1 00:00:00,400 --> 00:00:03,400 Speaker 1: This is Dana Perkins and you're listening to Switched On. 2 00:00:03,880 --> 00:00:07,080 Speaker 1: Each week on this show, we bring in different BNF 3 00:00:07,120 --> 00:00:09,800 Speaker 1: analysts to talk about their research, and this week we're 4 00:00:09,840 --> 00:00:14,680 Speaker 1: going to focus on grids, more specifically grid flexibility. It's 5 00:00:14,720 --> 00:00:17,680 Speaker 1: no secret that power grids are strained in locations all 6 00:00:17,720 --> 00:00:21,200 Speaker 1: over the world. Sometimes they're coping with aging infrastructure or 7 00:00:21,239 --> 00:00:25,439 Speaker 1: additional capacity installations in the form of intermittent sources like solar, 8 00:00:25,680 --> 00:00:29,120 Speaker 1: or changes to power demand resulting from more electric vehicles 9 00:00:29,160 --> 00:00:32,400 Speaker 1: on the road, and often they're not very flexible and 10 00:00:32,440 --> 00:00:35,879 Speaker 1: the technology to manage things can be lagging. In developed 11 00:00:35,920 --> 00:00:39,839 Speaker 1: economies where blackouts are uncommon, we've come to expect access 12 00:00:39,840 --> 00:00:43,159 Speaker 1: to power to be readily available whenever we want it, 13 00:00:43,520 --> 00:00:45,760 Speaker 1: So today we're going to get into some of the 14 00:00:45,760 --> 00:00:49,040 Speaker 1: things that utilities are doing to adapt and ensure that 15 00:00:49,040 --> 00:00:52,640 Speaker 1: that remains possible. The solution being featured is the emergence 16 00:00:52,680 --> 00:00:57,400 Speaker 1: of local flexibility markets. Sanjit Sangera leads bnaf's Grids and 17 00:00:57,520 --> 00:01:01,160 Speaker 1: Utilities team, and he's joined today by Felicia Amanov, who 18 00:01:01,280 --> 00:01:04,640 Speaker 1: is the lead author on a recent report titled Europe's 19 00:01:04,720 --> 00:01:09,840 Speaker 1: Local Flexibility Markets aiding a strained grid BNF subscribers will 20 00:01:09,880 --> 00:01:12,600 Speaker 1: be able to access the full report on BNF dot 21 00:01:12,640 --> 00:01:15,759 Speaker 1: com or at BNF go on the Bloomberg terminal. If 22 00:01:15,760 --> 00:01:18,479 Speaker 1: you want to hear more episodes or share this show 23 00:01:18,520 --> 00:01:21,480 Speaker 1: with others, subscribe to this show and give us a review. 24 00:01:21,680 --> 00:01:26,080 Speaker 1: But right now, let's start our conversation on local flexibility markets, 25 00:01:26,280 --> 00:01:29,440 Speaker 1: what they are, where they are, and how significant of 26 00:01:29,480 --> 00:01:42,120 Speaker 1: a solution they could become. Sanji, welcome to the show. 27 00:01:42,319 --> 00:01:43,759 Speaker 2: Hi Danna, thank you for having me. 28 00:01:43,720 --> 00:01:45,240 Speaker 1: And Felicia, thank you for being here. 29 00:01:45,400 --> 00:01:46,120 Speaker 3: Great to be here. 30 00:01:46,400 --> 00:01:49,120 Speaker 1: So we're here to talk about grid flexibility and some 31 00:01:49,280 --> 00:01:52,040 Speaker 1: innovations on that side that have to do with markets. 32 00:01:52,080 --> 00:01:55,280 Speaker 1: But before we get to the market flexibility end of things, 33 00:01:55,360 --> 00:01:57,040 Speaker 1: we like to do a history lesson at the beginning 34 00:01:57,080 --> 00:02:00,480 Speaker 1: of every show, which is how traditionally flexibility has been 35 00:02:00,520 --> 00:02:01,880 Speaker 1: handled when it comes to the grid. 36 00:02:02,080 --> 00:02:02,280 Speaker 2: Yeah. 37 00:02:02,320 --> 00:02:04,400 Speaker 4: Sure, I think we need to maybe start with what 38 00:02:04,520 --> 00:02:07,120 Speaker 4: the term flexibility means as well, because it's kind of 39 00:02:07,160 --> 00:02:08,120 Speaker 4: an ambiguous term. 40 00:02:08,480 --> 00:02:10,720 Speaker 1: Really, back to basics, Okay, here go, Yes, so. 41 00:02:10,919 --> 00:02:11,519 Speaker 2: We'll start there. 42 00:02:11,560 --> 00:02:14,919 Speaker 4: So, one of the critical challenges of operating a power 43 00:02:14,960 --> 00:02:18,760 Speaker 4: system is balancing supply and demand. So an electrical power 44 00:02:18,760 --> 00:02:22,040 Speaker 4: system has to be instantaneously balanced supply and demand all 45 00:02:22,080 --> 00:02:23,919 Speaker 4: the time. And this is what a system operator, a 46 00:02:24,000 --> 00:02:26,280 Speaker 4: grid operator, is spending much of their time doing. 47 00:02:26,360 --> 00:02:29,240 Speaker 2: And they have to do this across all types. 48 00:02:28,960 --> 00:02:31,760 Speaker 4: Of time ranges, so second to second, minute to minute, 49 00:02:31,760 --> 00:02:33,520 Speaker 4: hour to hour, and they're looking even further out to 50 00:02:33,520 --> 00:02:35,240 Speaker 4: make sure that they'll be able to do this. And 51 00:02:35,240 --> 00:02:37,360 Speaker 4: they're also trying to do it both at a system level, 52 00:02:37,400 --> 00:02:39,920 Speaker 4: so think of like the entire Great Britain power system, 53 00:02:40,000 --> 00:02:42,280 Speaker 4: as well as at a kind of a local regional level. 54 00:02:42,320 --> 00:02:43,040 Speaker 2: So they want to make. 55 00:02:42,960 --> 00:02:46,079 Speaker 4: Sure that each region doesn't have too much power being 56 00:02:46,120 --> 00:02:48,480 Speaker 4: produced or consumed, because what can happen then is the 57 00:02:48,520 --> 00:02:53,200 Speaker 4: individual power lines supplying that region will get congested or overload, 58 00:02:53,240 --> 00:02:56,040 Speaker 4: and that can cause issues with the failure of those equipments. 59 00:02:56,160 --> 00:02:57,960 Speaker 2: So this is the game that we're in, right. 60 00:02:58,000 --> 00:03:01,320 Speaker 4: We're trying to balance the power system cross time, cross space, 61 00:03:01,880 --> 00:03:06,160 Speaker 4: and we're doing this constantly. Flexibility is the word that 62 00:03:06,200 --> 00:03:08,720 Speaker 4: we use about how we're going to go about solving 63 00:03:08,760 --> 00:03:11,919 Speaker 4: that problem, right, and so here we're talking about taking 64 00:03:11,960 --> 00:03:15,680 Speaker 4: a generator and either taking its output the production of 65 00:03:15,720 --> 00:03:18,320 Speaker 4: it up or down. We could take a point of 66 00:03:18,360 --> 00:03:21,639 Speaker 4: consumption and maybe we could reduce it or even maybe 67 00:03:21,800 --> 00:03:24,440 Speaker 4: ask it to be raised artificially at a point in time. 68 00:03:24,480 --> 00:03:26,800 Speaker 4: And battery storage technology is in there too, somewhere in 69 00:03:26,800 --> 00:03:30,600 Speaker 4: between generation and demand, and it could be charging or discharging. 70 00:03:30,680 --> 00:03:32,400 Speaker 4: And so these are the tools that we have at 71 00:03:32,440 --> 00:03:36,160 Speaker 4: our disposal. And historically, you know, most of the flexibility 72 00:03:36,240 --> 00:03:39,200 Speaker 4: was being provided by generators, and not even just generators 73 00:03:39,400 --> 00:03:42,600 Speaker 4: large clustered like the large generator sitting in a single spot, 74 00:03:42,720 --> 00:03:46,600 Speaker 4: and so flexibility was highly centralized and consolidated. This is 75 00:03:46,640 --> 00:03:49,680 Speaker 4: now changing, Like you know we've spoken here before, generation 76 00:03:49,760 --> 00:03:52,680 Speaker 4: fleet is changing, and also consumption patterns are changing, and 77 00:03:52,760 --> 00:03:55,280 Speaker 4: so where we're going to get flexibility from will also 78 00:03:55,640 --> 00:03:58,920 Speaker 4: have to change. And so the rise of markets come 79 00:03:58,960 --> 00:04:02,120 Speaker 4: about as a means of solving this problem of taking 80 00:04:02,160 --> 00:04:05,920 Speaker 4: flexibility from a vast number of distributed assets and being 81 00:04:05,920 --> 00:04:09,200 Speaker 4: able to solve challenges of flexibility both at a system and. 82 00:04:09,160 --> 00:04:09,960 Speaker 2: A local level. 