WEBVTT - Strained Power Grids Test Flexible Market Solution 0:00:00.400 --> 0:00:03.400 This is Dana Perkins and you're listening to Switched On. 0:00:03.880 --> 0:00:07.080 Each week on this show, we bring in different BNF 0:00:07.120 --> 0:00:09.800 analysts to talk about their research, and this week we're 0:00:09.840 --> 0:00:14.680 going to focus on grids, more specifically grid flexibility. It's 0:00:14.720 --> 0:00:17.680 no secret that power grids are strained in locations all 0:00:17.720 --> 0:00:21.200 over the world. Sometimes they're coping with aging infrastructure or 0:00:21.239 --> 0:00:25.439 additional capacity installations in the form of intermittent sources like solar, 0:00:25.680 --> 0:00:29.120 or changes to power demand resulting from more electric vehicles 0:00:29.160 --> 0:00:32.400 on the road, and often they're not very flexible and 0:00:32.440 --> 0:00:35.879 the technology to manage things can be lagging. In developed 0:00:35.920 --> 0:00:39.839 economies where blackouts are uncommon, we've come to expect access 0:00:39.840 --> 0:00:43.159 to power to be readily available whenever we want it, 0:00:43.520 --> 0:00:45.760 So today we're going to get into some of the 0:00:45.760 --> 0:00:49.040 things that utilities are doing to adapt and ensure that 0:00:49.040 --> 0:00:52.640 that remains possible. The solution being featured is the emergence 0:00:52.680 --> 0:00:57.400 of local flexibility markets. Sanjit Sangera leads bnaf's Grids and 0:00:57.520 --> 0:01:01.160 Utilities team, and he's joined today by Felicia Amanov, who 0:01:01.280 --> 0:01:04.640 is the lead author on a recent report titled Europe's 0:01:04.720 --> 0:01:09.840 Local Flexibility Markets aiding a strained grid BNF subscribers will 0:01:09.880 --> 0:01:12.600 be able to access the full report on BNF dot 0:01:12.640 --> 0:01:15.759 com or at BNF go on the Bloomberg terminal. If 0:01:15.760 --> 0:01:18.479 you want to hear more episodes or share this show 0:01:18.520 --> 0:01:21.480 with others, subscribe to this show and give us a review. 0:01:21.680 --> 0:01:26.080 But right now, let's start our conversation on local flexibility markets, 0:01:26.280 --> 0:01:29.440 what they are, where they are, and how significant of 0:01:29.480 --> 0:01:42.120 a solution they could become. Sanji, welcome to the show. 0:01:42.319 --> 0:01:43.759 Hi Danna, thank you for having me. 0:01:43.720 --> 0:01:45.240 And Felicia, thank you for being here. 0:01:45.400 --> 0:01:46.120 Great to be here. 0:01:46.400 --> 0:01:49.120 So we're here to talk about grid flexibility and some 0:01:49.280 --> 0:01:52.040 innovations on that side that have to do with markets. 0:01:52.080 --> 0:01:55.280 But before we get to the market flexibility end of things, 0:01:55.360 --> 0:01:57.040 we like to do a history lesson at the beginning 0:01:57.080 --> 0:02:00.480 of every show, which is how traditionally flexibility has been 0:02:00.520 --> 0:02:01.880 handled when it comes to the grid. 0:02:02.080 --> 0:02:02.280 Yeah. 0:02:02.320 --> 0:02:04.400 Sure, I think we need to maybe start with what 0:02:04.520 --> 0:02:07.120 the term flexibility means as well, because it's kind of 0:02:07.160 --> 0:02:08.120 an ambiguous term. 0:02:08.480 --> 0:02:10.720 Really, back to basics, Okay, here go, Yes, so. 0:02:10.919 --> 0:02:11.519 We'll start there. 0:02:11.560 --> 0:02:14.919 So, one of the critical challenges of operating a power 0:02:14.960 --> 0:02:18.760 system is balancing supply and demand. So an electrical power 0:02:18.760 --> 0:02:22.040 system has to be instantaneously balanced supply and demand all 0:02:22.080 --> 0:02:23.919 the time. And this is what a system operator, a 0:02:24.000 --> 0:02:26.280 grid operator, is spending much of their time doing. 0:02:26.360 --> 0:02:29.240 And they have to do this across all types. 0:02:28.960 --> 0:02:31.760 Of time ranges, so second to second, minute to minute, 0:02:31.760 --> 0:02:33.520 hour to hour, and they're looking even further out to 0:02:33.520 --> 0:02:35.240 make sure that they'll be able to do this. And 0:02:35.240 --> 0:02:37.360 they're also trying to do it both at a system level, 0:02:37.400 --> 0:02:39.920 so think of like the entire Great Britain power system, 0:02:40.000 --> 0:02:42.280 as well as at a kind of a local regional level. 