This is Dana Perkins and you're listening to Switched on the B and EF podcast. For those who listen to this show regularly, you'll know that we recently did an episode about the B and EF Winter gas Outlook. On that show, we discussed, among other things, Russia's invasion of Ukraine and how it's created the largest global energy crisis
that we have seen in decades. In response, nations have introduced regulatory mechanisms to tackle inflation and strengthen their domestic energy security, bringing in measures including price caps, windfall taxes, and gas storage requirements. But have these actions in turn added to the fiscal strain placed upon some utilities? And
also how extensive has the market disruption really been. Will efforts to replace Russian energy supplies accelerate or decelerate the energy transition and does that mean that we're still on track to reach our net zero goals. Today we have a bit of an unusual show for you. We're actually going to bring you a panel from bnaf's recent summit
taking place in London. In this particular panel was on the tenth of October, and it's where Deputy CEO Albert Chung spoke with people including Greg Jackson he's the founder and chief executive officer at Octopus Energy, along with Georgios Stasis, Chairman and chief executive officer at Public Power Corporation, and Rui Tichiera, who is Chief financial officer at EDP Renewables. They discussed how best to approach energy security and affordability
in the wake of recent geopolitical issues. They also went through what might be required to increase the pace of clean energy technologies and streamline their deployment, and lastly, has the increase in fossil fuel investments made for a net
zero compatible future. To learn more about BNF six summits, which take place all over the world, and also to see replays of some of the b andF talks and debates that were delivered at our recent event in London, you're going to want to head to about dot BNF dot com Ford Slash Summit, or you can click on the link that's been provided in the show notes Now.
As always, if you like the podcast, make sure to subscribe and you'll receive an update on your phone when you get a future episode that's published, Or you can give us a review on Apple Podcasts or Spotify. If you want to make us more discoverable by other people. And now let's listen to Albert's conversation with his panel at the B ANDAP summit in London. It was called executive Dialogue Improving Energy Security while maintaining a net zero trajectory.
Thank you very much, Good morning everyone.
Great to be back here at the London summit discussing what I think is an incredibly important topic of improving energy security while maintaining a zero trajectory. Not an easy task, gentlemen, thanks so much for joining us for what I think.
Is going to be a very thought provoking discussion.
At the risk of stating the obvious, we're having this discussion because of the confluence of a number of factors that have emerged on the global scene over the last couple of years, not least a wave of rising climate ambition, really over the last two years, especially since COP twenty six, rising clean energy investment, rising ambition, rising technology development, but also the post COVID rebound in energy demand, supply chain disruptions.
Of course, Russia's invasion of Ukraine and the subsequent global energy crisis, and finally, a trend towards greater economic nationalism and more muscular industrial strategy in various parts of the world, as the panel.
Before us was just discussing.
So I think what all of that demonstrates is that the title of this panel, improving energy security while maintaining in net zero jectory, is not going to be.
A straightforward task.
So I want to kick off the discussion with you all by actually looking backwards over the last one and a half to two years and asking you each You've all had very very busy.
Intrays over the last couple of years.
I'd like you just to just recount some of the main challenges or maybe the hardest moments, and just tell us how your business navigated through that. And George, maybe I'll ask you to get it started.
Thank you very much and thank you for having me here today.
I mean, the last one and a half two years has been very difficult for the sector with the energy crisis. I still remember the August twenty twenty two with all the marging calls and the difficult period at that moment. Then the different countries in Europe and Europe intervened with the extraordinary measures in different speeds, I would say, but and maybe not fast enough. We didn't go directly to the root of the problem, which was a gas We went first on the power and later on intervened in
a better way. So this created a big turmoil run from the cause by the volatility of the market at the end of the day. So throughout this period, however, we managed to survive, and I believe as Europe we did we together looking back, and we achieved the security of supply for the European citizens. Uh And I think it has become very evident, but the answer to the energy dry LIMA is not is clearly the clean energy which is affordable, provide security and sustainable. So in that
direction we moved. Also in PPC, we have actually grown through all these years and we made major acquisitions throughout those couple of years. Uh And looking back, I mean, I think it was a big crisis which concluded in us becoming stronger.
