You're listening to Redefining Energy. Your co hosts from Berlin Gerard Reid and from London Laurent Segalan. Today on Redefining Energy job, we're going to talk about something we don't usually talk about. It's the distribution grids exactly the last month, which is incredibly critical to the energy transition and to ensuring that we have twenty four seven power right, which seems to be obvious way back when,
but now it's being put into question. But first of all, from our partner, Redefining Energy sponsored by a Mundi, the leading European asset manager, your trusted partner to accelerate the transition to a low carbon future. Leading asset manager based on the IPE ranking. Investing involves risk can sort your financial advisor. Yeah, I want to start with Lauren. Is that nobody thinks about the wires in the ground m h. We just take it for granted that
we have power. M But what's happening is we're seeing a lot of stress is taking place in the distribution grid. One is there are a lot of the distribution cables where are very old, the substations, the poles that they're on, et cetera, et cetera. The same thing and the need of an upgrade, and the need of an upgrade one because they're old, but also again because the stresses in the system, whether that's storms or it's two
way power flows. And actually must really be clear. In most villages, if there was three pouses in a row which had an electric car and they're charging at the same time, you've got a problem. The reason I want to talk about this topic is for me, it's I think it's going to be an increasing bottleneck in the energy transition is what to do with the distribution
grid. Yeah, because the transmission these are big projects, quite ee on the agenda, but if you look at the distribution grid, it's just a plate of spaghetti and you never know which spaghetti is gonna crease some stress.
And you're right about TV charging, but you know, we can talk about heat pumps as well, and at the same time, so does the demand at the same time, those distribution grid needs to accommodate with the first development of decentralized energies such as off top soil are exactly and let's be really clear, it's quite a tough thing to upgrade them because it's like replacing your electricity system within your home and rewiring. That's tough if you think up roles,
etcetera, etcetera. People don't like this. That's not easy whatsoever to do this. So how to reconcile the challenges of new local load and new supply. It's the challenge of decentralization while of course maintaining the grid stability while it's managed by local utilities, and those utilities which are all regulated either at regional or national level, they have a kind of slow pace and they're faced with the rapidity of change. By the way, a lot of these guys are
very small, right. I know, if you go to UK, there's only a handful of them, but if you go to Germany or the US, you've got hundreds of these distribution grid operators and you could think what do they do? They're the man in bands. They go around and make sure that the poles are built in the start of the other thing. And as you said, there's a certain culture there and to try and change that, like digitalizing these businesses, trying to modernizos greed is the job of our guest,
Robert Denda, that you've known for quite some time. So can you introduce Robert. Yeah, Robert is the CEO of a business called grid Aspertise, which is a company spun out of the Italian utility in Nel, and they are really one of the largest suppliers of solutions into distribution grid operators, so everything from smart meters to software systems. Greatspertise now is a fifty to fifty JV between NL and the investment fund CVC. The fifty percent was sold
by NL to CBC for throndude million dollars two years ago. Of course they're at quart in Italy, but they have a presence in Spain, Brazil, Usa, Germany, Scandinavia. So we're going to talk about all those issues smart metas, sensors, probably cyber ai and the CEO what type of solutions are being implemented, Well, let's bring them on the show. Robert, Welcome to the show. Hello, nice being here, Thank you for the
invitation. Robert. Maybe let me sort of kick off and what I'd be really interested to talk about is what's going on on the grid, and I'm particular the distribution grade and I was quite taken back to see the CEO of one of the Dutch distribution grid operators come out with a statement sort of saying, hey, listen, if you want to connect a house, a hospital, whatever it is in the country, we can't do it. And then I said, of go, how can this be in a modern society like
the Netherlands or something like this happens. You're right, and we see this not just in the Netherlands. What is happening there? And in many places you know that the distribution grids have a certain capacity, and the capacity has an contractual aspect and a technical aspect. Typically, first of all, you
have an exhaustion of contractual capacity in those places. So basically the contracts that exist that distribution system operator they need to guarantee that capacity for the electricity system to work, for to be able to not have interruptions and so on. And typically those capacities are not always used to one hundred percent. So that's the one point. Let's say you have an incredible increase of electric mobility eb heat pumps an other type of consumption on one side. On the other side,
you have the generation capacity problem. There's distributed generation popping up a huge pipeline of projects to be connected to the grid, and this does not match and there's a problem in the Netherlands, but also in other places where you
see actually that the contractual capacity is basically full. You can solve this contractual capacity problem with alternative connection agreements and these type of specific contracts where a customer gets an incentive if he does not use the overall capacity, and or the unused capacity can be shared among the different participants in the electricity sector for some
time at least until this reinforcement of the grid. Is there known that things are possible in this way in UK, in Norway, in Austria, in some places, and I think some experimental parts also in the Netherlands. So that gives that say a little bit of room. But then there's a technical capacity you actually have in the grid in certain areas if you really look on them from an in depth, in certain lines are just really at the limit.
