WEBVTT 1 00:00:04.679 --> 00:00:08.240 With Laurent segel And from London and Gerard Reed from Berlin. 2 00:00:08.759 --> 00:00:10.519 This is redefining Energy. 3 00:00:11.080 --> 00:00:11.400 Today. 4 00:00:11.439 --> 00:00:14.199 On Redefining Energy, we're going to talk about the state 5 00:00:14.279 --> 00:00:17.480 of the PPA market power purchase agreements, which are an 6 00:00:17.480 --> 00:00:20.760 incredibly important part of the electricity world around. 7 00:00:21.120 --> 00:00:26.079 Yeah, and new concept or so coming on FPAs flexibility 8 00:00:26.160 --> 00:00:30.559 Purchase Agreement. And for that we have our returning guest, 9 00:00:30.960 --> 00:00:34.159 Luc Aperti, co founder of Pixa Park, this. 10 00:00:34.359 --> 00:00:38.399 Time live from Texas. I think he last year he 11 00:00:38.439 --> 00:00:39.920 was in Texas as well, isn't he right? 12 00:00:40.679 --> 00:00:43.479 Okay, let's bringing on the show. But first of the 13 00:00:43.479 --> 00:00:44.399 world from our partner. 14 00:00:45.000 --> 00:00:48.359 A Loco Energy is Europe's premier leaser of ten foot 15 00:00:48.439 --> 00:00:53.439 container mobile batteries built in Europe with COTL best LFP cells. 16 00:00:54.000 --> 00:00:59.320 A Bloco Energy serves fourteen European countries, including France, Germany 17 00:00:59.359 --> 00:01:02.600 and the UK. A Blocko's batteries can be leased for 18 00:01:02.640 --> 00:01:05.840 any duration between six weeks and six years and they 19 00:01:05.840 --> 00:01:09.680 are monitored by the Dutch award winning platform school a 20 00:01:09.760 --> 00:01:13.079 block O Energy. Make your life easier, make your business 21 00:01:13.120 --> 00:01:16.680 more flexible. Back to the shows, Luca, first of almost 22 00:01:17.000 --> 00:01:19.519 happy New year, chief. I know we're in February, but 23 00:01:19.640 --> 00:01:23.159 still I'm gonna saying Happy New Year to people till the. 24 00:01:23.239 --> 00:01:23.799 End of June. 25 00:01:24.239 --> 00:01:26.319 Happy New Year. Thanks, great to be here. 26 00:01:26.599 --> 00:01:29.480 And Lucia, it's your thirurth time here. Now we bring 27 00:01:29.519 --> 00:01:33.120 you back because you download a lot. That's the only reason. 28 00:01:33.719 --> 00:01:35.760 Yeah, you told me, thanks. 29 00:01:35.680 --> 00:01:40.760 And Luca, I bring you back because I like you. 30 00:01:40.760 --> 00:01:44.159 You're speaking from Houston, Texas, so probably explain first why 31 00:01:44.280 --> 00:01:44.719 you're there. 32 00:01:45.439 --> 00:01:48.359 Yeah, Texa Park, as you know, provides price intelligence for 33 00:01:48.439 --> 00:01:52.120 clean energy. Europe is big, the US is as big. 34 00:01:52.319 --> 00:01:56.120 So we have expanded our coverage last year and I 35 00:01:56.159 --> 00:01:58.640 wanted to be front up here in the US to 36 00:01:58.680 --> 00:01:59.879 accompany our expansion. 37 00:02:00.359 --> 00:02:04.400 Excellent. Now you say fair value pricing, and of course 38 00:02:04.439 --> 00:02:07.400 I've read in a lot of your papers there is 39 00:02:07.519 --> 00:02:10.280 this acronym who comes on a regular basis, and that's 40 00:02:10.599 --> 00:02:14.319 if S thirteen. So can you elaborate a bit what 41 00:02:14.400 --> 00:02:14.759 it is. 42 00:02:15.719 --> 00:02:18.879 Yes, I'm not an auditor, but these are new rules 43 00:02:18.960 --> 00:02:24.039 which are impacting the market. So what is high fors thirteen. Well, 44 00:02:24.280 --> 00:02:29.960 it's basically a standard describing how you need to value contracts. 45 00:02:30.319 --> 00:02:32.479 The way it used to be in the past is 46 00:02:32.520 --> 00:02:36.759 that PPAs were seen as level three type of contracts, 47 00:02:36.840 --> 00:02:40.680 so there is no observable price points. This has changed. 48 00:02:40.840 --> 00:02:44.960 There are observable price points, so you need to value them. 49 00:02:45.240 --> 00:02:48.960 Now the type of exemptions that are applied that you 50 00:02:49.080 --> 00:02:52.280 need to value them as fair value. They have changed. 51 00:02:52.360 --> 00:02:54.599 So if you're in a financial contract, to make it 52 00:02:54.719 --> 00:02:58.680 very simple, you need to apply fair value accounting. That 53 00:02:58.800 --> 00:03:03.080 means the value of your PPA might shift much more 54 00:03:03.159 --> 00:03:06.639 dramatically as when you don't need to update those prices 55 00:03:06.680 --> 00:03:07.199 so often. 