With Laurent Sagoland from London and Gerard Reed from Berlin.
This is Redefining Energy today.
On Redefine Energy, Jard, we are releasing the excerpt of a John conversation we had with our friends at Open Circuit.
Yeah, it's a great conversation. They actually inspired us to set up the podcast in the first place.
Yea absolutely Open Circuit is the new name of the old Energy Gang that they have recreated with the original team Cigar Shah, Katrina Milton. Once Jigar left the DOE because when he was working for the government he could not come. And Katherine's charm and wit and Gigar's laugh. It was a great conversation but lasted like an hour plus, which is much too much for us. So I've just selected excerpt.
And don't forget Steven Stephen ac right, No, but I said it. No, No, you didn't mention Steve. I'll er the other two.
Okay, Stephen Lacy organize everything. He's a great producer. We love them a lot. Okay, let's listen to the tape.
From Latitude Media. This is Open Circuit. We'll revisit the new dual Order with a European twist. As America dismantles the post World War two global security order and leans into its role as a petro state, how will Europe respond. We'll look at how security is reshaping the EU's role as an emerging electro state. I'm Stephen Lacy. I'm the executive editor at Latitude Media.
Welcome.
I'm joined as zolways by my two co hosts, Katherine Hamilton and Jigger Shaw. Catherine's the co founder and chair of thirty eight Norse Solutions. Hey, Catherine, Hey, so excited to be doing this. Indeed, Jigger is the co managing partner of Multiplier and former director of the doees Loan Program's Office. Hey, Jigger, Hey, this week we have special treat We have not one, but two leading European energy investment experts here with us. Laurent Segolen and Gerard Read,
the co hosts of the Redefining Energy podcast. Laurent Segolen founded megawatt x, a London based energy transition investment platform. He's been trading and investing billions of euros and clean energy for over two decades. Laurent, welcome, Well, thank you so much for having us. You know it's a very emotional moment for us because the Energy Gang, the origin Energy Gang, was our inspiration when we set up our podcast,
and we are getting very emotional. So I just have to say one thing and then I'll let you speak. Times of change and times are strange. Here I come, but I ain't the same Mama. I'm coming home. What a good way to start the show. I love it, Gerar, can you beat that?
Oh my god? What can I say?
Jared also going to sing yes, I have definitely, But I do want to say he's dead right because myself and Laurent, you know, we're in a pulp one night having some beers and we were talking about your podcasts and we think of taxis.
We could do something Simna couldn't we so we did. And it's so great to be with you guys here today. It's brilliant. Really looking forward to this exchange.
Excellent well. Jared Reid is a founding partner of Alexa Capital and an expert on commodities and energy and mobility transitions. It's really good to see you.
Great to be here. Great to be here.
Let's move on to a much bigger story about European energy security. So back In April, we had a conversation about a report from the investment firm Carlisle called the New Dual Order, which argued that global investment flows and clean energy would be more influenced by security and localization of supply than decarbonization, and we asked are we leaving the net zero era into the energy security era? And one of the precipitating factors of all this was America's
changing role in the Gloe stage. As the US leans into its role as a dominant petro state and pulls back on its post World War Two security commitments to protect supply routes, countries are reevaluating their energy security and creating what Carlisle's Jeff Curry says is peak trade of fossil fuels. So a sequel to that report is out
is focused squarely on Europe. It looks at Europe's defense imperative as America pulls away, and the plan argues so that Europe needs to spend nine trillion euros over the next decade to build a very different economy, one with electrons and local supply chains at the center, largely for security reasons. And this pairs really nicely with another analysis from two Columbia University scholars arguing that we're in the middle of this split between two fundamentally different economic models,
the petro state versus the electro state. And petro states like America, Saudi Arabia, Russia control energy through scarcity through dominance of choke points, power through barrels and pipelines, and electro states, particularly China and Europe, build abundance through manufacturing, advantages through technology and generate value through innovation rather than extraction. It's a very simplified way of looking at things, but I think that's how you sort of define the difference
between petro states and electro states. So America is now really leaning into, as I said, the petro state strategy. And the question is can Europe join China as a leading electro state and increase both its security and competitiveness. And as it does, what can we learn from Europe's malinvestment in renewables that was clearly pioneering but also very very costly. Firstly, Laurent, do you agree with the assertion that security is becoming a more powerful force for Europe's
energy transition than decarbonization. How is that unfolding?
