Speaker 1: Hey, anybody, This is Mark Taylor and this is Danda Perkins,
Speaker 1: and you're listening to Switch on the benof podcast. Each
Speaker 1: week we speak with bienn F analysts about the interesting
Speaker 1: research they're working on, and this week we are joined
Speaker 1: by Meredith Annex, who is Bloomberg an EFS head of
Speaker 1: Heating and cooling research. Okay, wait, why do we have
Speaker 1: a head of heating and cooling research. It's actually a
Speaker 1: new thing for us, so it was a gap that
Speaker 1: we needed to fill. And the reason it was a
Speaker 1: gap is that heating and cooling are actually a huge
Speaker 1: part of total energy demand buildings alone account of global
Speaker 1: energy consumption. She's going to speak with us today regarding
Speaker 1: two pieces of research her team has written, the Greening
Speaker 1: of Heat and Decarbonizing US Heat Getting Started. These have
Speaker 1: a lot to do with gas and electricity and what
Speaker 1: options we might have in the future to pivot between
Speaker 1: the two for heating and cooling. Okay, cool. So both
Speaker 1: of these reports are available at benf dot com and
Speaker 1: b NF go on the Bloomberg terminal for our subscribers.
Speaker 1: If you're interested in becoming a BEANF client, reach out
Speaker 1: to us at Sales dot BNF At bloomberg dot net,
Speaker 1: we write about a wide range of topics, including clean energy,
Speaker 1: advanced transport, digital industry, innovative materials, and commodities. Please note
Speaker 1: that Bloombergunny does not provide investment or strategy advice, and
Speaker 1: you can hear a full disclaimer at the end of
Speaker 1: the show. Meredith, thank you for joining us. Hi Dana, Hi, Mark,
Speaker 1: thanks very much for having me such to day. We're
Speaker 1: going to talk about heat because that's what you spend
Speaker 1: pretty much all of your time focused on, isn't it. Yeah,
Speaker 1: pretty much that's new for you, right it is. Yeah.
Speaker 1: I've been at Bania for a number of years now,
Speaker 1: but we only started the team looking at heating and
Speaker 1: cooling at the end of last year because for us,
Speaker 1: it was really about finishing the puzzle pieces around the carbonization.
Speaker 1: If we look around the circled high chart of emissions,
Speaker 1: we understand power at BENIF very well. We're understanding transport
Speaker 1: better and better every single year. Our EV team is great,
Speaker 1: our autonomous driving team is great, but we haven't had
Speaker 1: as good of a picture of our solid picture of
Speaker 1: is buildings and industry. And that's where my team really
Speaker 1: comes in because it comes to building an industrial demand.
Speaker 1: A lot of that has to do with heating and cooling.
Speaker 1: There is a path to decarbonization. You outline this actually
Speaker 1: on a lot of the research that you do, and
Speaker 1: it seems to break down into just three areas. You've
Speaker 1: got electrification, district heating, green gas. Can you explain to
Speaker 1: us what each of those three things actually are. Yeah,
Speaker 1: So when it comes to decarbonizing buildings, what you're looking
Speaker 1: at mostly is space heating and hot water and hot
Speaker 1: water provisions for like your showers or that sort of thing,
Speaker 1: and you need it to be kept at sixty degrees
Speaker 1: celsius at least so that it doesn't grow bacteria. So
Speaker 1: you do need heat to be put into that wherever
Speaker 1: you are in the world now right now, Traditionally we're
Speaker 1: using fossil fuels to provide that heat. Very often around
Speaker 1: the world it's coal gas or oil being provided through
Speaker 1: a boiler or a furnace that is providing this heat
Speaker 1: to your home. When it comes to low carbon heating solutions,
Speaker 1: we do see three pathways, as you said, Dana. So
Speaker 1: one option is electrification um which is the you of
Speaker 1: heat pumps or direct electric heating in order to heat
Speaker 1: your home. What is a heat pump. It's a great question.
Speaker 1: I think a lot of people think that they don't
Speaker 1: know what a heat pump is, but you actually do.
Speaker 1: It's just an air conditioner running in reverse. So if
Speaker 1: you imagine that, I don't have an air conditioner, right,
Speaker 1: So so then we explain it a little bit more. Um,
Speaker 1: as long as you are above absolute zero in the world,
Speaker 1: which we always will be, and if we aren't, we
Speaker 1: got other problems. Uh, You've got latent energy in the
Speaker 1: ambient environment around you. So even at zero degrees celsius,
Speaker 1: there's still energy in the air outside. Even then in
Speaker 1: the ground outside, there's going to be energy. What a
Speaker 1: heat pump does is it sends a refrigerant out there
Speaker 1: and takes in some of that energy by boiling the refrigerant.