56 00:03:08.120 --> 00:03:11.520 Okay, so it means if I sign right now, say 57 00:03:11.599 --> 00:03:15.360 ten yere PPA, I need to value it every year, 58 00:03:15.479 --> 00:03:18.080 and it's going to go up and down because beforehand 59 00:03:18.120 --> 00:03:20.319 they used to keep it in a drawer and you 60 00:03:20.360 --> 00:03:21.120 know whenever. 61 00:03:20.919 --> 00:03:24.000 The correct and that means, of course, if you're a CFO, 62 00:03:24.280 --> 00:03:28.560 you will have bigger swings and earnings volatility. This is 63 00:03:28.599 --> 00:03:33.199 something which is not liked, but irrespective of the regulatory aspect, 64 00:03:33.280 --> 00:03:37.360 it is good practice. We call this mark to market. Now, 65 00:03:37.400 --> 00:03:40.560 you want to know what is the actual market value 66 00:03:40.599 --> 00:03:44.560 of your assets, of your contracts. This is a basic 67 00:03:44.639 --> 00:03:47.840 principle for risk management and it helps you to learn 68 00:03:48.240 --> 00:03:50.800 to act to react. And there were a lot of 69 00:03:50.879 --> 00:03:55.800 bad surprises in the PPA space because this practice wasn't done. 70 00:03:55.840 --> 00:04:00.599 So there's the regulatory aspect, which means certain contrasts need 71 00:04:00.639 --> 00:04:04.280 to be valued like this now. And there's the practical 72 00:04:04.319 --> 00:04:08.560 aspect that this is good practice anyway, whether you're regulated 73 00:04:08.719 --> 00:04:10.080 and you need to apply it or not. 74 00:04:10.759 --> 00:04:13.680 This is a nightmare because I can tell you what 75 00:04:14.360 --> 00:04:16.959 the accountant's love is what they call mak to model. 76 00:04:17.160 --> 00:04:20.079 So you know they do an excel sheet wonderful and 77 00:04:20.120 --> 00:04:21.800 that's how they mark their book and a lot of 78 00:04:21.839 --> 00:04:26.199 people have avoided a lot of losses or managed to 79 00:04:26.240 --> 00:04:29.079 push them forward by doing this mack to model. 80 00:04:29.079 --> 00:04:33.160 It's okay, look one thing and this is IFS, which 81 00:04:33.199 --> 00:04:35.399 is at the end of the day, this is non US, right, 82 00:04:35.399 --> 00:04:38.560 this is Europe. But when I hear this, what I 83 00:04:38.639 --> 00:04:42.560 think of is the big data center companies and hyperscalers 84 00:04:42.759 --> 00:04:44.680 because at the end of the day, what they're doing 85 00:04:45.279 --> 00:04:48.160 is they're going to have to sign long term PPAs 86 00:04:48.399 --> 00:04:50.600 to go and you know in and around the power, 87 00:04:50.600 --> 00:04:52.680 which means they have a liability on the balance sheet, 88 00:04:52.959 --> 00:04:56.000 and that liability if it was a UK or a 89 00:04:56.040 --> 00:04:58.560 European based business, what would actually happen is you would 90 00:04:58.560 --> 00:05:01.040 have volatility in its earnings because you're changing the value 91 00:05:01.040 --> 00:05:05.160 of this. Just dig into what impact you think this has. 92 00:05:05.279 --> 00:05:07.279 Does it mean that these companies are going to do 93 00:05:07.360 --> 00:05:10.800 less PPAs or more PPAs, or what does it mean 94 00:05:10.920 --> 00:05:11.439 for people? 95 00:05:11.959 --> 00:05:16.120 It means that financial PPAs need to be definitely marked 96 00:05:16.199 --> 00:05:18.959 at fair value where you have this earning volatility. This 97 00:05:19.120 --> 00:05:23.759 is something which typically companies that are not trading companies' 98 00:05:23.800 --> 00:05:26.720 utilities companies don't want to do. But if you have 99 00:05:26.759 --> 00:05:30.600 a physical PPA, if the power is for own use, 100 00:05:31.199 --> 00:05:34.720 then these rules do not apply. Also, there's more precise 101 00:05:34.839 --> 00:05:40.279 language on nature dependent electricity contracts because we know that 102 00:05:40.480 --> 00:05:43.360 it is not clear exactly how much volume will come 103 00:05:43.480 --> 00:05:46.240 and this volume maybe need to be sold back, which 104 00:05:46.279 --> 00:05:51.160 would automatically have caused fair value treatment. This is now exempted, 105 00:05:51.680 --> 00:05:56.000 so there is an approach trying to accommodate this. Definitely, 106 00:05:56.000 --> 00:06:00.319 what we can say crossboarded PPAs of financial nature will 107 00:06:00.360 --> 00:06:03.279 fall under these rules, and this is some sort of 108 00:06:03.319 --> 00:06:05.839 disincentive for those types of contracts. 