With Laurent's segal and from London and Gerard read from Berlin. This is redefining energy.
Happy new year, guys, great to see you. I'm looking forward to hearing your voices.
Happy new Year, Happy new Year to the both of you. Is going to be an awesome herr. There's going to be so much interesting stuff happening in twenty twenty six.
Is positive.
I agree totally with you, Michael, I agree totally. It's going to be a crazy year.
But first, gentlemen, before talking about the new year, we need to revisit the prediction we've done a year ago, and let me remind our listener six predictions. So Michael said, all production down in the US in two twenty five, Chard said, old prices eat forty that up buried in two twenty five.
Can I correct you there? I said fifty. No, no, you said forty. You just didn't. You couldn't understand my accent, Luren, I mean sorry, I fifty is what I said. I didn't say forty.
Sadly, your record is against you on this one's Gerard.
Yeah, yeah, fifty with starting with the four yeah third one geopolitics, stress, supply, chains and energy Bonanz up will bring more innovative and better world. That's me okay, So that's a Gerrard's style prediction. Number four Michael blood Bath or hydrogen transportation sector. Number five record installation of sellar seven hundred giga what ev twenty million and batteries two hundred giga what hour? From Jerrard and finally from me.
Number six the end of all financial products labeled ESG, climate and carbon. Let's start with number one. Michael, I failed. I'm asked by about eight months.
The oil price and oiled man was bullied because China has these massive reserves and has just kept buying oil. Are past the point of consumption. Even though actual diesel demand gasoline demand is down in China, their petrochemical industry has actually gone up a bit, so their actual oil assumption is relatively flat, but their reserves. They just don't think the geopolitics merit not having significant reserves, so that
kept it up. That kept the price up to the second point, which Kent meant that they did finalize shale wells in the United States, but the drill rigs in the United States are way off. They are not completing nearly as many wells, China's reserves have got to be complete. So I'm not making this one of my predictions. But I'm off by months. It didn't happen this year.
And by the way, just join on to that my thing about forty dollars oil, it relates to the same thing. At the end of the day.
What happened was demand is strongly that we expected. But I would go along also with Michael and say that coming year we will see prices down towards the forty dollars.
Yeah, okay, guy, that's what one. I'm fine. And it's true that the price of all is gone to, say, from eighty dollars to sixty. That's a lot. But let's rate Michael. So, Michael, I give you a two out of ten. Job.
Oh, I give Michael five out of ten. It was just a timing was slightly out.
That's very generous of your gerard. Thank you.
It's twenty twenty six, it's going to be a great year.
I would have given myself a three out of ten. So at two and a five, I'm in the range. I'm happy with that.
But I do want to say the one thing, Michael, get a great explanation of It is just geopolitics of energy of what made really twenty twenty five complex. So I just want to say.
That, Okay, Job, your prediction was very simple and you got it wrong. So I give you zero because it was very binary. So we get a zero out of ten. Mike out do you give Job?
I'm just going to say that my prediction was binary as well, and you were more generous to me. I'm going to give D three on that. As I said, it got down of fifty. It was lower than any of the oil botens thought it was going to be.
It was a bad year for oil.
Agreed.
Okay, So my prediction was vague, so it was a giard style. The winning strategy geopolitics stress, supply chain energy bonanza would bring a more innovative and better world. Well better, Well, I don't know, but what I do know is that the stress on the grids, we've seen advances and transformers. We've seen advances in digitization. We've seen incredible development of batteries. We even saw fuel cells. If you look at a company like Bloom Energy, all of a sudden, they're not
doing their fuel cells for hydrogen, but for gas. We've seen advancement for brid studies. With AI company like Tapestry, we have advanture thermal, a lot of work done on flexibility. So for me, the geopolitics the demand for energy yet's pushed innovation forwards.