All in all, we're staying with Southern Europe, I guess will stay there before we moved to the UK. The biggest challenge over the last couple of years of hardest moments, and how IDP and you and your business managed to get through, to get through all of that.
So I mean IDP is presently more than twenty markets worldwide, and of course we felt different challenges, you know, depending on the region. And Europe of course, a Jory said, was much more into the volatility on the power prices. US at some point was implementation of the Weigle First Labor Protection Act and the impact that it had in terms of importing some of the solar components into the US.
Brazil actually was moving, you.
Know, a bit of country cyclical in the sense that it was the inflation and macro environment was getting worse and then started to get better faster than elsewhere. But particularly in Europe, I think that what we felt the
most was that volatility in the power crisis. Nowadays, I mean we're actually seeing you know, this increasing tension in the Middle East, and I think we need to also, you know, look into what sort of impacts it could potentially have as we go forward, also on the gas market, that of course will impact the power market.
We are current, I mean.
We don't need also to look back eighteen twenty four months. Today we have this higher for longer interest rate environment that is pretty much underpinning the many investor confidence in the ability to create value from growth. So all of this it's all ingredients for you know, still internities that we have ahead of us. But I think the best way to deal with this is really making sure that we have a very strong focus on executing the strategy.
It's a twenty five billion euros CAPEX program until twenty twenty six, eighty five percent of that into renewables, as long as we can deploy this capital at sound profitability, at meeting our internal hurdles.
For the profitability of these projects.
And I think one of the important elements that we will keep pushing, and this is very much Europe and across Europe, is that we need to have regulatory stability.
I think it's important that Europe, if it defines that we want to address this trial Emma, one of the important elements that we have a stable, predictable regulatory environment and therefore we should not be reacting as we saw many of the member states during the crisis in a way that jeopardizes the confident and actually brought the investment in renewable space down to one of its laws definitely about forty percent less than it was the year before.
So I think this is one of the elements that we will need to keep on working to make sure that we keep the pace that we need to actually.
Deploy the energy transition. Greg, I guess you know a slightly different story.
But for Octopus, for the UK, what were the hard challenges over the last couple of years, What were the hard moment?
Yeah, So for those who don't know Octopus, although you operate in a lot of countries, we've got three main businesses. One's a consumer business in the UK, one is renewbal generation and the other is technology.
And I think.
The beginning of the crisis, the first thought had to be about consumers. It's how we're going to help them through affordability. It's worth noting that we can look back on the worst of the crisis now although we're not out of it and frankly strong action from companies, but really governments is what enables to get through in the UK and average energy but would have been six and a half thousand pounds last winter instead it was two and a half thousand. That was government intervention. It also
speaks to the scale of the issue. So I think the first change we had was to work out how do we work with governments to get the best schemes in place in the UK and other countries just to enable the basic fundamentals of consumers and businesses being able
to weather the crisis. I think we can all be pleased that governments did act the actor device decisively at scale, and I think that enabled us to keep the economy on the road and to be able to really focus then on the medium term and the medium term our question was how do we make sure this doesn't happen again, or at least we reduce our reliance on fossil fuels, And I think, picking up on the points already made, there's an enormous amount that you guys know, there's an
enormous amount of capital weight to be deployed in clean energy. But the real barrier now is permitting grid connections and ensuring that it can be done in an economically viable way for the investors. And we've been able to use the last couple of years to really rampime those conversations
with governments largely successfully. I mean, who would have forecast that grid connections would be a front page topic in pretty much every European country, but it had been, and so I think we do now have an improved backdrop for the transition.
We needed to make anyway.
And I guess the last bit, very selfishly is as a company, you know that we went into the crisis in a strong financial position, but with this kind of looming prospect for consumers, and the question was actually, how
do you turn a crisis into an opportunity? And I think working incredibly hard to look after customers and to deploy our vision at scale meant that we grew the business from just over two million customers to over six million there and doubled our renewable investment from three and a half billion of assets to seven billion with a lot more to come, and increase the number of licenses for the technology that will enable cheaper transitions around the
world from a few million to thirty or forty millionaire. So I think in every way what we saw was the horrific circumstances in Ukraine leads to terrible outcomes for customers and government's really looking down the Bible. Have never been able to afford to do this again, so we have to work hard now to make sure we don't. It's like going on a diet. You know, what you don't want to do is spot that you've lost a few pounds and then give up and go back on
the pies. We now have to make sure that we maintain this commitment to a more secure, cheaper energy system, which by the way, is also cleaner.