109 00:06:06.360 --> 00:06:10.639 Excellent, before we go to the new report that just 110 00:06:10.680 --> 00:06:14.399 went out, maybe rolling back a few months, because you've 111 00:06:14.399 --> 00:06:18.040 got a huge analysis on IPPs. They were like no 112 00:06:18.120 --> 00:06:20.839 eight podcasts to came up all of a sudden in December, 113 00:06:21.079 --> 00:06:23.040 which and I can tell you I've listened to none 114 00:06:23.079 --> 00:06:25.639 of them, but I'm sure they were great. Can you 115 00:06:25.720 --> 00:06:29.240 summarize in two minutes what you're finding on IPPs, because 116 00:06:29.240 --> 00:06:30.240 that's very interesting. 117 00:06:30.839 --> 00:06:35.000 Yes, IPPs are becoming revenue managers. Have we seen consolidation 118 00:06:35.199 --> 00:06:39.879 in the space. There's more value being accrude down the 119 00:06:39.959 --> 00:06:44.560 value trend, There's more value post the contract, that is 120 00:06:44.600 --> 00:06:48.639 in the optimization of the revenue. There's more value on 121 00:06:48.800 --> 00:06:52.040 portfolio level if you aggregate the assets and manage them, 122 00:06:52.399 --> 00:06:56.199 and that's a key driver in the IPP field. So 123 00:06:56.279 --> 00:07:01.319 what we're seeing is IPPs becoming bigger and piece becoming 124 00:07:01.439 --> 00:07:06.480 a bit like utilities. So they're adding structuring, trading, physical 125 00:07:06.519 --> 00:07:11.160 optimization desks because this is where the value is now accrude. 126 00:07:11.800 --> 00:07:15.360 And we're expecting a further consolidation in this space. But 127 00:07:15.519 --> 00:07:19.519 these are the principal actors next to utilities and developers 128 00:07:19.759 --> 00:07:23.000 and the off takers of course in the energy transitions. 129 00:07:22.839 --> 00:07:25.639 And Luke difference between North America and Europe or do 130 00:07:25.680 --> 00:07:26.519 you see them the same? 131 00:07:26.959 --> 00:07:30.680 A very good question. Very similar. The big difference is 132 00:07:30.680 --> 00:07:33.879 what we see is definitely in the US the ipp 133 00:07:34.040 --> 00:07:37.079 is making more use of third parties for portfolio management 134 00:07:37.519 --> 00:07:40.759 versus in Europe companies trying to build everything in house. 135 00:07:41.040 --> 00:07:44.399 But otherwise it is a consolidation which is also across 136 00:07:44.439 --> 00:07:48.319 the continent. It makes sense to spread and have assets 137 00:07:48.360 --> 00:07:49.920 in multiple jurisdictions. 138 00:07:50.959 --> 00:07:53.399 Can I just I give you my thesis for the 139 00:07:53.439 --> 00:07:55.040 year and you can just tell me you think this 140 00:07:55.120 --> 00:07:57.600 is mad or not. My thesis is that what you've 141 00:07:57.639 --> 00:08:00.879 got in Europe is the majority of renewables is owned 142 00:08:00.920 --> 00:08:03.879 by financial institutions in the form of funds, and then 143 00:08:03.879 --> 00:08:07.680 you have a fund manager and basically ninety percent of 144 00:08:07.680 --> 00:08:10.560 these guys have not the capabilities that you're talking about, 145 00:08:11.199 --> 00:08:14.240 which means that there's going to be massive amount of 146 00:08:14.560 --> 00:08:17.439 stress first and foremost and eventually needs to M and A. 147 00:08:17.879 --> 00:08:19.839 Do you see something similar or how do you look 148 00:08:19.879 --> 00:08:20.160 at it? 149 00:08:20.439 --> 00:08:23.240 I see the opportunity aspect of it, because more value 150 00:08:23.639 --> 00:08:28.279 is moving downstream those IPPs, those players that have these 151 00:08:28.319 --> 00:08:32.240 competencies are very well placed to grow. And yes M 152 00:08:32.279 --> 00:08:35.200 and A can be part of that story. But Jared, 153 00:08:35.240 --> 00:08:37.639 I think to mention stress this is the right word. 154 00:08:37.879 --> 00:08:41.879 The key thing is we are now in renewable dominated 155 00:08:41.960 --> 00:08:45.559 markets in ever more markets and this is causing stress. 