Gentle Amendment, My take is slightly different, not disagreeing with you, except on blue Energy, which has always been a natural gas fuel cell with very dubious environmental claims. Tried to write the hydrogen hype and didn't do much there. Now it's writing the data center hype that it's still just a ballotoxide fuel cell for methane. But the geopolitics were very interesting. Pakistan is trying to find a new home for twenty four LNG ships worth of committed long term
purchased LNG from Qatar that is seismic. The long term contracts were what was supposed to be buoying LNG and Pakistan says no because of seventeen gigawatts or rooftop solar they put in. Similarly, in the first six months of this year, India and China dropped LNG imports by double digits, and that was on India dropping gas generation by thirty four percent year. Every year, the world is changing tremendously
for the because of cheap solar and batteries. I see the evidence of this globally as I look around the place, and the LNG industry is just not ready for this. It is going to be a bloodbath in the OLNG in thesuit, which isn't my prediction by the world, John.
Well, let me sort of talk about the wording of what your prediction. You said geopolitics, stress supply change, and energy bonanza would bring a more innovative and better world. Yeah, so let's start with stress supply change. I don't see any stress supply change. I see oversupply of everything in anything out there in the energy space, whether it's oil, gas, coal, electricity. We're swimming electricity in Europe. You know, there's too much solar,
there's too much battery, there's too much wind. And I take the point of innovative and better world, I don't know about that. What's more innovative than last year? And I don't really see any huge innovations over the last twelve months. There's no doubt the world is a better place. And the Pakistani example is a good example of that was so vague and this that, and I'm going to give you a five out of.
Town, Michael.
I think Gerard is being quite generous giving vagueness. You know, I took him to task and I just thumped him and said, predictions are testable and quantifiable, and so I have to preserve my stance for quantifiability. And so I'm going to give you a four, okay, which just gives you the highest score on the first round of predictions out of three. Is because you know, I failed completely
on mine and Gerard failed completely on his. Generously, you guys gave me more than zero, which I thought was very nice in there.
Okay, So the fourth one, Michael, you nailed it. A blood bub for hydrogen your transportation sector. So did you have a few examples?
Oh my god, it is just being schadenfreud a city here in Vancouver, my schadenfreud. A cup has been flowing over. I've been talking about hydrogen and transportation and publishing and analyzing it for over a decade, and this year all the dreams come tumbling down. Let's just start with one of the big ones, heavy trucking. Obviously, batteries aren't going to cut it for heavy trucks in the freight industry, excepted in Aina, which is run the experiment with hydrogen
versus battery electric. They saw ninety thousand battery electric heavy truckspoled in the first nine months of this year, and the number of hydrogen trucks blapsed went from the low thousands to lower thousands, you know, so it was off by forty percent or something like that. That's kind of data point one. Globally, we're seeing battery electric trucks being delivered, not hydrogen trucks. Similarly, the fuel cell cars disappeared. Alstom
actually is now out of the hydrogen train business. They said, we're going to close down that division. Well, if you still want the hydrogen trains that you've got an order, will deliver them. But clearly they're signaling to their customers you shouldn't even eat them and keep you a battery
electric instead. Similarly, in every data point I've tracked right now, a list of one hundred and seventy one firms and organizations that were active in hydrogen transportation in theory this year, they claim they're active and full thirty six percent have dropped hydrogen or pivoted out of it. Formally, now that thirty six percent is underrepresenting that number substantially because my
standards for them dropping it are high. They have to explicitly said we're dropping it, as opposed to just quietly slinking away. So I think the number is well over fifty percent. Airbus dropped their hydrogen aviation program. Stillantis dropped hydrogen trucks. It's just terrible. Plug power fuel Cell Energy are struggling with reverse stock splits to try to stay on the stock market. They're cutting maintenance at their hydrogen plants,
which is just dangerous. It is really ugly in hydrogen for transportation land and as I said, I'm enjoying every minute of it.
Hey girl, we're done, so I give you eight out of ten.
I'll give you a nine because you've been calling for quite a while. Well, though, great job.
I'm wondering what more of a bloodbath do you want? What would cause it not to be to be a ten? Based on what I've shared.
It's very simple. I have quantitative criteria, and I think your and so was it vague? Okay, job number five? Now job that he gave number, and the number were pretty good.