So I want to build on that and look ahead for the next year or two, and maybe Greg, I ask you to kick off on this one. Staying on that topic of energy security and affordability, the impact has had on households, the impact has had on industry and competitiveness in Europe. I know, my energy bill is still very much elevated from you know, compared to.
Before the crisis.
All the forward curves are still elevated compared to historical levels. So to what extent can we say, you know, this submission accomplished. To what extent do we need to still be kept awake at night worrying about affordability and security? Like where are you on the spectrum of like we've done the job versus hold on this is still you know a huge issue for us.
Yeah, I mean we're nowhere near job done. I think we might have written out the to do list. We've now got to do it and everyone in business knows that's the hard bit.
The hard bit really now is that.
The single biggest thing we can do for affordability security is electrification brackets of everything where it's possible. And I think you know we're just beginning thatification journey. So if we look at the UK as a fairly typical Northern European economy and a forty five percent of energy is clean, sorry of electricity is clean. Electricity is only twenty percent of primary energy. So if you multiplied that through, we're
essentially nine percent of the way on the journey. It's slightly better than that because electrification is automatically an improver of efficiency. Electric vehicles are better at turning killer wats into motion than until accomplishing engines by a long way. Heat pumps are returning killoughts into heat than gas boilers. But we really are now only just beginning the very
hard job of building a new system. And I think, very briefly allow me to fly an idea by you, but I think talk of the energy transition is unhelpful. Anyone who's run a large organization knows that transformation is incredibly difficult. Often starting with a clean sheet of paper
is the best way of doing things. And what we're really doing is building a new electrification system in parallel with the existing energy system, and over time consumers and businesses, generators and infrastructure will be moving into that new world. That new world is the opportunity for a real upgrade on all the points of the trial and of security and affordability and cleanliness.
George, your thoughts on kind of where we are now on security and affordability looking forward the next year or two.
Yeah, as I said that the answer, the real answer to the trilema is clean energy. So we are in this path clearly, and that was a big lesson from the crisis. It reminds me of some of this crisis like the first oil stock in nineteen seventy three. Actually it's exactly fifty years from Optomber nineteen seventy three, where there was a very big crisis in the energy market worldwide. And what happened if you look back, I mean, the
world developed. They're wearing new systems, new proaducts, new solutions, new business models, which brought us further. So equally similarly, I believe this crisis is an opportunity.
We will need a new system. It's clear.
I mean, even looking at John's presentation this morning, we see the magnitude and the big steps we need to move, we need to take. And of course, as Grace said, I'm going back to that greeds. I know there's a session later on, but extremely important because the flow of energy is flowing in a totally different way nowadays, and with this system and the distribution of the generation, so very big important.
Some greeds permitting.
New market design, so new systems, let's say uncapped access to two PPAs for instance for the industrial sector. And of course in security is always on our mind. But I think all in all, it's clear where we need to go, and I mean all the industries work in that direction.
It's up to us how fast we will move.
The faster we move, the more it will be improving the competitiveness of every country and the European citizens.
At the end, were anything to add to that, well, maybe just a few data points. Europe still imports around fifty five percent of its energy needs, and of course I mean these imports are fossil fuels. We depend tremendously on geopolitic context that we see across the globe, and therefore we know that we will also be competing with Asia for gas for LNG so I think it's not to anyone surprise that we see gas prices three times higher than they were.
Back in twenty nineteen.
And I think that we will then, of course the reflections into the power prices, and I'm not seeing any within Europe any prices of three digits going back to double digits before you know, maybe the next two years. So this is a real problem for affordability that can be addressed through obviously renewables. You know, if today I'm asked to provide a fifteen years contract with a solar or wind plant in the south of Europe, I can
do that maybe for around forty euros. I think it's I would say impossible, but very hard to find one of those contracts from fossil or based on forward curves at those lot price levels, most likely at the sixty level, so substantial, you know, higher prices compared to to the renewables. So a renewables at this point can offer a lower cost and therefore they provide a real alternative to bring
down the cost to consumers. But secondly, and I think this is also very important, the more we accelerate the growth in renewables, the lower the number of hours where we'll have gas actually setting the price, so there is an additional benefit. Is not only that contract that specific consumer is effectively a benefit that is being introduced.