0:02:42.320 --> 0:02:43.040 So they want to make. 0:02:42.960 --> 0:02:46.079 Sure that each region doesn't have too much power being 0:02:46.120 --> 0:02:48.480 produced or consumed, because what can happen then is the 0:02:48.520 --> 0:02:53.200 individual power lines supplying that region will get congested or overload, 0:02:53.240 --> 0:02:56.040 and that can cause issues with the failure of those equipments. 0:02:56.160 --> 0:02:57.960 So this is the game that we're in, right. 0:02:58.000 --> 0:03:01.320 We're trying to balance the power system cross time, cross space, 0:03:01.880 --> 0:03:06.160 and we're doing this constantly. Flexibility is the word that 0:03:06.200 --> 0:03:08.720 we use about how we're going to go about solving 0:03:08.760 --> 0:03:11.919 that problem, right, and so here we're talking about taking 0:03:11.960 --> 0:03:15.680 a generator and either taking its output the production of 0:03:15.720 --> 0:03:18.320 it up or down. We could take a point of 0:03:18.360 --> 0:03:21.639 consumption and maybe we could reduce it or even maybe 0:03:21.800 --> 0:03:24.440 ask it to be raised artificially at a point in time. 0:03:24.480 --> 0:03:26.800 And battery storage technology is in there too, somewhere in 0:03:26.800 --> 0:03:30.600 between generation and demand, and it could be charging or discharging. 0:03:30.680 --> 0:03:32.400 And so these are the tools that we have at 0:03:32.440 --> 0:03:36.160 our disposal. And historically, you know, most of the flexibility 0:03:36.240 --> 0:03:39.200 was being provided by generators, and not even just generators 0:03:39.400 --> 0:03:42.600 large clustered like the large generator sitting in a single spot, 0:03:42.720 --> 0:03:46.600 and so flexibility was highly centralized and consolidated. This is 0:03:46.640 --> 0:03:49.680 now changing, Like you know we've spoken here before, generation 0:03:49.760 --> 0:03:52.680 fleet is changing, and also consumption patterns are changing, and 0:03:52.760 --> 0:03:55.280 so where we're going to get flexibility from will also 0:03:55.640 --> 0:03:58.920 have to change. And so the rise of markets come 0:03:58.960 --> 0:04:02.120 about as a means of solving this problem of taking 0:04:02.160 --> 0:04:05.920 flexibility from a vast number of distributed assets and being 0:04:05.920 --> 0:04:09.200 able to solve challenges of flexibility both at a system and. 0:04:09.160 --> 0:04:09.960 A local level. 0:04:10.240 --> 0:04:13.200 Well you're talking about system versus local. Let's define that 0:04:13.360 --> 0:04:15.560 even further as well, because when I think about the 0:04:15.600 --> 0:04:18.360 system level, the system itself is getting more complex. We're 0:04:18.400 --> 0:04:21.640 adding a wider variety of different energy sources onto it, 0:04:21.680 --> 0:04:24.480 and things are being put in various different locations. Are 0:04:24.480 --> 0:04:28.120 we still talking about creating flexibility and complexity at the 0:04:28.160 --> 0:04:31.040 local level when it comes to working with utilities. Are 0:04:31.160 --> 0:04:33.919 we actually talking about individuals, So I'm thinking of a 0:04:33.960 --> 0:04:36.960 home generator or a home power wall that would then 0:04:37.080 --> 0:04:39.440 give them backup power or does it really just depend 0:04:39.480 --> 0:04:41.279 on whether or not there's a lot of solar and 0:04:41.279 --> 0:04:43.400 a feed in tariff in that particular market structure. 