I was put under pressure, so I said seven hundred gigaba's the solar and I think to us have listen, we don't really have the numbers fully, but I think they were near to that, maybe six hundred and eighty something like that. EV's twenty million, we're there, or maybe a little bit above that, and definitely batteries into we sat. I said sort of two hundred gigawatts hours, and I think it's probably even higher that, right, Yeah, so I think it is going to be pretty well my numbers.
But it was a very good trick on your side because first you said two hundred gigawatts and then you said our so in fact, because of the batteries of four hours, well done, well done on this one, and that these.
Record numbers, right, they really were. It's amazing and you know what went on all right, So on.
This one you deserve a ten out of ten.
I'm giving you a ten out of ten as well, will reward you for being predicting and bleedingly obvious.
But you did pick.
Numbers, and you were precise, and you actually had three different numbers. And yeah, twenty twenty five has been an amazing year the global transformation in the energy industry.
Okay, so the last prediction of last year was myself the end of all financial products label ESG, climate and carbon. If I look at the amount of funds who claimed the were named climate or ESG, twenty five percent of them have been rebranded from sustainable to transition. In the US, there have been twelve consecutive quarters of outflows. It's about de carbonization versus the eddication. So everything that's de carbonization
really large, and I'm talking carbon capture, hydrogen. These guys are just burning money only to be bailed out by taxpayers and probably less and less words, the rectification funds are doing great because, as I always said, switch to fuel makes more sense than fix the fuel.
Gentlemen, great speech, London, But I'm about facts. And I just go into Google and I put ESG investing in, and what comes up is PIMCO, you know. So I go to Pimco and look, I go Pimco Climate, pand Fond Global Investment, Great Credit, Eschi Fond and so there's no end and mean it's finished. I mean it's still here. That's the reality. So there's no way of getting good marks for me.
Michael, you got.
The direction to travel, right, But like oil a for Gerard and I you missed the timing. You're far too aggressive on the timing. Yes, they're down, but I'd like to say that twenty five percent is less than thirty six percent. So from a qualification perspective, you certainly are getting perfect. I think it's a five out of ten personal You're right in that a bunch of them dropped and a bunch of changes occurred in that space, but it wasn't a blood bath in ESG and climate funds in the same way.
Yeah, I'll give you four.
So I recount as usual, I'm lost, and we are a winner again. It's Michael.
I was expecting not to be the winner this year because I missed one really badly.
Yeah, but you got Yeah, we're done pretty good. Oh yeah, yeah, and John the first was such a disaster that was sold, but that was not enough to catch up on Mike out. So as usual, the winner is Michael.
Well, Michael, I'd just like to say that my uncle Nostro Damas is rolling over in his brave. I was far too precise and testable my predictions.
There has been two additional predictions that we did along the way. The first is we thought that VP would not survive two twenty five. They did so good for them, Yeah, they did. And the other one is child the prediction you did fifteen months ago on the price of silver and you saw very botish silver. And when you said that silver was at thirty dollars and now it's at sixty. So this one, Jared, well done you.
One right, that's good.
Okay, gentlemen, it's time to move for our prediction for two or twenty six. Who want to go first?
I'll go first this time. My first prediction is that we're going to see in China at battery storage auctions forty dollars for Killowa hour for battery energy storage systems on the grid with twenty year contracts maintained and deployed. Yeah, we're at sixty five last December, which was astounding. I think we're gonna head forty this year.
Can I ask you a question, Michael Sure, what technology is it Lytia Mayon or is that sodium ion or what's your view?
LFP sodium ion and extra batteries that coatl Is bring in are promising, but they're also economically heavily challenged by LFP being dirt cheap and having been most to the advantages.
What's incredible is the new form factors which are arriving because everybody used to work on her three forty hours and now it's the five eighty seven. And we even see cells which are above one thousand and powers. So the bigger cells, the lower the cost of the system.
It has huge gramifications, isn't it, Because actually, if you just think of solar and batteries together, right, crazy prices.
And it's not just the sales loratl which was wrong and trite. And first principles was that it would be the same kind of thing we see with hydrogen electrolysis plants, where the balance of plant wouldn't get cheaper because it was commoditized. I expected that was true for the balance of the battery energy storage system. But in China with LFP, they assemble the cells. They just put them in a rack.