And if you reached this technical capacity, and then you need to do many things at the same time, and you need to work on all dimensions. And I think that's also what in the Netherland is happening now. The grid operators are of course trying to solve this contractual part, but trying to reinforce the grids but at the same time look at flexibility, demand response,
and many other solutions to that problem. Robert, just again, this is me from the outside looking in. Can you explain why this has happening now? Where I'm coming from? And this is we've had a grid for the last one hundred years and we've never had these congestion issues and then so why are they suddenly taking place now? And again I want to go back to
the Netherlands. It was a lovely picture I saw about six months ago from the grid operator there which just showed that like two years ago, it was congestion and that is massive congestion. Yeah, I think there was no congestions. Maybe there was congestion, but not as critical as today. Yes, And what is happening is really what we see in certain countries like the Netherlands, is really this huge increase in electrification, electric cars, mobility. You
see the increase of heat pumps and other type solutions. On the other side, you see this increase of renewable generation. And this happens now at the distribution grid level, and that's the problem here. Before in the past, big generation plans that were going from the transmission lines then to the distribution grid. So from high voltage to medium voltage and then got to low voltage and now what is happening really get problems in general, we see the distributions as
an operators struggling at medium voltage level and at low voltage level. Robert, how do you solve this as quickly as possible, as quickly as possible that if you have time, you would completely reinforce the grid. And you still need do this. So it's a mixture of things that the grid operators need to do. At the same time, they need to put reinforcement in the grids with different additional wires, reconductoring and all of those additional things that is
clear. At the same time, they need to shift in time the peaks. So that means at the end, let's say you have either storage or demand response flexibility, these type of solutions that helps the shift in time the peaks. And for all of that, you need digital technologies to really understand monitor, sensor in real time what is going on. Because if you look
at a certain place in the grid, that's quite amazing. Now you see the power flows in some hours of the day are going in one direction and other hours of the same day, they go in other directions and you see the peaks they moving around, and that is really creating the stress. So what you need to do is to first of all understand in real time what
is going on. And here now not speaking about the Netherlands only, but in general, the utilities are still not so well digitalized in the grids that they are have really complete real time visibility of the medium and low voltage grid in all places. And this is the first step. Of course, you need to do a network planning, set up flexibility markets, do at specific contracts, and then you're bound typically by the regulatory constraints that you have,
so it's a mix. You need to do the right contract, do the right reinforcement, do the right equipment, so put digital technologies inside the power grids and all of that combination engaging the customers then to curtail or to engage the inflexibility and all of that together actually then solves the equation. It's the only way to gain time. To gain time, Let's say two, we
have completely full capacity and with a refer network. Robert your CEO of a company called grids Perties, which probably people don't really heard about because in fact you're quite new. You are carved out of NL two years ago, and NL still owns half of your shares and the investment group CVC owns the other side. Now, of course you know the Italy greed inside out because you're part of an L. But you're also in Spain, in Brazil, India,
US, the Nordics. So when you have this geographical diversity, which of those grids would you say is the most ready and which problem are the same? Which problem are different? So how do you analyze all those problem and solution on a geographical basis? There are similarities and also great differences, but then the solutions to the problem then at the end turn out to be
very similar. So if you look at the different grids, first of all, you have the European grids that in big part in certain countries are underground. You look at the US grid on the other side, they are mostly overhead. And if you look at the customers per transformer, which is a really important number. For example, in Europe you might have like fifty to
one hundred something like that. In the US have sometimes of the very end the last transformer from medium to low vaulted death very few three four, or five customers, and those are differences that make of course the grids very different. They have some similarity actually if you speak about those two geographies, they were built in both cases many many years ago, and they were built for
this centralized generation that we said. So both in the US is in Europe we spoke about the Netherlands before, but also Latin America and other Asia have challenges today with this increased demand, and it comes from different points. It's the emerging countries, developing countries. It's maybe the introduction of cooling, air conditioning and these type of things. If we look at the US, if you look at Europe, we have those things. With the data centers for
