Speaker 1: Welcome to zero I am Akshatrati. This week, climate tech
Speaker 1: is resilience. In the weeks since the US and Israel
Speaker 1: began its war on Iran, we have seen oil and
Speaker 1: gas prices spike around the world. Iran has responded in kind,
Speaker 1: blocking the vital oil and gas artery that is the
Speaker 1: Strait of Hormuz and attacking oil and gas infrastructure across
Speaker 1: the Middle East. The war has led many to question
Speaker 1: in which direction the global economy will turn and how
Speaker 1: will it continue to power itself. Will this finally be
Speaker 1: the moment where countries move to renewables on mass or
Speaker 1: will countries deepen their relationship with fossil fuels. As ever,
Speaker 1: we are hearing loud voices on both sides. Last week,
Speaker 1: fossil fuel executives met at the major SERA Weak Energy
Speaker 1: conference in Here, where many said this is exactly the
Speaker 1: moment for the US gas industry to shine, providing reliable
Speaker 1: supply for the world. At the same time, the stock
Speaker 1: prices of Chinese electro tech firms have gained more than
Speaker 1: major oil companies since the war started, signaling that the
Speaker 1: market sees a more optimistic future for climate tech. To
Speaker 1: talk about all this I'm joined by aurore Belfrage, a
Speaker 1: tech investor, a geopolitical risk advisor, and sustainability strategist. She
Speaker 1: is the founding partner of the investment firm and think
Speaker 1: tank Sustainable for a Climate tech investor. She's a broad
Speaker 1: thinker and brings a European focused lens that isn't often
Speaker 1: given the same weight. If you have feedback for the show,
Speaker 1: guest suggestions or anything else, please write to us at
Speaker 1: zero Port at Bloomberg dot net.
Speaker 2: Welcome to zero Er, Thank you for having me.
Speaker 1: So we met in February at the International Energy Agency's
Speaker 1: Conference on Energy Innovation in Paris, and we had a
Speaker 1: great discussion. Your comments, especially to some of the European politicians,
Speaker 1: were on point and got the discussion going in a
Speaker 1: really good way that morning. But in the past month
Speaker 1: we've had a war started. So I want to touch
Speaker 1: on investment trends and climate tech in Europe, but let's
Speaker 1: briefly look at what's happening in the Middle East. Because
Speaker 1: you've had a wide ranging career in finance, venture capital,
Speaker 1: private equity, family offices, and throughout that you think about
Speaker 1: how risk affects investments, geopolitical risk is one of those layers.
Speaker 1: So given what's happening with the US and Israel attacking Iran,
Speaker 1: there is a huge impact on energy markets. How has
Speaker 1: your risk calculus changed and crucially, has that affected your
Speaker 1: investment decisions in any way today?
Speaker 2: Well, i'd say that, I mean, it's not hyperbole that
Speaker 2: we're in unprecedented times. We have multiple threats and opportunities
Speaker 2: to analyze, and this is I think adding a sense
Speaker 2: of urgency to many of them, and the question of
Speaker 2: the energy transition has gone from the one priority to
Speaker 2: being all encompassing. But your question is has that impacted risk?
Speaker 2: And I'm assuming that your underlying question is has that
Speaker 2: impacted how capital flows to this type of innovation? And,
Speaker 2: as you know, right now in the phase of big headlines,
Speaker 2: big emotions, so I think it's hard to tell exactly
Speaker 2: right now how it will impact it, but my guess
Speaker 2: is that it will catalyze capital flow into energy innovation
Speaker 2: that will strengthen European energy sovereignty.
Speaker 1: This is a second energy shock within the last decade.
Speaker 1: Russia's attack on Ukraine caused Europe specifically a lot of
Speaker 1: stress because of how much gas came from Russian pipelines,
Speaker 1: and it forced Europe to act on a very short
Speaker 1: turn around, and it did so in ways that would
Speaker 1: replicate a previous energy crisis response, which is to try
Speaker 1: to get fossil fuels from somewhere else for whatever price
Speaker 1: that they could afford. Tried to cut use of energy,
Speaker 1: which happened in good and bad ways. Industries shut down,
Speaker 1: but also households started consuming less energy. And it did
Speaker 1: something that was different. It really did speed up clean
Speaker 1: energy deployment. What do you think Europe can do now
Speaker 1: that it has this practice of trying to speed up
Speaker 1: energy transitions specifically, now, what can it do to speed
Speaker 1: it up further, diversify further.