To the system as a whole.
So I really see it as the more we can accelerate the decliment of this zero marginal cost technology with the current market context, the more we'll get two objectives, actually the three objectives of the trilam. It's sustainable, we can increase the security of supply, and is definitely cheaper versus any other source of fossil fuel power producing.
Right now, that resonates with me.
I mean when I think about all the challenges that clean energy deployment is facing right now, whether it's inflation, supply chain disruption, permitting constraints, Despite all of that, there's still a dividend of switching to clean energy, which is
you know that spread that you talked about. So I guess you know what I'd like to hear from all of you, is, you know, given all those challenges, and we're going to be talking about this throughout the day, what's your description for how do we keep making progress? How do we keep moving faster on clean energy deployment despite all of those challenges. Knowing there's a dividend there to be captured from the deployment.
Maybe I'll stay with you. Do you want to do you want to have a go at that one?
I think probably this will not sound original, but I mean, first of all, nowadays it takes five to ten years to develop one of these projects in Europe, you know, depending on the market. Within the five to ten years, we really need to make sure that we achieve the two years. This is defined that the state at the member state level, but then needs to happen at the
local level. So it's not only about having these green acceleration or rebelbo Acceleration zones, the positive silence, making sure that we actually have the skills within the local administration, the municipalities that more often than not are ultimately blocking these projects to come to fruition. A second is that we actually need to work much more with local communities.
It's obvious that we have the non in my backyard mindset across all the countries in Europe and and pretty much in the US many other places, but here in Europe that's a fact. There's a lot to be done by the private sector, but there's a lot to be done as well by the states, again at the state level and at the local level, to show that there are benefits, effective vantages that we can combine renewable projects with agricultural land. That they let me share one anecdote,
I mean this. I experienced this myself. I was discussing with the landowner about a project and he was telling me that the moment they had some winterbined installed up the hill, he actually had more wind in his house.
So there's an education process that you have to bring communities on board about the benefits of having the renewables, I think very importantly, and George mentioned that we need to have this increase the expansion in the greed more investment, smarter investment, allowing for the hybrid projects to happen, so I can use the semetery connection point and connect wind solar with hydro capacity. The point is that the more we can utilize that existing asset, the more efficial and
use of that in sought capacity we do have. And I think one thing which needs to be done as well, needs to happen is on the market design. And I think we had that discussion maybe a year ago as a reaction to that volatility in the in the in the.
Market prices nowadays.
I think it's that plus the fact that if we can have that long term revenue predictability or stability for these projects, we can reduce the cost of capital. And again as of now even more important than in the past. Reducing cost of capital will be key to ensure that we are not slowing down the investment. So you know, a lot needs to happen in the different front to make sure that we keep the base of investment and profitable investment in these assets.
Georgia, would your prescriptions be the same for your context. I know you have a few different halbs that you were.
So absolutely the same.
Yes, I mean this is the time that I mean we need also the policy makers so that they come into play, and we need to keep the dialogue open, and we do so, of course, and this event is helping very much for people and stakeholders to understand what is the correct direction in order to design the proper frameworks.
Other than that, I have to say on the other side that.
Renewables is the cheapest form of energy nowadays, so it's totally different how it was ten years ago. We have a good tailwind behind US, And last I think the other point to mention is that in terms of cost of capital, I think EU has the tools to provide to help and assist on the financing, subsidize financing. They can have a much better interest and I think we need to have instruments like that in the industry to assist those investments.
Correct anything to add Yeah, I mean, first of all, think rule is exactly right that we need to really think hard about community. In fact, I think we need to go further and truly understand consumers consumption because really we're not in a lightful like shift from fossil fuels to renewables. The physics and the economics of renewables are entirely different. When it's windy and sunny, you have abundant, super cheap power that's also clean, and it's really important.