83 00:04:10,240 --> 00:04:13,200 Speaker 1: Well you're talking about system versus local. Let's define that 84 00:04:13,360 --> 00:04:15,560 Speaker 1: even further as well, because when I think about the 85 00:04:15,600 --> 00:04:18,360 Speaker 1: system level, the system itself is getting more complex. We're 86 00:04:18,400 --> 00:04:21,640 Speaker 1: adding a wider variety of different energy sources onto it, 87 00:04:21,680 --> 00:04:24,480 Speaker 1: and things are being put in various different locations. Are 88 00:04:24,480 --> 00:04:28,120 Speaker 1: we still talking about creating flexibility and complexity at the 89 00:04:28,160 --> 00:04:31,040 Speaker 1: local level when it comes to working with utilities. Are 90 00:04:31,160 --> 00:04:33,919 Speaker 1: we actually talking about individuals, So I'm thinking of a 91 00:04:33,960 --> 00:04:36,960 Speaker 1: home generator or a home power wall that would then 92 00:04:37,080 --> 00:04:39,440 Speaker 1: give them backup power or does it really just depend 93 00:04:39,480 --> 00:04:41,279 Speaker 1: on whether or not there's a lot of solar and 94 00:04:41,279 --> 00:04:43,400 Speaker 1: a feed in tariff in that particular market structure. 95 00:04:43,600 --> 00:04:46,560 Speaker 3: So yeah, I think we're talking about both really, But 96 00:04:46,720 --> 00:04:50,599 Speaker 3: what we think is most exciting is the distributed small stuff, 97 00:04:50,640 --> 00:04:53,800 Speaker 3: and that can be people's homes. It can be rooftop 98 00:04:53,880 --> 00:04:56,400 Speaker 3: solar and batteries in people's homes. It can be an 99 00:04:56,440 --> 00:05:00,520 Speaker 3: electric vehicle charger, and even at a slightly larger level, 100 00:05:00,560 --> 00:05:03,840 Speaker 3: it can be things like in an individual public charging 101 00:05:03,880 --> 00:05:07,039 Speaker 3: station for cars. That's where we come into these new 102 00:05:07,120 --> 00:05:11,599 Speaker 3: types of flexibility markets. So local flexibility markets are these 103 00:05:11,680 --> 00:05:16,160 Speaker 3: markets that are run by distribution grid operators. So distribution 104 00:05:16,240 --> 00:05:19,239 Speaker 3: grid operators are the guys that run the local grids 105 00:05:19,279 --> 00:05:21,880 Speaker 3: that bring in the power into our homes. And as 106 00:05:21,920 --> 00:05:26,120 Speaker 3: there's now more and more new low carbon technologies connecting 107 00:05:26,279 --> 00:05:29,440 Speaker 3: at the low levels of the grid, the operators need 108 00:05:29,560 --> 00:05:32,360 Speaker 3: new tools to tackle this. So it's all the rooftop PV, 109 00:05:32,640 --> 00:05:35,440 Speaker 3: all the evs and things like heat pumps that are 110 00:05:35,480 --> 00:05:39,120 Speaker 3: replacing gas boilers, and a market is just a way 111 00:05:39,279 --> 00:05:44,040 Speaker 3: of paying someone to behave flexibily. You can kind of 112 00:05:44,320 --> 00:05:48,080 Speaker 3: get different types of flexibility also, for example through a tariff, 113 00:05:48,160 --> 00:05:50,680 Speaker 3: so someone can have a flexible tariff where during a 114 00:05:50,680 --> 00:05:52,960 Speaker 3: certain time of the day your price is lower. But 115 00:05:53,120 --> 00:05:56,000 Speaker 3: by doing it in a market mechanism, you can do 116 00:05:56,120 --> 00:06:00,160 Speaker 3: more complex things, so you can create these situations where 117 00:06:00,200 --> 00:06:04,320 Speaker 3: you can have both demand side flexibility and generation side 118 00:06:04,320 --> 00:06:07,359 Speaker 3: flexibility play against each other. So I think a good 119 00:06:07,480 --> 00:06:10,920 Speaker 3: example is found in the UK where one distribution grid 120 00:06:10,960 --> 00:06:14,240 Speaker 3: operator is running a market where you can pay people 121 00:06:14,320 --> 00:06:17,200 Speaker 3: to actually increase their consumption in the middle of the 122 00:06:17,279 --> 00:06:20,640 Speaker 3: day when solar generation is high. How that market solves, 123 00:06:20,680 --> 00:06:23,200 Speaker 3: How that price solves. It turns out that it's more 124 00:06:23,240 --> 00:06:27,039 Speaker 3: expensive to pay people to increase their consumption then you 125 00:06:27,080 --> 00:06:31,120 Speaker 3: could also instead pay the solar plant to stop generating. 126 00:06:31,320 --> 00:06:35,080 Speaker 3: So you kind of have these two alternative solutions competing 127 00:06:35,120 --> 00:06:38,400 Speaker 3: against each other on price, and whoever can provide it 128 00:06:38,640 --> 00:06:41,240 Speaker 3: the service at the lowest cost gets the contract. 129 00:06:41,520 --> 00:06:43,640 Speaker 1: So that's a great example, And you brought up some 130 00:06:43,680 --> 00:06:46,280 Speaker 1: of the mechanisms that can be used in order to 131 00:06:46,320 --> 00:06:49,680 Speaker 1: bring this to life, so flexibility through tariffs and a 132 00:06:50,000 --> 00:06:52,960 Speaker 1: local flexibility market. There are a few other ways though, 133 00:06:53,000 --> 00:06:55,600 Speaker 1: and some of them used more historically where these kind 134 00:06:55,600 --> 00:06:59,120 Speaker 1: of bilateral contracts and maybe no longer fit for purpose. 135 00:06:59,160 --> 00:07:01,680 Speaker 1: Given how come flex the system is? Can you talk 136 00:07:01,720 --> 00:07:05,760 Speaker 1: about the role though, of regulation in flexibility and how 137 00:07:05,880 --> 00:07:08,400 Speaker 1: that fits in with this whole universe in terms of 138 00:07:08,600 --> 00:07:12,000 Speaker 1: how this actually happens, how flexibility comes to life. 139 00:07:12,280 --> 00:07:15,640 Speaker 4: Regulatory models for flexibility have existed for some time, right, 140 00:07:15,720 --> 00:07:17,560 Speaker 4: and so this is I would say it, so you 141 00:07:17,600 --> 00:07:20,680 Speaker 4: can mandate a certain amount of flexibility in grid codes 142 00:07:20,840 --> 00:07:23,920 Speaker 4: that every single load customer that connects to a grid 143 00:07:24,120 --> 00:07:26,480 Speaker 4: or any type of generator connection that connects to the. 144 00:07:26,480 --> 00:07:28,239 Speaker 2: Grid will also have to follow. 145 00:07:28,440 --> 00:07:30,840 Speaker 4: And so this would this plays a certain role, right, 146 00:07:30,880 --> 00:07:33,800 Speaker 4: So this is kind of a minimum boundary of flexibility 147 00:07:33,800 --> 00:07:35,960 Speaker 4: that everyone should have to provide if they want to 148 00:07:35,960 --> 00:07:38,960 Speaker 4: be able to be part of the integrated system. So traditionally, 149 00:07:39,280 --> 00:07:42,600 Speaker 4: for generators, this is kind of like it's a droop setting. 150 00:07:42,640 --> 00:07:44,160 Speaker 4: So this is maybe a bit of a technical term, 151 00:07:44,240 --> 00:07:47,320 Speaker 4: but generators have this droup characteristic such that if they're 152 00:07:47,320 --> 00:07:49,680 Speaker 4: connected on the power system, their output has to be 153 00:07:49,680 --> 00:07:53,160 Speaker 4: able to slide up and down based on the frequency 154 00:07:53,440 --> 00:07:55,280 Speaker 4: of the power system that they're connected to, and. 155 00:07:55,240 --> 00:07:55,720 Speaker 2: This was the way. 156 00:07:55,800 --> 00:07:57,920 Speaker 4: This is a certain type of flexibility that they every 157 00:07:57,960 --> 00:08:00,280 Speaker 4: single generator that's connected to the system to. 158 00:08:00,200 --> 00:08:01,120 Speaker 2: Be able to provide. 