Yeah, everything changed so nothing changes. It's still EESG EESG except now. And I quote Liam Dinning from Bloomberg. ESG means economic security and geopolitics, So that's the new ESG. The second is the Jeff Curry Report was delivered in person by Vice President Jig Evans at the Unique Conference and jah the what you in Munich, I mean the message was kind of loud and clear.
Well, the message was loud and clear, which is the future is fossil fuels.
Right, That's what we got from the US. And I think what I.
Would say is Europe's in a sort of a difficult situation because at the end of the day, we outsourced our energy future to Russia. That hasn't worked out, and now we're very dependent on the United States, but we're also dependent on Saudi Arabia, etcetera, etcetera. And with sort of the geopolitical situation, you're in a present just so they say, oh, what can we do, Well, there's only one thing we can do, and let's move towards energy independence. And the
only way you can do that is to electrify. Now that's the big picture, Stephen. So I think we're all clear, that's what we have to do. It's not clear whether Europe is going to do that or not. That's what I just want to say to here. It is clear that China has gone that route, and we do need
to go that route. Geopolitics are difficult. What I mean by that is the geopolitical situation is that Europe's very very tied into the United States, and to break away from the United States means also breaking away from fossil fuels.
That really gonna have happen. I'm not one hundred percent sure. I hope it does.
And what I would add though, is that the way forward is definitely We have examples of the way forward in Europe, and it's called the Nordic countries because if you're Norway, Denmark, Sweden, these countries have electrified their economies. Already France to a certain extent as well, but particularly the case of Sweden. Sweden was totally unimpacted by what happened with the Russians cussing off the gas to Europe. The reason was because they don't use gas, they use
minimum amounts of it. So it's very clear that is the way going forward. But I would say the bottleneck and all of this is Germany because germany strategy was always to integrate close to the Russians, and industry has been really.
Badly impacted by the fact.
So then I take an expense of LNG and and I've got, you know, the German economics ministry who wants to go and build more and more.
Gas power stations, which sort of doesn't break the addiction. So, as I said, definitely, we know the path forward, and we hope that Europe goes this down this road, but it's not clear where we're going to go down there.
Now. Lauren might have a different opinion on this, but I certainly don't think it's clear.
Yeah, look, it's a change of paradigm. And if you look twenty years ago, the registration in the US and Europe was absolutely the same. Were literally importing molecules. And if you look at the price of power in the US twenty years ago, it was above Europe. When people say, oh, the price is crazy now in Europe, no, if you just take the price of power twenty years ago, you had inflation, this is the price you get now. So the price has kind of followed inflation. But in the
US ECOTT was above sixty twenty years ago. If you add inflation, that's one hundred dollars on the price is around middle thirty. So in fact, in the US, the price of power has gone down. In factor three, the reality is, and it's all because of racking and the Permian and everything, there's been an energy divergence, and of
course the politics follow, and the politics is. The reality is now our interests are not aligned anymore because you enjoy energy dominance, and you know, we're left holding the bucket like morons. Yeah, of course we're going to do something about it now. The allans with China. Yeah, we take a lot of Chinese batteries or Chinese panels. There's no tariff, no problem. Look, at some point you need to bring answers. They're not pretty, but that's what it is.
Certainly, historically, Europe, more than in the US, has been motivated in its energy transition for environmental reasons. And I'm wondering how you think security plays into Europe's motivations now compared to environmentalism and climate action. So are we seeing security, urgency and ownership of supply chains becoming the dominant force like this report suggests.
