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Speaker 1: Hi everyone. We all know wind and solar are intermittent.

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Speaker 1: Eventually the sun stops shining and the wind stops blowing,

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Speaker 1: but as wind and solar power unreliable. In a recent episode,

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Speaker 1: we talked about how the government in Mexico is saying

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Speaker 1: it is that intermittent wind and solar capacity puts the

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Speaker 1: grid at risk? But is that true. To help us

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Speaker 1: dig into this a bit this week on the show,

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Speaker 1: We've got Nat Bullard, chief content officer for benf Our.

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Speaker 1: Discussion is based on a couple of recent pieces he

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Speaker 1: did for Bloomberg Green as part of his spark Lines series.

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Speaker 1: One is peaker gas plants may have peaked after all,

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Speaker 1: and the other is aging renewable energy assets are future options.

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Speaker 1: You can get these reports on the Bloomberg terminal under

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Speaker 1: an I Bullard, or you can actually subscribe on Bloomberg

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Speaker 1: dot com as a reminder being if it does not

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Speaker 1: provide investment or strategy advice. And you can hear the

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Speaker 1: fullest claimer at the end of the show him Mark Taylor,

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Speaker 1: and you're listening to switch on to ben f podcast. Nat,

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Speaker 1: thanks for joining us, Thanks for having me here. Mark,

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Speaker 1: It's nice to be back. You've done a couple of

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Speaker 1: reports recently on renewable reliability. Can you kind of explain

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Speaker 1: where those came from and why we're talking about this today.

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Speaker 1: The history of renewable energy being integrated into grids is

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Speaker 1: that for every few percent more renewable energy that gets

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Speaker 1: integrated into the grid, people sort of tear their hair

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Speaker 1: out and run around like the houses on fire, thinking

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Speaker 1: that reliability is going to go through the floor and

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Speaker 1: we're never going to be able to integrate more than

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Speaker 1: the current percentage of renewable energy in the grid. You know,

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Speaker 1: first it was five percent, that was ten minutes twenty.

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Speaker 1: You can look at grids in say Germany for instance,

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Speaker 1: that are able to handle the integrate more than renewable

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Speaker 1: same in Denmark as well. When you get to some

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Speaker 1: other grids, like in the United States, you start to

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Speaker 1: have some real challenges and thinking about what are we

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Speaker 1: gonna do with this much renewable energy in our grid?

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Speaker 1: How is it going to impact reliability? How is a

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Speaker 1: grid planner, how is the developer, how is an asset owner?

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Speaker 1: Do I need to be thinking about that and what

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Speaker 1: do I need to do? And California is a great

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Speaker 1: sort of test bed for this as as you would imagine.

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Speaker 1: One thing is big state in the big mark it too.

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Speaker 1: It has a lot of renewable energy. And three, it

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Speaker 1: has quite a lot of wind and solar that tend

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Speaker 1: to arrive on the grid at specific times. Right. Wind

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Speaker 1: tends to have its peaks in the early morning and

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Speaker 1: in the late evening, whereas solar tends to have its

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Speaker 1: peak obviously in the middle of the day. And what

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Speaker 1: those what those things I'll do together is they make

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Speaker 1: the grid more variable in terms of the generation that's

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Speaker 1: coming in. They also mean that you have to still

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Speaker 1: plan for reliability in a time of greater variability, especially

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Speaker 1: as California looks out towards a hundred percent renewable energy

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Speaker 1: at some point zero carbon electricity. Then you have to

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Speaker 1: you have to start thinking, how is a grid full

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Speaker 1: of these variable assets going to play well with all

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Speaker 1: the other children? Right? How is solar or wind going

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Speaker 1: to maintain the integrity and quality of the grid as

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Speaker 1: you reach very high penetrations. And so California ran the

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Speaker 1: study on a term that I would imagine, honestly, not

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Speaker 1: that many people are familiar with, which is the effective

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Speaker 1: load carry in capable, which is how much of a

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Speaker 1: plant's total theoretical capacity of any kind can you be

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Speaker 1: counted on to provide when the grid needs it most? So,

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Speaker 1: if you've got a hundred megawat wind or a hundred

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Speaker 1: megawat soilar plant at the time when the grid needs

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Speaker 1: it most, how much of that energy can you count on?