159 00:08:01,160 --> 00:08:04,240 Speaker 4: Otherwise the system is just not reliable. But this was 160 00:08:04,360 --> 00:08:08,400 Speaker 4: quite significant when you'd have large consolidated generators providing this 161 00:08:08,480 --> 00:08:11,360 Speaker 4: type of service, and it's diminished over time as we've 162 00:08:11,360 --> 00:08:14,480 Speaker 4: gone to more distributed resources, and so you end up, 163 00:08:14,600 --> 00:08:18,480 Speaker 4: you know, is regulatory mandated grid codes the right way 164 00:08:18,680 --> 00:08:21,920 Speaker 4: of getting flexibility on a system as we move forward, 165 00:08:22,160 --> 00:08:23,680 Speaker 4: right because you know, we can talk about it being 166 00:08:23,680 --> 00:08:27,240 Speaker 4: contracted through these codes, through tariffs, and through markets. So 167 00:08:27,400 --> 00:08:30,600 Speaker 4: I think a blended approach is ultimately what we're seeing evolve. 168 00:08:30,680 --> 00:08:33,880 Speaker 4: Like different markets have gone down different paths, and markets 169 00:08:33,880 --> 00:08:36,640 Speaker 4: are kind of a newer form of bringing flexibility to 170 00:08:36,800 --> 00:08:38,600 Speaker 4: the system that we're seeing used more and more. 171 00:08:38,840 --> 00:08:41,440 Speaker 1: So the market's this newer form of getting things done 172 00:08:41,600 --> 00:08:43,960 Speaker 1: in this space. Let's talk about some examples. So you 173 00:08:44,000 --> 00:08:46,680 Speaker 1: brought up the UK. Where else is this being done 174 00:08:47,080 --> 00:08:48,400 Speaker 1: and how are they implementing it? 175 00:08:48,840 --> 00:08:52,880 Speaker 3: So the UK has been one of the first European 176 00:08:52,880 --> 00:08:57,840 Speaker 3: countries to start implementing this concept, so already in twenty nineteen, 177 00:08:58,080 --> 00:09:02,520 Speaker 3: local distribution grid companies here we're running trial tenders to 178 00:09:02,880 --> 00:09:05,920 Speaker 3: get these contracts in place, so for example, sign a 179 00:09:05,960 --> 00:09:09,720 Speaker 3: contract with a number of electric vehicle charging operators to 180 00:09:09,760 --> 00:09:14,439 Speaker 3: get those chargers to turn down stop charging at times requested. 181 00:09:14,640 --> 00:09:17,560 Speaker 3: But we're seeing this increasingly in other countries as well. 182 00:09:17,720 --> 00:09:21,800 Speaker 3: So the Netherlands is an example of a distribution grid 183 00:09:21,840 --> 00:09:25,360 Speaker 3: that is already facing a lot of grid congestion, so 184 00:09:25,400 --> 00:09:28,000 Speaker 3: that means that a lot of the time there is 185 00:09:28,120 --> 00:09:31,760 Speaker 3: more power trying to flow through those lines than the 186 00:09:31,800 --> 00:09:35,840 Speaker 3: lines can physically accommodate. So then to keep the grid 187 00:09:35,840 --> 00:09:39,040 Speaker 3: in a safe state, they needed solutions, so they started 188 00:09:39,160 --> 00:09:43,320 Speaker 3: implementing a type of local flexibility market which was actually 189 00:09:43,400 --> 00:09:47,560 Speaker 3: tied to the wholesale market for power, but the design 190 00:09:47,640 --> 00:09:51,760 Speaker 3: of this market was actually again more geared towards large 191 00:09:51,960 --> 00:09:57,320 Speaker 3: established whether it was generators or consumers such as industrial consumers, 192 00:09:57,400 --> 00:10:01,680 Speaker 3: and we haven't seen that much small, local, even residential 193 00:10:01,840 --> 00:10:05,120 Speaker 3: stuff being contracted through this market. But last year they 194 00:10:05,320 --> 00:10:08,800 Speaker 3: changed their policy and now we're starting to see more 195 00:10:09,040 --> 00:10:12,480 Speaker 3: flexibility contracts being implemented in the Netherlands as well. In 196 00:10:12,520 --> 00:10:16,840 Speaker 3: the Nordics, so mainly Norway and Sweden, they're also running 197 00:10:16,840 --> 00:10:23,200 Speaker 3: local flexibility markets there. The challenge is more on cold winters, 198 00:10:23,320 --> 00:10:25,640 Speaker 3: so you have a lot of electric heating in Norway 199 00:10:25,679 --> 00:10:29,360 Speaker 3: and Sweden, and as people are also now starting to have, 200 00:10:29,600 --> 00:10:31,920 Speaker 3: say an EV charger, you want to make sure that 201 00:10:32,000 --> 00:10:35,160 Speaker 3: they're not running their heat pump at max capacity at 202 00:10:35,200 --> 00:10:37,880 Speaker 3: the same time as they're charging their EV. So in 203 00:10:37,920 --> 00:10:40,800 Speaker 3: the Nordics, these markets are typically contracting for just a 204 00:10:40,840 --> 00:10:44,080 Speaker 3: few months a year, and in many places in Europe 205 00:10:44,160 --> 00:10:47,400 Speaker 3: what's becoming a real challenge is how to manage the 206 00:10:47,679 --> 00:10:52,680 Speaker 3: peaky generation of solar and in particular rooftop solar. If 207 00:10:52,679 --> 00:10:54,280 Speaker 3: people are not at home in the middle of the 208 00:10:54,360 --> 00:10:57,800 Speaker 3: day and all this power is blasted into the distribution grid, 209 00:10:58,000 --> 00:11:00,600 Speaker 3: you kind of want to have some market mechan to 210 00:11:00,720 --> 00:11:04,280 Speaker 3: incentivice that either being stored in batteries or that your 211 00:11:04,400 --> 00:11:06,880 Speaker 3: neighbor can consume that that's soldar. 212 00:11:07,320 --> 00:11:09,440 Speaker 1: So to put in context, and because you said this 213 00:11:09,480 --> 00:11:11,280 Speaker 1: is a newer market, so we're just kind of getting 214 00:11:11,280 --> 00:11:14,840 Speaker 1: started here about how much of power demand is actually 215 00:11:14,880 --> 00:11:18,240 Speaker 1: being treated this way in Europe when it comes to flexibility. 216 00:11:18,600 --> 00:11:22,840 Speaker 4: So currently the volumes dispatched are quite small. It's about 217 00:11:22,880 --> 00:11:26,840 Speaker 4: six gigawatt hours of flexibility in a twelve month period 218 00:11:27,000 --> 00:11:29,520 Speaker 4: stretching across twenty twenty two and twenty twenty three when 219 00:11:29,520 --> 00:11:31,480 Speaker 4: we kind of pull the data for each of these 220 00:11:31,520 --> 00:11:33,440 Speaker 4: markets that are doing it, and so to put that 221 00:11:33,480 --> 00:11:38,520 Speaker 4: into context, that's zero point zero zero one percent of 222 00:11:38,559 --> 00:11:41,520 Speaker 4: annual power demand in the countries that are actually doing 223 00:11:41,559 --> 00:11:44,480 Speaker 4: this flex But thought of another way, you know, they're 224 00:11:44,559 --> 00:11:48,040 Speaker 4: probably around twenty thousand assets that have been activated to 225 00:11:48,080 --> 00:11:50,280 Speaker 4: provide flexibility over the course of the year. And so 226 00:11:50,320 --> 00:11:53,200 Speaker 4: these are these are small markets today, and especially if 227 00:11:53,240 --> 00:11:55,400 Speaker 4: you compare them to the size of like the transmission 228 00:11:55,480 --> 00:11:58,400 Speaker 4: congestion markets that are much more developed and have been 229 00:11:58,440 --> 00:12:01,160 Speaker 4: around for a while. They are small, but they are growing. 