If we're going to have a cheap renewables based system, then we have the market reform that enables consumers to fill their electric cars, batteries, maybe run their appliances, that enables businesses to tap into this power and it's cheapest. That has two really important impacts. The first is it brings down the average cost because the more we use at those times, the more that we benefit from the
very low prices. But the second thing is it reduces the challenge of intermittency, because the more we can shift consumption and capitalize on it in those times, the smaller the gaps we have to fill.
So I think.
The really important thing is that this needs to be to be fast and to be economically efficient. We need smart grid technologies, We need price signals, we need dynamic pricing right through the grids. It doesn't mean that every old lady is going to see different price every half hour, but it does mean that the companies that are selling the product can wrap products around those price signals that enable every type of consumer to benefit from this. And look,
what we should absolutely not do is two things. One is we should give up sitting there and saying but what about and then creating some bizarre edge case.
We have to remember.
All the frailties of the fossil fuel system and stop expecting renewables to deliver everything fossil fuels did and every form of perfection. On top of that, we're building an entirely new system. And so the mindset, I think is the mindset for us to work out out of this most efficiently to do it in a way that generates best returns for business but also the best value for consumers. Is to think, you know what, if we never had fossil fuels, how would we build a system then.
Because that's the one we now need to build.
So I want to ask about fossil fuel investment as well. So you saw in John's talk that investment into clean energy has grown very significantly over the last couple of years. He didn't show that we have a chart that shows the same for fossil fuels. Investment has been growing over
the last couple of years. So I'm curious in the panel's opinion about to what extent it has been necessary to increase FOSSi fiel investment over the last couple of years, and to what extent is that consistent with getting on track for that zero Maybe, George, if you want to have a go at first, Yeah.
I mean it is a volatile market.
In the volatility and I think this volatility, if you take a step back and you look the decade in front of us, in the twenty years in front of us, in my opinion, this volatility will continue. Maybe not, so there will be areas of peaks and laws throughout the following years. So I still remember the wells in the US and for the fracking activity which went burst when we were at the laws.
And of course when we are.
On the peaks, they reinvest So we shouldn't care.
I mean, we don't mind. I mean we will always have opportunistic investments in that in that sense.
But what is constant and that with what has an upscale trend more and more is investing in clin technology. We see this, we are seeing, we are witnessing, and we will keep them seeing in the future. So no matter the volatility, the sustainable investment is only in clean technology.
So I mean, the more time passes and we go to the end of this decade, we will be witnessing in my opinion, less and less investments in fossil and much for much, much more on clean technologies, because also the latility will become.
Will be delayed.
So it's a sort of cyclicality versus secularity.
If I can, it is a bit too horrormation.
It is a transition, and the transition you will have a volatile situation and we need to learn to work with that. And this is the reality. So we need to also in the in the power sector. I mean, we need to use the laws in our favor and manage the difficulties.
Greg, are you relaxed about seeing fossil fil investment growing in this country and other places?
Yeah, I'm pretty relaxed tob that.
I mean, the first of all, the reality is until we built, you know, the upgraded new system based around renewables, we need to fill the gaps, and filling the gaps with, for example.
Gases perfectly.
The reason, yes, today we're totally dependent on fossil If you're going to fly anyway, you're going to be using fossil fuels. So certain sectors they're going to take a long time to electrify. And I think one of the reasons I'm stopping to talking about the transition is, you know, we don't need to demonize fossil fuels at all.
In fact, I would like the fossil fuel industry to.
Be more.
Open and proud. How do welliaminate green washing? We allow people to be honest. Honesty also delivers better returns for investors, and I think in the long run, enabling clarity between companies that are driving clean renewables based electrification and companies that are maintaining you know, the wheels on the bus for a period of time. In the world of fossil fuels, actually becoming clear on both sides will enable investors to
make better decisions. It will help reduce green washing, both in the consuming world and in.
The corporate world. And look at.
Tobacco companies, you know, went through this process where to begin with, they denied that smoking caused diseases, and then they introduced a whole bunch of kind of innovations to help reduce the harm, which didn't really and then eventually one day everyone honest about it. And since then I think on the whole tobacco is delivered some of the best returns in public stocks for decades. I see no
problem at all with fossil films. Actually just jumping. The quicker we jumped to the honesty period, the better, and then we can have you know, investors able to confidently back a sector. Is it I hope eventually winds down, but in the meantime serves the needs of society and confidently and clearly back a sector there's going to be the future.
