WEBVTT 1 00:00:04.719 --> 00:00:08.279 With Laurn's segle End from London and Gerard read from Berlin. 2 00:00:08.800 --> 00:00:10.560 This is redefining energy. 3 00:00:11.400 --> 00:00:11.759 Today. 4 00:00:11.919 --> 00:00:15.439 On Redefining Energy, we're going to talk about the opportunities 5 00:00:15.480 --> 00:00:17.239 in the German battery market. 6 00:00:17.239 --> 00:00:21.079 And it's going so crazy. I call that a blitz. 7 00:00:21.640 --> 00:00:23.519 But first of the well, from my partner. 8 00:00:23.719 --> 00:00:26.679 A b Loco Energy is Europe's premier leaser of ten 9 00:00:26.760 --> 00:00:31.039 foot container mobile batteries built in Europe with COTL best 10 00:00:31.199 --> 00:00:37.000 LFP cells. A Bloco Energy serves fourteen European countries, including France, 11 00:00:37.520 --> 00:00:41.200 Germany and the UK. A Bloco's batteries can be leased 12 00:00:41.200 --> 00:00:44.359 for any duration between six weeks and six years, and 13 00:00:44.399 --> 00:00:47.719 they are monitored by the Dutch award winning platform school 14 00:00:48.439 --> 00:00:51.920 A Blocko Energy. Make your life easier, make your business 15 00:00:51.920 --> 00:00:54.439 more flexible. Back to the show, Yeah, that's a good 16 00:00:54.479 --> 00:00:57.280 way to put it all, right, absolutely, and it's huge 17 00:00:57.280 --> 00:00:59.799 amount of drivers in that market, Laurn starting with just 18 00:01:00.200 --> 00:01:02.439 price volatility, right, incredible. 19 00:01:02.479 --> 00:01:07.079 What's going on before we introduce our guests, I've decided 20 00:01:07.159 --> 00:01:10.159 to bring on for a few minutes Zach Williams from 21 00:01:10.159 --> 00:01:13.879 Model Energy because Modo is really the best analysis of 22 00:01:14.000 --> 00:01:17.640 every battery market for three four minutes. Zach is going 23 00:01:17.680 --> 00:01:20.159 to explain us what's the set of play in the 24 00:01:20.200 --> 00:01:24.480 German battery market. Let's listen to Zach. Zach, welcome and 25 00:01:24.680 --> 00:01:28.439 please give us a broad picture of what model analyzers 26 00:01:28.519 --> 00:01:31.879 and then a few key figures on the German battery market. 27 00:01:32.239 --> 00:01:36.200 Yeah, thanks, Lauren murder Energy. We look into how batteries 28 00:01:36.239 --> 00:01:39.319 are performing today and how they're going to perform in 29 00:01:39.359 --> 00:01:43.599 the future. So we offer benchmarking services, power price and 30 00:01:43.640 --> 00:01:48.000 batchy revenue forecasts and also research into these markets. So 31 00:01:48.120 --> 00:01:51.040 some of the key topics, challenges and risks behind that. 32 00:01:51.640 --> 00:01:58.519 You follow GB Australia, Texas, California and you recently opened Germany. 33 00:01:58.879 --> 00:02:01.959 Yeah, we originally started in GB and for about a 34 00:02:02.079 --> 00:02:05.680 year now we've been doing the US markets and Australia 35 00:02:06.159 --> 00:02:10.520 and most recently now expanding into Europe, so Spain, Germany, 36 00:02:10.560 --> 00:02:12.439 France and Italy next on the list. 37 00:02:12.960 --> 00:02:15.599 So it seems the German market is very hot right now. 38 00:02:15.879 --> 00:02:18.919 What's your assessment of the German market now and going forward. 39 00:02:19.319 --> 00:02:21.599 Germany is a really hot market at the moment. There's 40 00:02:21.639 --> 00:02:25.280 a lot of interest both from the local developers as 41 00:02:25.280 --> 00:02:27.960 well as a lot of foreign investments. So a lot 42 00:02:28.000 --> 00:02:30.080 of companies that have got a lot of experience in 43 00:02:30.120 --> 00:02:33.120 gb that are looking how to get assets deployed in 44 00:02:33.159 --> 00:02:37.120 Germany as well. The merchant case in Germany is particularly strong, 45 00:02:37.240 --> 00:02:41.080 so you've got really strong, robust merchant returns across the 46 00:02:41.159 --> 00:02:44.479 three key portions of the revenue stack. So first of all, 47 00:02:44.520 --> 00:02:48.240 the fundamental case in the day ahead power market. Germany 48 00:02:48.240 --> 00:02:51.400 has the strongest daily power spreads of Europe's major markets. 