms of understanding how you can achieve
Speaker 5: the same outcomes but with much more granular, small scale assets.
Speaker 5: So increasingly we're seeing aggregated electric vehicles participating now in
Speaker 5: the capacity market compared with in the past it would
Speaker 5: have been dominated by gas fire Dean. That's true of
Speaker 5: increasingly granular and more small scale assets participating now connected
Speaker 5: into the tribution networks creates a much more complex challenge
Speaker 5: I think for system operators to dispatch that in an
Speaker 5: optimal way.
Speaker 2: One of the things I do like about the UK
Speaker 2: market is the fact that you've got a huge amount
Speaker 2: of innovation there. So it was from the European perspective,
Speaker 2: it was really the first to go and put large
Speaker 2: scale batteries in and now I thought was very interesting
Speaker 2: what you said is that we're now looking at virtual
Speaker 2: power plants in and around EV charging. So maybe expand
Speaker 2: on that and talk a little bit about how you
Speaker 2: see that developing then in the next few years.
Speaker 4: You're right.
Speaker 5: I mean, if you look at the Clean Power twenty
Speaker 5: thirty targets in GB market, which is intended to largely
Speaker 5: decarbonize the system in the next five years, flexibility and
Speaker 5: flexible assets are going to key heart in that. The
Speaker 5: first move is there are, as you say, aggregated EV
Speaker 5: to grid as part of a solution for that, but
Speaker 5: we're also seeing separate side of battery combinations that are
Speaker 5: available to provide the sort of flexibility you need to
Speaker 5: manage stability on the grid. As a result, a lot
Speaker 5: of high renewable penetration in GB market that's set to
Speaker 5: grow up the figures of the moments that makes up
Speaker 5: about EV's about two point three percent at the moment.
Speaker 5: That's set to grow significantly, and of course one of
Speaker 5: the keys to that growth is to ensure the consumers
Speaker 5: feel the benefit of providing those flexible services in their pocket.
Speaker 5: And at the moment, a lot of that is driven
Speaker 5: by a flexible time of use tariffs, but increasingly that
Speaker 5: will need to reflect the total system cost or the
Speaker 5: system value of having access to those evs or that flexibility. Yes,
Speaker 5: it's set to grow, and one of the key enables
Speaker 5: for that has to be smart metering and the ability
Speaker 5: to be able to sort of meter and take account
Speaker 5: of those transactions at the half hour level. Only now
Speaker 5: we introducing through a half hourly settlement the ability to
Speaker 5: see meters domestic meters at the half hourly level. So
Speaker 5: getting visibility of that and being able to understand and
Speaker 5: trup those transactions is going to be key to ensuring
Speaker 5: that the money flows are correct. So it's quite a
Speaker 5: complex picture. But going back to CP twenty thirty, that
Speaker 5: set to increase some flexibility is by about fivefold. So
Speaker 5: I think at the moment we've got about seven gigawats
Speaker 5: of battery storage on the system. That needs to increase
Speaker 5: to twenty five to twenty seven gigawats by twenty thirty.
Speaker 3: Earlier this year there was the conclusion of a huge
Speaker 3: work which was called REMA. Now for the non British listener,
Speaker 3: it's the Review of Electricity Market Arrangement, which came out
Speaker 3: with a certain decisions, decisions to implement some things and
Speaker 3: decisions not to implement others. Proposed reform like nodle pricing.
Speaker 3: What's your assessment of the result, and especially if we
Speaker 3: compare with other countries.
Speaker 5: REAMA has been ongoing now for many years across quite
Speaker 5: an ambitious scope of that review, looking at all aspects
Speaker 5: of the whole, whole set electricity market. The course of
Speaker 5: the review, it's looked at the fundamental reforms in relation
Speaker 5: to each aspect of that the last of which, as
Speaker 5: you say, was looking at whether the GB market should
Speaker 5: go down nodal or even zonal markets as opposed to
Speaker 5: sticking with its historic national pricing.
Speaker 3: Last year ruled.
Speaker 5: Out nodal pricing, and I think a lot of that
Speaker 5: was driven by the need for stability. So looking at
Speaker 5: the CP twenty thirty targets, it requires significant investment in
Speaker 5: both infrastructure and also renewable generation, I think there was
Speaker 5: some real concern that a fundamental shift in those markets
Speaker 5: could create sufficient uncertainty that that investment wouldn't follow. The
Speaker 5: timeline also for implementing that would be well in excess
Speaker 5: of twenty thirty, So all ways round, it was going
Speaker 5: to be a very difficult decision to take. Having said
Speaker 5: that retaining a national market doesn't necessarily mean that that
Speaker 5: won't incur further reform. Government now is working with industry
Speaker 5: around what they call the review of National Pricing, with
Speaker 5: the intent that it can bring about many of the
Speaker 5: benefits that zono markets would have brought without the uncertainty
Speaker 5: and disruption to investment, including looking at tinuous charging, So
Speaker 5: that's looking at network use of system charging and how
Speaker 5: to take account of the constraints I talked about earlier,
Speaker 5: how to properly incentivize generation to be connecting at the
Speaker 5: right place in the network where there's sufficient capacity already,
Speaker 5: which was one of the key building blocks of zono markets.