Ruy, do you do you agree with with all of that, well, I probably would prefer to see it, you know, the transition to happen faster. But I'll know again, we had the hottest July in the records. I think September was the hottest September. Ever, I'm not sure even sure if they did not change the scale of the graphic, because otherwise it would not show. Judge was just mentioning you have severe wildfires in Greece and week after if so, the world substantial. I mean, you go to Hawaii, you
go to Canada. You know, you have several examples in the world that climate change is reality with severe impact to the population. So we cannot afford waiting too long to actually accelerate the energy transitions. So the world needs this to happen. So that's maybe my first comment. So the second one is I think that you know, in general, of course.
Business react to signals.
The moment we start having, for example, a U two pricing in Europe, that signals to the oil and gas or the fossil fuels operators that there is actually an investment case or a business case for the transition. And again, the transition in the in the in the fossil fuel doesn't necessarily mean that they all go into renewables. I think that there are natural A player, a major player in green hydrogen. They are natural a or they should
be green players or good players in carbon sextration. So I think that's what to me is missing, is that additional investment in technology to decarbonize because there are some segments or some areas within the economy that it will be hard to electrify. So it's obvious that we'll need to have that knowledge and that investment into new technology. But very importantly, I think it's also good to have I would say governments being consequential of the strategy that
they define for Europe. You may remember that in twenty twenty two the power sector was subject to all kinds of clawbex you know, price caps, regulatory clowbecks, you name it, and that of course prevented companies to have the capital and cash to keep on accelerating into the energy transition.
And I'm little renewbles. You add all you take the top ten utilities in Europe, you add their reported net profit in twenty twenty two, the sun is smaller than the smaller of the oil and gas majors net profit reported that year in Europe, so the top ten utilities altogether have a lower net profit than the smallest of the oil and gas majors.
When this happens, it.
Means that it's not only about whether there are investments or not in the fossil fuels, by the way, where those investments happen and the job political concerns that we raised in beginning and the security of supply is also making sure that governments in Europe think long term and they are consequential about what they want in terms of energy deizition versus how they then act upon the sector when times are tough, as we saw in twenty twenty two.
Thank you well.
We talked about fossil fuels, we talked about renewal energy. We haven't yet talked about the next generation of clean technologies that we really need to scale up heat palms, green hydrogen systemable aviation fuels, you name a range of different solutions that make up maybe the last quarter of
decarbonization that John showed us before. So, I mean, we know the ambition is there, the targets are there, that there's a lot of projects being announced and so on, but deployment is still not at the pace it needs to be.
So my question for all.
Of you is kind of how do you view the challenges we're deploying this next phase of technologies and where do we go from here?
How do we get on track? And Greg, I'm going to ask you to go first.
I know your company is doing a lot of heat pumps in particular, and can to hear your thoughts on that well.
I mean, first of all, I fully agreed rule that we need to see all this faster. I think one of the reasons I just want the clarity is it enables us to be much clearer that our mission now is to build better solutions for consumers so that instead of them resisting what they see as are forced to change, they're provided with products and services that are clearly better than the ones they have today. Heat pumps is a
great example. The kind of current debate in the UK, particularly in the UK, about heat pumps versus gas boilers is kind of a ridiculous I see these stories about beloved gas boilers are not beloved. They're so unreliable that the insurance policy for a typical gas boiler is more
than the insurance policy for a typical home. Right they're so unreliable that people buy insurance because they're worried that if they wake up in the morning, the gas isn't the boiler's not going to work, and they have no hot water and they need an engineer there quickly. On top of that, you know, they mix together, you know, highly combustible gas, a very hot flame and water in a small box that then emits gases that are noxious enough to go.
Into the street.
Local air pollution kills thirty thousand people here in the UK. All of it is from combusting stuff. That's what we currently have in our homes. In twenty years time it will look as ridiculous as smoking in restaurants does now when we look back at the old world. But to get consumers there, we can't ask them to spend fifteenth and pounds put a house. To switch from that crappy, inefficient,
sometimes dangerous technology to something that's clean and benign. We have to take responsibility as companies and to innovate to bring the prices down rather.