49 00:02:51.879 --> 00:02:55.360 So there's over one hundred gigawatts of subsidized solar capacity 50 00:02:55.719 --> 00:02:59.240 and only eighty gigawatts of peak load. So during peak 51 00:02:59.280 --> 00:03:02.800 solar hours, the grid is flooded with this additional solar 52 00:03:02.879 --> 00:03:05.479 energy which it can't consume. So the result is you 53 00:03:05.520 --> 00:03:08.840 get these deep troughs in negative prices. So Germany has 54 00:03:08.840 --> 00:03:12.560 the most frequent negative prices of Europe's major markets and 55 00:03:12.639 --> 00:03:16.120 the deepest negative prices. So it's a dream for batches 56 00:03:16.159 --> 00:03:19.159 because you can charge during these periods of deep native 57 00:03:19.240 --> 00:03:22.159 prices and shift that energy to later in the day 58 00:03:22.800 --> 00:03:25.840 when power prices have returned. So yeah, ultimately Germany has 59 00:03:25.879 --> 00:03:28.840 the strongest day head power price spreads in Europe. On 60 00:03:28.879 --> 00:03:31.439 top of that, the market design in Germany means it 61 00:03:31.479 --> 00:03:35.400 has an extremely lucrative intra day market. So why is that. 62 00:03:35.719 --> 00:03:39.759 Essentially in Germany there's no central balancing mechanism like you 63 00:03:39.840 --> 00:03:42.599 have in markets like in the UK, and there's very 64 00:03:42.639 --> 00:03:46.479 strict imbalance penalties for being out of position. So if 65 00:03:46.479 --> 00:03:49.080 you're a solar or a wind or thermal generator that's 66 00:03:49.080 --> 00:03:51.879 out of position, you deliver more energy or less energy 67 00:03:51.879 --> 00:03:54.599 than you agree to, you get charge to penalty. So 68 00:03:54.759 --> 00:03:58.039 they're strongly incentivized to make sure they sell as much 69 00:03:58.159 --> 00:04:02.000 energy as they produce. How this happens in practice is 70 00:04:02.319 --> 00:04:06.080 solar producers will forecast how much energy they produce in 71 00:04:06.120 --> 00:04:09.120 the day head market. Let's say this is one hundred megawatts. 72 00:04:09.439 --> 00:04:12.120 Then for the following twenty four hours, as the forecasts 73 00:04:12.120 --> 00:04:14.280 are updated, they get a clear idea of how much 74 00:04:14.400 --> 00:04:17.240 energy they're going to produce, they correct their forecast in 75 00:04:17.279 --> 00:04:20.199 the intra day continuous market. So this creates a lot 76 00:04:20.240 --> 00:04:23.800 of intra day volatility which batchies can take advantage of. 77 00:04:23.959 --> 00:04:27.120 So I've heard batteries can trade up to fifteen times 78 00:04:27.360 --> 00:04:30.040 as much volume as they actually deliver, so a lot 79 00:04:30.040 --> 00:04:32.600 of non physical trading in the inter day market. And 80 00:04:32.639 --> 00:04:35.079 on top of that, you've also got the ancillary services. 81 00:04:35.480 --> 00:04:39.199 So Germany requires about five point five gigawatts of total 82 00:04:39.240 --> 00:04:43.240 ancidary service demands which are not yet saturated. And the 83 00:04:43.279 --> 00:04:45.639 star of the show in that market is the AFRR 84 00:04:46.040 --> 00:04:49.920 or Automatic Frequency Restoration Reserve, which you can bid two 85 00:04:50.000 --> 00:04:53.560 gigawats in either direction, and there's only around five to 86 00:04:53.600 --> 00:04:57.000 eight hundred megawats of batches registered in that service already. 87 00:04:57.639 --> 00:05:00.800 So if you're an optimizer of bat trees, you've got 88 00:05:00.839 --> 00:05:04.079 these three really strong revenue streams which you can cross 89 00:05:04.120 --> 00:05:07.879 optimize between. And that's why Germany is looking so strong 90 00:05:07.920 --> 00:05:10.199 and so attractive for so many different players. 91 00:05:10.519 --> 00:05:13.120 Well, thank you very much. So it's a very very 92 00:05:13.160 --> 00:05:16.240 out market. Thank you so much for coming. Thanks my preasure. 93 00:05:16.839 --> 00:05:20.360 So Jerh, we've decided to bring a very special guest. 94 00:05:20.639 --> 00:05:24.800 We could have brought a very established developer institutional, but 95 00:05:24.879 --> 00:05:29.439 we have decided to go for a pioneer commando absolutely. 96 00:05:29.519 --> 00:05:32.120 So what we've decided to do is bring in Philip Mann, 97 00:05:32.319 --> 00:05:37.160 who's the CEO of a battery business called Terreller, very 98 00:05:37.199 --> 00:05:40.560 active in the German market, and some very interesting and 99 00:05:40.720 --> 00:05:44.000 pioneering agreements that they've put in place, which I think 100 00:05:44.000 --> 00:05:47.600 are very important for the future. Of financing batteries, not 101 00:05:47.680 --> 00:05:49.079 just in Germany but across the world. 