Speaker 1: With Laurent segal And from London and Gerard Reed from Berlin.
Speaker 2: This is redefining energy today on really finding energy. We
Speaker 2: have a great guest on the front of the show,
Speaker 2: Christian Ruby, Secretary General of your electric Yeah.
Speaker 3: It was great to have him on the show. And
Speaker 3: I just want to apologize for my sound quality. I'm
Speaker 3: really sorry. I was in a car traveling through France.
Speaker 2: And you are in a car because you're moving your
Speaker 2: precious collection of where whiskeys from Germany to Ireland.
Speaker 3: Exactly, That's what I've been doing.
Speaker 2: Yeah, So with Christian, we're gonna discuss the state of
Speaker 2: play of the European electricity sector with good news, not
Speaker 2: so good news, but have a really open conversation about
Speaker 2: what's going on.
Speaker 3: Yeah, listen, I think it's at the end of the day.
Speaker 3: Where as to Quotia, we are entering the era of strification.
Speaker 2: Absolutely, but the question is when this Welcome Christian on
Speaker 2: the show. Christian, welcome back to the show.
Speaker 1: Thank you very much. It's a pleasure to be here.
Speaker 2: Christian. You already think publishers a regular report called power
Speaker 2: bart Metals, and this year your report's called zeroing in.
Speaker 2: What are your main takeaways.
Speaker 1: Yeah, so our power parameter came out some good week
Speaker 1: ago and essentially that the key trends we're seeing are
Speaker 1: quite mixed. Back. If we start with some good news,
Speaker 1: electricity is decarbonizing at record pace, and this is literally
Speaker 1: record pace. The carbon emissions of electricity are down fifty
Speaker 1: percent from a two thousand and eight baseline, so very significantly.
Speaker 1: We have as of this month this year, seventy four
Speaker 1: percent carbon free electricity in the mix, fifty percent renewables,
Speaker 1: twenty four percent nuclear, and we are seeing record amounts
Speaker 1: of new capacity come online. We are talking in excess
Speaker 1: of seventy gigawatts of new wind and solar joining the
Speaker 1: grid last year. Those are the very encouraging trends. On
Speaker 1: the demand side, the picture is a bit more depressing,
Speaker 1: to be honest. Overall, the tendency is that we've seen
Speaker 1: a significant drop in demand over the crisis years twenty
Speaker 1: twenty one to twenty twenty three seven and a half percent.
Speaker 1: And when we look into the drivers of electrification, the
Speaker 1: electric cars, the heat pumps, we are seeing a stagnation
Speaker 1: or even drop in the uptake of these technologies. If
Speaker 1: we want to continue to increase the supply of clean electricity.
Speaker 1: We need to see something happen to the demand side,
Speaker 1: because already now with the trends that we're seeing, we
Speaker 1: can see that we have headwinds ahead for renewables. We
Speaker 1: have low capture rates, we have record instances of negative prices,
Speaker 1: and we have a strong consolidation, i would say, of
Speaker 1: power prices at lower levels compared to the crisis years.
Speaker 1: So that's in a nutshell, the big picture that we
Speaker 1: are capturing in this report. Thank you very very much
Speaker 1: for that.
Speaker 3: Over you. I just one quick statement as I look
Speaker 3: at the market, the issue is that there is no
Speaker 3: financial incentive for the consumer to electrify because electricity and
Speaker 3: a lot of Europe is just too expensive compared to
Speaker 3: gas and even oil if you're talking about the electrification
Speaker 3: of an automobile. So surely that has a push going
Speaker 3: forward or am I missing something?
Speaker 1: You're definitely right on that. And just to pick out
Speaker 1: one crazy policy that's under discussion for the moment in France,
Speaker 1: they want to slap a fifty euro tax on every
Speaker 1: megawatt of electricity mega what hour that is, and there
Speaker 1: we just have to say, if that's what they're going
Speaker 1: to do, well, for sure, the uptake of electricity is
Speaker 1: going to stall. Of course, people are going to react
Speaker 1: to such a strong disincentive, So we need to work
Speaker 1: on the taxes, that's for sure. And we also need
Speaker 1: to work outside of the electricity space, because the choice
Speaker 1: between a gas solution and an electricity solution is going
Speaker 1: to be, you know, dependent on the economics of either
Speaker 1: of them. So we need to have some disincentives frankly
Speaker 1: to use the gas solutions going forward, if we want
Speaker 1: to continue our phase out of primarily the Russian imports
Speaker 1: of gas, and in the longer term also than a
Speaker 1: full transition to carbon free or carbon neutral gases.