0:04:43.600 --> 0:04:46.560 So yeah, I think we're talking about both really, But 0:04:46.720 --> 0:04:50.599 what we think is most exciting is the distributed small stuff, 0:04:50.640 --> 0:04:53.800 and that can be people's homes. It can be rooftop 0:04:53.880 --> 0:04:56.400 solar and batteries in people's homes. It can be an 0:04:56.440 --> 0:05:00.520 electric vehicle charger, and even at a slightly larger level, 0:05:00.560 --> 0:05:03.840 it can be things like in an individual public charging 0:05:03.880 --> 0:05:07.039 station for cars. That's where we come into these new 0:05:07.120 --> 0:05:11.599 types of flexibility markets. So local flexibility markets are these 0:05:11.680 --> 0:05:16.160 markets that are run by distribution grid operators. So distribution 0:05:16.240 --> 0:05:19.239 grid operators are the guys that run the local grids 0:05:19.279 --> 0:05:21.880 that bring in the power into our homes. And as 0:05:21.920 --> 0:05:26.120 there's now more and more new low carbon technologies connecting 0:05:26.279 --> 0:05:29.440 at the low levels of the grid, the operators need 0:05:29.560 --> 0:05:32.360 new tools to tackle this. So it's all the rooftop PV, 0:05:32.640 --> 0:05:35.440 all the evs and things like heat pumps that are 0:05:35.480 --> 0:05:39.120 replacing gas boilers, and a market is just a way 0:05:39.279 --> 0:05:44.040 of paying someone to behave flexibily. You can kind of 0:05:44.320 --> 0:05:48.080 get different types of flexibility also, for example through a tariff, 0:05:48.160 --> 0:05:50.680 so someone can have a flexible tariff where during a 0:05:50.680 --> 0:05:52.960 certain time of the day your price is lower. But 0:05:53.120 --> 0:05:56.000 by doing it in a market mechanism, you can do 0:05:56.120 --> 0:06:00.160 more complex things, so you can create these situations where 0:06:00.200 --> 0:06:04.320 you can have both demand side flexibility and generation side 0:06:04.320 --> 0:06:07.359 flexibility play against each other. So I think a good 0:06:07.480 --> 0:06:10.920 example is found in the UK where one distribution grid 0:06:10.960 --> 0:06:14.240 operator is running a market where you can pay people 0:06:14.320 --> 0:06:17.200 to actually increase their consumption in the middle of the 0:06:17.279 --> 0:06:20.640 day when solar generation is high. How that market solves, 0:06:20.680 --> 0:06:23.200 How that price solves. It turns out that it's more 0:06:23.240 --> 0:06:27.039 expensive to pay people to increase their consumption then you 0:06:27.080 --> 0:06:31.120 could also instead pay the solar plant to stop generating. 0:06:31.320 --> 0:06:35.080 So you kind of have these two alternative solutions competing 0:06:35.120 --> 0:06:38.400 against each other on price, and whoever can provide it 0:06:38.640 --> 0:06:41.240 the service at the lowest cost gets the contract. 0:06:41.520 --> 0:06:43.640 So that's a great example, And you brought up some 0:06:43.680 --> 0:06:46.280 of the mechanisms that can be used in order to 0:06:46.320 --> 0:06:49.680 bring this to life, so flexibility through tariffs and a 0:06:50.000 --> 0:06:52.960 local flexibility market. There are a few other ways though, 0:06:53.000 --> 0:06:55.600 and some of them used more historically where these kind 0:06:55.600 --> 0:06:59.120 of bilateral contracts and maybe no longer fit for purpose. 0:06:59.160 --> 0:07:01.680 Given how come flex the system is? Can you talk 0:07:01.720 --> 0:07:05.760 about the role though, of regulation in flexibility and how 0:07:05.880 --> 0:07:08.400 that fits in with this whole universe in terms of 0:07:08.600 --> 0:07:12.000 how this actually happens, how flexibility comes to life. 0:07:12.280 --> 0:07:15.640 Regulatory models for flexibility have existed for some time, right, 0:07:15.720 --> 0:07:17.560 and so this is I would say it, so you 0:07:17.600 --> 0:07:20.680 can mandate a certain amount of flexibility in grid codes 0:07:20.840 --> 0:07:23.920 that every single load customer that connects to a grid 0:07:24.120 --> 0:07:26.480 or any type of generator connection that connects to the. 0:07:26.480 --> 0:07:28.239 Grid will also have to follow. 0:07:28.440 --> 0:07:30.840 And so this would this plays a certain role, right, 0:07:30.880 --> 0:07:33.800 So this is kind of a minimum boundary of flexibility 0:07:33.800 --> 0:07:35.960 that everyone should have to provide if they want to 0:07:35.960 --> 0:07:38.960 be able to be part of the integrated system. So traditionally, 0:07:39.280 --> 0:07:42.600 for generators, this is kind of like it's a droop setting. 