102 00:05:49.360 --> 00:05:52.800 Yeah. Absolutely, And one of the innovations well, first of 103 00:05:52.879 --> 00:05:56.399 all is vertical integration, but with partner at every step 104 00:05:56.399 --> 00:05:58.680 of the way. But the second he has a master 105 00:05:58.759 --> 00:06:03.000 of toting agreements and a toning agreement. Basically, you build 106 00:06:03.079 --> 00:06:07.199 the battery and you go contract with a trader and 107 00:06:07.240 --> 00:06:11.519 somehow it's a swap fix to viable, which means Talaa 108 00:06:11.639 --> 00:06:14.959 is going to get a fixed revenue. So that's excellent 109 00:06:15.000 --> 00:06:16.959 because you can raise that on the top of that, 110 00:06:17.720 --> 00:06:20.199 and on the other side, the traders and these are 111 00:06:20.360 --> 00:06:24.160 big guys with that and fil they get access to 112 00:06:24.199 --> 00:06:27.199 the battery and they trade around it without having to 113 00:06:27.319 --> 00:06:31.040 invest in the battery exactly. And that's very important because 114 00:06:31.279 --> 00:06:34.279 people don't understand that the trading desk in those big 115 00:06:34.319 --> 00:06:38.639 company is very very far away from the industrial department. 116 00:06:39.240 --> 00:06:41.959 So in fact it's faster to go through a third 117 00:06:42.000 --> 00:06:44.519 party than trying to organize something in. 118 00:06:44.519 --> 00:06:48.199 House exactly exactly. So as and Minor, we bring Pel 119 00:06:48.279 --> 00:06:48.800 upon the show. 120 00:06:49.720 --> 00:06:50.120 Philip. 121 00:06:50.160 --> 00:06:51.319 It's great to have you on the show. 122 00:06:51.680 --> 00:06:52.920 Thank you very much for inviting me. 123 00:06:53.360 --> 00:06:56.079 Philip. We like to bring thriving on top onurs and 124 00:06:56.120 --> 00:06:58.639 I think you're one of them. Three years ago your 125 00:06:58.639 --> 00:07:01.360 company did not exist. You have managed to raise close 126 00:07:01.399 --> 00:07:04.360 to one hundred million of equity and debt, which is 127 00:07:04.399 --> 00:07:07.319 pretty phenomenal. So how did you succeed so fast? 128 00:07:08.040 --> 00:07:11.279 When we started November twenty two, we were still running 129 00:07:11.279 --> 00:07:14.079 our old company, which was a B to C luxury marketplace, 130 00:07:14.399 --> 00:07:16.879 and before that, I started my career at Glenkor. So 131 00:07:17.199 --> 00:07:19.079 the way I think about it is it's kind of 132 00:07:19.240 --> 00:07:22.199 coming back home, back to energy, which way I started 133 00:07:22.240 --> 00:07:25.480 my career. We've been able to move quite fast for 134 00:07:25.519 --> 00:07:28.360 the simple reason that there's this massive over indexing and 135 00:07:28.399 --> 00:07:32.639 renewable energy generation investment structurally too littless happening in grits 136 00:07:32.680 --> 00:07:35.199 and in storage, and so we felt very quickly on 137 00:07:35.279 --> 00:07:38.399 that this is probably one of the largest single asset 138 00:07:38.399 --> 00:07:42.240 capital deployment opportunities of our time. Everything is about AIAI 139 00:07:42.360 --> 00:07:44.680 is fundamentally about built world, which is data centers and 140 00:07:44.720 --> 00:07:49.000 data centers about power. We very quickly managed to create 141 00:07:49.040 --> 00:07:53.279 a differentiated value proposition and hypothesis, which, combined with attraction 142 00:07:53.319 --> 00:07:55.839 that we droped G attracted a lot of standout investors, 143 00:07:55.839 --> 00:07:57.319 and we've been very lucky too. 144 00:07:58.040 --> 00:07:59.879 Yeah, i'd be just to hear what you think, are 145 00:07:59.879 --> 00:08:00.800 you as peers. 146 00:08:01.079 --> 00:08:03.680 Yeah. So when we started with this business, you know, 147 00:08:03.680 --> 00:08:07.000 we looked at storage. In Germany November twenty two, there 148 00:08:07.079 --> 00:08:10.639 was under a gigawoud of grid scale bes. So we said, okay, well, 149 00:08:10.639 --> 00:08:13.319 there's obviously not enough storage, but if you truly believe 150 00:08:13.360 --> 00:08:15.560 that this asset class will be as big as people think, 151 00:08:16.000 --> 00:08:18.800 we felt three things needed to happen to make a differentiation. 