Speaker 2: Well, we've gone from Plant A to Plan B to
Speaker 2: Plan C, so I think we're moving along the contingent
Speaker 2: and see plans and there is a positive element in that,
Speaker 2: and obviously the war isn't that one of the positive impact.
Speaker 2: But hopefully that allows Europe in its analysis to realize
Speaker 2: that the ultimate plan needs to be European. We need
Speaker 2: to supply our own energy. And what I find astounding
Speaker 2: is we've known how to do that for a while.
Speaker 2: It's not a secret contingency plan that someone's now presented.
Speaker 2: We know that we are able to supply ourselves in
Speaker 2: Europe with solar, with wind, with battery capacity. I'm personally
Speaker 2: invested in geothermal, wave, tidal, etc. So I think it
Speaker 2: won't be that difficult to put this in motion because
Speaker 2: the technology exists. Entrepreneurs have been building in the space,
Speaker 2: but we've seen a slight hesitancy from policy makers but
Speaker 2: also from capital and hopefully that will change now, allowing
Speaker 2: many of these technologies that have just been waiting in
Speaker 2: terms of timing to now flourish.
Speaker 1: So let me come back to climate tech. But there
Speaker 1: is a dynamic we should address before we get into
Speaker 1: the investment trends in Europe, which is that Russia, Ukraine,
Speaker 1: this born in the Middle East. Trump's attack on Europe
Speaker 1: are forcing Europe to have a strong desire now to
Speaker 1: rearm and many of the ESG funds, these environmental social
Speaker 1: governance funds that were important in investing in climate tech,
Speaker 1: are now opening themselves up to invest in defense oriented
Speaker 1: companies and technologies. Is that bad news for climate tech
Speaker 1: because limited money is getting diverted.
Speaker 2: No, not at all. I would say climate tech has
Speaker 2: always been resilience tech. If you want we're now reskinning ourselves.
Speaker 2: So many of the portfolio companies that I work with,
Speaker 2: they would call themselves something and the buzzword du jour
Speaker 2: is demonstrating how this type of technology also is defense,
Speaker 2: security and resilience, but it's not fundamentally changing anything in
Speaker 2: the actual technology. It has always been about defense and resilience.
Speaker 2: And I think this scenario that we're facing is just
Speaker 2: allowing new buckets of money to understand that what was
Speaker 2: called climate tech isn't some sort of bo ho experiment
Speaker 2: and some sort of trendy green tech that we nice
Speaker 2: to have. It's also part of the security apparatus. But
Speaker 2: I've been thinking about something that I'd like to discuss
Speaker 2: with you when it comes to this, when it comes
Speaker 2: to defining climate tech versus defense tech as policymakers, but
Speaker 2: I'm looking at myself as an investor. We're all trying
Speaker 2: to predict the future somehow, and I'm not aware of
Speaker 2: anyone that has the actual crystal ball. And we are rearming,
Speaker 2: as you're saying, and we're investing in defense as a
Speaker 2: security measure against the threat. And this is ultimately a
Speaker 2: probability challenge. The likelihood of an invasion is mathematically somewhere
Speaker 2: between one and zero, and in recent times we're concerned
Speaker 2: that this is closer to one than before, so to speak.
Speaker 2: And there is also potentially a threshold where we increase
Speaker 2: investments and that acts as a deterrent. And this is
Speaker 2: not my field, so I'm going to stay in my
Speaker 2: lane and observe. But if we analyze the same investment
Speaker 2: thinking regarding climate, which also has a probability between one
Speaker 2: and zero and a massive amount of data and scientists
Speaker 2: that have a fairly good grasp on future scenarios as
Speaker 2: we over consume and exceed our planetary boundaries, and it
Speaker 2: ain't pretty. And here's my question to you, why is
Speaker 2: the sentiment around climates in investment? It's too expensive and
Speaker 2: I'd argue that the probability of disaster is high, and
Speaker 2: I don't want to go in and compare because not
Speaker 2: a competition. But why in the defense investment it's justified
Speaker 2: as some sort of threat deterrent and essential security measure measurement.