Speaker 1: A electric compressor then compresses refrigerant to put even more
Speaker 1: energy in the system, and all that gets released as
Speaker 1: heat into your home. So you are using you're basically
Speaker 1: transferring heat from the ambient environment into your house using
Speaker 1: a very small amount of purchased energy and form of electricity,
Speaker 1: and this means that you have a huge amount of
Speaker 1: efficiency from it. So on average, in Europe we would
Speaker 1: expect that for one kill a lot hour of purchased electricity,
Speaker 1: a heat pump would produce three point five kill a
Speaker 1: watt hours of useful heat in your home. And just
Speaker 1: as a comparison, do either of you guys have gas
Speaker 1: boilers in your home right now? I do, and it's
Speaker 1: broken at the moment. I've got a repairman coming today anyway. So, um,
Speaker 1: in comparison, those gas boilers that you have, for every
Speaker 1: one kill abott hour of gas that they're consuming, they're
Speaker 1: producing around point nine to kill a lot hours of
Speaker 1: useful heat. So you're just you have under efficiency for
Speaker 1: a gas boiler because that's how physics works. But for
Speaker 1: a heat pump, because they take advantage of this latent
Speaker 1: energy in the ambient environment, you can have well over
Speaker 1: in terms of the Yeah, so district heating, what you're
Speaker 1: doing is you're moving hot water around a series of pipe,
Speaker 1: so you've created heat in a centralized look asian or
Speaker 1: semi centralized location. Usually it's a c HP plant. It
Speaker 1: could be like waste heat from a facility, or it
Speaker 1: could be a heat pump, but you're heating hot water
Speaker 1: that's going around pipes, and then you have a heat
Speaker 1: transfer unit in your home that takes some amount of
Speaker 1: that heat into your home and then leaves a slightly
Speaker 1: colder fluid in the pipe afterwards. And then there's green gas. Now,
Speaker 1: what is what what comprises the green gas category? Yeah,
Speaker 1: so we're using green gas as a catch all term
Speaker 1: at BNF because there's no real industry standard for what
Speaker 1: it means. Usually it consists of two or three types
Speaker 1: of things biogas, so biomethane, hydrogen, and synthetic natural gas,
Speaker 1: which would be basically methane molecules, but they're cregated through
Speaker 1: a process like electrolysis. So, of these three, electrification, district
Speaker 1: heating and green gas, which is got the rosiest future
Speaker 1: ahead of it. I think it depends on where you are. Actually,
Speaker 1: it's a very diverse field. Are in if you're lucky
Speaker 1: enough to have historic legacy district heating, that's really fortunate
Speaker 1: when it comes to the carbonization because it's relatively straightforward. Iceland, yeah,
Speaker 1: or or Denmark is usually the example that you would hear.
Speaker 1: Um District heating is source agnostic as long as it's
Speaker 1: operating within a certain temperature range um and that means
Speaker 1: that you can replace that c HP plant with lookhard
Speaker 1: and sources in a pretty stat foremanner. You have to
Speaker 1: do some digitalization, you have to do some some optimization
Speaker 1: of the facility, but you can do it everywhere else.
Speaker 1: It's kind of an open field about whether it's going
Speaker 1: to be green gas or electrification. And it's kind of
Speaker 1: the battle that we're seeing in most countries regardless of
Speaker 1: whether they've got a strong gas grid or not today.
Speaker 1: So the rosy future kind of depends on the drive
Speaker 1: for it. Absolutely yeah, And at the moment, policy is
Speaker 1: going to be a big determinating factor about where we
Speaker 1: see the growth opportunities today. The story in the US
Speaker 1: is a little bit different than the story in Europe.
Speaker 1: Looking specifically at the States, you identify the fact that
Speaker 1: in the South it might be more appealing to actually
Speaker 1: have some of these electrification solutions. Why why is a
Speaker 1: great question. So the South has a couple of things
Speaker 1: working in its favor. The biggest one is mild weather.