152 00:08:19.279 --> 00:08:21.240 First one is aim there will be a lot of 153 00:08:21.240 --> 00:08:25.439 people that need flexibility, large CNI traders, utilities, et cetera. 154 00:08:25.920 --> 00:08:28.519 It will not be practical for everyone to own and 155 00:08:28.600 --> 00:08:31.360 operate their own assets, so we said, somebody needs to 156 00:08:31.360 --> 00:08:35.120 build something like the Amazon Web Services for energy flexibility. 157 00:08:35.759 --> 00:08:38.159 The second point that we made is that we said 158 00:08:38.360 --> 00:08:41.960 most people look at flexibility and best as just a 159 00:08:42.000 --> 00:08:45.559 development business. But you know, storage is an active asset class. 160 00:08:45.799 --> 00:08:47.679 If you build a PV plant, then you do nothing 161 00:08:47.679 --> 00:08:50.159 with it, still produces power when it's sunny. You build 162 00:08:50.159 --> 00:08:51.960 a battery and you do nothing with it, well, it 163 00:08:51.960 --> 00:08:54.000 does nothing. So I think a lot of the value 164 00:08:54.039 --> 00:08:56.919 is actually in the commercialization of the asset. And the 165 00:08:56.960 --> 00:08:59.159 third thing that we said, is you need to ownly 166 00:08:59.200 --> 00:09:02.120 off take. It's an infrastructure asset class in the making. 167 00:09:02.480 --> 00:09:04.840 It looks like infrastructure, it's hard assets, it's on the 168 00:09:04.840 --> 00:09:07.919 ground that's power involved. But if you actually look at storage, 169 00:09:08.120 --> 00:09:10.679 it's a volatile business in the very nature of it. 170 00:09:11.000 --> 00:09:13.399 So we said, you need to enable to attract off 171 00:09:13.480 --> 00:09:16.720 takers to drive long term revenues and if you have these, 172 00:09:17.279 --> 00:09:20.320 they would scale with you on a global basis. And 173 00:09:20.519 --> 00:09:23.440 we just closed two deals recently in Germany, one with RWE, 174 00:09:23.519 --> 00:09:27.039 one with button FID. And while obviously electricity markets are local, 175 00:09:27.399 --> 00:09:29.440 Germany is different the France, France, it's different the Spain 176 00:09:29.480 --> 00:09:31.840 and so on, but the off takers are global. So 177 00:09:31.919 --> 00:09:34.000 once you have somebody in Germany, you can expand to 178 00:09:34.039 --> 00:09:35.879 other markets for them. And so these were three key 179 00:09:35.960 --> 00:09:39.279 hypothesis that drove what we built, so ultimately that led 180 00:09:39.320 --> 00:09:42.039 us to build terror Alayer. What is terror Layer? We 181 00:09:42.200 --> 00:09:46.120 are a integrated energy flexibility provider, so on the one 182 00:09:46.159 --> 00:09:48.480 side we kind of have two parts of the business. 183 00:09:48.679 --> 00:09:52.240 On the one side, we are a quote unquote conventional 184 00:09:52.399 --> 00:09:56.720 best developer owner operator. We develop in ourse with partners 185 00:09:56.720 --> 00:09:58.759 and we own fifty percent of a joint venture where 186 00:09:58.759 --> 00:10:01.879 we develop grid scale back batteries, currently one hundred percent 187 00:10:01.879 --> 00:10:04.960 focused on Germany, and on the back of that, we've 188 00:10:04.960 --> 00:10:09.600 built an off take platform that aggregates these batteries, virtualizes 189 00:10:09.639 --> 00:10:13.600 these batteries and essentially markets portfolios of these batteries by 190 00:10:13.679 --> 00:10:16.080 toilling them out or renting them out to large off 191 00:10:16.120 --> 00:10:19.279 takers in a way that you kind of circumvent the 192 00:10:19.320 --> 00:10:23.320 conventional way to monetize these assets, because typically today when 193 00:10:23.360 --> 00:10:25.159 you own a battery, you have one of two options, 194 00:10:25.360 --> 00:10:28.559 very simplified. You can go to a trader called optimizer 195 00:10:28.639 --> 00:10:31.240 and they will trade your asset intra day day ahead. 196 00:10:31.240 --> 00:10:34.639 Then in the ancillary services you get very high revenues potentially, 197 00:10:34.679 --> 00:10:37.799 but it's volatile cash laws or b you can go 198 00:10:37.840 --> 00:10:41.320 to utility and you can rent out the capacity, which 199 00:10:41.360 --> 00:10:43.320 is great because then you have fixed revenues, but all 200 00:10:43.320 --> 00:10:45.320 the upside is gone. And also the problem is that 201 00:10:45.360 --> 00:10:48.759 currently in Germany ninety five percent of assets are below 202 00:10:48.840 --> 00:10:52.159 twenty megawats in size. So we said you shouldn't have 203 00:10:52.159 --> 00:10:55.360 to choose fully risky or fully de risk the no upside. 