0:07:42.640 --> 0:07:44.160 So this is maybe a bit of a technical term, 0:07:44.240 --> 0:07:47.320 but generators have this droup characteristic such that if they're 0:07:47.320 --> 0:07:49.680 connected on the power system, their output has to be 0:07:49.680 --> 0:07:53.160 able to slide up and down based on the frequency 0:07:53.440 --> 0:07:55.280 of the power system that they're connected to, and. 0:07:55.240 --> 0:07:55.720 This was the way. 0:07:55.800 --> 0:07:57.920 This is a certain type of flexibility that they every 0:07:57.960 --> 0:08:00.280 single generator that's connected to the system to. 0:08:00.200 --> 0:08:01.120 Be able to provide. 0:08:01.160 --> 0:08:04.240 Otherwise the system is just not reliable. But this was 0:08:04.360 --> 0:08:08.400 quite significant when you'd have large consolidated generators providing this 0:08:08.480 --> 0:08:11.360 type of service, and it's diminished over time as we've 0:08:11.360 --> 0:08:14.480 gone to more distributed resources, and so you end up, 0:08:14.600 --> 0:08:18.480 you know, is regulatory mandated grid codes the right way 0:08:18.680 --> 0:08:21.920 of getting flexibility on a system as we move forward, 0:08:22.160 --> 0:08:23.680 right because you know, we can talk about it being 0:08:23.680 --> 0:08:27.240 contracted through these codes, through tariffs, and through markets. So 0:08:27.400 --> 0:08:30.600 I think a blended approach is ultimately what we're seeing evolve. 0:08:30.680 --> 0:08:33.880 Like different markets have gone down different paths, and markets 0:08:33.880 --> 0:08:36.640 are kind of a newer form of bringing flexibility to 0:08:36.800 --> 0:08:38.600 the system that we're seeing used more and more. 0:08:38.840 --> 0:08:41.440 So the market's this newer form of getting things done 0:08:41.600 --> 0:08:43.960 in this space. Let's talk about some examples. So you 0:08:44.000 --> 0:08:46.680 brought up the UK. Where else is this being done 0:08:47.080 --> 0:08:48.400 and how are they implementing it? 0:08:48.840 --> 0:08:52.880 So the UK has been one of the first European 0:08:52.880 --> 0:08:57.840 countries to start implementing this concept, so already in twenty nineteen, 0:08:58.080 --> 0:09:02.520 local distribution grid companies here we're running trial tenders to 0:09:02.880 --> 0:09:05.920 get these contracts in place, so for example, sign a 0:09:05.960 --> 0:09:09.720 contract with a number of electric vehicle charging operators to 0:09:09.760 --> 0:09:14.439 get those chargers to turn down stop charging at times requested. 0:09:14.640 --> 0:09:17.560 But we're seeing this increasingly in other countries as well. 0:09:17.720 --> 0:09:21.800 So the Netherlands is an example of a distribution grid 0:09:21.840 --> 0:09:25.360 that is already facing a lot of grid congestion, so 0:09:25.400 --> 0:09:28.000 that means that a lot of the time there is 0:09:28.120 --> 0:09:31.760 more power trying to flow through those lines than the 0:09:31.800 --> 0:09:35.840 lines can physically accommodate. So then to keep the grid 0:09:35.840 --> 0:09:39.040 in a safe state, they needed solutions, so they started 0:09:39.160 --> 0:09:43.320 implementing a type of local flexibility market which was actually 0:09:43.400 --> 0:09:47.560 tied to the wholesale market for power, but the design 0:09:47.640 --> 0:09:51.760 of this market was actually again more geared towards large 0:09:51.960 --> 0:09:57.320 established whether it was generators or consumers such as industrial consumers, 0:09:57.400 --> 0:10:01.680 and we haven't seen that much small, local, even residential 0:10:01.840 --> 0:10:05.120 stuff being contracted through this market. But last year they 0:10:05.320 --> 0:10:08.800 changed their policy and now we're starting to see more 0:10:09.040 --> 0:10:12.480 flexibility contracts being implemented in the Netherlands as well. In 0:10:12.520 --> 0:10:16.840 the Nordics, so mainly Norway and Sweden, they're also running 0:10:16.840 --> 0:10:23.200 local flexibility markets there. The challenge is more on cold winters, 0:10:23.320 --> 0:10:25.640 so you have a lot of electric heating