156 00:08:45.799 --> 00:08:50.480 It's causing stress on capture rates, negative prices, price volatility, 157 00:08:50.879 --> 00:08:55.720 technical curtailments, balancing cost. But this is all temporary and 158 00:08:56.000 --> 00:09:00.120 this is driving the players to add more intelligence. You 159 00:09:00.200 --> 00:09:04.320 need more intelligence, you need commercial management to deal with 160 00:09:04.399 --> 00:09:08.240 those effects of the energy transition. And this is a 161 00:09:08.279 --> 00:09:11.639 massive value game. The value is just occurring at a 162 00:09:11.720 --> 00:09:15.360 different area in the value chain, and this is driving 163 00:09:15.399 --> 00:09:20.799 this IPP consolidation. This is driving this next generation of players. 164 00:09:20.840 --> 00:09:23.519 And do you think, because again just taking a step 165 00:09:23.639 --> 00:09:25.879 beyond what you're saying there, do we move back to 166 00:09:26.000 --> 00:09:29.919 virtual integration in other words, that you also not just 167 00:09:30.000 --> 00:09:32.879 have that mondetization and risk management part, but you sort 168 00:09:32.879 --> 00:09:34.320 of go, well, if I'm really going to be in 169 00:09:34.360 --> 00:09:38.000 this game, I need to actually have customers. 170 00:09:37.399 --> 00:09:41.159 We don't see yet. On the IPP side, there is 171 00:09:41.200 --> 00:09:45.279 a good argument to make in less liquid market, especially 172 00:09:45.639 --> 00:09:49.360 to sell to smaller clients as an IPP. But this 173 00:09:49.519 --> 00:09:52.519 is not something which we're seeing it. We're seeing smart 174 00:09:52.639 --> 00:09:57.960 place in the aggregation space. So you're seeing new intermediation companies, 175 00:09:57.960 --> 00:10:02.639 so to say, stepping up aggregating demands smartly and connecting 176 00:10:02.679 --> 00:10:06.639 it with producers. There is real value there because they 177 00:10:06.679 --> 00:10:09.840 are from a renewable perspective underserved. 178 00:10:10.480 --> 00:10:14.919 Okay, maybe it's time to dive into your findings because 179 00:10:15.200 --> 00:10:18.039 you published this incredible amount. I mean, there's more and 180 00:10:18.120 --> 00:10:20.799 more slides every year. I mean the other first year 181 00:10:20.919 --> 00:10:23.759 was like five slides and now we're like sixty or something. 182 00:10:24.360 --> 00:10:27.480 You've become more intelligent, the market has become more complex. 183 00:10:28.080 --> 00:10:30.720 What are the big big findings? Because you start talking 184 00:10:30.759 --> 00:10:32.840 about them, so let's dive into it. 185 00:10:33.519 --> 00:10:36.039 The key finding of the report is just a matter 186 00:10:36.120 --> 00:10:39.360 of fact that we are living in ever more markets, 187 00:10:39.360 --> 00:10:44.360 in renewable dominated environments, and this is changing how markets 188 00:10:44.399 --> 00:10:47.879 work and where value is accrude and we call it 189 00:10:47.919 --> 00:10:52.480 the big repricing. We can show where value is going 190 00:10:52.639 --> 00:10:57.200 and it's definitely moving downstreams. There's more value in the optimization, 191 00:10:57.600 --> 00:11:01.639 there is more value in structuring, there's more value in 192 00:11:02.080 --> 00:11:06.240 the arbitrot and this is shaping and impacting the players 193 00:11:06.480 --> 00:11:09.759 we just talked about the ippiece. These are some of 194 00:11:09.799 --> 00:11:12.159 the key structural trends which we're observing. 195 00:11:12.600 --> 00:11:15.600 Can I ask your relation to that, because ultimately part 196 00:11:15.639 --> 00:11:17.399 of the issue is the fact that what we've got 197 00:11:17.480 --> 00:11:20.039 is huge volatility in the pricings and you could say 198 00:11:20.039 --> 00:11:22.440 this is largely caused by the fact that we've just 199 00:11:22.480 --> 00:11:24.679 got too much, in particular too much solar or at 200 00:11:24.679 --> 00:11:28.120 certain parts of the day and obviously when it's sunny. 