Speaker 3: I should say, Christian, I don't think there's one politician
Speaker 3: in Europe that will make gas more expensive, and the
Speaker 3: reason is because voters don't want us. So I think
Speaker 3: we have to change that dialogue and say let's make
Speaker 3: electricity cheaper. That's my view. Your French and after your pots.
Speaker 2: Oh, EDF is a basket case. Let me give you
Speaker 2: an example. So recently the government is so bankrupt they're
Speaker 2: going to steal money from EDF without asking them. I
Speaker 2: mean they're literally going to help themselves. And at the
Speaker 2: same time DF needs more money to finish in clap
Speaker 2: pointcy in the UK, so they need to tap some
Speaker 2: private e quickly fund. We're gonna, you know, charge them
Speaker 2: an absolute fortune. So I'm afraid that EDF is a
Speaker 2: victim of too much government intervention. But that's just my
Speaker 2: point of view. And I know, Christian you need to
Speaker 2: stay very neutral and we're not going to open the
Speaker 2: nuclear yes, no, and so on, because we only hear
Speaker 2: twenty minutes. But I'm interested in the following view. Electricity
Speaker 2: demand is going up literally everywhere. China has electlified, in
Speaker 2: fact much more than you're in percentage of its energy consumption.
Speaker 2: In the US, for the first time we see really
Speaker 2: a pickup in energy demand. A lot of talks of
Speaker 2: our AI that. So why is this not happening in
Speaker 2: Europe or yet?
Speaker 1: I think there's a whole range of reasons. The first,
Speaker 1: very important reason is that there was a very significant
Speaker 1: amount of demand reduction and demand destruction over the crisis
Speaker 1: years when electricity prices went through the roof. That led
Speaker 1: to shutdown of a number of big factories in Europe,
Speaker 1: and it led to consumers starting to save both gas
Speaker 1: and electricity. So there's definitely some aftermath of this, because
Speaker 1: even if consumers have been forgetting about the energy efficiency measures,
Speaker 1: some of those factories that shut down did not reopen.
Speaker 1: And another key element is in this is that we
Speaker 1: have very sluggish growth in Europe. In the US they
Speaker 1: have decent, if not impressive growth rates, maybe close to
Speaker 1: three percent. In China they're struggling to get past the
Speaker 1: five percent growth mark. But in Europe where I mean
Speaker 1: when we look at accricate Europe, we're less than one percent.
Speaker 1: That's just very clear that that without some economic growth,
Speaker 1: it's also difficult to see a significant increase in the
Speaker 1: demand for electricity. And the other things are that we're
Speaker 1: still waiting for the impact of the demand side policies,
Speaker 1: the uptake of electric cars, the heat pumps are not
Speaker 1: really beginning to work wonders when it comes to demand.
Speaker 1: And this is also why one of our key messages
Speaker 1: these days is we need to stimulate demand for electricity,
Speaker 1: otherwise we're not going to be able to make the success,
Speaker 1: the decarbonization success of electricity a broader societal success.
Speaker 2: Everybody heard about last month's Mayo Druggy report on your
Speaker 2: europe competitiveness, and they say, oh, now, the US are
Speaker 2: so much more competitive than you'all. I've been on the
Speaker 2: energy market for quite some time, so I know the history.
Speaker 2: If you look back at the average power price in
Speaker 2: your inflation ADS, that compared to twenty five years ago,
Speaker 2: we have managed to reduce that price by fifty percent.
Speaker 2: So in fact, if we CITI is much cheaper than
Speaker 2: it was now. Because the US found shale gas, and
Speaker 2: you know the equivalent of the Saudi Arabia and permium basin,
Speaker 2: their prices have gone down times four. That's why we're
Speaker 2: not competitive. We're not competitive because we don't make it false.