in Norway 0:10:25.679 --> 0:10:29.360 and Sweden, and as people are also now starting to have, 0:10:29.600 --> 0:10:31.920 say an EV charger, you want to make sure that 0:10:32.000 --> 0:10:35.160 they're not running their heat pump at max capacity at 0:10:35.200 --> 0:10:37.880 the same time as they're charging their EV. So in 0:10:37.920 --> 0:10:40.800 the Nordics, these markets are typically contracting for just a 0:10:40.840 --> 0:10:44.080 few months a year, and in many places in Europe 0:10:44.160 --> 0:10:47.400 what's becoming a real challenge is how to manage the 0:10:47.679 --> 0:10:52.680 peaky generation of solar and in particular rooftop solar. If 0:10:52.679 --> 0:10:54.280 people are not at home in the middle of the 0:10:54.360 --> 0:10:57.800 day and all this power is blasted into the distribution grid, 0:10:58.000 --> 0:11:00.600 you kind of want to have some market mechan to 0:11:00.720 --> 0:11:04.280 incentivice that either being stored in batteries or that your 0:11:04.400 --> 0:11:06.880 neighbor can consume that that's soldar. 0:11:07.320 --> 0:11:09.440 So to put in context, and because you said this 0:11:09.480 --> 0:11:11.280 is a newer market, so we're just kind of getting 0:11:11.280 --> 0:11:14.840 started here about how much of power demand is actually 0:11:14.880 --> 0:11:18.240 being treated this way in Europe when it comes to flexibility. 0:11:18.600 --> 0:11:22.840 So currently the volumes dispatched are quite small. It's about 0:11:22.880 --> 0:11:26.840 six gigawatt hours of flexibility in a twelve month period 0:11:27.000 --> 0:11:29.520 stretching across twenty twenty two and twenty twenty three when 0:11:29.520 --> 0:11:31.480 we kind of pull the data for each of these 0:11:31.520 --> 0:11:33.440 markets that are doing it, and so to put that 0:11:33.480 --> 0:11:38.520 into context, that's zero point zero zero one percent of 0:11:38.559 --> 0:11:41.520 annual power demand in the countries that are actually doing 0:11:41.559 --> 0:11:44.480 this flex But thought of another way, you know, they're 0:11:44.559 --> 0:11:48.040 probably around twenty thousand assets that have been activated to 0:11:48.080 --> 0:11:50.280 provide flexibility over the course of the year. And so 0:11:50.320 --> 0:11:53.200 these are these are small markets today, and especially if 0:11:53.240 --> 0:11:55.400 you compare them to the size of like the transmission 0:11:55.480 --> 0:11:58.400 congestion markets that are much more developed and have been 0:11:58.440 --> 0:12:01.160 around for a while. They are small, but they are growing. 0:12:01.520 --> 0:12:04.920 So that's the question, it's how is it going? Is 0:12:04.960 --> 0:12:07.439 this going to be something that other countries are looking 0:12:07.480 --> 0:12:09.920 at and then going to in theory adopt in the future, 0:12:10.000 --> 0:12:12.560 because really that's it's a bit of an experiment, right 0:12:12.640 --> 0:12:16.080 and that is what happens. The first movers essentially work 0:12:16.080 --> 0:12:18.600 out all the kinks and uncover the things that need 0:12:18.640 --> 0:12:21.320 to be fixed and have we gotten through the working 0:12:21.360 --> 0:12:23.400 out the kinks phase or have there been a number 0:12:23.480 --> 0:12:25.360 of things that kind of come up in these different 0:12:25.400 --> 0:12:28.640 countries that you think will stand in between wider adoption. 0:12:28.760 --> 0:12:32.040 First, I think we haven't still quite gotten over the 0:12:32.080 --> 0:12:35.160 part where all the kinks are being worked out, but 0:12:35.640 --> 0:12:39.360 there's like constant improvement. And in the markets where this 0:12:39.480 --> 0:12:41.400 has been done for a number of years, such as 0:12:41.440 --> 0:12:44.880 the UK, we've seen the volumes increasing every year and 0:12:45.040 --> 0:12:49.080 also the design of the contracts changing. And yeah, one 0:12:49.120 --> 0:12:51.960 of the things that's been happening is in the first 0:12:52.200 --> 0:12:55.600 trial runs they put in these really long term contracts 0:12:55.760 --> 0:12:58.840 so you would get kind of security