230 00:12:01,520 --> 00:12:04,920 Speaker 1: So that's the question, it's how is it going? Is 231 00:12:04,960 --> 00:12:07,439 Speaker 1: this going to be something that other countries are looking 232 00:12:07,480 --> 00:12:09,920 Speaker 1: at and then going to in theory adopt in the future, 233 00:12:10,000 --> 00:12:12,560 Speaker 1: because really that's it's a bit of an experiment, right 234 00:12:12,640 --> 00:12:16,080 Speaker 1: and that is what happens. The first movers essentially work 235 00:12:16,080 --> 00:12:18,600 Speaker 1: out all the kinks and uncover the things that need 236 00:12:18,640 --> 00:12:21,320 Speaker 1: to be fixed and have we gotten through the working 237 00:12:21,360 --> 00:12:23,400 Speaker 1: out the kinks phase or have there been a number 238 00:12:23,480 --> 00:12:25,360 Speaker 1: of things that kind of come up in these different 239 00:12:25,400 --> 00:12:28,640 Speaker 1: countries that you think will stand in between wider adoption. 240 00:12:28,760 --> 00:12:32,040 Speaker 3: First, I think we haven't still quite gotten over the 241 00:12:32,080 --> 00:12:35,160 Speaker 3: part where all the kinks are being worked out, but 242 00:12:35,640 --> 00:12:39,360 Speaker 3: there's like constant improvement. And in the markets where this 243 00:12:39,480 --> 00:12:41,400 Speaker 3: has been done for a number of years, such as 244 00:12:41,440 --> 00:12:44,880 Speaker 3: the UK, we've seen the volumes increasing every year and 245 00:12:45,040 --> 00:12:49,080 Speaker 3: also the design of the contracts changing. And yeah, one 246 00:12:49,120 --> 00:12:51,960 Speaker 3: of the things that's been happening is in the first 247 00:12:52,200 --> 00:12:55,600 Speaker 3: trial runs they put in these really long term contracts 248 00:12:55,760 --> 00:12:58,840 Speaker 3: so you would get kind of security for five years 249 00:12:58,880 --> 00:13:02,160 Speaker 3: forward that if you were an EV charging operator and 250 00:13:02,440 --> 00:13:05,120 Speaker 3: you've responded to the calls to provide flexibility, you would 251 00:13:05,120 --> 00:13:07,640 Speaker 3: get paid a certain amount. But that turned out to 252 00:13:07,679 --> 00:13:12,319 Speaker 3: be quite hard to navigate, both from the distribution grid side, 253 00:13:12,400 --> 00:13:15,040 Speaker 3: who's the buyer of the service, and from the EV 254 00:13:15,360 --> 00:13:19,240 Speaker 3: charging provider side, because the EV charging provider doesn't know 255 00:13:19,280 --> 00:13:21,719 Speaker 3: exactly how many chargers and where they will have them 256 00:13:21,720 --> 00:13:24,040 Speaker 3: in five years, and the grid operator might not know 257 00:13:24,080 --> 00:13:27,360 Speaker 3: exactly which power line can be congested. So I think 258 00:13:27,360 --> 00:13:30,560 Speaker 3: that's like a big challenge on how to design a 259 00:13:30,720 --> 00:13:34,360 Speaker 3: good local flexibility market is how do you define how 260 00:13:34,400 --> 00:13:37,800 Speaker 3: local you should go, Because if you're on just one street, 261 00:13:38,120 --> 00:13:40,320 Speaker 3: it's probably a bit too small. And if that's one 262 00:13:40,360 --> 00:13:42,880 Speaker 3: street is so congested that you can't deal with it, 263 00:13:42,960 --> 00:13:45,559 Speaker 3: you probably just need to put in a new power line. 264 00:13:45,600 --> 00:13:49,280 Speaker 3: But when we're talking like a slightly larger area, say 265 00:13:49,280 --> 00:13:52,880 Speaker 3: a neighborhood, you could already start having enough assets that 266 00:13:53,000 --> 00:13:56,800 Speaker 3: can compete against each other and provide flexibility at a 267 00:13:56,840 --> 00:14:01,280 Speaker 3: sensible price. But in Germany, when they try local flexibility 268 00:14:01,280 --> 00:14:05,400 Speaker 3: markets in twenty twenty one, they didn't see high enough 269 00:14:05,480 --> 00:14:08,960 Speaker 3: volumes to become comfortable that these markets could work. So 270 00:14:09,080 --> 00:14:12,400 Speaker 3: what they saw was that only a small number of 271 00:14:12,440 --> 00:14:15,439 Speaker 3: assets bid in. So whether that's small batteries or again 272 00:14:15,480 --> 00:14:18,480 Speaker 3: my favorite example, electric vehicles, if you have just a 273 00:14:18,520 --> 00:14:21,440 Speaker 3: couple of them, they can essentially dictate the price and 274 00:14:21,640 --> 00:14:24,880 Speaker 3: it ends up not being the most cost effective solution. 275 00:14:25,320 --> 00:14:29,680 Speaker 3: I personally think that was just kind of feature of 276 00:14:29,720 --> 00:14:32,720 Speaker 3: it being so new, and I think click Germany maybe 277 00:14:32,720 --> 00:14:35,360 Speaker 3: gave up a little bit to it too early. And yeah, 278 00:14:35,400 --> 00:14:37,400 Speaker 3: it would be interesting to see if they they give 279 00:14:37,480 --> 00:14:41,640 Speaker 3: local flexibility markets a chance at some later point. Overall 280 00:14:41,680 --> 00:14:45,920 Speaker 3: EU legislation is kind of pushing towards this direction because 281 00:14:45,960 --> 00:14:49,640 Speaker 3: it's seen as a fair way of remunerating either people 282 00:14:49,720 --> 00:14:53,520 Speaker 3: or companies who contribute to the sustainable operation of the 283 00:14:53,560 --> 00:14:56,680 Speaker 3: power grids. And I think a last challenge to really 284 00:14:56,720 --> 00:15:00,840 Speaker 3: get those volumes and get that competition, I think need automation. 285 00:15:01,200 --> 00:15:04,320 Speaker 3: So especially when you're relying on the really small stuff 286 00:15:04,360 --> 00:15:07,960 Speaker 3: like residential flexibility, Like you don't want to force people 287 00:15:08,000 --> 00:15:11,240 Speaker 3: to like sit in the dark or go hungry to 288 00:15:11,280 --> 00:15:15,320 Speaker 3: provide flexibility you want to have, Like I think just 289 00:15:15,360 --> 00:15:17,680 Speaker 3: an EV charger is just the perfect thing because your 290 00:15:17,720 --> 00:15:19,400 Speaker 3: car is just going to be plugged in for so 291 00:15:19,520 --> 00:15:23,400 Speaker 3: long anyways. And if you have software controlling the charging 292 00:15:23,480 --> 00:15:25,160 Speaker 3: and you put in a time when you want your 293 00:15:25,200 --> 00:15:27,440 Speaker 3: car to be fully charged, you don't really care when 294 00:15:27,440 --> 00:15:29,840 Speaker 3: that's happening. You don't have to worry about it, and 295 00:15:30,040 --> 00:15:32,520 Speaker 3: your car can just help the power system, you can 296 00:15:32,520 --> 00:15:34,800 Speaker 3: get a bit of money back, and your life isn't 297 00:15:34,800 --> 00:15:37,200 Speaker 3: disrupted in any way. So I think that type of 298 00:15:37,240 --> 00:15:39,800 Speaker 3: automation is where we need to move forward this to 299 00:15:39,840 --> 00:15:40,520 Speaker 3: really work out. 300 00:15:40,920 --> 00:15:43,400 Speaker 1: So I see how this works with the owner of 301 00:15:43,400 --> 00:15:46,840 Speaker 1: the EV hypothetically, so this person who's trying to figure 302 00:15:46,880 --> 00:15:49,560 Speaker 1: out when to charge their vehicle. And I certainly understand 303 00:15:49,560 --> 00:15:52,960 Speaker 1: it from the utility level because it decreases the peak 304 00:15:53,000 --> 00:15:55,200 Speaker 1: amount of supply that you actually have to produce. But 305 00:15:55,240 --> 00:15:57,040 Speaker 1: what I really want to know is who's making money 306 00:15:57,040 --> 00:15:57,480 Speaker 1: out of this. 