They slap a bus on top of the lumin conductors, which is dirt cheap and he easy to assemble, and they shriek wrap them and put them in a box and put the box in a field. It's insanely light balance of plant. They're still innovating on everything in the system. There's still juice to be squeezed out of that level.
Good job, Okay. So I'm going to go second, and of course I'm going to talk about data centers. Data centers and the new panic of eighteen seventy three. We're going to see a gigantique perch. And of course people hear about the bubble, which has been especially the case at Gen of last year. There have been some extremely unhealthy behavior. A startup that is borrowing money to build
data center for another startup. They are both losing tremendous amount of cash and yes, somehow being able to raise the debt capital in order to fund this bill out again without having customer of the visibility into those investments paying off. I can predict that you like last decade Adam Neumann from we Work, I can tell you some old man from open Ai is the Adam Newman of the decade, but with a bigger order of magnitude. The Google,
the Microsoft, They're going to be okay. But on the peripherry there are number of companies and I'm even wondering if we not put Oracle inside that group. Blue Owl Core with everything is built on credit and if you look at the CDs, and I mean I was at Liman twenty years ago, so everybody knew what created default swab was and everybody has forgotten since then. And for the past three months people talk about CDs again and the CDs of those peripheral company is the same as
EGYP TOI, Twopao, Sri Lanka. So when I find j how you go to see Pimco A Pimko. They've given me a twenty billion of credit. So could you give us one line please so we can actually quantify it and actually see if you're right around. Okay, fifty of the data center announced will never be built.
That's remarkably low, but I'll take fifty percent. That's an easy target to hit.
I agree.
I have specked data centers in my professional career. I've been put loads in data centers the first.
Time in the eighties.
I put loads in the clouds and cloud based data centers. And I've been doing AI professionally on and off for fifteen years, including in you know, one of my current firms. And I've been a performance engineer on major software. So I note three rules for software. First, never optimize early. Just assume you're able to throw hardware at it.
Because that'll be the cheapest fix. Ducay, If you.
Have a performance problem, throw hardware at it because that's the cheapest fix. Third, if you can't fix it with cheap hardware, then get intelligent people to optimize it. And that's what deep Seek did this year. Deep Seek at intelligent people. They optimize the software. They got amazing results with back level chips in a fraction of the training and processing time, and they're selling that model globally. A lot of the innovation in stuff is scripting that isn't
using the large language models. So I know the demand bubble is gone. Now I'd like to talk about just a little bit of what the corollary is to the implications of that. When I analyzed the AI spike, what I found was that vast majority of the data center buildout is in the United States. All of the stock gains of the US stock market have been in the seven big tech companies. We're building massive data centers. Everything
else is flat or declining. The United States is in structural recession except for the AI data center build So that's kind of economic indicator one. Economic indicator two is that the top ten percent of income earners are spending fifty percent of the consumer spending. They're spending that because their four to one k's are good. Because of this data center thing. They've got index funds that are over invested in these data centers. There is a bloodshed coming.
This is not my prediction that there's bloodshed coming in the American economy next year as these economic indicators collide and the top ten percent stop spending.
I think your boat row. Oh, I think it'll be twenty twenty seven, not twenty twenty six. Okay, you got your time in ronk job. You're going to explain me. Texas right now, receive two hundred and twenty six gigawa requests or new data center and the peak loode is eighty five.
No, what you said in terms of data centers, I agree they're not going to be built.
Right.
It's the same as look at all the battery development projects that are in Germ not going to be built. But the point is you are going to say record CAPPAX expenditures in twenty twenty six.
No, no, no, no, you're a romantic. Okay, you look at equit.
Okay, but you're thinking about fifty percent of you know, when everybody's rushing for quick connections. What they do is they go and try and get quick connections everywhere that's not going to be built. So your prediction for me, it's not a proper prediction.