Speaker 1: If you're imagining that heat pump again and it's taking
Speaker 1: let's say it's an air source heat pumps, so it
Speaker 1: is that means that it's sourcing its heat from the
Speaker 1: ambient air outside. What matters for its effectiveness at moving
Speaker 1: heat from the outside into your home is the temperature
Speaker 1: differential between your home and the outside. So if I'm
Speaker 1: trying to move the water going around your radiators or
Speaker 1: the air coming out of your air ducts, depending on
Speaker 1: what type of system you've got in your house, is
Speaker 1: going to be somewhere around thirty five to seventy five
Speaker 1: degrees celsius and that temperature differential, So getting the ambient
Speaker 1: air outside up to that temperature is what the heat
Speaker 1: pump has to do, and that determines how much electricity
Speaker 1: work you have to put into the system. So if
Speaker 1: you're starting from a point like in a cold climate
Speaker 1: where it can easily be below zero or negative five
Speaker 1: degrees celsius, that's a bigger temperature that you have to
Speaker 1: work over. And as we all probably know from just
Speaker 1: life experiences, temperature doesn't like to move from a low
Speaker 1: spot to a high spot. It likes to move the
Speaker 1: other way. So you're working against nature in that sense.
Speaker 1: You know, you're adding work to the system through the
Speaker 1: electricity purchase. So the electrical demand is what's driving the
Speaker 1: class competitiveness. Then in these different geographies, half of it
Speaker 1: so this is half the story. So half the story
Speaker 1: is that because the winters are more mild and more
Speaker 1: days are more mild in the South, you're always going
Speaker 1: to have a higher efficiency for your system because the
Speaker 1: system has to work less hard. The other half of
Speaker 1: the story, though, has to do with cooling, which is
Speaker 1: the other half of my team's focus, and that's the
Speaker 1: reverse air conditioner exactly, or the reverse heat pump as
Speaker 1: you will in this context. So a heat pump can
Speaker 1: work both ways. You need to add a fan maybe,
Speaker 1: but you know it can work both ways. As long
Speaker 1: as that's the case, you basically get too for the
Speaker 1: price of one in terms of your upfront cost. And
Speaker 1: that's a huge deal because heat pumps have a very
Speaker 1: high upfront cost When you compare them to a traditional
Speaker 1: gas system, whether it's a furnace in the US or
Speaker 1: a boiler in Europe. Uh, they're usually out of the
Speaker 1: money in terms of upfront costs, and that puts off
Speaker 1: a lot of potential buyers. When you then add in
Speaker 1: the price of an air conditioning system. Now in the
Speaker 1: southern US, you're looking at not just the cost of
Speaker 1: a gas furnace, you're also looking at a gas furnace
Speaker 1: and as some sort of central air conditioning system. Instead
Speaker 1: of getting both of those separate systems, you could just
Speaker 1: get a heat pump, and all of a sudden, heat
Speaker 1: pumps start to look really cost effective, both an upfront
Speaker 1: cost and operational costs, you know. And just an in
Speaker 1: personal interest, just been hearing about the northern US and
Speaker 1: specifically in New York the company Dandelion from Google, So
Speaker 1: I have two questions about that, and that could help
Speaker 1: us dip into the players in this in this space
Speaker 1: as well and into retro for versus new build. But
Speaker 1: what I've heard from about them is, well, first can
Speaker 1: clarifies that district heating your heat pumps. It's heat pumps,
Speaker 1: and they're specifically ground source heat pumps. So they're looking
Speaker 1: instead of using the air as their ambient environment, they're
Speaker 1: using ground so the soil. Okay. I was a bit
Speaker 1: dubious about it when I first heard of their venture,
Speaker 1: but it sounds like I got it wrong. It sounds
Speaker 1: like they're kind of killing it. What is interesting to
Speaker 1: me what I've heard is basically that they're putting these
Speaker 1: into new developments, right so new communities, new build homes,
Speaker 1: and using it as a marketing tool to bring people
Speaker 1: to these new communities, right, so they'll say, hey, you know,
Speaker 1: come to this new community where you're heating and cooling
Speaker 1: costs basically zero and people are moving to these these
Speaker 1: new homes. So is that we're gonna be seeing in
Speaker 1: this space more and more? What's the future there? Well,
Speaker 1: So we are actually working on a case study right
Speaker 1: now that's looking specifically at Dandelion's business model. I didn't
Speaker 1: know that beforehand, folks, I know that was a perfect plug.