201 00:11:28.639 --> 00:11:30.639 Surely what's going to happen going forward is that's just 202 00:11:30.679 --> 00:11:32.279 going to be armed out because we're just going to 203 00:11:32.320 --> 00:11:35.440 be lots and lots of batteries in there right correct, 204 00:11:35.519 --> 00:11:37.600 And do you have any sense of that in terms 205 00:11:37.639 --> 00:11:38.759 of unity extent of it. 206 00:11:39.440 --> 00:11:43.320 We do expect no easing of the pressure in terms 207 00:11:43.360 --> 00:11:46.639 of negative prices and price volatility in twenty twenty six. 208 00:11:47.159 --> 00:11:50.360 When you just look at fundamentals, how many more gigabots 209 00:11:50.440 --> 00:11:54.159 of a flexible capacity we can build to have an effect. 210 00:11:54.639 --> 00:11:57.320 This will at least for the next two three years 211 00:11:57.600 --> 00:12:01.480 keep us or the industry busy to end this flexible capacity. 212 00:12:02.039 --> 00:12:05.279 But you see already the early science you see in 213 00:12:05.360 --> 00:12:09.480 markets where we add quickly best how it is impacting 214 00:12:09.600 --> 00:12:12.679 price setting. It was very nice to see here in Urcot. 215 00:12:12.799 --> 00:12:17.120 Approximately ten gigabots were added off flexible capacity in twenty 216 00:12:17.159 --> 00:12:21.559 twenty five and it had an immediate impact on price volatility, 217 00:12:22.039 --> 00:12:25.399 reducing those breads. And that's exactly the purpose of this 218 00:12:25.720 --> 00:12:28.519 and this is what we're seeing in every market. It's 219 00:12:28.600 --> 00:12:30.639 just a question of time how fast this will go. 220 00:12:31.240 --> 00:12:34.840 Well, look, because you're Swiss, you're very moderating your statement. 221 00:12:35.080 --> 00:12:38.440 But if I look at the numbers the batteries in 222 00:12:39.200 --> 00:12:43.320 twenty five in RCOT, they made ten times less money 223 00:12:43.480 --> 00:12:48.559 than three years ago. So everybody went merchant like, yeah, yeah, yeah, 224 00:12:48.639 --> 00:12:51.840 it's a bit of a disaster, or or it only 225 00:12:51.919 --> 00:12:54.679 works if there is a cold snap or a heat wave, 226 00:12:54.799 --> 00:12:57.440 which was not really the case in two twenty five. 227 00:12:57.919 --> 00:12:59.840 You know, we can talk about the price of gas. 228 00:13:00.519 --> 00:13:02.759 Yeah, but that's the nature of a free market. And 229 00:13:02.840 --> 00:13:06.279 this is how it also works on renewables. At some 230 00:13:06.480 --> 00:13:10.039 point you have cannibalization, and you have the same effect 231 00:13:10.080 --> 00:13:13.360 on storage. You build more at the same location, it 232 00:13:13.399 --> 00:13:16.360 will have an impact on the revenue. Where we see 233 00:13:16.399 --> 00:13:21.360 stability is when you aggregate it on portfolio. So yes, 234 00:13:21.480 --> 00:13:26.519 we have cannibalization on single asset perspective, but if you 235 00:13:26.600 --> 00:13:30.759 are a smart large ipp or utility, you can construct 236 00:13:30.799 --> 00:13:34.480 a portfolio which is stable and can serve the grid 237 00:13:35.279 --> 00:13:38.320 and the customer. And this is where we see the 238 00:13:38.399 --> 00:13:44.000 value going. Yes, it's cannibalizing, but overall it can be stable. 239 00:13:45.080 --> 00:13:48.240 Okay. So here I'm going to show the audience that 240 00:13:48.320 --> 00:13:51.320 have done a lot of research because there is this 241 00:13:51.360 --> 00:13:56.000 new thing called RTC plus B in Acott launch in December. 242 00:13:56.600 --> 00:13:57.759 Is complaining about that? 243 00:13:58.720 --> 00:14:02.320 Yeah, a rule chain, how very specific question. A rule 244 00:14:02.440 --> 00:14:07.000 change how batteries are operated in aircut the major change. 245 00:14:07.039 --> 00:14:13.000 It's now five minute coptimization and previously ancillary services were 246 00:14:13.200 --> 00:14:16.919 locked in during the day ahead market and now aircut 247 00:14:16.919 --> 00:14:20.559 the operator will optimize every five minutes. And if you 248 00:14:20.639 --> 00:14:24.039 had awarded a battery in a regulation service, but energy 249 00:14:24.080 --> 00:14:28.840 prices suddenly spike, the system swaps for the energy production instantly. 250 00:14:28.960 --> 00:14:33.240 So from a system perspective, this is all about higher efficiency, 251 00:14:33.279 --> 00:14:36.879 better management. The short term impact is of course a 252 00:14:36.960 --> 00:14:40.679 lower arbitrage what is being expected. But from a system 253 00:14:40.720 --> 00:14:43.320 perspective it it does sound very sensible. 