Oh yeah, security after the invasion of Ukraine by Russia. Yeah, of course it changed everything, all of a sudden change everything. And then you add AI and all those types of things. The two twenties are harder, they are more digital, they are more disruptive, and people who stick on their two tense software view of the world with kumbaya, let's go to cup let's de carbonized, let's all be friends. This
area is done. It's gone. The all ESG thing, which was basically you build a portfolio of shares, you go long tech, short oil, and then you say, oh, look, ESG is so profitable, that was not true. So we had a bit of a series of shock and we're adapting to those shocks.
I think the part of the story that people miss is that the United States coming out of World War Two really had extraordinary amounts of manufacturing capacity, and we were able to use a lot of that manufacturing capacity to make planes and tanks and all sorts of other stuff, and then you know, when peace time came, we turned
it into an engine for the world. The reason our defense was so strong, though, was it was less than five percent of the supply chain, so most of it was used to make a civilian equipment and five percent of it was used to make defense equipment. Today, our defense supply chains are used only for defense, and they are horribly mismanaged today. I'm not even sure we could
make a carrier if we wanted to. That is how bad our ports are in our shipbuilding capacity is right, and so one of the things that Europe has to figure out how to do is to avoid some of
the problems that the United States is in today. So it needs to make sure that when it increases its budgets to five percent of GDP to defense, which many European countries have done, that it is based upon civilian supply chains, not based on defense supply chains, because defense supply chains are horribly corrupt and horribly inefficient, and so it's just one of those things that you just cannot
build a modern society on pure defense supply chains. In the US is falling off a cliff because we've ended up there. That takes real planning. And that's the part that scares me the most. Right is that when you look at what Japan has done around its industrial strategy, it has done things through these corretzus right in Koreas, through the Kybals, and these are major industrial powerhouses that play both roles.
So you start to.
See conversations around VW taking some of their factories and turning them into defense facilities. That makes sense. They know how to manufacture stuff at scale at very low cost. But if VW starts getting eighty percent of its revenues from defense, you will see VW becomes sclerotic, which is what's happened to many of the supply chains in the United States. And so I just think that people have
to be careful. We have this extraordinary opportunity in front of us to use technology that have largely been invented in the West and scale them up in these places. The other thing I would say is the European experiment, which is this sort of you know, EU hybrid but each country sort of runs itself. Has sort of led to the fact that you don't have this transfer capacity, for instance, between countries and the transmission grid. It has
led to a lot of these other challenges. But one of the other opportunities that it presents is there are many low cost areas of Europe. So whether it's Hungary or Serbia or some of these other places, you can
manufacture stuff really dirt cheap there even today. So the question becomes, how do you get the place polytical consensus across all of these countries to actually manufacture things in places of low cost in Europe, because right now Europe really still operates as if France needs to manufacture its own stuff and Germany needs to manufacture its own stuff, and other people need to have their own companies that are dominant in their countries, and that's not really the
lowest cost approach. That's one of the benefits of the United States is that you don't need a passport to cross state lines. You have this ability to just do stuff in Georgia, or do stuff in Florida, or do
stuff in Wyoming. And so one of the big challenges with the EU experiment in this moment is that they're going to need to figure out whether this moment is the time where they tighten up the coordination across all of the countries or they still operate as a confederation of independent countries.
Geraud lent, what are Europe's advantages or disadvantages in scaling up manufacturing, specifically in energy and clean energy? What do you make of them?
Well, let's maybe talk about the difficulties that we have right, and then we can talk about the advantages. So the difficulties that we have are really geopolitical, which is, remember we outsourced our energy to Russia, We've outsourced our tech to the US, and we've now exported our industrial technology base to China. And we're stuck in the middle between these three nations. That are these three countries that we've
precarious relationships with each of them. And that's the real big challenge for us going forward is how do we manage the relationships between these three countries going forward. I don't know what the answer to that is, but it's the critical challenge because we don't have the technology.
You know, well ry on Microsoft, Google, etc. Etc.