Speaker 1: So Uh. An analyst on my team, em A Coker,
Speaker 1: is currently working on that report. Should be on in
Speaker 1: a couple of weeks. Very exciting to have the chance
Speaker 1: to plug it in here. Uh. And Dandeliane is really cool. Uh.
Speaker 1: My understanding is that they do retrofits as well as
Speaker 1: honestly is just what I hear. Literally, the thing that
Speaker 1: there's a couple pieces to unpack there specifically within Dandelion,
Speaker 1: And the thing that we find really innovative about Dandelion,
Speaker 1: aside from the way they're working to modularize the way
Speaker 1: that they do ground source heat pumps, is um the
Speaker 1: financing model that they provide, so they're providing private sector
Speaker 1: loans that you pay off over twenty years in order
Speaker 1: to reduce the upfront cost of a ground source heat pump,
Speaker 1: and that can remove that barrier. Because these systems can
Speaker 1: be eight thousand dollars equivalent in Europe a ground source
Speaker 1: heat pump, you're talking closer to fifteen sixteen thousand dollars
Speaker 1: in Europe. These are a huge cost to take. So
Speaker 1: if you can remove the upfront cost, then you're great.
Speaker 1: The biggest thing, though, that you're pointing on is about
Speaker 1: why a new billing would be going for them, And
Speaker 1: actually this is something that we're seeing across the board,
Speaker 1: not just with Dandelion. Across the board, heat pump sales
Speaker 1: are stronger, probably and often driven by new builds. So
Speaker 1: um in the southern US you could have six depending
Speaker 1: on where you are in terms of census region of
Speaker 1: new build homes that are opting for heat pumps instead
Speaker 1: of any other heating system at all. And the US
Speaker 1: on average new builds have a heat pump instead of
Speaker 1: any other type of heating system at all. This is
Speaker 1: not a particularly new business model because we've actually seen
Speaker 1: this in the solar industry, where I'm hearing comparable upfront
Speaker 1: costs and My question really is are the payback periods
Speaker 1: in terms of equal or roughly the same. So that's
Speaker 1: something we're also working on for this summer, because they're
Speaker 1: doing a great job hitching my pipeline um. In terms
Speaker 1: of how it works compared to solar, they're both very
Speaker 1: similar in terms of a high upfront cost that you
Speaker 1: earn back over their operational lifespan. The way that tends
Speaker 1: to work in solar is that you're reducing your electricity bill.
Speaker 1: The way that that works with heat pump is that
Speaker 1: you're using less fuel total than you would have with
Speaker 1: your other system. And so what you have to look
Speaker 1: at is the ratio between the electricity price and the
Speaker 1: gas price and the efficiency of each of your heating system.
Speaker 1: So it's a bit more completely complicated of a calculation
Speaker 1: to do than first solar, which makes it a little
Speaker 1: bit harder, I think for the average homeowner. But with
Speaker 1: a new build home, you're almost always going to be
Speaker 1: having a lower operating cost um and that's usually what
Speaker 1: a new bill developers worried about. They're less worried about
Speaker 1: the upfront cost of the system, They're more worried about
Speaker 1: the lifespan of this building. And how operational costs are
Speaker 1: going to be affecting the future tenants or future buyers
Speaker 1: over time, because having a home that's new with lower
Speaker 1: energy bills is more attractive from a bious perspective. Well,
Speaker 1: I guess the difference is you're going to need a
Speaker 1: heating and cooling system in a home regardless, but the
Speaker 1: solar panels seem to be fairly optional because you've got
Speaker 1: the grid connection exactly and on that. Actually, let me
Speaker 1: ask you guys a question. Do you know off the
Speaker 1: top of your head what the hence per kill a
Speaker 1: watt hour is? Because we're in the UK for the
Speaker 1: electricity that you buy versus the gas that you buy,
Speaker 1: I gotta go well, and this is the thing most
Speaker 1: people don't write, so most people aren't thinking about this.