Speaker 2: We're not competitive because the permium bason is not in Bavaria,
Speaker 2: it's in Texas. Sometimes I think we get a bit
Speaker 2: hard on us, knowing that we are a continent which
Speaker 2: imports eighty percent of its energy and we're not blessed
Speaker 2: by great resources, and we need to understand that we
Speaker 2: are naturally in a difficult position. I don't want to
Speaker 2: have a too gloomy conversation. We need to deal with
Speaker 2: the cars that we have, which are not very good.
Speaker 2: But I've seen so much podcast and you know, Jard
Speaker 2: and I we invested in rooftop solar and so I
Speaker 2: wonder how is it processing your statistics you count them
Speaker 2: like solar production or negative demand, because you might have
Speaker 2: a lot of official demand which just disappear by the
Speaker 2: fact that people are doing a lot of self consumption,
Speaker 2: or how do you process that?
Speaker 1: Well, two things to take up here. First off, I
Speaker 1: think part of the story about waning demand is exactly
Speaker 1: what you say, that some of it in quotation mark
Speaker 1: disappears behind the meter, and let's be very very clear
Speaker 1: and articulate about that. There's absolutely no problem with that.
Speaker 1: On the contrary, that's a good thing. That's why I
Speaker 1: insist to distinguish between demand reduction and demand destruction. The
Speaker 1: reduction piece we're absolutely fine with. It's the destruction piece
Speaker 1: that we're concerned about. That's when factories shut down and
Speaker 1: don't reopen. The second thing that you're bringing up is
Speaker 1: incredibly important and it's one that I am actively making
Speaker 1: to policy makers these days. We have to get the
Speaker 1: analysis right when we talk about compar additiveness. As a
Speaker 1: matter of fact, just explaining exactly what you did to
Speaker 1: a journalist the other day, namely that holded power prices
Speaker 1: are historically speaking fairly low for the moment and it
Speaker 1: is a mistake to think that we should be going
Speaker 1: to the price levels of twenty twenty for power, because
Speaker 1: in twenty twenty nobody was making money and you were
Speaker 1: not going to see sustained investments. If you have power
Speaker 1: prices at you know, say thirty euros or something, that's
Speaker 1: just not enough to have a proper business case. So
Speaker 1: we need to be clear about the fact that, yes,
Speaker 1: we have a competition situation for some specific industries and
Speaker 1: we need to deal with this. But we need to
Speaker 1: be very careful with this generic policy recommendation of lowering
Speaker 1: energy prices. The risk is that we lower it so
Speaker 1: much that that investments stop because it just doesn't make
Speaker 1: sense to invest anymore. So there we need to find
Speaker 1: a very very delicate.
Speaker 3: Bal don't need to be cut across it. Where I'm
Speaker 3: coming from a slightly different it's not about lowering the
Speaker 3: wholesale power prices. It's actually lowering the cost to the
Speaker 3: consumer of buying electricity. There is no incentive for the
Speaker 3: consumer to decarbonize because gas is too cheap. Retail gas
Speaker 3: is too cheap compared to electricity. That's where I'm coming from.
Speaker 3: So if you get rid of taxes, if you maybe
Speaker 3: even rethink the way grid charges work, et cetera, et cetera,
Speaker 3: then actually you bring the costs down and automatically the
Speaker 3: consumer down is going to put in heat punts, is
Speaker 3: going to put in electric vehicles, etcetera.
Speaker 1: Counter that's where I'm coming from. I think you have
Speaker 1: a point as well, Gerard. We are very much in
Speaker 1: agreement that we need to look at incentives for consumers
Speaker 1: to take up the electric solutions. Grid charges can be
Speaker 1: one element in this, passing through the benefits of cheap
Speaker 1: renewables to customers via PPAs and see if these can
Speaker 1: be another way. We just need to do it in
Speaker 1: a way that's carefully crafted so that we don't get
Speaker 1: the wrong policy outcome. Again here, for instance, the Draugi
Speaker 1: report says, let's progressively cover all renewables with PPAs and CfDS.
Speaker 1: If you cover hydro with a CFD, you're going to
Speaker 1: turn a flexible resource into a baseload resource and that's
Speaker 1: not going to be helpful for system costs. So yes,
Speaker 1: let's work on ways of making it attractive for consumers
Speaker 1: to decarbonize. Some elements in this are locational signals, not
Speaker 1: locational markets, but locational signals, time of use signals. It
Speaker 1: is flexibility signals, so that you activate your heat pump,
Speaker 1: your car charging in a way so that it actually
Speaker 1: helps the grid. And by the way, that there is
Speaker 1: an economic premium potentially from owning these types of devices.