Speaker 2: It's life and death, as it should be. However, climate
Speaker 2: requires a return on investment, and it needs to strictly
Speaker 2: adhere to the rules of the market, and it needs
Speaker 2: to make financial sense only. And I find these two
Speaker 2: separate ways of thinking in similar tech hard to understand.
Speaker 2: And I'm sure there's a smart reason, right, I just
Speaker 2: don't get it. How do you see this?
Speaker 1: Well, it's a good point, you know. I was thinking
Speaker 1: about Bloomberg Green's launch, which happened in January twenty twenty.
Speaker 1: You know, Bloomberg was making this big bet on the
Speaker 1: desire that people have to read more coverage about climate
Speaker 1: and climate solutions and how governments and investors are thinking
Speaker 1: about this big challenge in front of us. And just
Speaker 1: about then, of course, the pandemic happened and we were
Speaker 1: all locked down, and there was a moment of sort
Speaker 1: of reflecting inward as the Bloombergreen team was being put together, like,
Speaker 1: oh my god. You know, we were going to focus
Speaker 1: on this big important challenge, but now the world is
Speaker 1: going to be focused on a pandemic, Like, you know,
Speaker 1: what will people want to read about? And it turned
Speaker 1: out actually people wanted to read more about climate change
Speaker 1: at that moment because the pandemic was sort of showing
Speaker 1: you there's this big global challenge that because we did
Speaker 1: not do enough about now we are suffering and climate
Speaker 1: is something we have understood and we actually can do
Speaker 1: something about. And we saw in your investment world a
Speaker 1: huge boom in climate tech investments in twenty one and
Speaker 1: twenty two. So when I was reflecting on that in
Speaker 1: this current moment, it actually turns out that if anything,
Speaker 1: in this six year period, technologies have only gotten better.
Speaker 1: Green technologies have only gotten cheaper. And so now that
Speaker 1: this crisis is upon us, and it's a very different
Speaker 1: kind of crisis than the pandemic, but it is focusing
Speaker 1: the reader's mind on the war because of the uncertainty,
Speaker 1: because of the price of energy. But the overall way
Speaker 1: to react to this in the climate space will be
Speaker 1: to try and speed up the deployment of these technologies
Speaker 1: which have become easier to get and cheaper to build.
Speaker 1: And the reason I think we don't treat it as
Speaker 1: equivalent to say investing in the defense technologies that are
Speaker 1: necessary is the human timeline on which these crises play out.
Speaker 1: The pandemic was a live crisis playing out within a
Speaker 1: year two years. The war plays out over months and
Speaker 1: maybe years, whereas climate change is a decadal challenge, and
Speaker 1: so you tend to then lower it in the priority
Speaker 1: list because yes, we will have to deal with it,
Speaker 1: you know, even after the war is over, even after
Speaker 1: the pandemic is over, and it is certainly not being
Speaker 1: treated with the same urgency. So that's my observation of
Speaker 1: how I've seen you investors and politicians treat this challenge.
Speaker 1: What I will note is that in the background, most
Speaker 1: of them do not start ignoring climate, even if they
Speaker 1: might put it down the priority now.
Speaker 2: And I agree with that. I think especially many energy
Speaker 2: intensive industrial players know that this calculation isn't changing. The
Speaker 2: physical environment is changing. There's an insurance play on that
Speaker 2: my physical assets are at risk, my energy costs is increasing.
Speaker 2: Many key players that are affected are continuing to double
Speaker 2: down on climate, both in terms of an investment. But
Speaker 2: the general mood still fascinates me because when it comes
Speaker 2: to defense and the pandemic, to a degree, the return
Speaker 2: on investment wasn't important. We weren't talking about it in
Speaker 2: terms of an investment that needed a return. It was
Speaker 2: a crisis in life and death, and this crisis, the
Speaker 2: climate one. You're not allowed to talk about it in
Speaker 2: those terms. You have to show a return on investment
Speaker 2: on every dollar spell into every crown spent and That's
Speaker 2: one of the things that we talked in Paris about
Speaker 2: which I find fascinating, which is how do we create
Speaker 2: a political environment where we calculate two separate calculations. One
Speaker 2: is the cost of investment and there I will come
Speaker 2: as a private investor in the private capital and fine
Speaker 2: and family offices, et cetera. And then in parallel you
Speaker 2: compare it to the cost of inaction. What happens if
Speaker 2: we don't do this, And you need both those numbers
Speaker 2: in order to take decisions.