Speaker 1: But depending on where you are, that ratio could be
Speaker 1: really high or really low. In the UK, actually the
Speaker 1: ratio is really off putting for a heat pump, usually
Speaker 1: because you're probably paying I think the average in the
Speaker 1: UK is about sixteen pence per kill a lot hour
Speaker 1: on electricity compared to eight pence per kill a wat
Speaker 1: hour on your gas. So you would need a very
Speaker 1: efficient heat pump to make up worth your while in
Speaker 1: terms of operating costs? Can we go back to policy
Speaker 1: though in that vein? Is there going to be a
Speaker 1: time where I'm going to be forced to retrofit my
Speaker 1: my house? You know? Regardless am I in trouble in
Speaker 1: in UK or anywhere else? Maybe in the UK more
Speaker 1: than anywhere else. Uh So this is a really like
Speaker 1: you hit on a really serious, Paul, the point that
Speaker 1: that governments are thinking about today, Like, honestly, this is
Speaker 1: a core part of the Net zero report in the
Speaker 1: UK is trying to decide how we're going to incentivize
Speaker 1: this transition. Historically, the way that incentives for heat pumps
Speaker 1: of work has been very similar to solar. You get
Speaker 1: a subsidy for the upfront cost, or you get a
Speaker 1: subsidized tariff for the electricity consumed by that system, which
Speaker 1: would be the equivalent maybe of an export tariff for
Speaker 1: the solar, and that's the way that you would earn
Speaker 1: it back. So it's all financial mechanisms that are driving
Speaker 1: these markets forward right now. What the Committee of Climate
Speaker 1: Change report is saying is basically is that the best
Speaker 1: way to go, Because there's a couple of problems with that.
Speaker 1: First of all in the UK, it hasn't actually led
Speaker 1: to a dramatic rise in the optake of low carbon heating.
Speaker 1: But also there's a big concern around governments about the
Speaker 1: social costs here because as you get to poor and
Speaker 1: poorer communities, a larger portion of their income is being
Speaker 1: taken up by energy bills. So should you be offering
Speaker 1: financial attentives, should you be offering standards and then paying
Speaker 1: for those through kind of a national tax program. That's
Speaker 1: kind of the ongoing question. So how do you remove
Speaker 1: the financial barriers and burden from the individual and what
Speaker 1: do you get a bigger chunk of the change if
Speaker 1: you went for commercial first, No, because commercial there's fewer
Speaker 1: commercial buildings, and commercial buildings use heat differently, right, so
Speaker 1: you have more space heating in commercial buildings, but or
Speaker 1: space coin depending um on on the type of building
Speaker 1: that you're in. For instance, in Bloomberg, we've got a
Speaker 1: lot of servers in our building, so really all that
Speaker 1: we have to do is cool the building because we
Speaker 1: get passive heat provided by most of our servers. Um
Speaker 1: So it gets a lot more complicated. But you don't
Speaker 1: have hot water, which around the world tends to be
Speaker 1: the biggest source overall, because if you think about milder climates,
Speaker 1: especially developing countries, you don't really need space heating. You
Speaker 1: do need hot water. That's not an issue in commercial buildings.
Speaker 1: So commercial buildings also have a challenge be has Generally speaking,
Speaker 1: retrofits are more complicated with a low carbon system, and
Speaker 1: and that has to do with basically the output temperature
Speaker 1: the system and how fast you can eat your heat
Speaker 1: your building and how much of a what's called a
Speaker 1: U loss a heat loss coming out of the buildings,
Speaker 1: like a load of factors that affect this. But if
Speaker 1: you're going to have to retrofit your building in order
Speaker 1: to have a low carbon heating system, that's harder to
Speaker 1: do for an office space that it is for a home.
Speaker 1: So you need to do both. You need to address both,
Speaker 1: but there's probably different ways that you get to both.
Speaker 1: The UK is often looking at using tendency agreements and
Speaker 1: mortgage agreements as a way to do this. So commercial
Speaker 1: buildings in the UK, it's either a current policy or
Speaker 1: soon to be that if you're building has a energy
Speaker 1: performance rating EPC code below an F you're not going
Speaker 1: to really be able to resell that kind of commercial building.