307 00:15:58,000 --> 00:16:00,760 Speaker 3: So currently in the UK, where we have a data 308 00:16:00,800 --> 00:16:05,840 Speaker 3: on who's making money, it's been utilities with residential consumers, 309 00:16:06,080 --> 00:16:08,480 Speaker 3: so Octopus energy is a big one. And then we 310 00:16:08,600 --> 00:16:13,640 Speaker 3: have some virtual power plants that aggregate many small things 311 00:16:13,680 --> 00:16:16,840 Speaker 3: like batteries and EV chargers and in some cases even 312 00:16:16,920 --> 00:16:20,560 Speaker 3: things like a really small gas turbine that's sitting at 313 00:16:20,600 --> 00:16:25,560 Speaker 3: the distribution level. At the moment, the amount of money 314 00:16:25,600 --> 00:16:29,400 Speaker 3: to be made is it's not huge volumes yet because 315 00:16:29,440 --> 00:16:32,640 Speaker 3: the overall contracted volumes are quite small. But we are 316 00:16:32,720 --> 00:16:37,800 Speaker 3: seeing that in comparison with, for example, the payments that 317 00:16:38,160 --> 00:16:42,000 Speaker 3: the transmission system operator are doing to tell wind power 318 00:16:42,080 --> 00:16:43,960 Speaker 3: to shut off. This is happening in the UK and 319 00:16:44,000 --> 00:16:48,280 Speaker 3: also in Germany, where there's at times so much wind 320 00:16:48,320 --> 00:16:51,160 Speaker 3: generation that there's not enough capacity on the power grid 321 00:16:51,200 --> 00:16:53,720 Speaker 3: to transport it, and the wind farms are being paid 322 00:16:53,760 --> 00:16:56,080 Speaker 3: quite a bit to be turned off. And if we're 323 00:16:56,120 --> 00:16:59,400 Speaker 3: comparing the price of that with the price of these 324 00:16:59,400 --> 00:17:03,600 Speaker 3: local flex ability solutions, it's competitive, so we think there's 325 00:17:03,720 --> 00:17:06,399 Speaker 3: room for that to grow and can help both with 326 00:17:06,640 --> 00:17:10,840 Speaker 3: managing the grid and also with absorbing renewables locally so 327 00:17:10,880 --> 00:17:13,760 Speaker 3: you don't have to always transmit them over such long distances. 328 00:17:14,200 --> 00:17:17,480 Speaker 4: I think ultimately the goal here is to find more 329 00:17:17,520 --> 00:17:22,160 Speaker 4: economic outcomes for a system, right, and so curtailing renewables 330 00:17:22,400 --> 00:17:25,040 Speaker 4: is one tool we have in the toolbox, but it's 331 00:17:25,040 --> 00:17:27,239 Speaker 4: not always the most economic thing to do, and like 332 00:17:27,280 --> 00:17:29,560 Speaker 4: it could be that turning up load is actually a 333 00:17:29,600 --> 00:17:32,639 Speaker 4: more economic way of managing the system, and so having 334 00:17:32,680 --> 00:17:36,640 Speaker 4: that it actually will result in rates going down for consumers, 335 00:17:36,720 --> 00:17:39,200 Speaker 4: even though there will be other people who are making 336 00:17:39,240 --> 00:17:41,360 Speaker 4: money off of this. The other thing to note here 337 00:17:41,400 --> 00:17:44,480 Speaker 4: is fundamentally we're sitting in a power grid that needs 338 00:17:44,520 --> 00:17:47,840 Speaker 4: to be expanded basically across Europe. So we've done some 339 00:17:47,920 --> 00:17:51,800 Speaker 4: analysis internally we think that the capital expenditures on an 340 00:17:51,800 --> 00:17:55,119 Speaker 4: annual basis in Europe basically need to double by twenty thirty, 341 00:17:55,280 --> 00:17:57,400 Speaker 4: in large part to integrate a bunch of renewables, but. 342 00:17:57,359 --> 00:17:59,560 Speaker 2: Also to support an electrifying load. 343 00:17:59,800 --> 00:18:03,040 Speaker 4: So the buildout of this grid, you know, it's a 344 00:18:03,119 --> 00:18:05,720 Speaker 4: very difficult thing to do, and on the transmission system 345 00:18:05,760 --> 00:18:07,080 Speaker 4: we need to do it. We also need to do 346 00:18:07,119 --> 00:18:10,360 Speaker 4: it on the distribution grid. On the distribution grid, this 347 00:18:10,440 --> 00:18:13,879 Speaker 4: is in cities. We're talking about digging up every single 348 00:18:13,960 --> 00:18:17,119 Speaker 4: city street in some places, right in order to accommodate 349 00:18:17,160 --> 00:18:19,720 Speaker 4: heat pumps and evs like. This is quite an undertaking, 350 00:18:19,840 --> 00:18:22,520 Speaker 4: and so the role that flexibility can play in being 351 00:18:22,560 --> 00:18:25,880 Speaker 4: able to provide another tool other than putting. 352 00:18:25,520 --> 00:18:27,160 Speaker 2: In a power line is crucial. 353 00:18:27,200 --> 00:18:29,560 Speaker 4: And so part of what this is is deferring that 354 00:18:29,640 --> 00:18:33,000 Speaker 4: spend or maybe even foregoing the spend entirely in certain 355 00:18:33,000 --> 00:18:35,320 Speaker 4: regions if you can have a baseline of flexibility in 356 00:18:35,359 --> 00:18:39,000 Speaker 4: a larger region. And so, yes, like there's cash flows 357 00:18:39,000 --> 00:18:41,960 Speaker 4: that will go in different pockets, but fundamentally, right pairs 358 00:18:41,960 --> 00:18:45,000 Speaker 4: stand to benefit from a more efficient system that can 359 00:18:45,080 --> 00:18:46,760 Speaker 4: use flexibility comprehensively. 360 00:18:47,240 --> 00:18:50,560 Speaker 1: As we go about doing this and creating this more flexible, 361 00:18:50,680 --> 00:18:54,280 Speaker 1: more dynamic space for the grid, there's a necessity for 362 00:18:54,359 --> 00:18:58,200 Speaker 1: more enhanced technology and those companies are new entrants into 363 00:18:58,200 --> 00:19:00,199 Speaker 1: this space. Can you talk a little bit about the 364 00:19:00,280 --> 00:19:02,639 Speaker 1: different types of technology that are really going to be 365 00:19:02,720 --> 00:19:04,960 Speaker 1: required in order for this to really take off. 366 00:19:05,400 --> 00:19:06,359 Speaker 2: Yeah, that's a great question. 367 00:19:06,800 --> 00:19:10,240 Speaker 4: So doing all of this requires new technologies, right, and 368 00:19:10,560 --> 00:19:11,880 Speaker 4: control centers. 369 00:19:11,520 --> 00:19:13,440 Speaker 2: Are already quite modern places. 370 00:19:13,560 --> 00:19:16,480 Speaker 4: And like there's a certain prudence that's needed in modernizing 371 00:19:16,480 --> 00:19:18,840 Speaker 4: a control center because ultimately these are costs that get 372 00:19:18,920 --> 00:19:21,879 Speaker 4: again passed down to rate pairs, and so each expenditure 373 00:19:21,920 --> 00:19:24,159 Speaker 4: is incurred slowly. But there's a number of systems that 374 00:19:24,200 --> 00:19:28,200 Speaker 4: are needed to really realize this new form of flexibility 375 00:19:28,200 --> 00:19:29,920 Speaker 4: that's so decentralized. 376 00:19:30,080 --> 00:19:32,800 Speaker 2: And so like the way I'd like to think about it. 377 00:19:32,560 --> 00:19:35,480 Speaker 4: Is, instead of wrestling like a one ton elephant, you're 378 00:19:35,480 --> 00:19:38,479 Speaker 4: actually wrestling like one ton of mice, right, And so 379 00:19:38,520 --> 00:19:40,199 Speaker 4: you need different tools to be able to. 380 00:19:40,480 --> 00:19:41,520 Speaker 2: Take on this challenge. 381 00:19:41,560 --> 00:19:44,920 Speaker 4: So one of which is an advanced distribution management system. 