Okay, Okay, you'll say that's what I'm just saying is because you force me, you corner me into giving you a number. But what I'm just saying is the debt market will simply not finance all those data cent always been announced, period, There's just too much that now the people who provide that stuff freaking out. The risk premium is going up. So that's it. We agree to disagree. We've got our chicken in this two day job. Your
first prediction, I'm not going to be vague. What you're going to see is lower global wind and solar installations in twenty twenty six and twenty twenty five. And in fact, I even go so far as to say we've seen peak global wind and solar installations, and I'll explain why. By the way, this is not to say that the energy transition is failing. What actually is happening is you've
just got massive system constraints. Grids are full, permitting is slow, financing is higher cost courtailment is rising, capture price the falling. That's what's going on, and in some ways wind and solar have sort of become a victim of their own success. But as said, I would just describe this as part of the revolution that we're going through. Okay, well, so the peak solar we did an episode last year and winds grew in two twenty five.
So I yeah, I'd like to reflect on this because it actually leads into my prediction, which I won't share. But there's one key country I always look at because what China does moves the needle. China change its solar price points for developers, and so that was three quarters of the way through the year, and everybody was rushing in China to get the solar in at those price points.
It's just we see the same behavior everywhere. Will whether it's feed in tariffs or the investment tax credit or production tax credit in the United States, fiscal incentives from governments and price points make a difference. So this year three hundred gigawatts of solar going in. Next year the best number is likely two hundred gigawats of stolar going in in China, and so I think Gerard is right. Maybe, but I'm in my prediction. I'm going to hold out
a very interesting thing potential, and let's finish off. Gerards Laurent has said, I said, almost nothing has it abused you yet?
What's going on?
No, that's all right, that's good, he's been nice to me. Go on, you go straight into yours of mighty.
Okay, China drops under gigawatts of capacity installs last year. Let's assume that's true. There's more than three hundred gigawatts of solar panel capacity. And is China an insular country? Does it not trade?
No?
No, that one hundred gigawatts of production is not going to be used domestically.
It's going to be used internationally.
So the same dynamic that occurred in Pakistan, which all of a sudden was flooded with cheap solar panels and to a lesser extent, batteries, they could just get seventeen gigawants of mostly behind the meter solar in a single year, blowing out everybody's expectations. And as we discussed earlier, disrupting the global LNG market. That's gonna occur global it We already saw the breakout of solar in Africa.
There's a flywheel for Africa.
There's a million Chinese expats living across Africa. The Belgian Road Initiative has built twelve ports, it's built railways, It's built twelve thousand kilometers of highways. Africa is now a free trade zone between countries. China has this massive glut of solar panels and it'll have a lot of battery capacity. What this tells me we're already seeing an uptick. Last year there was two point five gigawatts of total solar
deployed in Africa. My prediction for twenty twenty six is twenty gigawatts.
I'd like to say more, wow wow wow wow.
So prediction twenty gigawatts of solar in Africa in twenty twenty six. I think I'm being conservative, Franklin, We're all going to be surprised.
I'm actually tot to which totally? Which a not Michel. I actually agree with you, Toto.
Okay, So my prediction number two is the fight for the Greeners Gas Protocol is going to turn ugly. Let me remind you of the previous episodes. The Greeners Gas Protocol is a non binding volutary system to account for CO two emission. It was established twenty five years ago and it's due to revision on a regular basis, and now they are currently negotiating the third revision. And the most important part is are we going to count the
electrons or our certificates? They used to count on an yearly basis, and now the new system which is proposed, is going to count on an hourly basis. And ninety nine percent of the companies agree with you moving towards an hourly system. And there are two old doubts, which I'm going to call because they've been already naming the press. I would name them Dark Amazon and Dark Meta, the two lots sits who are absolutely making everything they can
to lower the standards. And they have this alternative system called emission first, who really, frankly is a joke. And because they've been put in minority, and now they've threatened to go to the US Senate, So the fight's going to turn very quidly, and I hope reason will prevail, but there's going to be some tough time ahead. That's my prediction.