Speaker 1: So the idea of the framing of a climate emergency
Speaker 1: was trying to do that thing where it wanted to
Speaker 1: put climate on the same moral footing as the idea
Speaker 1: of defense or dealing with a pandemic. But maybe that's
Speaker 1: the moment to then look at this wider trend that
Speaker 1: you have been an investor for the last decade. You
Speaker 1: have invested mostly in European companies, independent of what's happened
Speaker 1: in the US, and we will come to the US
Speaker 1: because it does impact how you think about in Europe.
Speaker 1: But independent of the US, what have you seen in
Speaker 1: the last decade of investments in climate tech in Europe?
Speaker 1: Because we went from a period where governments were very
Speaker 1: keen on subsidizing these green technologies. As a result, the
Speaker 1: investors were seeing written on investment to then yanking those
Speaker 1: subsidies as Germany did and Spain did for solar, to
Speaker 1: then losing those solar companies to China. Broadly, in climate tech,
Speaker 1: you know, how do you think the trends have evolved
Speaker 1: in your ten year period in Europe?
Speaker 2: Well, Luckily, investors and entrepreneurs and researchers are different species,
Speaker 2: and they work on different timelines and they have different missions,
Speaker 2: which is a good thing for both for investors as myself,
Speaker 2: but also for humanity, which means that all those things
Speaker 2: that you talk about are macro scenarios. It's policy, it's
Speaker 2: yanking money back and forth, et cetera. And the undercurrent
Speaker 2: of mission driven bright PhD students, professors, entrepreneurs solving problems
Speaker 2: is that they've actually powered through all of this, and
Speaker 2: sometimes life becomes easier because policy makers go, oh, this
Speaker 2: is exciting, and then suddenly life comes to be harder
Speaker 2: and it's called a winter of some sorts, and policy
Speaker 2: makers aren't that interested, which also has advantages because then
Speaker 2: you can build free from all the headlines and free
Speaker 2: to build as you want and make a bit of
Speaker 2: some mistakes. So if I look at it from I
Speaker 2: tend to be an early stage investor. I work closely
Speaker 2: with the universities and labs and what's coming out of
Speaker 2: research and applied research, and there the understanding of the
Speaker 2: general problems which creates opportunities has been relatively steady, and
Speaker 2: many of the things that I invest in aren't flashes
Speaker 2: in the pan. It is four or five ten years
Speaker 2: of research and dedicated brains are continued to be dedicated.
Speaker 2: So I wouldn't say that we will that we see
Speaker 2: that type of up and down waves when it comes
Speaker 2: to what it's actually coming out. But it affects it
Speaker 2: of course, which is what you're implying. Money allows you
Speaker 2: to scale quicker, It allows you to recruit, It allows
Speaker 2: you to test in a different phase. And I hear
Speaker 2: I'd love to hear your thoughts on the US versus Europe,
Speaker 2: because scaling and throwing money at something has its advantages.
Speaker 1: It's a good moment to bring the US in because
Speaker 1: the country just seems to swing between wanting to do
Speaker 1: something about climate to trying to meddle with anyone trying
Speaker 1: to do anything on climate these days, and yet it
Speaker 1: remains the hub of climate tech. Most of the climate
Speaker 1: tech startups are still in the US. The amount of
Speaker 1: capital available in the US is just so much bigger,
Speaker 1: and how that capital flows has an impact on Europe.