Speaker 5: So that, coupled with nisso's own spatial planning role, now
Speaker 5: means that through national pricing you can still get some
Speaker 5: of those benefits. In other words, sit the renewables where
Speaker 5: they need to be on the network in order to
Speaker 5: optimize network investment, and also looking at things like shorter
Speaker 5: settlement periods to sharpen wholesale market prices, and particularly to
Speaker 5: give much greater visibility into flexibility actions so that they
Speaker 5: can be settled. Because clearly, even though forty eight to
Speaker 5: thirty minute blocks is reasonably granular. The actions we're talking
Speaker 5: about on the network are very in sub thirty minutes,
Speaker 5: and therefore if you're providing freakany response services from your
Speaker 5: EV then you need to be rewarded for the actions
Speaker 5: within that thirty minute period. So there's a lot still
Speaker 5: to go on under the banner of what was now
Speaker 5: reform of national pricing. So over the next few years
Speaker 5: we should see continued reform, but without necessarily the disruption
Speaker 5: to the investment required. Over the next few years.
Speaker 3: The first of October continued to past fifteen minutes settlement
Speaker 3: compared to an hour, so everything has been multiplied by four.
Speaker 3: Have you started to see impact of that reform?
Speaker 5: So I don't think we've seen that impact in gb
Speaker 5: markets as a result of the European reform. Going back
Speaker 5: to pre Brexit, we were always set to be on
Speaker 5: that same trajectory, so under what was called European harmonization.
Speaker 5: I think back in twenty twenty we were looking at
Speaker 5: harmonizing to fifteen minute settlement as well. As you know,
Speaker 5: the Australians have already moved to fifteen and five minute settlement,
Speaker 5: and we're keeping a very close eye on how that's
Speaker 5: worked for them. We've built the systems within Alexon to
Speaker 5: cope with much shorter settlement period so that we can
Speaker 5: scale for that when it comes in, and we would
Speaker 5: assess that we are going down a very similar trajectory.
Speaker 5: But there's still the business case to look at across
Speaker 5: the industry to understand exactly where the benefits of that
Speaker 5: will fall.
Speaker 4: Peter, So, surely the benefits are pretty simple. What you've
Speaker 4: got is you've just got the market now that basically
Speaker 4: the market working as best as can down to that
Speaker 4: gate closure of fifteen minutes, which means lots of competition
Speaker 4: to how would I say, you know, removing efficiencies.
Speaker 5: The benefits are clear. I think what's not clear at
Speaker 5: the moment is the cost of the transition to that
Speaker 5: within the GB market. And so my mi ndstanding is
Speaker 5: that the business case that was done was some time
Speaker 5: ago and so there will need to be a refresh
Speaker 5: of that. But yeah, from a system perspective, we clearly
Speaker 5: see the benefit of sharpening those wholesale market signals and
Speaker 5: also our ability then to understand what's happening at a
Speaker 5: sub thirty minute level in order to trie up those transactions,
Speaker 5: particularly from flexibility from balancing in that shorter time frame.
Speaker 4: Peter, maybe you talk a little bit about how do
Speaker 4: we incentivize in particularly renewable build out, but also other
Speaker 4: forms of generation inclusive batteries going forward.
Speaker 5: That in the GB market has been substantially underpinned for
Speaker 5: many years now through contracts of different scheme and also
Speaker 5: the capacity market, so both doing slightly different things. Capacity
Speaker 5: market providing confidence that capacity will be there for generation
Speaker 5: that the NISSO can be can rely on in particular
Speaker 5: areas of or times of system stress. But in terms
Speaker 5: of long term investment signals in renewables, the contract for
Speaker 5: different scheme is really critical in that. So that's providing
Speaker 5: guaranteed strike price the energy price volatility that we might
Speaker 5: see in order that that decisions can be taken around
Speaker 5: return on capital over the duration of those assets. And
Speaker 5: what we're seeing is an extension of the CFD now
Speaker 5: out to twenty year contracts, which is really sort of
Speaker 5: underpinning the capital investment needed to build an undercertainty required
Speaker 5: to build those renewables. We're also seeing very similar games
Speaker 5: now with nuclear, so size we'll see is being underpinned
Speaker 5: by what we call the regulatory asset base, which is
Speaker 5: another lowy scheme which elects on runs on behalf of
Speaker 5: the local contracts company. So again that's guaranteeing that in
Speaker 5: undertaking sizeable investment in nuclear, that the return on capital
Speaker 5: is going to be achieved, so reducing the cost of
Speaker 5: capital for those investments.