I actually published and analyzed a bunch of stuff about the new projections. Because there's various groups who do the accounting the old way, and they like the old way, and there's actually spin off of URMI and nonprofit what Time, and what they do is another company which resure You,
which does liability assessments for VPPs and vppas. Their position has been always that the global emissions are what count, and so that putting a solar farm in a high coal area is better than putting a solar farm next to a data center if the data center happens to be in a lower col player. And that's a valid point, but the argument right now is about additionality, temporality and locality,
and that's kind of broken down. Additionally, bring more beer to the party you're going to, don't drink beer that's already at the party. Our temporality is bring beer to the party when the party is actually going as opposed to the next day. And locality is bring beer to the house that's having a party, not the house next door. What that means is you got to you've got to put new generation near the demand area. You've got to have the demand match to the generation from the new asset.
It's close and arrow matched. That's a tough standard. It's an expensive standard.
Three two guys. Okay, I'm not going to name them. They exactly know who they are against the rest and the fact that they are ready to use strong gum tactics and using their lobbying power going to the Senate to do imo skull dodgery, namely the way you want. But that's not how our industry and community works. So don minoit. And the only UNSWERI is, look is my way or the eyeway? Sorry, it's going to be the eyeway. That's my prediction, okay, job.
Yeah.
Last prediction is sort of back again to Michael, and we've sort of agreed, and that is the golden days of ler G are over. What I mean by that is you're going to.
See a whole pile of businesses that get themselves in financial difficulties because they're going to be selling it negative margins. And you've also got increasing LNG capacity coming online, which means you're also going to see asset problems with the investments in those assets. There's a few reasons for this.
The first thing is global demand for gas has peaked, could actually have peaked already in twenty twenty five, but if not, it's twenty twenty six, and this is because OEZ demand is shrinking keeps shrinking, China growth is down. What Michael said earlier on about Pakistan putting on solar, etcetera center that's going to come more important, and this means that also as an example of Pakistan, as these
emerging markets are becoming much more price sensitive. The other thing that I would say as a final point is we'll see Russian gas come back into Europe and that changes the whole dynamics so much. And I'm saying that because I believe part of the peace agreement will be that Russian gas comes back in. So that means that golden days of LNG are over. And I say, you think you're going to see the beginnings of the restructuring of that system towards the end of twenty twenty six.
Let's talk about that LNG thing.
Go for it. You talk about it because you brought it up. Michael Gofer.
Yeah, I think Gerard is right.
I've been looking at global LNG demand and the growth there, especially North American growth in LNG exports.
Canada.
We've got two massive programs part of Mark Kearney's Major Project's Office approving pipelines Now the implications of all this capacity coming online are very interesting for the United States. Again another intomic problem because Joe Biden put a halt to new LNG export ports because domestic gas prices were rising. They are now pegged to international prices, not to domestic prices.
With massive amounts of export coming online and bidding for spot market stuff, that's going to drive up domestic prices. At the same time, the cost of domestic production is going up. Just as the shale oil is now hitting the marginal stuff, the shale gas is hitting the marginal sites as well, So costs are going up for domestic production. It's exposed to international prices even if they're depressed. Domestic energy prices in the United States are going to spike
because they remain very gas seating. People are going to be in real financial trouble in the United States in the coming year.
Okay, gentlemen, if I summarize our six prediction, Michael, China buttery system will go down to forty dot per kilo. What hour I predict a credit and great crisis around you? That do center? So you ask a number, is fifty percent of that announced will never be built? Chire the lower wind and solar installation in twenty six compared to to twenty five Michael twenty giga out of solar in
Africa in twenty six. The fight for the greenhouse Gas Protocol revision is going to turn ugly and finally the LNG glut will create the stress as set with flat demand and more supplies arriving on the market center. Man, I like to remind you and our listeners that Ukraine is still at war, is going to be almost four years and our heart goes to the Ukrainian who are resisting every day and those awful attacks, so our heart is with them. Any last word, gentlemen.
Well, I'm going to just wish you both a grade twenty twenty six and all our listeners thank you very much for listening to it. We're looking forward to serving you over the next twelve months.
Thank you for listening to Redefining Energy. Don't forget to rate the show and subscribe on Apple Podcasts, Spotify, or the platform of your choice.