for five years 0:12:58.880 --> 0:13:02.160 forward that if you were an EV charging operator and 0:13:02.440 --> 0:13:05.120 you've responded to the calls to provide flexibility, you would 0:13:05.120 --> 0:13:07.640 get paid a certain amount. But that turned out to 0:13:07.679 --> 0:13:12.319 be quite hard to navigate, both from the distribution grid side, 0:13:12.400 --> 0:13:15.040 who's the buyer of the service, and from the EV 0:13:15.360 --> 0:13:19.240 charging provider side, because the EV charging provider doesn't know 0:13:19.280 --> 0:13:21.719 exactly how many chargers and where they will have them 0:13:21.720 --> 0:13:24.040 in five years, and the grid operator might not know 0:13:24.080 --> 0:13:27.360 exactly which power line can be congested. So I think 0:13:27.360 --> 0:13:30.560 that's like a big challenge on how to design a 0:13:30.720 --> 0:13:34.360 good local flexibility market is how do you define how 0:13:34.400 --> 0:13:37.800 local you should go, Because if you're on just one street, 0:13:38.120 --> 0:13:40.320 it's probably a bit too small. And if that's one 0:13:40.360 --> 0:13:42.880 street is so congested that you can't deal with it, 0:13:42.960 --> 0:13:45.559 you probably just need to put in a new power line. 0:13:45.600 --> 0:13:49.280 But when we're talking like a slightly larger area, say 0:13:49.280 --> 0:13:52.880 a neighborhood, you could already start having enough assets that 0:13:53.000 --> 0:13:56.800 can compete against each other and provide flexibility at a 0:13:56.840 --> 0:14:01.280 sensible price. But in Germany, when they try local flexibility 0:14:01.280 --> 0:14:05.400 markets in twenty twenty one, they didn't see high enough 0:14:05.480 --> 0:14:08.960 volumes to become comfortable that these markets could work. So 0:14:09.080 --> 0:14:12.400 what they saw was that only a small number of 0:14:12.440 --> 0:14:15.439 assets bid in. So whether that's small batteries or again 0:14:15.480 --> 0:14:18.480 my favorite example, electric vehicles, if you have just a 0:14:18.520 --> 0:14:21.440 couple of them, they can essentially dictate the price and 0:14:21.640 --> 0:14:24.880 it ends up not being the most cost effective solution. 0:14:25.320 --> 0:14:29.680 I personally think that was just kind of feature of 0:14:29.720 --> 0:14:32.720 it being so new, and I think click Germany maybe 0:14:32.720 --> 0:14:35.360 gave up a little bit to it too early. And yeah, 0:14:35.400 --> 0:14:37.400 it would be interesting to see if they they give 0:14:37.480 --> 0:14:41.640 local flexibility markets a chance at some later point. Overall 0:14:41.680 --> 0:14:45.920 EU legislation is kind of pushing towards this direction because 0:14:45.960 --> 0:14:49.640 it's seen as a fair way of remunerating either people 0:14:49.720 --> 0:14:53.520 or companies who contribute to the sustainable operation of the 0:14:53.560 --> 0:14:56.680 power grids. And I think a last challenge to really 0:14:56.720 --> 0:15:00.840 get those volumes and get that competition, I think need automation. 0:15:01.200 --> 0:15:04.320 So especially when you're relying on the really small stuff 0:15:04.360 --> 0:15:07.960 like residential flexibility, Like you don't want to force people 0:15:08.000 --> 0:15:11.240 to like sit in the dark or go hungry to 0:15:11.280 --> 0:15:15.320 provide flexibility you want to have, Like I think just 0:15:15.360 --> 0:15:17.680 an EV charger is just the perfect thing because your 0:15:17.720 --> 0:15:19.400 car is just going to be plugged in for so 0:15:19.520 --> 0:15:23.400 long anyways. And if you have software controlling the charging 0:15:23.480 --> 0:15:25.160 and you put in a time when you want your 0:15:25.200 --> 0:15:27.440 car to be fully charged, you don't really care when 0:15:27.440 --> 0:15:29.840 that's happening. You don't have to worry about it, and 0:15:30.040 --> 0:15:32.520 your car can just help the power system, you can 0:15:32.520 --> 0:15:34.800 get a bit of money back, and your life isn't 0:15:34.800 --> 0:15:37.200 disrupted in any way. So I think that type of 0:15:37.240 --> 0:15:39.800 automation