254 00:14:43.919 --> 00:14:46.279 And of course if we compare to Europe, you have 255 00:14:46.519 --> 00:14:56.320 the mechanismod A Provigianamento Decapacita di stoccagio Electrico bravo bet 256 00:14:56.399 --> 00:14:59.679 are known as MAXI in Italy, and that's the dream 257 00:14:59.720 --> 00:15:03.399 point Fossil to invest are because basically it's a giganteque 258 00:15:03.399 --> 00:15:05.639 tooling contract at national level. 259 00:15:06.559 --> 00:15:10.399 Yes, and we have different schemes in Europe. So definitely 260 00:15:10.440 --> 00:15:15.120 we see in Spain and Italy more regulated capacity mechanisms 261 00:15:15.480 --> 00:15:19.159 versus other markets like in GB in Germany which are 262 00:15:19.279 --> 00:15:23.799 very successful with flexibility purchase agreement which are tools and floors, 263 00:15:23.960 --> 00:15:27.120 as well as optimization agreement. So more the private route. 264 00:15:27.360 --> 00:15:29.200 I think it will be like in the renewable space, 265 00:15:29.240 --> 00:15:33.720 you will have multiple route to markets which serve different purposes. 266 00:15:34.159 --> 00:15:37.960 You have auctions and you have private contracts and they 267 00:15:38.000 --> 00:15:42.240 are complementary. But overall, actually Italy has been a great market. 268 00:15:42.320 --> 00:15:44.919 It has been not just on the storage side, on 269 00:15:44.960 --> 00:15:47.799 the ppa side that was real progress. It was one 270 00:15:47.879 --> 00:15:50.159 of the hottest market in Europe twenty twenty five. 271 00:15:50.519 --> 00:15:50.720 OK. 272 00:15:51.000 --> 00:15:53.840 What I see with bascheries is we talked about the cannibalization. 273 00:15:54.240 --> 00:15:57.279 That's just like the batteries are just becoming a mature 274 00:15:57.360 --> 00:16:00.480 asset class now. Is that the way you look it, right? 275 00:16:00.519 --> 00:16:02.440 Because if I look the way it was at the beginning, 276 00:16:02.840 --> 00:16:05.240 you go into a battery, you run into the UK market, 277 00:16:05.279 --> 00:16:07.720 you get your three year payback, then you run somewhere else. 278 00:16:07.759 --> 00:16:10.720 This is the way it's gone. But now it's really 279 00:16:10.720 --> 00:16:12.759 becoming a serious as a class. Is that the way 280 00:16:12.799 --> 00:16:15.639 you see it or I'm missing it. 281 00:16:15.679 --> 00:16:19.000 Absolutely, it just went much faster than in the renewable space, 282 00:16:19.120 --> 00:16:22.679 where this took six seven eight years. In the battery space, 283 00:16:22.720 --> 00:16:24.120 it took just two three years. 284 00:16:24.320 --> 00:16:26.440 Okay, great, that sort of gives me a little bit 285 00:16:26.440 --> 00:16:27.440 of sense of where we'll go. 286 00:16:28.039 --> 00:16:33.759 Now, you just introduced the new term FPA flexibility purchase agreement, 287 00:16:33.799 --> 00:16:36.519 and now you put that at the same level as PPA. 288 00:16:36.720 --> 00:16:39.759 So now we're gonna talk. So first of all, maybe 289 00:16:39.759 --> 00:16:42.279 a broad definition of FPA. 290 00:16:43.080 --> 00:16:47.120 It's basically industry consultation. What shall we use? What is 291 00:16:47.159 --> 00:16:51.000 the battery off take? In broad lines, we have flexibility 292 00:16:51.039 --> 00:16:55.799 purchase agreement, which means an off taker is taking on 293 00:16:55.960 --> 00:17:01.679 price risk, that's a floor, that's a toll years, seven years. 294 00:17:02.159 --> 00:17:06.079 And then we have optimization agreements which give a root 295 00:17:06.160 --> 00:17:10.240 to the market, which provide the intelligence and algorithm which 296 00:17:10.279 --> 00:17:14.279 helped to optimize the battery on various markets. So these 297 00:17:14.359 --> 00:17:19.240 two broad categories of battery off takes, optimization agreement and 298 00:17:19.359 --> 00:17:21.279 flexibility purchase agreements. 