Speaker 1: After the Inflation Reduction Act was passed under Joe Biden,
Speaker 1: there's all this fear in Europe that, oh my god,
Speaker 1: European startups are going to have to go to the
Speaker 1: US now because clearly the money is going to be there,
Speaker 1: and maybe we saw one or two companies, but not
Speaker 1: really that many move. And now, of course, with all
Speaker 1: that reversed, the Inflamation Reduction Act has been decapitated. It's
Speaker 1: been reversed by attack on clean energy. The latest headline is,
Speaker 1: you know, the Trump administration is actually going to buy
Speaker 1: out licenses from Shell and Total energies that want to
Speaker 1: build offshore wind so that they'd never get to build
Speaker 1: them again. So in this swing that happens in the US,
Speaker 1: and yet the fact that there's big capital there still,
Speaker 1: how does that affect your climate tech investments in Europe?
Speaker 2: Well depends on which hats I'm wearing. And if you
Speaker 2: talk about that from a European geopolitical perspective, there's a
Speaker 2: massive opportunity. The underlying trend is the same. We are
Speaker 2: moving from a fossile economy to a fossile free economy.
Speaker 2: Will that take two, three, five, six, ten, fifteen. I
Speaker 2: mean it is ultimately the main trajectory. And this allows
Speaker 2: Europe to re establish itself as a hub for that
Speaker 2: time of climate take. And it's an opportunity for family
Speaker 2: offices to invest, for venture capital to dig how their
Speaker 2: statutes are built in order for them to be more
Speaker 2: aligned with the actual timelines of how this type of
Speaker 2: investment pans out. I'd argue, and I'd argued in a
Speaker 2: book that I've written two years ago, this is a
Speaker 2: massive geopolitical opportunity as we exchange the fundaments of our
Speaker 2: economy to a fossile free platform. That is the lever
Speaker 2: and the next chapter of our economy of the human
Speaker 2: existence and the players that are moving the fastest has
Speaker 2: a massive opportunity. I'm not sure Europe is leading yet,
Speaker 2: and I look at China who's leaning in to renewables
Speaker 2: and the energy transition. But however, the US taking a
Speaker 2: bit of a pause currently allows an opportunity for Europe However,
Speaker 2: if you give me, if you ask me as an investor,
Speaker 2: that creates a predicament for my European startups because it's
Speaker 2: easier to raise capital in the early phases in your
Speaker 2: local market with local investors.
Speaker 1: After the break, will countries return to coal or will
Speaker 1: we see a surge in interest for clean energy. If
Speaker 1: you're enjoying this episode of Zero, please take a moment
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Speaker 1: or Spotify. It helps new listeners find the show.
Speaker 3: Thank you.
Speaker 1: If we again take the last ten years. The first
Speaker 1: Trump term was negative for climate tech, but only mildly.
Speaker 1: Then of course, this Trump term has been much harder
Speaker 1: because there was an upswing in all the Inflation Reduction
Speaker 1: Act stuff, and then that money was yanked. We have
Speaker 1: seen that companies are having to adapt to this landscape
Speaker 1: in the US, and they are doing it in the
Speaker 1: way a crisis would unfold. Companies are doing layoffs. We've
Speaker 1: reported on Green Cement startup, Sublime, Green Steel, Boston Metals,
Speaker 1: direct air capture climb works, even battery metals recycling, which
Speaker 1: you know, through all the climate tech seems to be
Speaker 1: one that people are interested in. Even redwood materials has
Speaker 1: seen job cuts in the past twelve to twenty four months.
Speaker 1: Many have gone bankrupt. Sodium ion battery startup Neatron solar company,
Speaker 1: so Nova battery maker twenty four m. If this is
Speaker 1: an opportunity for European investors, does that opportunity also mean
Speaker 1: going out and trying to get existing startups to maybe
Speaker 1: come to Europe or trying to invest in them, or
Speaker 1: is it a warning for European startups that look, this
Speaker 1: kind of thing will happen to you as well, because
Speaker 1: it is US capital that is starting to pull out,
Speaker 1: which is a major contributor in this space.
Speaker 2: I think it's an excellent question. However, it's industry specific.
Speaker 2: I think from a transition point of view, I'd like
Speaker 2: us to acknowledge that we've moved into another phase between
Speaker 2: the pandemic and now we saw a massive increase in innovation.
Speaker 2: The smart PhDs that I were talking about created a
Speaker 2: lot of technologies that allows us to use energy in
Speaker 2: a morefficient way industrial applications, actual renewable et cetera, et cetera.