Speaker 3: Basically, what you're saying is that the market per se
Speaker 3: does not provide signals for investment, and that whether it's
Speaker 3: offshore wind so it's going to be CfDS, nuclear is
Speaker 3: going to be what I call a blank check, let's
Speaker 3: face it. And then for a lot of long duration
Speaker 3: here as you storage or interconnectors who are into cap
Speaker 3: and floor regimes. So in fact, the government intervenes indirectly
Speaker 3: in the investment in any new type of capacity. Is
Speaker 3: it the correct understanding.
Speaker 5: Yeah, in conjunction with with a NISO, Yeah, sending the
Speaker 5: right signals to ensure that the right investments are made
Speaker 5: in the right sorts of renewable technology. You rightly, it's
Speaker 5: not just wind generation, so that's offshore wind generation, onshore
Speaker 5: wind generation, nascent technologies like a floating offshore wind and
Speaker 5: long term storage. So whether that be investment in longer
Speaker 5: term battery technology or whether that's in from hydro. Yeah,
Speaker 5: the mix of that is now being determined through the
Speaker 5: auction processes, the next one of which is AR seven
Speaker 5: and right, prices will be agreed across those different technologies
Speaker 5: in order to give certainty on return and investment and
Speaker 5: reduce the cost of capital.
Speaker 3: I love pumpeirol and I'm sure you know a few
Speaker 3: can be done in Scotland. But let's face it, with
Speaker 3: the pace of development of batteries and the cost going
Speaker 3: down like bananas bananas, Because I started investing in batteries
Speaker 3: two years ago. Now I see prices divided by four
Speaker 3: in two years, and I can tell you when I
Speaker 3: started looking into batteries, it's okay, one hour battery, then two,
Speaker 3: then four and eight, And it means for me, the
Speaker 3: longertion energy starage is like an ice bag on the
Speaker 3: tropical sea. It's just gonna melt away because cleture my
Speaker 3: own battery can take up to twelve hours, you know,
Speaker 3: without any problem. So the question is I understand the
Speaker 3: long term policy of governments, but the arrival of batteries
Speaker 3: is gonna put us certain number of supposedly future of
Speaker 3: technology to be obsolete. How do you give sufficient flexibility
Speaker 3: in those long term plans to accommodate technological innovation, which
Speaker 3: is really difficult question.
Speaker 5: Now it is a very different question, and we see
Speaker 5: the same with solar. So you know, solar is also
Speaker 5: becoming way more efficient. Prices are plummeting for installation of
Speaker 5: large scale solar and the combination of that with batches
Speaker 5: and the ability to, as you say, increasingly use batches
Speaker 5: for longer term storage. That innovation in the technology will
Speaker 5: disrupt and it does raise questions around long term commitment
Speaker 5: to underpinning subsidy schemes which will effectively set the price
Speaker 5: of that for many years to come. At the same time,
Speaker 5: you're say much greater innovation and reduction in.
Speaker 2: Pricing, Peter, I just I'm going to follow on from
Speaker 2: Luran's comment. Just if I grow on being in batteries
Speaker 2: for quite a while, and if I just went back
Speaker 2: eight nine years ago, we were talking about batteries for
Speaker 2: ten minutes. Well, the latest I've heard now and I'm
Speaker 2: just back from a battery conference the six hour batteries, right,
Speaker 2: So it's it's like the use case is just explode.
Speaker 2: It's not long just even the pricing. It's the use
Speaker 2: case as exposed as well, right, because of those price
Speaker 2: reductions as well, which and I go along with Ron,
Speaker 2: it's a really game changer.
Speaker 5: No, agreed, because you say, quite right, the use case
Speaker 5: is changing, and there was a big gap I think
Speaker 5: when you're looking at batteries providing a short term only
Speaker 5: there was a big gap, particularly around the intermittency for
Speaker 5: with such a dominant generation on the GB network, such
Speaker 5: as wind, where you get a low wind cold spell
Speaker 5: and you've got a big problem because you've got a
Speaker 5: big gap to fill largely historically through intercollectors. Now, as
Speaker 5: you say that, that is a game change, and there's
Speaker 5: a long term storage coming well, longer term storage coming
Speaker 5: from batteries, and as you really say that, the rate
Speaker 5: of innovation at battery technology is also a game changer.
Speaker 3: Peter.