Speaker 1: What they're talking about is looking at the same thing
Speaker 1: the tendency laws. So in a right private building, potentially
Speaker 1: saying that okay, you can't wint out this building if
Speaker 1: it's below you know, be or whatever on the EPC rating,
Speaker 1: which is the energy efficiency ratings here in Europe. And
Speaker 1: so that could be a way that you do with
Speaker 1: your standards, which kind of takes the financial question out
Speaker 1: of the hands of the individual buyer, but you do
Speaker 1: have to find a way to fund that. From a
Speaker 1: decarbonization standpoint, Let's say you've got this finite pot of
Speaker 1: money and you want to spend it on solar or
Speaker 1: on your heat renovating your heat system. Which one is
Speaker 1: going to give you more bang for your buck in
Speaker 1: terms of decarbonization, it depends on the carbon content of
Speaker 1: your electricity credit because right now, if your electricity grid
Speaker 1: is mostly coal, then you know coal's got the highest
Speaker 1: carbon intensity of any of these In electrifying your heating
Speaker 1: systems doing no good because you're now switching to coal
Speaker 1: instead of gas essentially too like really generalize, but if
Speaker 1: you're in a region, and this is why we put
Speaker 1: electrification as one of the pathways to decarbonization. If you're
Speaker 1: looking at a country where the grid is carbonized, then
Speaker 1: your electricity isn't the issue. The issues you're heating At
Speaker 1: that point, Can we go back to the players for
Speaker 1: a minute. Is this the startup play like Dandelion or
Speaker 1: are we going to see bigger names? You know, familiar
Speaker 1: names come into the space right now. There's kind of
Speaker 1: like the big five heat pump companies always a big five. Um,
Speaker 1: I'm not entirely clear on who's in the list of
Speaker 1: the Big five, but you always hear the big five.
Speaker 1: But it's it's going to be your typical like Mitzubig
Speaker 1: Electric di can the big makers of air conditioners are
Speaker 1: the big players in heat pops? Are they also the installers?
Speaker 1: Do they have installing installations? Installers tend to be very
Speaker 1: much like solar, where it is going to be mom
Speaker 1: and pop bands doing the installation. A lot of these
Speaker 1: companies will run training program because installations complicated with a
Speaker 1: heat pump, and so you need to make sure that
Speaker 1: someone's installing it properly otherwise it doesn't work. Um, but
Speaker 1: but it'll still usually be a mom and pop shop
Speaker 1: that's doing the installation. That said, there are smaller players
Speaker 1: in this space as well, like the Dandellions of the
Speaker 1: world who are doing innovation right now. There's a lot
Speaker 1: of lack of transparency around the heat pump space, and
Speaker 1: that allows room for a lot of players, a lot
Speaker 1: of distributed players, a lot of different types of design,
Speaker 1: the business models that may or may not be fully
Speaker 1: competitive with each other because people just have a lack
Speaker 1: of information to do that comparison. So there's space for
Speaker 1: new entrants, yeah, and consolidation. What we're expecting is that
Speaker 1: as these sectors continue to grow, and we've been seeing
Speaker 1: some pretty remarkable growth rates for heat pumps in recent
Speaker 1: years compared to where they were before. They're still a
Speaker 1: very small portion of total homes, but their growth rates
Speaker 1: in terms of annual sales of heatpumps have been rising
Speaker 1: in Europe in the US. As that continues, you would
Speaker 1: expect to see the space continue to evolve with new players, entering,
Speaker 1: players consolidating all of the normal stuff that happens when
Speaker 1: you start to increasingly commoditize a relatively non transparent sector.
Speaker 1: What sorts of innovations would help accelerate this, and specifically
Speaker 1: from cost competitiveness standpoint, So the big conversation right now
Speaker 1: within heat pumps is around variable motors. I think I
Speaker 1: probably have the terms lightly wrong, but it's essentially that
Speaker 1: the idea is that you can operate your heat pump
Speaker 1: and your refrigerant flow at multiple speeds. And the reason
Speaker 1: that you may want to do this is because you
Speaker 1: don't have to have the heat pump operating all the time.
Speaker 1: And you can imagine that this can improve the performance
Speaker 1: of the heat pump dramatically, both in terms of heating
Speaker 1: your home, but also in terms of like what it
Speaker 1: can provide in terms of flexibility to the grid. So
Speaker 1: if you had to demand response portfolio with a lot
Speaker 1: of heat pumps and all of them are on variable speed,
Speaker 1: instead of turning them off and on, you can just
Speaker 1: ramp them up and down and use that to smooth
Speaker 1: your grid, for instance. So that's a big exciting conversation
Speaker 1: right now. Uh. The other one isn't really about costs,
Speaker 1: are about market size, and that's noise reduction. So heat
Speaker 1: pumps have a motor, they have a fan, they tend
Speaker 1: to be a bit noisy. Uh. They are always designed
Speaker 1: to be compliant with noise regulations. But how noisy like
Speaker 1: annoy me? Noisy outside the house noisy you would think
Speaker 1: we're talking about split systems right now. Um, for the
Speaker 1: people on listening to the podcast who know what that is.