Speaker 2: And now we're entering another phase which is scaling that
Speaker 2: and that is where we understand that we need to
Speaker 2: use our time and efforts to create demand and maybe
Speaker 2: even subsidize that demand, or think about that in a
Speaker 2: different way, allowing the tech that we have to scale.
Speaker 2: And here is where Europe has an opportunity because that
Speaker 2: technology exists, we have industrial players, and we understand the
Speaker 2: transition timeline. So I would say, sure, this is an
Speaker 2: opportunity to lure startups to Europe, but from a transition
Speaker 2: point of view, I'd say the big opportunity is now
Speaker 2: for private equity, infrastructure, capital and public procurement to realize
Speaker 2: their time is now.
Speaker 1: No, that is a very good point. I mean the
Speaker 1: list of companies that I mentioned, many of them have
Speaker 1: failed at that moment of going from having proven the
Speaker 1: technology working at a demonstration scale to really wanting to
Speaker 1: build a factory to install or to manufacture the types
Speaker 1: of things that are needed. And that requires this different
Speaker 1: type of capital that needs to come in and different
Speaker 1: type of off takes that need to come in. So
Speaker 1: the European Industrial Accelerator Act, which was you know, put
Speaker 1: in place in some way as a reaction to the
Speaker 1: Inflation Reduction Act, is reaction to this big report on
Speaker 1: European competitiveness that was published by Italian politician and former
Speaker 1: central banker Druggi. And that act is now at least
Speaker 1: in proposal form being published in Europe, and it promises
Speaker 1: a bunch of things that you talked about. It says
Speaker 1: it's going to have procurement requirements for things like cement
Speaker 1: and steel, is going to have at least a one
Speaker 1: hundred million euros worth of fund for non European country
Speaker 1: trees that are you know, major players in the space
Speaker 1: outside maybe electric vehicles, maybe batteries, maybe critical materials that
Speaker 1: Europe doesn't have. It is looking to and this phrase
Speaker 1: I always hate, but mobilize one hundred billion euros worth
Speaker 1: of support for European made clean manufacturing. What have you
Speaker 1: made of the Industrial Accelerator Act? Is it good enough
Speaker 1: or is it coming too slow? What kind of impact
Speaker 1: will it have on European climate tech companies?
Speaker 2: And I don't want to spend an hour moaning about
Speaker 2: the speed, the glacial speed of us absorbing the drug
Speaker 2: report and then producing something, So I think my sentiment
Speaker 2: is clear, and let's move on to the to the
Speaker 2: actual content of it. And I find this procurement challenge
Speaker 2: slash opportunity fascinating because it's an easy word to say,
Speaker 2: let's mobilize European procurement, and it it sounds very reasonable.
Speaker 2: But if you break that down, where does procurement happen
Speaker 2: by whom? And how like, what's the what's the culture,
Speaker 2: what's the DNA of the people that public really procure?
Speaker 2: And still the procurement legislation environment was built for a
Speaker 2: different time, and that the northern star was we have
Speaker 2: to be prudent with taxpayers money. And when you say
Speaker 2: that sentence, please be prudent with taxpayers money, everyone nots
Speaker 2: is of course we should be prudent with taxpayers money.
Speaker 2: And the under the subtext to that is you buy
Speaker 2: robust and tested technic. You don't test. You don't buy
Speaker 2: innovative things. You don't buy things that are new off
Speaker 2: the shelf. You know, however, in this current climate, buying
Speaker 2: robust and technology means that someone else, someone else has
Speaker 2: tested it, the market has created it, and you are
Speaker 2: by definition five six years behind of its being built.
Speaker 2: And you have openly said I don't want to be
Speaker 2: in the driving seat. Someone else is in the driving seat,
Speaker 2: and I will buy it later. A you're too slow,
Speaker 2: but two more importantly, you don't get to impact the
Speaker 2: artificial intelligence that's being built as a foundation of it,
Speaker 2: the values that are important. You don't get to have
Speaker 2: a say in how it fits your infrastructure, et cetera,
Speaker 2: et cetera. And I can do the long list. You
Speaker 2: get the picture. And I think that's where we need
Speaker 2: to have a public debate around how do we, as
Speaker 2: bureaucracies and policy makers and procurement institutions adopt some sort
Speaker 2: of venture capital entrepreneurial spirit and iteratively build with them.