Speaker 1: So those are definitely elements that we should be working
Speaker 1: more on.
Speaker 2: Recently, the IEA really is annual report which is very bullish.
Speaker 2: They call it the age of electricity. So that's good.
Speaker 2: The second good news is that's not coming from it.
Speaker 2: It's coming from job. It's an energy transition up. Not
Speaker 2: when you find a new source of energy, it's when
Speaker 2: you find a new source of energy storage. And now
Speaker 2: if you look at the price of batteries, I mean
Speaker 2: I'm investing in batteries, the price is going down. It
Speaker 2: is phenomenal. With the price going down, we're opening new
Speaker 2: markets all the time, markets which are too expensive. And
Speaker 2: now yes we can apply. And of course you can
Speaker 2: always have the question of the docal floater. We need
Speaker 2: to keep some fossil fuel backup and stuff so on,
Speaker 2: develop capacity market. I mean into those type of conversations.
Speaker 2: But I would say overall, the technology continue to improve.
Speaker 2: Solar panel at eight cents per What Wow. Now the
Speaker 2: way in the industry, what problems too three years ago
Speaker 2: is fixing itself. Now you see again that the price
Speaker 2: is going to attal stabilize, the LCUI is going to
Speaker 2: go down, batteries so cheap crazy, that's good. These are
Speaker 2: good news, These are tailways. So I also don't want
Speaker 2: our listeners to end up in a bit of a
Speaker 2: gloomy perspectively, I think there's a lot of stuff going
Speaker 2: on in the posive direction for industry, I.
Speaker 1: Would agree, And the one thing I picked out of
Speaker 1: that I report was the forecast on solar that that
Speaker 1: solar employment is going to continue to boom and also
Speaker 1: towards the end of this decade, I agree with that
Speaker 1: the combination of massive over capacity in production of panels
Speaker 1: with the relatively lower amount of friction NIMBI friction is
Speaker 1: really just making solar a winner. The one thing I
Speaker 1: see in terms of challenges ahead, or the two things
Speaker 1: perhaps for solar are one grid connections, because we really
Speaker 1: see the connection cues expand at record pace. And the
Speaker 1: second thing is a deteriorating business case because let's face it,
Speaker 1: these panels are producing at the same time and therefore
Speaker 1: the capture rates are going to be under increasing strain.
Speaker 1: That's where your point about storage comes in, and I
Speaker 1: think we need to look at the storage question from
Speaker 1: a number of different angles. First of all, we need
Speaker 1: to look at the different timeframes, what is it, what
Speaker 1: type of timeframes do we need in the market. And secondly,
Speaker 1: we need to look at the volumes, because the volumes
Speaker 1: required are frankly humbling, even if technology costs are coming down.
Speaker 1: We assess that we will need some one hundred and
Speaker 1: fifty gigawatts to be added to the grid by twenty thirty.
Speaker 1: And to put this in perspective, the existing amount of storage,
Speaker 1: including all pumped hydro storages, that's around fifty so everything
Speaker 1: we've ever built that is on line today, we need
Speaker 1: to build three times as much in five years or so.
Speaker 1: It is quite a daunting challenge and it's great to
Speaker 1: hear that we increasingly have that merging business case. But
Speaker 1: I think that if we look at utility scale storage
Speaker 1: capacity markets is going to be a quite important element,
Speaker 1: and this is for instance, what we see in the
Speaker 1: UK where storage is taking off more than in other markets.
Speaker 3: One thing I just want to add to that that
Speaker 3: you're forgetting about is the rooftop market, and the rooftop
Speaker 3: market is basically forty percent of all solar, and that
Speaker 3: business case is getting better and better and better. The
Speaker 3: reality is in a lot of countries across Europe today
Speaker 3: you can put solar on your roof and you're generating
Speaker 3: a third to a quarter of the price that you're
Speaker 3: buying it from the power ber that and by the way,
Speaker 3: then it makes sense to be able to put batteries
Speaker 3: in alongside that, and you know they're going to be
Speaker 3: in in droves. So I would look at that and
Speaker 3: actually say, I hear what you say in terms of storage.
Speaker 3: What my point is, it's common, but it's not large scale.