382 00:19:45,280 --> 00:19:47,760 Speaker 4: It's commonly termed as an eighty m ASS. So this 383 00:19:47,880 --> 00:19:50,080 Speaker 4: is in a control room. Imagine, you know, you need 384 00:19:50,119 --> 00:19:52,639 Speaker 4: some sort of blackscreen software like the Bloomberg terminal, but 385 00:19:52,680 --> 00:19:55,200 Speaker 4: this is what they're using to look at the distribution 386 00:19:55,359 --> 00:19:57,720 Speaker 4: grid and a lot of data is flowing into it, 387 00:19:57,840 --> 00:20:00,720 Speaker 4: much like the Bloomberg terminal itself, and people can and 388 00:20:00,720 --> 00:20:03,480 Speaker 4: observe what's going on and make decisions. Now within that 389 00:20:03,520 --> 00:20:08,480 Speaker 4: there is a specialized application called distributed Energy Resource Management 390 00:20:08,720 --> 00:20:12,840 Speaker 4: systems or dorms, and that's one such technology that's integrated 391 00:20:12,920 --> 00:20:17,000 Speaker 4: on an ADMS that allows these operators to control and 392 00:20:17,080 --> 00:20:19,320 Speaker 4: operate the great and use flexibility. So it's like a 393 00:20:19,359 --> 00:20:22,840 Speaker 4: function maybe on a Bloomberg terminal. And so the building 394 00:20:22,920 --> 00:20:25,959 Speaker 4: up of these software over time has really come from 395 00:20:26,000 --> 00:20:28,240 Speaker 4: the outside. There's been a lot of outside players that 396 00:20:28,320 --> 00:20:30,720 Speaker 4: have pioneered some of this software, and then over time 397 00:20:30,760 --> 00:20:33,399 Speaker 4: there's been acquisitions and a lot of the larger industrial 398 00:20:33,440 --> 00:20:35,879 Speaker 4: companies that have the credibility in the control room have 399 00:20:35,960 --> 00:20:37,080 Speaker 4: acquired and built. 400 00:20:36,840 --> 00:20:38,280 Speaker 2: Up this expertise themselves. 401 00:20:38,440 --> 00:20:40,920 Speaker 4: The other piece of technology that's crucial here is the 402 00:20:41,320 --> 00:20:45,040 Speaker 4: tendering platforms themselves. And rather than having like a single 403 00:20:45,080 --> 00:20:47,840 Speaker 4: tendering platform that everyone has anchored onto, there is a 404 00:20:47,920 --> 00:20:50,560 Speaker 4: sea of tendering platforms. Like in Great Britain there's a 405 00:20:50,640 --> 00:20:53,480 Speaker 4: number of them, the largest of which is peak Low, 406 00:20:53,560 --> 00:20:57,520 Speaker 4: which covers about sixty percent of the flexibility tenders, and 407 00:20:57,640 --> 00:21:01,000 Speaker 4: it has expanded to Italy and Portugal. Goal in Norway 408 00:21:01,000 --> 00:21:04,920 Speaker 4: and Sweden there's a platform called nodes which facilitates most 409 00:21:04,920 --> 00:21:07,520 Speaker 4: of the tenders. In July twenty twenty three, expand it 410 00:21:07,560 --> 00:21:12,119 Speaker 4: to Poland and the Dutch DSOs and TSOS developed a 411 00:21:12,160 --> 00:21:16,000 Speaker 4: platform called go packs in Enodies the French dso there's 412 00:21:16,000 --> 00:21:18,400 Speaker 4: another one there. So you have a number of these 413 00:21:18,480 --> 00:21:21,240 Speaker 4: kind of platforms that have evolved either within the utility 414 00:21:21,520 --> 00:21:24,600 Speaker 4: or outside of the utility framework itself. These platforms are 415 00:21:24,680 --> 00:21:27,440 Speaker 4: used to figure out what type of flexibility is needed, 416 00:21:27,440 --> 00:21:30,320 Speaker 4: what that product is, and then attracting the providers of 417 00:21:30,320 --> 00:21:33,080 Speaker 4: that flexibility to the utility to solve the problems. 418 00:21:33,480 --> 00:21:37,560 Speaker 3: I think it's interesting to compare the tendering platforms that 419 00:21:37,640 --> 00:21:40,960 Speaker 3: have been developed in house by utilities, where the French 420 00:21:40,960 --> 00:21:43,960 Speaker 3: distribution gride operator en IT this is one example, and 421 00:21:44,160 --> 00:21:47,320 Speaker 3: then compare that with for example, Pichlo in the UK. 422 00:21:47,760 --> 00:21:51,000 Speaker 3: And we've seen that Enidis was trying to in some 423 00:21:51,080 --> 00:21:54,800 Speaker 3: ways like reinvent the wheel and do some of the 424 00:21:54,840 --> 00:21:57,720 Speaker 3: things that the UK had already sort of stumbled on, 425 00:21:57,880 --> 00:22:00,760 Speaker 3: and they kind of went through that same pro and 426 00:22:01,119 --> 00:22:04,080 Speaker 3: in their first attempts of tenders they didn't get much 427 00:22:04,119 --> 00:22:07,760 Speaker 3: participation at all, and part of it was because the 428 00:22:07,840 --> 00:22:10,439 Speaker 3: way to sign up to these tenders was just so 429 00:22:10,600 --> 00:22:14,280 Speaker 3: complicated that you didn't get the participation. Then, on the 430 00:22:14,320 --> 00:22:17,520 Speaker 3: other hand, actors like PICCLO and nodes have kind of 431 00:22:17,600 --> 00:22:20,800 Speaker 3: learned a good way to run these tenders in one market, 432 00:22:20,880 --> 00:22:24,680 Speaker 3: and then they're like exporting that technology platform and also 433 00:22:25,080 --> 00:22:28,120 Speaker 3: the knowledge about how to run these tenders and markets 434 00:22:28,160 --> 00:22:31,240 Speaker 3: to other countries. And yeah, we've seen that as a driver. 435 00:22:31,720 --> 00:22:33,920 Speaker 1: How important are the tenders and kind of how much 436 00:22:33,920 --> 00:22:36,160 Speaker 1: of the market are they actually involved with. 437 00:22:36,680 --> 00:22:40,000 Speaker 3: I think the tenders are the start of the market, right. 438 00:22:40,280 --> 00:22:43,199 Speaker 3: So typically we sometimes use the word tenders when we 439 00:22:43,240 --> 00:22:45,640 Speaker 3: mean longer term contracts, and then we use the word 440 00:22:45,760 --> 00:22:49,359 Speaker 3: market when we're talking about trading say one day ahead 441 00:22:49,520 --> 00:22:52,919 Speaker 3: or one week ahead. But overall, in some sense is 442 00:22:52,960 --> 00:22:56,320 Speaker 3: the same thing. It's just the timeframe of how long 443 00:22:56,600 --> 00:22:59,639 Speaker 3: you lock in a price for. But in any case, 444 00:23:00,119 --> 00:23:04,280 Speaker 3: for a flexibility market to work, you need some type 445 00:23:04,320 --> 00:23:08,840 Speaker 3: of marketplace where all these different players can look at 446 00:23:08,880 --> 00:23:12,119 Speaker 3: what's offered in terms of contracts, in terms of locations, 447 00:23:12,240 --> 00:23:15,240 Speaker 3: in terms of kind of size of the units you 448 00:23:15,320 --> 00:23:18,640 Speaker 3: need to have, and then in an easy way bid 449 00:23:18,680 --> 00:23:22,240 Speaker 3: into that. And I think that's sometimes a challenge for 450 00:23:22,440 --> 00:23:25,720 Speaker 3: the new types of service providers in the flexibility space, 451 00:23:25,800 --> 00:23:29,199 Speaker 3: for example, the virtual power plants, is how to navigate 452 00:23:29,480 --> 00:23:33,560 Speaker 3: these type of markets in many different countries if everyone's 453 00:23:33,640 --> 00:23:35,760 Speaker 3: kind of doing it in their own way. So at 454 00:23:35,800 --> 00:23:38,600 Speaker 3: the transmission grid level, so much of this has been 455 00:23:38,760 --> 00:23:44,360 Speaker 3: standardized through many years of collaboration between transmission system operators 456 00:23:44,400 --> 00:23:48,240 Speaker 3: in Europe, but at the distribution grid level, in many ways, 457 00:23:48,400 --> 00:23:51,160 Speaker 3: everyone is kind of still doing their own thing, and 458 00:23:51,200 --> 00:23:54,720 Speaker 3: I think for this to really scale in like a 459 00:23:54,800 --> 00:23:58,399 Speaker 3: smooth way, some type of standardization would make things a 460 00:23:58,400 --> 00:23:59,760 Speaker 3: lot easier for the industry. 