Than just ask for the handouts.
And so for example, you know, we've just launched a heat pump that you know, the uniqu cost about fifteen hundred pounds will come down to one thousand, will soon be able to. In fact, today in the right homes we can replace them for not a lot more than a gas boiler. But I think again back to rules point, government policy is bizarrely holding all this back. So in the UK you need planning permission for many heat pumps. You literally need to ask the council for it takes
six weeks minimum. Most councils don't know how to handle it, and so you have consumers who are now really interested in this new, upgraded, clean technology, but they literally can't get it because of outdated, unnecessary laws. Similarly, across Europe, electricity is far more heavily taxed than gas, and we do need carbon taxes, but even before that, we need to get rid of this bonker's counterproductive thing where we tax the clean fuel, making it less and less efficient
for consumers to run clean technologies. And we need price signals. At the moment, the price of electricity is set in most countries, pretty much all of Europe, by the price of gas. And as you said, although its we build more renewables, are more sort of time periods in which
renewables set the price. If we had dynamic local pricing, people could be running their heat pumps using smart controls, automated algorithms that are grabbing the electricity when it's cheapest and keeping their home more compliments ever been on a gas boiler. If we do all this, by the way, heat pumps are already going to be cheaper for the vast majority of homes. So I think we have the technologies. Unfortunately we have outdated taxes and rules which prevent it.
It's obviously the same with hermitting for wind and solar, and so I think we very quickly now need governments to catch where where business is going, and business needs to take responsibility for cremet patter solutions.
George your thoughts next generation in climate, how to get it on track?
I think there are two speeds on the consumer related technologies. I think consumers are picking up both in terms of heat pumps, solar in the roof, chargers, lead lighting, energy efficiency on the house. There are a lot of schemes we do a lot in Greece, in a lot of countries is picking up and the customers are really coming into it. And I think the more we have more
tools and technologies this will go further. On the other hand, new technologies are which could be of a bigger scale, like hydrogen is lacking behind hydrogen which can be a seasonal store or it can help to to de carbonize our debate. Sectors does not have the same support as it does in the US, for instance with the IRA, so there's no market, there is no clear let me say, price signal to help investing there. I want us to remember how it was when solar and WIN ten fifteen
years ago. They were not yet competitive, but they got support. This is how we need to look on these kind of technologies, so we need to nurture them they when they are let's say it's still developing.
And.
I would expect governments and institutions and European institution to give a big support as well. On the consumer related stuff, I'm much more optimistic that things will go better.
Thank you, Rue. You get the last word.
And then I think Dan's going to ask us some questions.
Sure well, I think George said it. Twenty years ago solar was two hundred and twenty percent more expensive than coal. Today is what fifty percent cheaper, seventy percent cheaper. And the reason why because it had very clear framework to invest and.
Therefore develop the technology. We need to have that.
For example, for green hydrogen EEDP got awarded for six projects in Iberia Peninsula two hundred million euros of funds. It was perhaps the most cumbersome complex processes we went through over the last two years. It's super hard and it's not enough, so we will not make an investment decision, so we'll need to take another year or so, you know, piles of papers.
We need to simplify that.
So I think there's an element there of how can we actually streamline make everybody lives easier to deploy capital into these new technologies.
But there's another element.
If you think, for example, storage bettery storage in the UK is probably the only market in Europe where we can actually decide to invent on the center lane base because there is a stacking of revenues that you know, makes a business case. Nobody else or sorry, nowhere else in Europe. We are seeing that fundamentally because of regulation. Regulation is not allowing to capture you know, the ancillary services and the different dynamic you know on the peak of peak and capacity market.
So is not a longing for this to happen.
It doesn't require a subsidy, it doesn't require some support. It does require, however, that we have that regulatory evolution so that we can then make our business decisions.
Fantastic, Thank you Danner. Over to you.
So we have a skeptic in the room when it comes to renewables being cheap when you think about it at the end consumer retail price. So the question comes down to whether or not once we consider other costs, including grid, which comes into the agenda a little bit later today, whether or not renewables always are the cheaper option when it comes to retail.