Speaker 2: Really, just in terms of wrapping up, I think one
Speaker 2: thing we didn't talk about was AI and digitalizations. Really,
Speaker 2: you know, just give us a review on how AI
Speaker 2: and particular AI has got to change the whole power
Speaker 2: markets and trading environment. In the future.
Speaker 5: Data and digitalization is going to be key. We're talking
Speaker 5: about an energy system that's going to have millions of
Speaker 5: assets connected undertaking hundreds of thousands of transactions, which is
Speaker 5: beyond the way that historically the system operators both distribution
Speaker 5: level and national level have been able to manage balancing
Speaker 5: on the grid maintaining stability of supply. The only way
Speaker 5: to do that in reality is to have much more
Speaker 5: highly automated systems that are managing those transactions, and clearly
Speaker 5: the role of AI is going to need to play
Speaker 5: a part. I guess the challenge culturally is how you
Speaker 5: effectively see control to AI when historically that's been done
Speaker 5: with people at control centers working twenty four to seven
Speaker 5: to ensure that that system is balanced. But it's going
Speaker 5: to become highly complex in terms of how the system
Speaker 5: is balanced. It's much more Grindal the Peter.
Speaker 3: We're kind of glad that competent teams like yours are
Speaker 3: in charge of the system, because not only we need reliable, affordable,
Speaker 3: but we need to work the fact that ALEXN is
Speaker 3: doing such a crucial role, which is not really perceived.
Speaker 3: You know, when everything works, everything is normal, and it's
Speaker 3: when there's a glitch that all of a sudden people realize,
Speaker 3: you know, something missing, So you're kind of the subbaress
Speaker 3: of the energy system. If I may say so, thank
Speaker 3: you very much for coming on the show. Thank you,
Speaker 3: Thanks Peter, great having you well job. People like when
Speaker 3: I sing, people like when I bentter. But unfortunately you've
Speaker 3: got some episode which are a bit technical. And what
Speaker 3: did you use? Say it?
Speaker 2: Because I use the word boring, but I don't know
Speaker 2: if that's appropriate.
Speaker 4: I know, I mean it's a complex topic.
Speaker 2: Ron and I listen. I think you and me have
Speaker 2: a good understanding of this, but each country is slightly different,
Speaker 2: and it really ends up with a whole part of
Speaker 2: technical words and acronyms that when you do listen to
Speaker 2: it you sort of go, what are they actually talking about?
Speaker 3: Right? Yeah, But at the end of the day, it's
Speaker 3: the old pipe of that, the old pipe of money
Speaker 3: every day between six hundred parties, retailers and so on.
Speaker 3: I can understand some who used to be very vertically integrated.
Speaker 3: You know, it was all one and fine, there was
Speaker 3: one bio, one cellar and so on. But in very
Speaker 3: few examples monopoly have proven efficient for the consumer. And
Speaker 3: where you see monopoly is where you have an asset
Speaker 3: base which is extremely capexivy, so you tend to seemilarpoli
Speaker 3: where you have large hydro fleets or large nuclear fleets.
Speaker 3: But if not, the market is better organized with a
Speaker 3: multitude of actors, biags more and so on.
Speaker 2: And yeah, and in the market like UK which has
Speaker 2: massive amounts of sort of wind and a huge band
Speaker 2: of actors that own assets in the system, right and
Speaker 2: don't forget massive amounts of batteries and this, that and
Speaker 2: the other thing, the market approach really works well.
Speaker 3: To our listeners. Sometimes we do technical episodes which are
Speaker 3: interesting in the sense that it's easy to talk about
Speaker 3: the future two fifty you know, YadA, YadA, YadA. But
Speaker 3: at some point you've got guys like Peter who are
Speaker 3: in the weeds every day, every day, every day to
Speaker 3: make sure that the hundreds of millions or billions are
Speaker 3: being exchanged so that somehow the system lives.
Speaker 2: Yeah, and actually we take it totally for granted around
Speaker 2: because at the end of the day, we assume that
Speaker 2: the money that we're old hits my bank account and
Speaker 2: vice versa. Somebody has to go and do that. At
Speaker 2: the background conclusion, look, power markets are critical for actually
Speaker 2: ensuring that capital is deployed in the right areas. Number
Speaker 2: one and number two. It's also critical for ensuring in
Speaker 2: this world of intermittent renewables that you actually can ensure
Speaker 2: that they are as efficiently and cost effectively as possible
Speaker 2: integrated into the energy system, the wider energy system.
Speaker 3: Chig, you're so wise. It's a pleasure to do the
Speaker 3: podcast with you. Okay, I took to you next week.
Speaker 3: Let's see you next week.
Speaker 1: Thank you for listening to Redefining Energy. Don't forget to
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