461 00:24:00,320 --> 00:24:01,960 Speaker 1: We've gone through a lot of examples that are all 462 00:24:02,000 --> 00:24:03,960 Speaker 1: based in Europe. Is there anywhere else in the world 463 00:24:04,040 --> 00:24:06,280 Speaker 1: that's looking at this or is this is Europe essentially 464 00:24:06,359 --> 00:24:08,000 Speaker 1: the sandbox for everybody else right now? 465 00:24:08,400 --> 00:24:11,480 Speaker 3: So we've looked at this closely for Europe. But we 466 00:24:11,520 --> 00:24:14,480 Speaker 3: also know that Australia is doing quite a bit on 467 00:24:14,680 --> 00:24:19,119 Speaker 3: local flexibility markets. They have, again a lot of distributed 468 00:24:19,160 --> 00:24:22,439 Speaker 3: solar resources, which makes it a good good market to 469 00:24:22,440 --> 00:24:25,719 Speaker 3: do this kind of thing. Piclow has also expanded their 470 00:24:25,760 --> 00:24:28,639 Speaker 3: services to the US, so they're running some tenders in 471 00:24:28,720 --> 00:24:31,960 Speaker 3: New York. So Europe is not the only place where 472 00:24:32,000 --> 00:24:35,760 Speaker 3: it's being done. But we see these markets starting to 473 00:24:35,800 --> 00:24:38,760 Speaker 3: pop up in places where you're starting to have a 474 00:24:38,800 --> 00:24:42,560 Speaker 3: lot of distributed resources. So in countries that have been 475 00:24:42,560 --> 00:24:45,919 Speaker 3: a bit slower with moving with their energy transition or 476 00:24:46,240 --> 00:24:49,600 Speaker 3: they're just relying on you know, old fashioned hydro power 477 00:24:49,640 --> 00:24:53,160 Speaker 3: to decarbonize, there's not as much need for this type 478 00:24:53,200 --> 00:24:53,720 Speaker 3: of innovation. 479 00:24:54,280 --> 00:24:57,600 Speaker 1: I keep asking questions about how it's going and for examples, 480 00:24:57,640 --> 00:24:59,719 Speaker 1: and what I really want to know is what's going 481 00:24:59,760 --> 00:25:02,520 Speaker 1: to hap and in the future. So how big could 482 00:25:02,560 --> 00:25:04,560 Speaker 1: this get and how important of a role could it 483 00:25:04,600 --> 00:25:08,320 Speaker 1: really play in optimizing our energy system. 484 00:25:08,640 --> 00:25:11,680 Speaker 4: So we've done some analysis at b and EF using 485 00:25:11,680 --> 00:25:14,720 Speaker 4: our net zero scenario, and so I mentioned that today 486 00:25:14,840 --> 00:25:18,080 Speaker 4: it's about zero point zero zero one percent of annual 487 00:25:18,080 --> 00:25:20,840 Speaker 4: power demand. Based on the amount of flexibility we see 488 00:25:21,080 --> 00:25:23,760 Speaker 4: being necessary in our net zero scenario, we think that 489 00:25:23,840 --> 00:25:26,639 Speaker 4: these markets could be zero point one to zero point 490 00:25:26,720 --> 00:25:30,000 Speaker 4: two percent of annual power demand by twenty thirty. 491 00:25:30,240 --> 00:25:31,880 Speaker 2: So that's not too far away. So it'd be ten 492 00:25:31,920 --> 00:25:34,280 Speaker 2: times the current levels. That's like somewhere between. 493 00:25:34,000 --> 00:25:36,760 Speaker 4: Four to eight tarrawa hours rather than the six gig 494 00:25:36,760 --> 00:25:38,640 Speaker 4: of what hours that I had mentioned earlier, with. 495 00:25:38,640 --> 00:25:42,040 Speaker 1: That net zero scenario essentially operating under the premise that 496 00:25:42,080 --> 00:25:44,640 Speaker 1: we reach at zero by twenty fifty. So what must 497 00:25:44,680 --> 00:25:46,959 Speaker 1: be true in order for us to get there and 498 00:25:47,080 --> 00:25:48,760 Speaker 1: kind of seeing that path forward. 499 00:25:49,000 --> 00:25:52,280 Speaker 4: Yeah, so the scenario is a fairly ambitious scenario that's 500 00:25:52,320 --> 00:25:55,720 Speaker 4: paras aligned. It reaches less than two degrees sea of warming, 501 00:25:56,000 --> 00:25:58,840 Speaker 4: and what it really does is also have a steep 502 00:25:59,040 --> 00:26:03,240 Speaker 4: rise in renewable deployment this decade. And what accompanies that 503 00:26:03,080 --> 00:26:05,840 Speaker 4: is a need for this flexibility, because as you scale 504 00:26:05,960 --> 00:26:08,879 Speaker 4: up wind and solar projects, you end up creating a 505 00:26:08,960 --> 00:26:11,720 Speaker 4: need for flexibility that needs to be met elsewhere, both 506 00:26:11,760 --> 00:26:13,840 Speaker 4: at a system level because of the intermittency of this 507 00:26:13,880 --> 00:26:16,399 Speaker 4: power generation, but also at a local level because you 508 00:26:16,480 --> 00:26:19,880 Speaker 4: often end up putting these facilities in locations that are 509 00:26:19,880 --> 00:26:23,520 Speaker 4: clustered together. So think of the north of the Great Brittain, 510 00:26:23,560 --> 00:26:25,800 Speaker 4: Scotland in the north of Germany. So you end up 511 00:26:25,840 --> 00:26:29,480 Speaker 4: with these clusters of wind projects and then creating congestion 512 00:26:29,560 --> 00:26:31,840 Speaker 4: issues that need to be resolved, and this form of 513 00:26:31,840 --> 00:26:34,240 Speaker 4: flexibility is part of the toolkit that can help solve 514 00:26:34,240 --> 00:26:37,280 Speaker 4: those problems. So this is a net zero scenario output 515 00:26:37,520 --> 00:26:39,439 Speaker 4: that shows kind of a bookend of how large this 516 00:26:39,520 --> 00:26:41,959 Speaker 4: market could get in the near term. Even then, like 517 00:26:42,160 --> 00:26:45,560 Speaker 4: it's still less than the size of the transmission market today. 518 00:26:45,720 --> 00:26:48,840 Speaker 4: So these numbers aren't unfathomable, so to say that the 519 00:26:49,119 --> 00:26:52,440 Speaker 4: local flexibility on the distribution grid is still less than 520 00:26:52,480 --> 00:26:55,440 Speaker 4: but getting into the realm of the transmission congestion market. 521 00:26:55,840 --> 00:26:59,399 Speaker 1: So keeping on thinking about the future, as this is 522 00:26:59,400 --> 00:27:02,600 Speaker 1: a space that is is actively changing, what are some 523 00:27:02,640 --> 00:27:04,959 Speaker 1: of the ways you think that these markets might evolve 524 00:27:05,040 --> 00:27:05,879 Speaker 1: as we go forward. 525 00:27:06,240 --> 00:27:09,280 Speaker 4: I think the price of local flexibility is an interesting 526 00:27:09,320 --> 00:27:13,320 Speaker 4: thing to think about. So presently it can vary quite 527 00:27:13,320 --> 00:27:17,320 Speaker 4: a bit, right because these markets aren't necessarily deep, and 528 00:27:17,359 --> 00:27:21,000 Speaker 4: so we've seen prices ranging on a monthly basis between 529 00:27:21,200 --> 00:27:25,320 Speaker 4: sixty four to sixteen hundred dollars per mega wad hour, 530 00:27:25,400 --> 00:27:27,600 Speaker 4: so it's quite a wide range. I think the average 531 00:27:27,640 --> 00:27:30,159 Speaker 4: was around four hundred if you took every single monthly 532 00:27:30,240 --> 00:27:33,480 Speaker 4: data point. Over time, we think prices will be pushed 533 00:27:33,520 --> 00:27:36,600 Speaker 4: down as the number of resources become available to markets 534 00:27:36,600 --> 00:27:39,320 Speaker 4: become more rich, and the price of flexibility could be 535 00:27:39,400 --> 00:27:42,040 Speaker 4: much lower than one hundred dollars per mega wild hour. 536 00:27:42,400 --> 00:27:44,360 Speaker 4: One other thing that we kind of notice about the evolution, 537 00:27:44,680 --> 00:27:46,399 Speaker 4: and we've kind of alluded to this, is that the 538 00:27:46,480 --> 00:27:48,959 Speaker 4: role that ebs will play, and we think electric vehicles 539 00:27:48,960 --> 00:27:52,200 Speaker 4: are going to be important part of the future flexibility landscape. 