If you want to talk about electric vehicles for example, sorry, the best electric vehicles in the world are Chinese.
Are bid without a doubt. That's a challenge for the automobile industry in Europe. So that's the challenging environment we have. Now let me talk about the advantages. What we have is in certain industries we are still we're leaders. So if you take the case of wind, Vestus is still
the biggest wind turbine manufacturer in the world. We've got incredible grid companies across Europe, whether it's a Semens or an ABB or you know, if you want to build power cables or something like this again, Prismium, all these words. So we've got great advantages there and I think the other area that we've got strength is is the whole area of controls and actually power controls, whether they be semiconductors or whether they be software. That's the strength that
Europe hasn't so we have to build on that. But that requires us to change our attitude a little bit to realize that this and we're not necessarily going to be the biggest in the world at something, and maybe we need to partner up with China, maybe we need to partner up with the US, you know. So there's a thinking change that's also need in Europe. But we definitely still have industries in the energy space where we're leading, and that's the advantag still health we.
Were absolutely amazed when the IRA came out, and this is really rich people luxury and analyzing the IRA, probably from your open point of view, fully Persent, made absolutely no sense because you are so profiligate, which unfortunately we can't do. And now you're back to reality, and they going to take all the subsidies, and you know, and that's it. You know, we're a mature industry. Okay, so read the band aid and do it in one go and go with it. And the price of power is
going to go up in the US. It's a very tough moment. But look, I count on your animal spirit and you'll get through it. A lot of things are going to be done by reaction. The advantage we have compared to the US is much more compact. You know, everything is two hours flight from where we are, and you know, people speak different language, but they think the same way. And when we see Russia, we see your administration,
we see China. I can tell you people understand very fast whether interest is so we'll moddle through that, not brilliantly, but we'll get through it.
Catherine, we've talked in multiple episodes, in our most recent episode with Kim Zoo about how a lot of investors from around the world and in the US are looking to Europe. How do you think Europe might benefit from America's current retrenchment and clean energy.
Well, I don't think anybody in the globe benefits from retrenchment from clean energy. But I would say that the US spends thirteen percent of our federal budget on the military, and that sounds terrifying, except that the military is also the source of a lot of innovation that has big impacts on civilians, not just from a military standpoint. So for example, DARPA, the Defense Advanced Research Projects Agency, of course famously help inspired ARPA E, which is the Department
of Energy. And that's kind of like startup technologies because the Department of Defense can take a little more risk, you know, they can say, you know, we're willing to try this experiment if it's going to help us somehow deploy what we need to deploy, and if it has other benefits, that's great. We also, of course have a system where the private sector is very very involved, so
it's not like state owned technologies state owned resources. But the other big piece is the Defense Production Act, and so this is a fund that does go to private sector companies based on national defense emergency response essential goals and services that are declared by any president as being a crisis. And it doesn't have to be a wartime crisis.
It could be any crisis. So for example, during a Biden administration, he said, we have a climate crisis, so how what are we going to fund through the Department of Defense. So they funded critical minerals, heat pumps, electronics components. They're still funding like workforce, mining, geological, environmental engineering, metallurgical, all this workforce that we need because we need so many critical men les right now no matter what we do.
Fabrics they've done, aluminum battery materials has been a big thing.
Now.
The President Trump now has said our emergency is for energy supply and infrastructure. Well, that could be mean transmission. It doesn't necessarily have to mean coal plants. I think he would like for it to mean coal plants, but supply chains, et cetera. So we can put our Department of Defense to work on things that are considered important from a national security standpoint that are also from an
energy security standpoint, and work our innovation through that. So we see my companies sees the folks that we work with that are really always interested in non deluted funding and programs to the federal government. They see them drying up on the civilian side in a lot of ways, but then on the defense side, they see those growing.
And I think that's something to keep in mind. Is like our Department of Defense does a lot more on innovation than we necessarily think about when we think about security.