204 00:10:55.679 --> 00:10:59.360 So we've built a platform that aggregates assets across portfolios, 205 00:10:59.399 --> 00:11:03.159 building one large virtual battery across a portfolio, maybe Bavaria 206 00:11:03.279 --> 00:11:06.519 or across Frankfurt, and then gets off take us the 207 00:11:06.600 --> 00:11:09.559 ability to rent this capacity without the constraints of the 208 00:11:09.600 --> 00:11:10.600 individual assets. 209 00:11:11.559 --> 00:11:14.279 Thank you for the sales speech. I hope we didn't 210 00:11:14.320 --> 00:11:17.840 lose half of our listeners. Let's be a bit granular. 211 00:11:18.240 --> 00:11:21.399 You raise on hundred million. How do you choose your 212 00:11:21.440 --> 00:11:24.960 first sights and choose your supplier? Because I've been buying 213 00:11:25.000 --> 00:11:27.200 batteries that I can tell you it's a bit of 214 00:11:27.200 --> 00:11:30.320 a headache. So explain that process and the type of 215 00:11:30.440 --> 00:11:33.879 team you have. I would expect more established guys like 216 00:11:33.919 --> 00:11:37.240 in Caves or the classical solar developer to do that, 217 00:11:37.279 --> 00:11:40.360 but you managed to beat them. So how did you 218 00:11:40.399 --> 00:11:44.639 really build your asset first before you market them. Yeah. 219 00:11:45.000 --> 00:11:48.159 On the development, there's two ways to develop. Obviously it's 220 00:11:48.240 --> 00:11:51.519 our quantity, but I think it's also very much more quality. 221 00:11:52.039 --> 00:11:54.919 And we've been fortunate in the approach that we didn't 222 00:11:55.000 --> 00:11:57.799 just develop in house. So we very early on started 223 00:11:57.799 --> 00:12:01.759 developing with co developers, started a company with an engineering 224 00:12:01.759 --> 00:12:04.759 company from Hamburg, a greenfield development JV of which we 225 00:12:04.799 --> 00:12:08.000 owned fifty percent, and then also we did greenfield development 226 00:12:08.000 --> 00:12:11.480 in house and so from very early days we essentially 227 00:12:11.519 --> 00:12:15.399 developed across all forty SO zones in Germany. We currently 228 00:12:15.440 --> 00:12:18.240 developed in thirty three DSO zones. And the reason why 229 00:12:18.279 --> 00:12:20.840 we were able to do this faster than others was 230 00:12:21.600 --> 00:12:24.240 we had very fortunate timing to the market, but b 231 00:12:24.639 --> 00:12:28.480 we didn't have this romance of doing everything greenfield in house. 232 00:12:28.919 --> 00:12:31.639 We were happy to leave some economics on the table 233 00:12:32.120 --> 00:12:34.919 and have our partners make money as well to kind 234 00:12:34.960 --> 00:12:39.000 of parallelize the greenfield development efforts with many teams. So 235 00:12:39.039 --> 00:12:41.279 I think that enabled us to very quickly develop and 236 00:12:41.360 --> 00:12:43.879 as a result, we currently have two assets life in Germany, 237 00:12:43.960 --> 00:12:46.480 we have six assets in construction. We're about to sign 238 00:12:46.559 --> 00:12:49.759 another nine assets into constructions in Germany. And also we 239 00:12:49.799 --> 00:12:52.519 focused very quickly on the medium voltage, which is kind 240 00:12:52.519 --> 00:12:56.440 of typically ten to thirty megawads in commercial zones because 241 00:12:56.440 --> 00:12:59.159 it's faster to be permitted. As for the second part 242 00:12:59.159 --> 00:13:02.240 of the question, how do we choose the suppliers, We 243 00:13:02.360 --> 00:13:05.600 have a team from from Affluence from O rwe from 244 00:13:05.600 --> 00:13:08.200 A Noah from g on the team. We could in 245 00:13:08.360 --> 00:13:11.840 theory do full EPC in ours, but we buy fully repped, 246 00:13:12.279 --> 00:13:15.279 so we go to strong EPC partners like be Storage 247 00:13:15.279 --> 00:13:18.399 for instance in Germany or Axola and by fully repped. 248 00:13:18.639 --> 00:13:21.360 We have a team that is very active as a customer. 