540 00:27:52,240 --> 00:27:56,119 Speaker 4: So it's interesting because fossil fuels are competing against electric 541 00:27:56,240 --> 00:27:58,440 Speaker 4: vehicles on the road, but they're also going to ultimately 542 00:27:58,480 --> 00:28:02,040 Speaker 4: compete against them in the flexibility landscape because right now, 543 00:28:02,080 --> 00:28:05,679 Speaker 4: the king of flexibility is actually a gas turbine on 544 00:28:05,720 --> 00:28:08,800 Speaker 4: a power system. That's where most markets are getting their flexibility. 545 00:28:08,840 --> 00:28:11,240 Speaker 4: But if we start shifting towards electric vehicles, you know, 546 00:28:11,280 --> 00:28:13,760 Speaker 4: there's one more thing that vehicles are kind of coming 547 00:28:13,760 --> 00:28:16,040 Speaker 4: after gas with. And so when we look at the 548 00:28:16,119 --> 00:28:18,200 Speaker 4: data from the UK, which again is you know, it's 549 00:28:18,240 --> 00:28:22,040 Speaker 4: still early data, what we found was that the electric 550 00:28:22,119 --> 00:28:26,359 Speaker 4: vehicles held the largest amount of the flexibility contracts in 551 00:28:26,440 --> 00:28:29,879 Speaker 4: terms of capacity. So there's about five hundred megawatts of 552 00:28:29,920 --> 00:28:33,240 Speaker 4: flexibility contracts awarded to electric vehicles, and if you look 553 00:28:33,280 --> 00:28:35,280 Speaker 4: at how much are they being used, then yes, you'll 554 00:28:35,280 --> 00:28:38,000 Speaker 4: see that gas is actually being called on more regularly 555 00:28:38,280 --> 00:28:40,840 Speaker 4: than evs, even though more evs. 556 00:28:40,440 --> 00:28:41,680 Speaker 2: Have been contracted. 557 00:28:41,760 --> 00:28:44,000 Speaker 4: And that's partly because gas is just available when you 558 00:28:44,040 --> 00:28:47,160 Speaker 4: need it, it's up and running, it's reliable, and with evs, 559 00:28:47,280 --> 00:28:50,040 Speaker 4: even though you've contracted them, you're not guaranteed that you're 560 00:28:50,080 --> 00:28:52,160 Speaker 4: going to be able to deliver the flexibility when you 561 00:28:52,240 --> 00:28:54,760 Speaker 4: need it from that capacity. But as the fleet of 562 00:28:54,800 --> 00:28:57,760 Speaker 4: evs grows and becomes you know, these kind of mind 563 00:28:57,800 --> 00:29:01,240 Speaker 4: boggling numbers of capacity that we expected be that will 564 00:29:01,240 --> 00:29:03,840 Speaker 4: only make it a more deeper resource that can be 565 00:29:03,960 --> 00:29:06,320 Speaker 4: drawn against to provide that flexibility. So we think that 566 00:29:06,360 --> 00:29:08,320 Speaker 4: this is going to be an important resource to watch 567 00:29:08,400 --> 00:29:09,120 Speaker 4: as we go forward. 568 00:29:09,240 --> 00:29:12,400 Speaker 1: I mean, because evs are ultimately batteries, and I do 569 00:29:12,640 --> 00:29:16,480 Speaker 1: expect that that predictability is really important. So then are 570 00:29:16,480 --> 00:29:19,400 Speaker 1: they contracting mostly with companies who actually have fleets of 571 00:29:19,400 --> 00:29:22,000 Speaker 1: commercial vehicles or is it in consumer isn't trying to 572 00:29:22,000 --> 00:29:23,560 Speaker 1: do the price signals there, So. 573 00:29:23,640 --> 00:29:28,360 Speaker 3: Usually the DSO is unlikely to contract directly with the consumer, 574 00:29:28,480 --> 00:29:31,720 Speaker 3: so it would be done either through their utility so 575 00:29:31,800 --> 00:29:36,280 Speaker 3: their electricity supplier, or through a separate charging operator. 576 00:29:36,440 --> 00:29:39,760 Speaker 1: So that's pretty unpredictable because you don't know how people's 577 00:29:39,760 --> 00:29:42,239 Speaker 1: preferences will change, or there could be holidays in there. 578 00:29:42,240 --> 00:29:43,840 Speaker 1: I guess you have to look at the entire year 579 00:29:43,920 --> 00:29:45,960 Speaker 1: and see how people move around and have all that 580 00:29:46,000 --> 00:29:46,960 Speaker 1: backward looking data. 581 00:29:47,240 --> 00:29:50,560 Speaker 3: Yeah, exactly, And I think again that's where to some extent, 582 00:29:50,680 --> 00:29:55,000 Speaker 3: having large enough numbers, so as electric vehicles become more 583 00:29:55,000 --> 00:29:57,800 Speaker 3: and more popular, at some point there will be so 584 00:29:57,920 --> 00:30:00,200 Speaker 3: many of them that even if one doesn't show up, 585 00:30:00,360 --> 00:30:03,240 Speaker 3: you reach a point where it's sort of like statistically 586 00:30:03,440 --> 00:30:06,280 Speaker 3: quite likely that enough of them will show up. And 587 00:30:06,320 --> 00:30:10,160 Speaker 3: that's why it makes sense to operate chargers as a fleet. 588 00:30:10,360 --> 00:30:14,160 Speaker 3: And it gets technically challenging, of course, to do that 589 00:30:14,360 --> 00:30:17,440 Speaker 3: with so many different chargers. So I think we looked 590 00:30:17,440 --> 00:30:20,800 Speaker 3: at the five hundred megawatts that Sanjeet was talking about 591 00:30:20,840 --> 00:30:23,000 Speaker 3: in ev charging, I think that means something like forty 592 00:30:23,000 --> 00:30:26,400 Speaker 3: two fifty thousand electric vehicles, depending a bit on the 593 00:30:26,400 --> 00:30:29,400 Speaker 3: assumptions you make about the size of the charger. So 594 00:30:29,440 --> 00:30:33,360 Speaker 3: that's already a lot of coordination, and that's why you 595 00:30:33,400 --> 00:30:38,400 Speaker 3: need sophisticated technological solutions and software to make that possible. 596 00:30:38,440 --> 00:30:40,680 Speaker 3: But we're already seeing that happening to some extent. 597 00:30:41,200 --> 00:30:44,160 Speaker 1: So just another example of all of the different ways 598 00:30:44,240 --> 00:30:47,400 Speaker 1: that the different facets of the energy transition, all these 599 00:30:47,400 --> 00:30:51,400 Speaker 1: different industries really are coming together. Senji Felicia, thank you 600 00:30:51,480 --> 00:30:52,640 Speaker 1: very much for joining today. 601 00:30:52,800 --> 00:30:53,800 Speaker 3: Thank you for having us. 602 00:30:53,880 --> 00:30:54,200 Speaker 2: Thank you. 603 00:31:03,400 --> 00:31:06,520 Speaker 1: Today's episode of Switched On was produced by Cam Gray 604 00:31:06,720 --> 00:31:10,400 Speaker 1: with production assistance from Kamala Shelling. Bloomberg NIF is a 605 00:31:10,440 --> 00:31:13,560 Speaker 1: service provided by Bloomberg Finance LP and its affiliates. This 606 00:31:13,680 --> 00:31:16,360 Speaker 1: recording does not constitute, nor should it be construed, as 607 00:31:16,400 --> 00:31:20,280 Speaker 1: investment advice, investment recommendations, or a recommendation as to an 608 00:31:20,320 --> 00:31:23,520 Speaker 1: investment or other strategy. Bloomberg ANIF should not be considered 609 00:31:23,560 --> 00:31:26,880 Speaker 1: as information sufficient upon which to base an investment decision. 610 00:31:26,960 --> 00:31:29,960 Speaker 1: Neither Bloomberg Finance LP nor any of its affiliates makes 611 00:31:29,960 --> 00:31:33,720 Speaker 1: any representation or warranty as to the accuracy or completeness 612 00:31:33,720 --> 00:31:36,720 Speaker 1: of the information contained in this recording, and any liability 613 00:31:36,760 --> 00:31:39,440 Speaker 1: as a result of this recording is expressly disclaimed.