The one thing I would say that the Carlisle piece focuses on is supply chains, and I feel like that is something that Europeans never care about, and it's something that they're going to have to care a lot about. I'll give you an example. The Europeans love getting solar panels for nine cents a lot right now from China. There are so many solar panel manufacturers that can manufacture in Turkey, in Jordan, in Ethiopia, in India at thirteen cents a lot instead of nine cents a water that
is more expensive. I get it, But they should want the diversification of the supply chain for a technology that they depend on to decarbonize their grid, and I think that they will need to be very vigilant around not getting addicted to China. Like it is not good for them to have eighty percent of their supply chain coming
from one country. It is important for them to strategically invest in other regions in the world, especially where USAID is taking a step back out of the United States, and like the Europeans can play this critical role in being the off take agreement for other countries building up their manufacturing base in their countries, and the Europeans have all of the expertise that they can share with those
countries and help them to industrialize their countries. But I think we're in this weird spot where the US has always been focused on this, and I think even the Trump administration is focused on this, but it's not clear to me that the Europeans are focused on this, and
that I think is what scares me the most. Around what the Carlisle Group has talked about is if the Europeans decide to just say, you know what, China's so good at scaling the stuff up, like, let's just do that and we'll do the finished products over here in Hungary or some other place like that would be a huge mistake on their part.
I'm going to say it's game over and Solar so I'm not even going to try and compete with the Chinese, and solder makes zero sense. The technology leaders, they have the scale, complete waste of capital. However, there's one area which is not and that is batteries, because batteries is critical not just for our power system but to the future of the automobile industry, which is critical for Europe. But there's an issue there as well, which is China
is leading in the technology as well. The biggest battery manufacturers and technology leaders are all in China.
So how do you compete.
I actually think you cannot compete by trying to go on a loan.
We've tried this in Europe.
We have Northfolk complete another disaster, ten billion put into it and nothing out of it, So we have no choice but to compete with the Chinese.
You probably go, okay, if we're.
Going to do that, then we really need to cooperate intensely with the South Koreans of the Japanese.
That's one possibility.
Or the second possibility is you say, affect that we're going to actually cooperate with the Chinese in a different way what we did with them thirty years ago, where we went into joint ventures with them.
You do the exact same.
Thing here, So my view would be very very different.
Yet, if you're going to try and.
Beat the Chinese, you have to beat them at their game, and that means cooperate with them firstly and then learn from them and then see if you can leave prog them.
I want to wrap up with this petro state versus electro state framing once again, and we visit this. You flag this piece for us on this dynamic and the split between electro states and petro states. Do you think this is a helpful framework for looking at the world and do you think Europe will emerge as a powerful electro state.
So first of all, let's give credit to who coined the term and explosate. That's our friend Kingsley Bond. I think it's a very valid framework to have a different view, and sometimes you need those meta systems. And I remember the first time I read the prize by Jogin when it was the Great Yogin. Now today I'm not that sure, probably past you date, but when I read the price, it's the first time I understood that oil at the we find the twentieth century. So that framework is very useful.
Now you can come and say, oh, what about Canada, what about Brazil? What about Norway which are exporting fossil fuels and are big on hydro and you'll be absolutely right. But Gerie speaking, it's a very interesting framework. Now Europe will tag along. I disagree with GGR and I give you three examples. Child, and I have invested in the
company who was installing solar hoftop in Germany. Yeah, we bought all our panels from Ginco or gsolar, but that was only two thousand euro per roof the rest of the value, say twenty thousand yo, was all European value. It was our advance, it was our systems, it was our invertos, it was our workers, the job we created. Right now, I'm investing in batteries. I use COTL LEFP cells, but just the cells. The rest all the battery is made in Europe. And by the way, the Chinese cont snooping.