AI for example, is coming up. It's foreseen it by twenty twenty six. Just the data centers for AI will create probably the same demand than Germany as a country today. So if you look at those things, you see them in certain geographies, so the topic is different. And in certain geographies you still look at frauds, technical losses and really bring the quality of the
supply to the same level. So there are different situations. Really, what is happening everywhere is that there are more and more emergency events due to climate changes where you create outages because the wind creates a line interruptions, trees fall on the lines, and at the same time you have also this change in demand and you want to bring the security of supply. So what we see
really grids per tise. Looking at all those different geographies, there are commonalities in the solution because you always need to understand in real time what is going on in order to solve then the specific problems that might be minimize the interruption time, make sure that quality of supply is continuous, increase the hosting capacity and all of that and the part of the solutions then have many similarities and they go typically by putting sensors on the grids in the form of smart meters.
For example, smart meters are ready now becoming almost a commodity that is really necessary tool for utilities worldwide to understand what is going on at the endpoint of the grid, and a new generation of smart meters actually give much more information in real time that can then be used for this real time flexibility management as well. On the other side, you need to control you grid.
That means that you need to put elements inside the grid that allow you remotely disconnect, reconnect lines, change the topology and do this wherever possible in an automated way so that there's a minimum interference or no interference at all to the customers at the same time. And so those are the similarities that we see really all around the globe. That the set of solutions that are there are
very similar in terms of technologies. They require digital technologies, telecommunication links and of course control and measurement technologies inside the grid, and they solve still different problems because of the different geographies are at different levels of maturity. Robert, can I ask you a little bit about your view on storage, because as I'm listening to you, I'm sort of thinking, surely the answer is just
to put lots and lots of decentralized storage in there. Storage is a solution to a certain part of the problem because it shifts in time your peak problem. Everywhere where there's a problem with the peak, storage can help for sure. And there's a lot of activity ongoing worldwide, know in utility grade storage, and that is clear. And also the price of storage no is getting
down, so it becomes more and more attractive. But it's a complementary solution always to the other pieces you still need to act on those storage because in the storage the energy that you store, this is just therefore a certain time So short term things can be managed through storage. But you still need to interconnect then the controller of the storage actually that you have in the grid with the actual control of the grid itself with the customer, and so you need
to control this area of the grid. Storage is a piece of the solution. Flexibility in general is another one. Grid control is for sure another one as well. Even topology reconfiguration of the grids and doing this autumnmatically is another piece of the solution, and you need to do all of that in certain areas. Whenever you contract with a distribution company, do they have a clear view of their problems? Because there's a lot of solution flying and but first
they have their own idea. The second thing is there are a lot of startups swarming around. I'm sure some with a great product or there is not that a great product. Plus you get the equipment manufacturer, the g the Detachi or Snideranson also pushing to their solutions. So how all this works together? When do you ally, when do you compete? How does it work?
First of all, the utilities really have a big challenge today, and that's not just this technological challenge, but also the way they are set up, the way the organizations work, you know, the generational problem as well a problem also getting the skill sets and training in the field. So all of those things at the end makes very important the different parts of the solution, let's say, work together. So it's a lot of orchestrating the solution
for the utilities, helping them working together with a solution. And that's what we see when we talk to the different utilities, they in some cases about really co designing, co creation. In some cases even goes to managing fully the technology on behalf of the utility as a service. And this is a new business model. Of course. Also for some utilities say okay, hey, certain pieces of this problem, the technological piece that is really complex,
I outsource this and have a trusted partner that manages this for me. That is a new model. And this is what we see that utilities are one and more looking also those new models that are in contrast on this traditional mind of the utility that follow this highly KPEX intensive path of doing investments, investments that are recognized by the regulator. And this brings me to the other very
important piece of the equation. It's actually the regulatory schemes because what is really also needed in order to stimulate and allow the utilities to redo this needed change. Is he the right regulatory framework to be able to recognize a totex model instead of just KPEX and these type of things output based regulation. There are schemes in many places around the world, but not in many many other places.