249 00:13:21.440 --> 00:13:23.000 You know, we drive to the sites every week, we 250 00:13:23.039 --> 00:13:25.759 look at how the systems are packaged, et cetera. But 251 00:13:25.879 --> 00:13:28.399 we decided to focus on where we think drives the 252 00:13:28.440 --> 00:13:31.519 most value with our skill set, and that's the development 253 00:13:31.519 --> 00:13:33.679 process and the commercialization process. 254 00:13:34.600 --> 00:13:36.240 Can I ask just to talk a little bit about 255 00:13:36.320 --> 00:13:40.360 the German market because what we hear is two hundred 256 00:13:40.360 --> 00:13:44.840 gigawats of batteries potentially in planning, and then we hear 257 00:13:45.080 --> 00:13:48.600 that you've got the distribution companies like the eises By 258 00:13:48.639 --> 00:13:52.120 our nets are blocking every single battery coming onto their system. 259 00:13:52.240 --> 00:13:55.360 So just talk a little bit about the dynamic there 260 00:13:55.399 --> 00:13:58.840 and that also what that means for your business going 261 00:13:58.879 --> 00:14:00.519 forward and how do you deal with that. 262 00:14:01.440 --> 00:14:04.159 There's a German saying, which is everything is cooked hotter 263 00:14:04.240 --> 00:14:06.879 than it is eaten. What that fundamentally means is, you know, 264 00:14:06.879 --> 00:14:10.240 people talk about development a lot more than what is 265 00:14:10.279 --> 00:14:12.879 actually developed. So what you mentioned with buying there, etcetera. 266 00:14:12.879 --> 00:14:16.600 Is absolutely correct. And there are these publications about two 267 00:14:16.639 --> 00:14:19.960 hundred gigawats of grid reservations et cetera. But at the moment, 268 00:14:20.399 --> 00:14:22.240 and this is this is changing, and this is good 269 00:14:22.440 --> 00:14:25.480 for the industry. But up until very recently, you know, 270 00:14:25.559 --> 00:14:28.000 everyone with a mother and a dog was able to 271 00:14:28.000 --> 00:14:31.120 submit the grid application with just the power of attorney, 272 00:14:31.120 --> 00:14:33.200 with a piece of land without having to secure that. 273 00:14:33.639 --> 00:14:36.279 But the quality of a lot of these applications is 274 00:14:36.320 --> 00:14:39.080 really low or these are people that actually don't have 275 00:14:39.120 --> 00:14:41.799 the financial means or the engineering means or the capabilities 276 00:14:41.840 --> 00:14:44.639 to realize these projects. And so what you see a 277 00:14:44.639 --> 00:14:47.159 lot in Germany is there's a lot of talk about 278 00:14:47.159 --> 00:14:49.759 all these grid applications and a lot of the disls 279 00:14:49.759 --> 00:14:53.639 and thesos just shut down these processes and they're now 280 00:14:54.120 --> 00:14:58.679 asking for proxies that help them determine seriousness. For instance, 281 00:14:58.679 --> 00:15:00.039 they want to see, do you already have that a 282 00:15:00.320 --> 00:15:03.639 system designer place? You have you already submitted the building permit? 283 00:15:04.200 --> 00:15:07.799 Are you able to prepay a portion of the grid connection? 284 00:15:07.919 --> 00:15:10.480 Charts the b KT about cost and sushus and so 285 00:15:10.519 --> 00:15:12.519 this is how they're kind of trying to triage now 286 00:15:12.559 --> 00:15:15.480 who's actually able. But the numbers that you just mentioned, 287 00:15:15.519 --> 00:15:17.240 I mean I read about them too, and you read 288 00:15:17.279 --> 00:15:20.639 about battery tsunami, et cetera. But I do think the 289 00:15:20.639 --> 00:15:24.159 people that are actually able to realize, construct, finance and 290 00:15:24.240 --> 00:15:27.039 operate assets this is a very small number in Germany. 291 00:15:27.399 --> 00:15:30.759 I am not that concerned about this flood coming because 292 00:15:31.000 --> 00:15:32.399 I think a lot of this stuff is just not 293 00:15:32.480 --> 00:15:33.679 high quality. 294 00:15:33.759 --> 00:15:37.639 You're smart, you have good partners, whether it's the EPC, 295 00:15:37.919 --> 00:15:41.559 the engineering. You start building your batteries, when do you 296 00:15:41.679 --> 00:15:45.519 decide to go for the tolling very early on, like 297 00:15:45.759 --> 00:15:48.960 almost before the construction or once the construction is finished. 298 00:15:49.000 --> 00:15:52.000 So how does the tolling and turn into the process. 