is where we need to move forward this to 0:15:39.840 --> 0:15:40.520 really work out. 0:15:40.920 --> 0:15:43.400 So I see how this works with the owner of 0:15:43.400 --> 0:15:46.840 the EV hypothetically, so this person who's trying to figure 0:15:46.880 --> 0:15:49.560 out when to charge their vehicle. And I certainly understand 0:15:49.560 --> 0:15:52.960 it from the utility level because it decreases the peak 0:15:53.000 --> 0:15:55.200 amount of supply that you actually have to produce. But 0:15:55.240 --> 0:15:57.040 what I really want to know is who's making money 0:15:57.040 --> 0:15:57.480 out of this. 0:15:58.000 --> 0:16:00.760 So currently in the UK, where we have a data 0:16:00.800 --> 0:16:05.840 on who's making money, it's been utilities with residential consumers, 0:16:06.080 --> 0:16:08.480 so Octopus energy is a big one. And then we 0:16:08.600 --> 0:16:13.640 have some virtual power plants that aggregate many small things 0:16:13.680 --> 0:16:16.840 like batteries and EV chargers and in some cases even 0:16:16.920 --> 0:16:20.560 things like a really small gas turbine that's sitting at 0:16:20.600 --> 0:16:25.560 the distribution level. At the moment, the amount of money 0:16:25.600 --> 0:16:29.400 to be made is it's not huge volumes yet because 0:16:29.440 --> 0:16:32.640 the overall contracted volumes are quite small. But we are 0:16:32.720 --> 0:16:37.800 seeing that in comparison with, for example, the payments that 0:16:38.160 --> 0:16:42.000 the transmission system operator are doing to tell wind power 0:16:42.080 --> 0:16:43.960 to shut off. This is happening in the UK and 0:16:44.000 --> 0:16:48.280 also in Germany, where there's at times so much wind 0:16:48.320 --> 0:16:51.160 generation that there's not enough capacity on the power grid 0:16:51.200 --> 0:16:53.720 to transport it, and the wind farms are being paid 0:16:53.760 --> 0:16:56.080 quite a bit to be turned off. And if we're 0:16:56.120 --> 0:16:59.400 comparing the price of that with the price of these 0:16:59.400 --> 0:17:03.600 local flex ability solutions, it's competitive, so we think there's 0:17:03.720 --> 0:17:06.399 room for that to grow and can help both with 0:17:06.640 --> 0:17:10.840 managing the grid and also with absorbing renewables locally so 0:17:10.880 --> 0:17:13.760 you don't have to always transmit them over such long distances. 0:17:14.200 --> 0:17:17.480 I think ultimately the goal here is to find more 0:17:17.520 --> 0:17:22.160 economic outcomes for a system, right, and so curtailing renewables 0:17:22.400 --> 0:17:25.040 is one tool we have in the toolbox, but it's 0:17:25.040 --> 0:17:27.239 not always the most economic thing to do, and like 0:17:27.280 --> 0:17:29.560 it could be that turning up load is actually a 0:17:29.600 --> 0:17:32.639 more economic way of managing the system, and so having 0:17:32.680 --> 0:17:36.640 that it actually will result in rates going down for consumers, 0:17:36.720 --> 0:17:39.200 even though there will be other people who are making 0:17:39.240 --> 0:17:41.360 money off of this. The other thing to note here 0:17:41.400 --> 0:17:44.480 is fundamentally we're sitting in a power grid that needs 0:17:44.520 --> 0:17:47.840 to be expanded basically across Europe. So we've done some 0:17:47.920 --> 0:17:51.800 analysis internally we think that the capital expenditures on an 0:17:51.800 --> 0:17:55.119 annual basis in Europe basically need to double by twenty thirty, 0:17:55.280 --> 0:17:57.400 in large part to integrate a bunch of renewables, but. 0:17:57.359 --> 0:17:59.560 Also to support an electrifying load. 0:17:59.800 --> 0:18:03.040 So the buildout of this grid, you know, it's a 0:18:03.119 --> 0:18:05.720 very difficult thing to do, and on the transmission system 0:18:05.760 --> 0:18:07.080 we need to do it. We also need to do 0:18:07.119 --> 0:18:10.360 it on the distribution grid. On the distribution grid, this 0:18:10.440 --> 0:18:13.879 is in cities. We're talking about digging up every single 0:18:13.960 --> 0:18:17.119 city street in some places, right in order to accommodate 0:18:17.160 --> 0:18:19.720 heat pumps and evs like. This is quite an undertaking, 0:18:19.840 --> 0:18:22.520 and so the role that flexibility can play in being 0:18:22.560 --> 0:18:25.880 able to provide another tool other than putting. 