Great.
Sure, we've got lots of skeptics in the room, but you know that's why I say we have to literally, first of all, put our mindset into the new system we need to build. The reality at the moment is that when it's windy and sonny, we can generate electrics a few pence per kill hour and consumers are currently paying in the UK twenty seven that we don't expose to the consumer the system price is anywhere near enough.
And the system isn't just the generating price, but it's also the price of the infrastructure.
All of that is flat priced.
So currently it cost the same to generate an electron next door and transmit it as it does to generate it at the other end of the country and transmit it. That's crazy, right, you know, it's absolutely crazy. We don't have price signals that enable a more efficient use of the system when it's windy. In Scotland, we currently spend I think last year we spent several billion pounds turning off wind farms instead of just giving Scottish people cheap electricity.
There's currently a moratorium on building new data centers, warehouses and homes to the west of London because we can't get any electricity to them. If we had super cheap electricity in Scotland when it's windy, plenty of data centers would move there by the way, that would also then free up more electricity for things like homes in England. Price singles work in every other part of our economy.
When Margaret Thatcher hosted Mike mcaal Gorbachev in nineteen eighty as they went round London, he said, why are there accusing the shops? Who does your central planning? And he said, Margaret Thatcher said, it's price singles market forces. Yet in electricity we still have God's plan and we really need now to understand that everyone here is a capitalist, I hope, and understands that efficient allocation of resources comes when new unleash price singles.
So I think I know your answer to the next question, which is one.
Of the overrated underrated categories.
Which is government intervention in power prices. Clearly you stand on that being overrated. How about the other panelists.
Well, I actually mentioned that in the during the you know, the panle so for example, in Romania, Romanian Poland worked, I think are two cases where that emergency measures were poorly implemented to the point that at some point there was a price cap, so there was a clawback for every con For you know, if we had the prices above a center and threshold, would have to return that to the system. They ignored that we had forward sold the power. So imagine that I sold forward at ninety,
the clawback was at sixty. Sorry, I sold forward at forty. The clowback was at sixty. So everything that was if the price in the market was above sixty, I would need to hand back to the government or to the system something I never earned. So the problem with the price setting has in my view has to and there are two implications. One is that it doesn't allow the market to operate, and therefore you don't create the market signals.
You actually don't reduce consumption when you have to because prices are high exactly because you need do you still have consumption, so you have to reduce it. Secondly, and O reminds the confidence of the forthcoming investment because I don't know what to expect expecting. Thirdly, if poorly implemented like Poland and Romania, actually I'm losing money.
I actually have to written money that I've never earned.
So yes, the way regulators and governments implement many of these measures are actually detrimental to what we need to do in terms of accelerating investment.
Well, clearly we are in sector which is impacted heavily by regulators and governments.
This is not a secret.
On the other hand, we need to think that we have the same agenda the end somehow the politicians, because we really want to have a very competitive price into our customers, all of us. You've talked about renewables, if they are cheaper to the end customer, well, they're definitely cheaper in the system. They don't necessarily see it in the retail I understand, but they also don't see the highs, so they see something flat. So I agree with Greg, we need to go more in more dynamic tools. But
this in reality is happening. I mean with the mold, the consumers are becoming active and more active with new technologies hit pumps, solar. They get exposed and they have the benefits as well of this technology. So I think I'm quite optimist. I mean that we are linked to the government and the politicians, but I think we all want to go in say, the same direction, and we're getting there.
Albert, over to you for final views.
Yeah.
To be honest, it's been a great discussion, and I'm actually thinking now if we have this discussion again, we need to change the title to.
Accelerating the Zero Transition in.
Order to provanergy security. So that's my mante. So thanks very much for joining us. Really appreciate it.
Thank you.
N Bloomberg n EF is a service provided by Bloomberg Finance LP and its affiliates. This recording does not constitute, nor should it be construed, as investment advice, investment recommendations, or a recommendation as to an investment or other strategy. Bloomberg n EF should not be considered as information sufficient
upon which to base an investment decision. Neither Bloomberg Finance LP nor any of its affiliates makes any representation or warranty as to the accuracy or completeness of the information contained in this recording, and any liability as a result of this recording is expressly disclaimed