299 00:15:52.639 --> 00:15:55.639 So basically, the layer platform that we build allows us 300 00:15:55.720 --> 00:15:59.120 to aggregate many assets and for a single API to 301 00:15:59.159 --> 00:16:02.320 give the off taker one virtual battery. The deal that 302 00:16:02.320 --> 00:16:04.799 we did with button file, for instance, is eight assets 303 00:16:05.039 --> 00:16:08.360 spread across the tenet region. So what we basically do 304 00:16:08.600 --> 00:16:12.039 every quarter is we assemble a cohorede of assets which 305 00:16:12.080 --> 00:16:15.519 we bundle and virtualize. Once these assets are a ready 306 00:16:15.559 --> 00:16:18.039 to build or before ready to build, we run a 307 00:16:18.120 --> 00:16:22.039 competitive auction with different offtaker partners like button File and 308 00:16:22.120 --> 00:16:26.480 Rwe We typically then sell fifty percent of the capacity 309 00:16:26.559 --> 00:16:29.000 upfront at pretty much at the same time as we 310 00:16:29.039 --> 00:16:32.559 mandate the EPCs. The acids then get into construction. Typically 311 00:16:32.600 --> 00:16:35.080 this takes give a take twelve months once they're alive. 312 00:16:35.679 --> 00:16:37.879 And then once the assets arelive, we have fifty percent 313 00:16:37.879 --> 00:16:41.120 capacity already told typically right now between five and a 314 00:16:41.159 --> 00:16:43.759 half and seven years. This will go longer over time, 315 00:16:44.120 --> 00:16:47.120 and then fifty percent is merchant. Now the merchant size 316 00:16:47.159 --> 00:16:49.320 the way that we operated, we auction it off on 317 00:16:49.360 --> 00:16:52.679 a daily basis to a multitude of bidders. If it 318 00:16:52.720 --> 00:16:55.639 does not clear above the hurdle price that we internally set, 319 00:16:55.840 --> 00:16:59.960 it falls back to conventional optimizers that are designated optimizer 320 00:17:00.080 --> 00:17:03.159 partners that help us. The idea, however, is from the 321 00:17:03.240 --> 00:17:06.119 kind of fifty to fifty to upsize over time to 322 00:17:06.240 --> 00:17:09.359 call it sixty seventy or maybe eighty percent tolling, but 323 00:17:09.559 --> 00:17:12.440 just that the capacity once the assets are cod is 324 00:17:12.440 --> 00:17:15.119 instantly available, and we believe you will be able to 325 00:17:15.160 --> 00:17:17.720 achieve a higher price for the tolling if it's click 326 00:17:17.759 --> 00:17:19.519 and tall and you can have it straight away rather 327 00:17:19.559 --> 00:17:20.640 than in twelve months. 328 00:17:20.960 --> 00:17:24.079 That's very impressive the fact that you have signed two 329 00:17:24.119 --> 00:17:28.920 tolling agreements, because I read recently on PEGSA Park that 330 00:17:29.359 --> 00:17:31.920 there have been only five toolling agreements are in Germany, 331 00:17:32.000 --> 00:17:34.400 so you're forty percent of the market. 332 00:17:35.000 --> 00:17:35.559 Yeah. 333 00:17:35.880 --> 00:17:39.960 Is there a market price for tolling or is it 334 00:17:40.000 --> 00:17:41.880 really location dependent? 335 00:17:42.759 --> 00:17:45.119 The short answer is there is no market price. I 336 00:17:45.119 --> 00:17:47.920 would say there is a range, but I think there's 337 00:17:47.920 --> 00:17:50.640 a lot of parameters that dictate tolling price. I think 338 00:17:50.640 --> 00:17:55.240 it's a contract size B. There is a little bit 339 00:17:55.279 --> 00:17:57.559 of an element which tears all Zonia in, but it's 340 00:17:57.599 --> 00:18:00.599 not really a big difference. And see it's you know, 341 00:18:00.680 --> 00:18:03.240 when you start to deliver, is it you know this year? 342 00:18:03.319 --> 00:18:05.240 Is it next year? As at the after? And then 343 00:18:05.279 --> 00:18:08.119 there's a lot of structuring that goes into tolling thinks 344 00:18:08.119 --> 00:18:10.319 that impact price that you wouldn't think that impact price, 345 00:18:10.400 --> 00:18:13.079 for instance, the credits. So if you want to do 346 00:18:13.119 --> 00:18:15.599 a seven year tall and needs a single asset, let's 347 00:18:15.599 --> 00:18:19.000 say fifty megawats one hundred megawatts. We've seen off takers 348 00:18:19.000 --> 00:18:22.400 that wanted two years of tolling fee sitting in your 349 00:18:22.440 --> 00:18:25.400 bank accounts as a guarantee. So if you have one 350 00:18:25.440 --> 00:18:27.519 hundred megawat TALL and I'm just going to invent a number, 351 