Speaker 2: And we have no experience of doing that. And I
Speaker 2: think that's the challenge. It's what stated in the document
Speaker 2: makes sense, but now implementing it requires a massive change
Speaker 2: in how we procure.
Speaker 1: I think it is a good point. I mean, we
Speaker 1: talk about numbers, and we talk about trends, but there
Speaker 1: is an aspect of this that is so human in
Speaker 1: our world of artificial intelligence that we cannot quantify it,
Speaker 1: but we know it makes a difference, which is your
Speaker 1: attitude as an entrepreneurial, not just startup, but as an
Speaker 1: entrepreneurial state your attitude towards risk taking and towards prudency.
Speaker 1: Things break, Yeah, and you go to America and being
Speaker 1: a startup that goes bankrupt is sometimes seen as a
Speaker 1: badge of honor. You tried something really risky and you failed.
Speaker 2: Great.
Speaker 3: You go to.
Speaker 1: Asia and you have this energy where there are huge
Speaker 1: amounts of challenges because the government doesn't work, and yet
Speaker 1: there is this desire for people to want to make
Speaker 1: things and benefit from it. In Europe, that attitude change
Speaker 1: hasn't come yet, and maybe these crises will force people
Speaker 1: to do that. But if we take an aspect of
Speaker 1: this which you have invested in, which is geothermal, how
Speaker 1: do you think that attitude of risk and entrepreneurialism prudency
Speaker 1: is playing out in that technology today.
Speaker 2: Well, everyone loves to quote Churchill, never let waste the
Speaker 2: spoil a good crisis, and I'll do the same. And
Speaker 2: I think this is an opportunity here because there is
Speaker 2: a sense of urgency. Costs increasing, there is a green
Speaker 2: arms race, so to speak, in terms of energy, and
Speaker 2: as we were saying, we're now into the contingency plan.
Speaker 2: Europe needs to build its own energy and geothermal is
Speaker 2: a massive opportunity literally standing on a battery.
Speaker 1: But apart from Iceland, where we know there is just
Speaker 1: really attractive geology that allows you to deploy geothermal at
Speaker 1: scale and really make it very cheap and actually turn
Speaker 1: Iceland from a developing country into a developed country. Where
Speaker 1: else in Europe is that opportunity there? Does the geology
Speaker 1: not matter, Is the technology advanced and are we taking
Speaker 1: the risk to actually deploy it in Europe?
Speaker 2: So Turkey is another market that's come quite far when
Speaker 2: it comes to geothermal. But I think more importantly the
Speaker 2: last ten years, quietly in labs in Europe and the US,
Speaker 2: we've seen innovation, and I think it's important to break
Speaker 2: down the different aspects of geothermal. Iceland knows how to
Speaker 2: transform heat into electricity, so everything that's above ground is
Speaker 2: a commodity, so to speak. We don't need any innovation there.
Speaker 2: We also know how to drill. We've been drilling for
Speaker 2: ages and we have all the infrastructure there, not least
Speaker 2: the oil and gas industry, the rigs, the hard hats,
Speaker 2: the geologists, etc. The missing piece has been cost efficiently
Speaker 2: drilling through the hard rock. And there we're seeing some
Speaker 2: really interesting companies, both in the US and in Europe,
Speaker 2: and I have an invested interest in some of them.
Speaker 2: And this allows us to use conventional drilling and a
Speaker 2: whole industry and just adding a few elements that will
Speaker 2: decrease cost. But your question wasn't necessarily about the technology,
Speaker 2: which I would say is here now. It's about are
Speaker 2: we willing to take risk? And here I think the
Speaker 2: current crisis will force us to take risk and we
Speaker 2: will come out on the other end happier and more
Speaker 2: sovereign and energy rich for it. Because we're seeing energy
Speaker 2: intensive industries in Europe going to their local policy makers
Speaker 2: requiring a certain amount of energy that their local grids
Speaker 2: can't provide, and they're also saying, I want to know
Speaker 2: that it's green, renewable energy, and the local grids become
Speaker 2: even more stressed realizing that they cannot provide this. There's
Speaker 2: a supply issue. And my prediction hot take for the
Speaker 2: next ten years is what we'll see industries create their
Speaker 2: own off grid solutions with geothermal.
