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