00:18:27.519 --> 00:18:30.000 and you have one hundred thousand euros so ten million 352 00:18:30.039 --> 00:18:32.599 a year, it wants a twenty million kind of sitting 353 00:18:32.599 --> 00:18:34.559 in your bank account of a letter of credit, and 354 00:18:34.559 --> 00:18:37.839 that obviously eats into your economics, and so I don't 355 00:18:37.880 --> 00:18:40.839 think there is a market. That's why we created what 356 00:18:40.920 --> 00:18:43.839 we believe is a differentiated product because we think that 357 00:18:43.880 --> 00:18:46.880 we can create the market standard together with strong partners 358 00:18:47.000 --> 00:18:51.079 like Rwe like button File and other large utilities. But 359 00:18:51.119 --> 00:18:53.359 there is no stig price yet. The way you can say, 360 00:18:53.759 --> 00:18:56.960 that's the index and that's exactly the price, and then 361 00:18:56.960 --> 00:18:58.720 there's you know how many cycles a day, et cetera. 362 00:18:58.880 --> 00:19:01.200 So it's a rabbit you can get really into. So 363 00:19:01.240 --> 00:19:03.960 there's no such thing as the toll and that's the price. 364 00:19:04.599 --> 00:19:06.799 Philip, can I ask you, is the business model then 365 00:19:06.880 --> 00:19:09.720 to be an independent power producer going forward? Or do 366 00:19:09.799 --> 00:19:12.799 you at some point he just sell the assets to 367 00:19:12.839 --> 00:19:13.440 somebody else. 368 00:19:14.079 --> 00:19:16.519 Look, I think we're both. There's a lot of differences. 369 00:19:16.559 --> 00:19:19.599 But someone who we admire and think has similarities to 370 00:19:19.680 --> 00:19:21.960 us as Octopus Energy. On the one side, they have 371 00:19:21.960 --> 00:19:24.839 the utility that's our best business, and on the other 372 00:19:24.880 --> 00:19:27.759 side there have Kraden, which is our layer business. At 373 00:19:27.759 --> 00:19:30.759 the moment. There's a lot of synergy and we are yes, 374 00:19:30.920 --> 00:19:33.920 an ipp or ifp At the moment, I think over 375 00:19:34.000 --> 00:19:38.279 time we will run more and more other people's best 376 00:19:38.279 --> 00:19:41.759 assets on our infrastructure and we will add them structure tolleling, 377 00:19:41.880 --> 00:19:45.400 have them structured emergent deals, and become the operating platform 378 00:19:45.599 --> 00:19:49.039 for the business, hopefully partnering with other utilities, partnering with 379 00:19:49.079 --> 00:19:51.720 other optimizers, et cetera. We very much want to build 380 00:19:51.720 --> 00:19:54.000 this in an open way where we don't compete with 381 00:19:54.119 --> 00:19:57.079 utilities or optimizers. Well there as an owners Does that 382 00:19:57.160 --> 00:19:59.799 mean in the future that we may not own assets potentially, 383 00:19:59.839 --> 00:20:02.920 but I think we very much like asset ownership. We 384 00:20:02.960 --> 00:20:04.880 want to own assets. It's a very big part of 385 00:20:04.880 --> 00:20:07.000 our DNA and at the moment, I think something that 386 00:20:07.039 --> 00:20:08.359 goes very strongly hand in hand. 387 00:20:09.039 --> 00:20:11.720 The interesting part and again, tell me if I'm wrong 388 00:20:12.079 --> 00:20:14.759 in the fact that you're only totaling fifty percent of 389 00:20:14.799 --> 00:20:19.119 your capacity. In fact, you're giving them a seniority, meaning 390 00:20:19.160 --> 00:20:22.039 that if some of the battery don't work or only 391 00:20:22.039 --> 00:20:25.000 work at says seventy five percent, they still get their 392 00:20:25.039 --> 00:20:27.759 fifty percent. Is that correct? Or if the battery is 393 00:20:27.799 --> 00:20:30.839 only worth eleven So basically there's a bit of a 394 00:20:31.000 --> 00:20:34.960 trenching being done. And if you have a technical problem, 395 00:20:35.079 --> 00:20:38.759 you absorb it through not having the capacity to trade 396 00:20:38.799 --> 00:20:40.440 on the daily business. Is that correct? 397 00:20:40.839 --> 00:20:45.240 It's absolutely correct. Basically, the long term contracts always have priority. 398 00:20:45.480 --> 00:20:48.640 So for instance, button file has a fifty five megawats 399 00:20:48.640 --> 00:20:51.559 seven year toll. That's a portfolio just over one hundred 400 00:20:51.759 --> 00:20:55.519 megawats that they have, so around fifty percent. And this 401 00:20:55.599 --> 00:20:58.559