299 00:17:21.640 --> 00:17:25.319 So ppafpas, can you explain a bit who signed what 300 00:17:25.960 --> 00:17:29.319 and how did it change to a twenty five versus 301 00:17:29.400 --> 00:17:30.359 to twenty four. 302 00:17:31.200 --> 00:17:35.640 On the star side, we have utilities and optimizers. On 303 00:17:35.720 --> 00:17:38.240 the optimizer side, we have a lot of new companies 304 00:17:38.279 --> 00:17:41.240 which didn't exist a few years ago, so these are 305 00:17:41.319 --> 00:17:44.880 new players on the market. On the PPA side, we 306 00:17:45.000 --> 00:17:48.359 have two differentiate between the US and Europe, but in 307 00:17:48.400 --> 00:17:51.880 both markets we saw lower figures than twenty twenty four 308 00:17:52.240 --> 00:17:56.440 for different reasons. During Europe we see definitely saturation of 309 00:17:56.640 --> 00:18:01.680 PPA demand, mainly also due to set for solar profiles. 310 00:18:01.920 --> 00:18:06.400 It's not generally just lower demand. Data center's a huge 311 00:18:06.480 --> 00:18:09.680 factor of thirty five percent of the demand in corporate 312 00:18:09.720 --> 00:18:14.640 PPAs from data centers. The other big notable change in 313 00:18:14.759 --> 00:18:18.839 Europe is utilities are back. So it used to be 314 00:18:18.880 --> 00:18:21.640 over the last five six years that the role of 315 00:18:21.759 --> 00:18:25.880 utilities in PPAs became smaller, smaller, smaller in absolute and 316 00:18:25.920 --> 00:18:29.839 relative terms, and now they're back. So they just doubled 317 00:18:29.839 --> 00:18:33.079 the volume, going from one point seven to three point 318 00:18:33.160 --> 00:18:36.400 eight gigawatt. And it's a sign of the times that 319 00:18:36.880 --> 00:18:40.480 it takes more work, it takes more optimization to do 320 00:18:40.599 --> 00:18:43.920 good deals, and this speaks to the strength of utilities. 321 00:18:44.680 --> 00:18:46.960 A big thing on the off take side is of 322 00:18:47.000 --> 00:18:50.319 course not just PPA, but the big demand pulled data 323 00:18:50.319 --> 00:18:53.000 centers they want to go direct. So a big trend 324 00:18:53.079 --> 00:18:58.680 is bring your own capacity, co locate directly, get exemptions. 325 00:18:58.920 --> 00:19:01.920 We could probably cover PGM, which is the largest market 326 00:19:02.079 --> 00:19:05.440 in the world where we have all those data centers, 327 00:19:05.599 --> 00:19:09.440 and it's dramatic there. Just imagine we have a market 328 00:19:09.440 --> 00:19:13.319 with one hundred gigawatt of peak demand and we just 329 00:19:13.359 --> 00:19:16.720 had a capacity auction where the margin which was left 330 00:19:16.759 --> 00:19:20.440 was one hundred and thirty nine megawatts and prices of 331 00:19:20.480 --> 00:19:25.680 course shot up, and this has huge political implications. Affordability 332 00:19:25.759 --> 00:19:28.680 is a big topic here. What does it cost five 333 00:19:28.799 --> 00:19:31.559 hundred bucks more a year on a household level, so 334 00:19:31.759 --> 00:19:33.079 very big stress. 335 00:19:33.160 --> 00:19:34.000 And what to do. 336 00:19:34.079 --> 00:19:36.640 And basically there was just a ruling from the regulator 337 00:19:37.359 --> 00:19:41.200 co location ruling and what they allow is, among others, 338 00:19:41.519 --> 00:19:45.759 some very sensible things like enabling fostering non firm demand. 339 00:19:46.240 --> 00:19:49.519 Data center is not baseload. They can ramp. They don't 340 00:19:49.559 --> 00:19:51.960 want to do it, but they can and this has 341 00:19:52.079 --> 00:19:56.079 tremendous value if you can reduce by fifty hours or 342 00:19:56.200 --> 00:19:59.880 seventy hours or whatever the figure is. And then another 343 00:20:00.200 --> 00:20:02.240 which is called interim service, which we just give you 344 00:20:02.279 --> 00:20:05.279 an exemption to build gas or whatever in an island 345 00:20:05.519 --> 00:20:09.839 at your site. So there are all desperate means to 346 00:20:09.960 --> 00:20:14.440 make capacity available as fast as possible, and unfortunately in 347 00:20:14.480 --> 00:20:17.960 PGM it is not renewables. The market is maybe at 348 00:20:17.960 --> 00:20:21.640 ten percent. There would be fantastic values on the PPA 349 00:20:21.720 --> 00:20:24.559 side for those PPAs, but the queue is so long 350 00:20:24.599 --> 00:20:27.279 and you don't get it permitted. So that's a bit 351 00:20:27.319 --> 00:20:30.319 what we see on the mid demand side, and definitely 352 00:20:30.440 --> 00:20:35.720 most interesting on can we make firm demand interruptible? And 353 00:20:35.839 --> 00:20:39.559 this island strategy that they bring their own capacity directly. 