There's no kill switch because there is a cybersecurity low in Europe, or all the software do in Europe. So whenever I buy a system of battery, let's say three hundred thousand dollars piece, the value of Chinese equipment is less than ten percent, so I create ninety percent value. And my third example, and somebody who want to salute here is Greg Jackson. So Greg Jackson has created an
empire in less than ten years. Atoperc Energy based on digital is now the biggest retail in the UK, starting from zero and is the first person who has done a bundle retail power and vehicle to grid, but he has done it with BYD and so it's a full package your car power zero. And then when people charge at home, he has access to the bid batteries and
he does a demand response with all those batteries. So these are three examples where we leverage on the part of the supply chain where Chinese are really good and we build value locally around it.
Well, let's wrap up and get each of your quick takes on the role of Europe as a counterbalance to the United States. So we are seeing more investative interest in Europe. Europe is starting to talk about taking supply chains more seriously. The US's role in the energy transition is shifting and we are increasingly focused on fossil fuels. So will Europe emerge as a strong counterbalance to the US in the clean energy transition? Gerard, you want to start.
Without a doubt because we have no choice. In the United States. You have a choice, and the choice.
Is you've got lots of fossil fuels already, so you can actually just stay with them. We have a geopolitical imperative, simple as that, and we also have businesses in this area where we have a competitive advantage. And if I do look at the United States in the energy space, there's only a handful of businesses that I can think of that are actually international leaders in the space.
If I look at Europe, I go whole part of leaders.
And I'd also go and actually look at our utilities as well, because again there's not one US utility in Europe. There's a whole part of European utilities in there. So we've got a lot of competitive advantage in the space and we have to change simple as that.
So I'd be very positive about our future because the imperative is there.
I think the Europeans have a golden opportunity today. As Catherine suggested, I think we've spent the better part of fifteen years spending a ton of money on innovation, and all of that money has resulted in sixteen hundred companies that Kim Zao and others are tracking out of London, and so we actually know exactly which companies they are and which ones need saving and how to save them
and all that stuff. But one of the big challenges of Europe is that a lot of these programs have been led by government regulation, feed and tariffs, top down sort of approaches. For Europe to succeed in this moment, they're going to need a lot more large corporates to step up and actually say that they want these things to be in Europe. And so we'll see whether they do that. But right now we are in a critical
moment where it can't be the governments that lead. It has to be the private sector that leads.
Yeah, I'm not really willing to seed clean energy to fossil fuels in the United States. I'm still pretty bullish on clean energy. We've already started a lot of manufacturing here. We have deployed like mad and my biggest concern is that we are isolating ourselves such that Europeans do not want to invest anymore here, and you know, we're looking to what happens in Europe.
I do think it's an opportunity for Europe.
I just would hate to seed everything in the US that we've tried to get done. So I'm going to keep fighting to make sure that we stay on the clean energy train and that we continue to try to do business with Europe as we can.
Yeah. I started by a song I'm going to close by a song, Kathy, I said as we bordered the Greyhound in Pittsburgh, Michigan seems like a dream to me now. It took me four days to reach out from Saginaw, and I've come to look for America, for European America. These our cousins are brethrens and seeing America at the UN Security Council voting with Iran and Noskoia and Russia against us, where have you gone?
Many of us asked that question every day.
Russia is our enemy. I don't want to secede from America. This is nos Atlantic, this is our Marinostrom, this is who we are. And I hope you know you'll come back to census. And of course we need to take more responsibility and not rely on other people. But you know where we need together. We only represent twenty five percent of the world population at best, but with the best universities, the best resource Chano, we are bound to do that together. So that's my final words.
Amen, brother, Yes, I think the three of us feel that very deeply, and a lot of Americans do as well, and that's part of the reason we wanted to have this conversation. Thanks to both of you. This was a lot of fun. Thanks for your podcast and also keeping us informed. Gerard Reid and Laurent Segelen are the co hosts of Redefining Energy. You can find their show the same way you find this one anywhere you download podcasts, or you can click the link in the show notes
and you can get to their page. Gerard, really good to talk to you. Likewise, Laurent a pleasure.
Thank you guys, We love you.
Thank you all. This has been so much fun in it to win it.
Thank you for listening to Redefining Energy.
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