Speaker 1: Yeah, and you're starting to see that, at least in
Speaker 1: the AI data center space, where just given how much
Speaker 1: capital they have and how much desire they want for electricity,
Speaker 1: they are starting to deploy their own of grid solutions,
Speaker 1: which tend to be right now gas heavy, but maybe
Speaker 1: it also becomes renewable because that is easier to build
Speaker 1: if not in the US and other places.
Speaker 2: And Europe can't afford that. Many of these companies say adios,
Speaker 2: we will build somewhere else. We will see that the opportunity,
Speaker 2: the lack of supply will need to meet the current demand,
Speaker 2: both in terms of we need to keep the jobs
Speaker 2: in Europe, we need to keep the sovereignty, we need
Speaker 2: to keep the data centers, et cetera. So I foresee
Speaker 2: the next five or six years we will see a
Speaker 2: massive deployment of geothermal in Europe. And I'm not the
Speaker 2: only one saying it. We're seeing it in many other markets.
Speaker 2: And the international Energy agencies also rejigged their analysis and
Speaker 2: predicted this would be fifteen percent of the energy mix
Speaker 2: by twenty fifteen.
Speaker 1: Asian countries have been relying on Katari loqu ordinatural gas,
Speaker 1: so as Europe now now given it's getting or at
Speaker 1: least wanting to get more Cathari LNG in a gas crisis,
Speaker 1: we know that fuel switching happens for countries that can
Speaker 1: fueld switch, which is go back to coal and coal
Speaker 1: emissions to go up. We see that happening in Asia.
Speaker 1: We might even see it in Europe because there are
Speaker 1: still huge amounts of coal power plants in Germany and
Speaker 1: in Poland. What can be done to try to stop
Speaker 1: coal from coming back and increase in European emissions in
Speaker 1: this gas crisis.
Speaker 2: We talked originally about the need to have a return
Speaker 2: on investment on every aspect of climate investment versus defense,
Speaker 2: which is simply life and death. And I don't mean
Speaker 2: to be flippant, but if we look at the market
Speaker 2: at play when it comes to climate technologies, there is
Speaker 2: a case for or a returnal investment of all of
Speaker 2: these things that we've talked about. And as an investor,
Speaker 2: I'm not that worried. I'm very excited about the opportunity
Speaker 2: of how we're building back and building a phossolt Fie economy. However,
Speaker 2: there are market failures that we also could correct to catalyze.
Speaker 2: So to answer your question, if we speed up putting
Speaker 2: a price on carbon and green haass gas emissions, that
Speaker 2: will allow us to make the calculation quicker, forcing innovation,
Speaker 2: forcing scale up and adoption. Because as long as we
Speaker 2: don't do that, and we have this gaping hole in
Speaker 2: the equation, it makes sense to switch to.
Speaker 1: Call yeah, and that is something that the European Union
Speaker 1: is now under force to try and revise, to try
Speaker 1: and add more permits in the European emissions trading system
Speaker 1: so that the price can be lower, which might actually
Speaker 1: allow more cold to come through the system. And this
Speaker 1: is the moment where politicians have to stand up for
Speaker 1: principles for longer term thinking despite the crisis in front
Speaker 1: of us.
Speaker 2: But it's also a market correction. I think we have
Speaker 2: to see it as that if we are very strict
Speaker 2: and prudent about applying market rules to the climate transition
Speaker 2: and we want a return on investment, we can't have
Speaker 2: an externality like greenhouse gas emissions, and we also we
Speaker 2: can't have massive subsidies to the fossile industry. Both these
Speaker 2: things need to be corrected.
Speaker 1: Thank you, er, thank you very much for having me,
Speaker 1: and thank you for listening to zero. Now for the
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Speaker 1: growing in number thanks to successful reintroduction campaigns across the country.
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Speaker 1: This episode was produced by Oscar boyd Our theme music
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Speaker 1: Milan and shan Chan. I'm Akshatrati back soon.