Speaker 1: That means that you've got an outside piece as well
Speaker 1: as an insect piece, and those are generally what you're
Speaker 1: talking about when you've got a centralized heat pump. Otherwise
Speaker 1: you're talking about a package system, which is kind of
Speaker 1: like a window mountain air conditioner, right um, and those
Speaker 1: ones they will be about as noisey as a refrigerator.
Speaker 1: I believe. If you take a look at our barriers
Speaker 1: to heat pump adoption in Europe, note then we actually
Speaker 1: show where heat pumps fall on that scale. Now that
Speaker 1: means where they're you know, that's the standard operating of them,
Speaker 1: but they're designed to hit a point for two decibel
Speaker 1: because that's the noise regulations require of them. So it
Speaker 1: adds costs. So there's a lot of investigation being done
Speaker 1: about what you can do to reduce noise in order
Speaker 1: to have heat pumps in more concentrated locations, which as
Speaker 1: multi family housing units with multiple heat pumps, or just
Speaker 1: to you know, have them become more popular because that
Speaker 1: is something that a lot of people worry about making
Speaker 1: heaps exactly. So I'm actually doing a bunch of home
Speaker 1: retrofits at the moment to try and make my house
Speaker 1: more carbon friendly. And I want to know how am
Speaker 1: I going to find out about these companies? How does
Speaker 1: one stumble across them or intentionally come across them? And
Speaker 1: what are the business models that they have for going
Speaker 1: to market? Yeah, it's a great question. So, and this
Speaker 1: is something that that is a big topic right now
Speaker 1: within heat pumps. His education because oftentimes if you can
Speaker 1: just go to your installer, they may or may not
Speaker 1: know about a heat pump or be familiar with them.
Speaker 1: They may not be trained in how to install them
Speaker 1: because it's a mom and pop shop and most of
Speaker 1: their revenues probably come from gas boilers and replacements. So
Speaker 1: what the heat pump manufacturers do is they work with
Speaker 1: mainly two types of companies. Well, they first of all,
Speaker 1: they can just sell them directly themselves. They can also
Speaker 1: work with a real estate developer, so trying to find
Speaker 1: real estate partners that they can work with. And this
Speaker 1: comes back to your question or mark with how the
Speaker 1: operating costs work. So they'll work with the building designer
Speaker 1: to incorporate. He comes right at the start um, so
Speaker 1: you're seeing more and more conversations between those. And the
Speaker 1: last is to go with your utility or with a
Speaker 1: bulk supplier, and both of those are almost distribution venues
Speaker 1: for these companies, so they can advert basically be the
Speaker 1: preferred partner for Eon or for E d F or
Speaker 1: or for whoever. Uh. And that's how you can find
Speaker 1: out about the heat hump. So the benefits utilities as well.
Speaker 1: It does. Yes, for utilities, it can be looked at
Speaker 1: as a way to increase their relationships with their customers,
Speaker 1: bringing new customers, have longer customer relationships, have an extra
Speaker 1: revenue stream coming in from their customers. If it gets
Speaker 1: combined with a smart home or a flexibility solution. Yeah,
Speaker 1: there's a lot of interesting conversations happening on that front too.
Speaker 1: What I find most interesting about this is all these
Speaker 1: existing massive incumbent players that are going to benefit from this.
Speaker 1: Because we talk a lot at the company about potential disruption,
Speaker 1: but I'm seeing this is more of an opportunity for
Speaker 1: utilities and potentially you're even saying water companies. Yeah, And
Speaker 1: I think the question is really around how the gas
Speaker 1: companies deal with it, probably because some of them are
Speaker 1: are moving more and more oil and gas companies. You know,
Speaker 1: they're increasingly the same thing. But some of them are
Speaker 1: meeting more into electricity, some of them are looking into
Speaker 1: heat pumps, and if they do that, then this can
Speaker 1: be a benefit for them to or it could almost
Speaker 1: be a challenge because we would expect that a Europe
Speaker 1: with more electrified heat would also have reduced gust demand.
Speaker 1: Even if there's more gas band in the power sector
Speaker 1: than there is today, it would still be less overall
Speaker 1: gas demand. And so how do you deal with that?
Speaker 1: Do you then kind of push for green gas hydrogen
Speaker 1: as your solution? Do you look for and extremely efficient
Speaker 1: gas provision of heat, such as an absorption heat pump
Speaker 1: which uses gas burning as the heat source. What do
Speaker 1: you do is basically the open question. Meredith, thanks for
Speaker 1: joining us, no problem, Thanks for having me, Mark and
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