Still it's all about investment recognition summering a little bit. There's the challenge about the regulatory framework that of course has put a way of working in the utilities in place that is looking really of doing investments in the grids in part where in wires and cables and transformers, which is all needed, but it's not the only way you need to compliment with digital technologies. Then there is
this training upscaling of people. The internal organizations today have metering departments that you have with an operation department within a utility. Maybe they do not even speak to each other because in the past it was not necessary. Today it's becoming really relevant and what we see really here coming back also to the competitors today,
we really seek now many of the competitors. In some cases they are really competitors, but in many other cases they are partners because we need at the end to solve the problem for the utility and for the sector, and you can only do this by working and working together. Robert, I like what you're talking about. And actually it's the biggest concern I have around the energy transition, is that what you're talking about is we need cultural change in
the incumbents. That's what you're sort of saying, and I suppose I'm curious about how do we do this? Yeah, how does that happen? There's a generational change as well. At the same time, the people that work in the utilities of force are users of electron their users of digital technologies, and so I mean we're getting there, and they're very innovative utilities as well, and others follow those more innovative utilities over time. You're right, it's
a cultural change. And what is really helpful is this type of new business models that you really support the utilities offering as a service. The technology as a service contract might have at the end a transfer of that knowledge of that
technology and everything again back inside the utility. So the utility can for a certain time of this change continue to manage a big piece of the grid as it used to manage that part of the grid, while the new technologies are introduced in those areas where the problems occur and slowly revamping the grid migrating and at some point have also then a transition back so that it becomes part of the regular operation of the grids, because the grid operator at the end become
system operators and need to have also all of those skills internally. At some point, Robert, just explain what you mean by this area of us as servers. What I mean here is the technology. If you equip a digital grid with digital technologies, that means you install edge computing, you install RTUs. Let's say it's control units inside the grid. Know that control monitor sensor your grid. You install smart meters. There's a lot about new IT systems
would integrate with the OT systems, so you have much more information. We speak here about everything related to the data and together with those edge computing. So all of those technologies are complex because they go together with the right communication links with small latency, the right band with a really challenging problem to solve and it requires a high level of skill sets, and as a service means that a company like ours but also others offer to the utility saying Okay,
don't worry about the complexity. We take care of that complexity for you. We manage that technology for you with a service level agreements, and then there might be a transfer and to the utility at a certain time for example. And this as a service means that it's a solution that allows them to not be too much concerned about this cultural change in such a short time. They can do this over a little bit more time, and they have as a
company a partner that helps take care of this technological complexity. So how about you talk about you iiting more digital and what we see in the press, and you're going to tell me if it's for real or if it's just scare mongoring. Is cyber attacks? Cyber attacks not great? So is it for real? How do you protect yourself? Or is it just generally is trying
to get more clicks? Don't know? It's a cybersecurity is really a design criteria today of the grids of the digital technologies, and it's really important and for all this real time control that I mentioned before sensors and everything that you need to do, you need to be protected from cyber attacks. So today I'm not aware of all the modern technologies that are being used are already designed to be secure before cybersecurity. What really helps is this distributed way of doing
things. For example, do is we have edge computing devices that go really down at the local level within the distribution system, operation and control then a local area, and this local area makes the grid actually more resilient. What
still needs to be protected. You're absolutely right, are all the OT systems, all everything that also in the past of a big concern for the utility, But I really see the level of protection at the utility levels is really increasing, so they are more not only aware of cybersecurity, they are getting protected there. And this is also some area where we as a technology company,
for example, help the utilities. Robert, maybe just let me ask one more question, which is if you look at the future here, talk a little bit about how you see the great management and also what we didn't mention was at all in the conversation was transmission. So distribution versus transmission. Talk about that and how you see this. You know, over the next