0:18:25.520 --> 0:18:27.160 In a power line is crucial. 0:18:27.200 --> 0:18:29.560 And so part of what this is is deferring that 0:18:29.640 --> 0:18:33.000 spend or maybe even foregoing the spend entirely in certain 0:18:33.000 --> 0:18:35.320 regions if you can have a baseline of flexibility in 0:18:35.359 --> 0:18:39.000 a larger region. And so, yes, like there's cash flows 0:18:39.000 --> 0:18:41.960 that will go in different pockets, but fundamentally, right pairs 0:18:41.960 --> 0:18:45.000 stand to benefit from a more efficient system that can 0:18:45.080 --> 0:18:46.760 use flexibility comprehensively. 0:18:47.240 --> 0:18:50.560 As we go about doing this and creating this more flexible, 0:18:50.680 --> 0:18:54.280 more dynamic space for the grid, there's a necessity for 0:18:54.359 --> 0:18:58.200 more enhanced technology and those companies are new entrants into 0:18:58.200 --> 0:19:00.199 this space. Can you talk a little bit about the 0:19:00.280 --> 0:19:02.639 different types of technology that are really going to be 0:19:02.720 --> 0:19:04.960 required in order for this to really take off. 0:19:05.400 --> 0:19:06.359 Yeah, that's a great question. 0:19:06.800 --> 0:19:10.240 So doing all of this requires new technologies, right, and 0:19:10.560 --> 0:19:11.880 control centers. 0:19:11.520 --> 0:19:13.440 Are already quite modern places. 0:19:13.560 --> 0:19:16.480 And like there's a certain prudence that's needed in modernizing 0:19:16.480 --> 0:19:18.840 a control center because ultimately these are costs that get 0:19:18.920 --> 0:19:21.879 again passed down to rate pairs, and so each expenditure 0:19:21.920 --> 0:19:24.159 is incurred slowly. But there's a number of systems that 0:19:24.200 --> 0:19:28.200 are needed to really realize this new form of flexibility 0:19:28.200 --> 0:19:29.920 that's so decentralized. 0:19:30.080 --> 0:19:32.800 And so like the way I'd like to think about it. 0:19:32.560 --> 0:19:35.480 Is, instead of wrestling like a one ton elephant, you're 0:19:35.480 --> 0:19:38.479 actually wrestling like one ton of mice, right, And so 0:19:38.520 --> 0:19:40.199 you need different tools to be able to. 0:19:40.480 --> 0:19:41.520 Take on this challenge. 0:19:41.560 --> 0:19:44.920 So one of which is an advanced distribution management system. 0:19:45.280 --> 0:19:47.760 It's commonly termed as an eighty m ASS. So this 0:19:47.880 --> 0:19:50.080 is in a control room. Imagine, you know, you need 0:19:50.119 --> 0:19:52.639 some sort of blackscreen software like the Bloomberg terminal, but 0:19:52.680 --> 0:19:55.200 this is what they're using to look at the distribution 0:19:55.359 --> 0:19:57.720 grid and a lot of data is flowing into it, 0:19:57.840 --> 0:20:00.720 much like the Bloomberg terminal itself, and people can and 0:20:00.720 --> 0:20:03.480 observe what's going on and make decisions. Now within that 0:20:03.520 --> 0:20:08.480 there is a specialized application called distributed Energy Resource Management 0:20:08.720 --> 0:20:12.840 systems or dorms, and that's one such technology that's integrated 0:20:12.920 --> 0:20:17.000 on an ADMS that allows these operators to control and 0:20:17.080 --> 0:20:19.320 operate the great and use flexibility. So it's like a 0:20:19.359 --> 0:20:22.840 function maybe on a Bloomberg terminal. And so the building 0:20:22.920 --> 0:20:25.959 up of these software over time has really come from 0:20:26.000 --> 0:20:28.240 the outside. There's been a lot of outside players that 0:20:28.320 --> 0:20:30.720 have pioneered some of this software, and then over time 0:20:30.760 --> 0:20:33.399 there's been acquisitions and a lot of the larger industrial 0:20:33.440 --> 0:20:35.879 companies that have the credibility in the control room have 0:20:35.960 --> 0:20:37.080 acquired and built. 0:20:36.840 --> 0:20:38.280 Up this expertise themselves. 0:20:38.440 --> 0:20:40.920