354 00:20:40.200 --> 00:20:42.640 Luca, what's it like in the Texas market. 355 00:20:43.240 --> 00:20:48.160 Well, it's just a fascinating market because huge demand growth, 356 00:20:48.559 --> 00:20:53.680 huge everything, So building lots of renewables, still building lots 357 00:20:53.680 --> 00:20:57.480 of storage. I just mentioned ten gigabotes, data centers being 358 00:20:57.519 --> 00:21:03.440 built and served, everything done, everything fast, everything big. And 359 00:21:03.480 --> 00:21:09.000 then Europe, Europe complicated. I think we don't have demand 360 00:21:09.039 --> 00:21:13.519 growth as a first, we see the energy transition progressing. 361 00:21:14.119 --> 00:21:17.079 We are in the wobbles of the energy transition, so 362 00:21:17.440 --> 00:21:20.920 we see the stresses and we're reacting now to those stresses, 363 00:21:21.079 --> 00:21:25.279 which means new business models, new pools of value. So 364 00:21:25.880 --> 00:21:29.799 some of the innovation, the way of doing this is 365 00:21:29.880 --> 00:21:35.000 actually happening here. We are more advanced along the energy transition, 366 00:21:35.119 --> 00:21:39.200 and you see this especially markets like gb and Germany. 367 00:21:39.680 --> 00:21:42.720 This is where actually the future is being built. But 368 00:21:42.839 --> 00:21:47.119 there are very big structural barriers I mentioned already in 369 00:21:47.160 --> 00:21:50.359 the next two three years, we can't build as fast 370 00:21:50.400 --> 00:21:54.519 as possible the storage to improve capture and reduce negative prices. 371 00:21:55.000 --> 00:21:59.039 Gas remains the marginal price center in many markets, so 372 00:21:59.200 --> 00:22:02.960 system costs are up. We need so much more intelligence 373 00:22:03.319 --> 00:22:06.880 we need to incorporate and you covered it the distribution grid, 374 00:22:07.160 --> 00:22:11.039 which is something different than the transmission. It's under utilized 375 00:22:11.079 --> 00:22:14.160 with just twenty percent. So there's so much more to do. 376 00:22:14.240 --> 00:22:17.599 But there are some structural questions in the markets which 377 00:22:17.640 --> 00:22:20.920 need to be answered. And Laura, was you saying the 378 00:22:21.039 --> 00:22:24.240 energy transition is made deal by deal. I stick to 379 00:22:24.319 --> 00:22:28.000 this for ten years, this is where it happens. But 380 00:22:28.759 --> 00:22:31.319 maybe twenty twenty five was for the first time for 381 00:22:31.440 --> 00:22:34.319 me where I needed to step back and say, Okay, 382 00:22:34.519 --> 00:22:39.079 there is politics to it. There is structural constraints which 383 00:22:39.359 --> 00:22:40.799 cannot be solved deal by deal. 384 00:22:41.599 --> 00:22:44.920 Luca. Two twenty six is the year of the revision 385 00:22:44.960 --> 00:22:47.759 of the green as gas POTOCOLO. We need to count 386 00:22:47.799 --> 00:22:51.200 those electrons on an hourly basis, and do you see 387 00:22:51.200 --> 00:22:54.599 this going through or do you feel this too much resistance? 388 00:22:55.359 --> 00:22:59.160 First, we need modern market infrastructure, which is we need 389 00:22:59.200 --> 00:23:04.400 to assign hourly green value in markets dominated by renewables. 390 00:23:04.799 --> 00:23:07.960 We need this as a paradigm shift. I have no 391 00:23:08.039 --> 00:23:10.400 prediction of whether it is going through, but it's just 392 00:23:10.759 --> 00:23:15.240 essential transparency for the modern functioning. What we're worried a 393 00:23:15.279 --> 00:23:19.559 bit is just we're making deal making more complicated. We 394 00:23:19.640 --> 00:23:25.119 have IFS thirteen, we have greenhouse gas protocol, we're having 395 00:23:25.559 --> 00:23:31.039 SABAM rules for non European companies. From a corporate perspective, 396 00:23:31.279 --> 00:23:34.759 we can just risk to delay and reduce deals where 397 00:23:34.799 --> 00:23:37.920 they say this is just too complicated, We're not doing it. 398 00:23:38.319 --> 00:23:40.799 So it's a fine balance. But for me it is 399 00:23:40.920 --> 00:23:44.720 unavoidable that we need a modern infrastructure to assign value 400 00:23:44.880 --> 00:23:47.240 to firm green hourly production. 401 00:23:48.039 --> 00:23:50.279