few years developing well. First of all, I think the focus really will now get more and more on the distribution network and the transmission network remain, that is clear, but the topics we discussed before flexibility of those capacity local capacity problems become things on the distribution network. So that's first of all, that is very clear. And this is also where the focus needs to be
at the same time. That is, COB networks traditionally are less digitalized as well less control, and this is where really what I see in the future what will happen. And the nice thing is that you can today you have the technologies available that you can put into the grids that also allow for updates
in the future. So it's not that you put a technology today in the place that solved just today's problem, but they actually help you solve the future problems buy and that is the interesting thing software updates, and so that is
when we ask about the future. Here we have the combination of hardware and software solutions that equip and make a digital grid that are needed in combination and that will change over time to make this grid and maintain that this grid is really flexible enough for the current challenges, but also the increased future challenges, making use of batteries, making use of customer side resources at the same time looking at really the grid management and doing the best management of losses and all
of the other technical aspects of a power grid. Well, Robert, thank you very much for this conversation. I probably have a one hundred more questions, but what I can see is that there are some intelligent people like you who are taking care of permanently modernizing the grid, and that's what needed for a successful energy transition. Chard. Thank you very much, Robert. I really enjoyed the conversation. I've learned a lot. Yeah, thank you,
thank you both the pleasure well, Jarred. As usual, the most critical part of the value chain in the ergy transition are also the one which are the most difficult to get enthusiastic about. It's a tough one to get enthusiastic about distribution grids. They are nevertheless, nevertheless, they're critical. Yeah, nobody likes the wires or the substation, so I agree with you on that. Absolutely we need them, but we we just take them for granted and
ignore them. And by the way, politicians don't win votes by saying we're going to upgrade the distribution grid doesn't happen. Yeah, but if there's all in blackout all of a sudden, the politicians and start waking up. And these are long term play because they always have a margin, and at the beginning they eat into their margin, and when there is no margin, boom, something happens. But it's going to take years to reconstitute the margin. So it's a tough one. It's a tough one. Yeah, it is
a tough one. The reflection that I had was that I think we need
to have radical regulatory change. And the reason I say that is because most grid operators are incentivized just to build a grid, and we need to incentivize them to make sure that the grid is much more efficient and effective, and that requires different intentions reflection I had on this and I'm not saying we know how to know how to do that, but as I said, I don't think the current regulator environment across most of the western world is really conducive to
doing this. And I think of it, if I look at my local grid operator, it's a small grid operator. How are they going to digitalize
the grid? How can they? They don't have the capabilities in their house Okay, maybe they're outsourcer to a grid expertise or something like that, but if you don't have the capabilities in house, you can't even acquire those service Dodge understand what I mean this is it's that, and then it's the lack of expertise, and then it's still as I said, the incentive structures I think need to change. But I think that that's the way it is going
to go going forward. You're going to have to outsource this whole digitalization element to a third party because you just can't do it yourself. Simple as that. And I asked one of the digit distribution grid operators what the capacity utilization is in the distribution grid at any time? Guess what what the number was?
We know a little bit or that twenty five Okay, yeah, well probably not in the Netherlands, probably not of the letter there's probably ninety percent there, yeah yeah, but in the West and words twenty five, So we know otherwise we overbuild a grid. Yeah, and that's okay that we overbuild the grid, but that's not a very efficient way. So say, well, okay, well how can we better use that seventy five percent? And we need to think in things in a completely different way than we've done
in the past. I think this is really critical if we're going to go through this energy transition in a cost effective way. Well, look, you can't build data center west of London. You can't have a new housing development in the west of London because the local grids is the weak. So there is no one side fitrole every place. The grid has to be many to
much in a much more granular way. But maybe a lot of the solution are the same sense of digital, smart metals and so on, so we know the direction of travel, except that those investments are not sexy enough for politicians who want to cut ribbonds, and here there's no ribbonds to cut, so we're going to tag along with those problems. I agree with Shanda. Well, we thank Robert for coming and to be continued, we thank a Mundi for supporting our show. Thank you very much, guys, great having
you on board and I'll talk to you next week look forward. Thank you for listening to Redefining Energy. Don't forget to read the show and subscribe on Apple, Podcast, Spotify or the platform of your choice.