Speaker 3: It's rooftop because the economics are just so good there.
Speaker 1: That's good news in the sense that something is coming.
Speaker 1: I would just say the figures I'm mentioning that one
Speaker 1: hundred and fifty gigawatts is still of a magnitude that
Speaker 1: is quite humbling, and therefore our biggest challenge for the
Speaker 1: energy transition is going to be challenges to the system
Speaker 1: and handling those on time. It's not going to be
Speaker 1: that we lack the technology or so. It's about making
Speaker 1: this stay stable as we fundamentally transform this. Some people
Speaker 1: say it's like rebuilding a train while it's traveling at
Speaker 1: ninety miles per hour or something, and that's a little
Speaker 1: bit the task we have at hand. When we see
Speaker 1: how the grid is being strained today. We need batteries
Speaker 1: and storage flexibility arrangements at all voltage levels in order
Speaker 1: to keep it stable.
Speaker 2: Because I'm in a great mood, I want to end
Speaker 2: up on a very positive initiative that's being taken around
Speaker 2: the North Sea, and it's called the North Sea Windpower Hub.
Speaker 2: And all the countries around the North Sea regarding the
Speaker 2: fact that they are in the EU, or war in
Speaker 2: the EU, or will never join the EU, so from
Speaker 2: Norway to Denmark to Germany, Netherlands and the UK are
Speaker 2: thinking together about using really the North Sea as a
Speaker 2: gigantic source of power and sharing intelligently through nodes, hubs
Speaker 2: and so on, so that each connection is not developed
Speaker 2: one by one, but there's a there's a measure of
Speaker 2: literally creating a new power system inside the North Sea.
Speaker 2: And I see that as an extremely positive development, and
Speaker 2: I'm sure You're Electric supports that initiative absolutely.
Speaker 1: I believe we were the first trade association in the
Speaker 1: world that came out with estimate of what we need
Speaker 1: to build in the North Sea, which was on point,
Speaker 1: and which is what the makers have kept, which is
Speaker 1: the Bullpark figure of three to four hundred gigawads of capacity. Actually,
Speaker 1: as it were, I'm seeing that built out potential not
Speaker 1: only as a savior for the energy transition and the
Speaker 1: power supply in northwestern Europe, but also as a basis
Speaker 1: for closer cooperation between the UK and the EU twenty
Speaker 1: seven Because in a world with more teopolitical strains, more
Speaker 1: hostile neighbors, more aggressive industrial competition, I think eventually we'll
Speaker 1: see that it makes sense to work together between the
Speaker 1: European brothers and sisters, even if one of the siblings
Speaker 1: decided to move out a.
Speaker 2: Little bit of a temp to tent drug exactly.
Speaker 1: So, Actually, we just wrote a letter to both the
Speaker 1: Commission and to Downing Street to say it's time to
Speaker 1: move on from the Brexit minimalism, the stalemate of Brexit
Speaker 1: and come towards more mutually benefit official working arrangements because
Speaker 1: the current trade framework is not going to be conducive
Speaker 1: for the infrastructure build out and the trade for this
Speaker 1: mega power plant. That we're building in the North Sea.
Speaker 1: We need better rules when it comes to power trading,
Speaker 1: to the use of our interconnectors if we want to
Speaker 1: make the most of this both for the UK and
Speaker 1: for the continent. So we see I to eye here.
Speaker 2: Well, Christian, that's an excellent way to end this conversation
Speaker 2: with a pleasure talking with you. We fully support your
Speaker 2: electric and keep on the great work.
Speaker 1: Thank you and likewise, thank you very much.
Speaker 2: Take care. In conclusion, we just want to tell our
Speaker 2: friends and listeners then Chard and I will both will
Speaker 2: be present to twenty first of November at the Energy
Speaker 2: Storage Awards and it's going to be a fantastic evening.
Speaker 2: So I don't know how many remaining seats are, but
Speaker 2: please take it out. We'll leave the coordinates in the
Speaker 2: show notes.
Speaker 3: Looking forward to my friend, looking forward to us.
Speaker 2: Thank you for.
Speaker 1: Listening to Redefining Energy.
Speaker 3: Don't forget to rate the show and subscribe on Apple, Podcast,
Speaker 3: Spotify or the platform of your choice.