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Speaker 1: And this is where things start to get a little

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Speaker 1: bit interested before we get into that more deeply, can

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Speaker 1: we put something to bed the grids in Germany and Denmark?

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Speaker 1: Are they fundamentally different than what we find in California

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Speaker 1: or the US? Or is it more of a dogma

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Speaker 1: you know that more renewables equals less reliable grid. It's

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Speaker 1: a bit of both. But but on the technical side,

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Speaker 1: the grids are just better integrated, like they're better built interact.

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Speaker 1: But it very plainly and very candidate. And also they're

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Speaker 1: very different different they're very different types of systems. I mean,

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Speaker 1: California is sort to buy its nature, long and linear

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Speaker 1: in many cases, and they're still designed around central station

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Speaker 1: generation historically, right, you know, the grids of the US

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Speaker 1: are designed around a small number of large and then

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Speaker 1: then eventually very large bulk generation plants way far out

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Speaker 1: of town, and then a large number of small assets,

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Speaker 1: probably closer into load centers, but they're not designed for

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Speaker 1: hundreds of thousands or millions of generators like in the

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Speaker 1: really distributed fashion, or even for that matter, they're not

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Speaker 1: really designed for I don't know, potentially thousands of utility scale.

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Speaker 1: It's the relatively small solar projects that have variability in

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Speaker 1: their output, even though that variability is pretty well known

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Speaker 1: at this point. Okay, so let's go into that variability

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Speaker 1: and reliability. So the effective load carrying capacity or capability,

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Speaker 1: what is that for wind and solar. The study which

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Speaker 1: looked out to the end of this decade in California

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Speaker 1: shows that the effective load carrying capability for wind it's

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Speaker 1: been nineteen cent next year, meaning if you have a

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Speaker 1: hundred megawat project, you could ring eye on nineteen megawats

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Speaker 1: and that when the grid needs it most, and it's

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Speaker 1: it's fairly stable measure out to the end of this decade.

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Speaker 1: If you add four hours of energy storage to it,

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Speaker 1: it performs better, but it doesn't do like amazingly well.

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Speaker 1: It's definitely very far from like the kind of load

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Speaker 1: carrying capability you would get out of a natural gas plant.

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Speaker 1: Just to clarify, four hour storage is a battery, right,

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Speaker 1: that's about well, they say say four hours of energy

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Speaker 1: storage in the study, so we we I think it's

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Speaker 1: safe to assume in most cases that that is a battery,

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Speaker 1: but that could be a gigantic kinetic energy storage system,

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Speaker 1: that could be pump hydros And about that, the study

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Speaker 1: very deliberately does not specified batteries. However, let's be honest,

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Speaker 1: most people that they're going to be developing four hours

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Speaker 1: of storage right now are probably developing it using a

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Speaker 1: lithi ion storage battery. Now, let's talk about solar, which

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Speaker 1: is not wind solar. Even the big industrial scale installations

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Speaker 1: are pretty much useless from an effective load carrying capability

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Speaker 1: in two it's it gets even worse as you go

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Speaker 1: further into the future, because you've got you have more

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Speaker 1: of you have more in the grid, you have more

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Speaker 1: sort of collected variability. Reliability of each individual assets is

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Speaker 1: less significant over the breadth of this entire grid. But

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Speaker 1: where it gets interesting and where it gets sort of fundamental,

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Speaker 1: I think, is that if you add storage to that

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Speaker 1: four hours of storage to get doesn't say that it's

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Speaker 1: a battery, but not just assume that it's a battery,

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Speaker 1: you get to an effective load care and capability of

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Speaker 1: which i'll call it pretty close to a hundred in

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Speaker 1: this case. So basically, at the time when the grid

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Speaker 1: is most going to need power from solar, if you

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Speaker 1: have a battery attached to it for four hours of storage,

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Speaker 1: you can pretty much treat it as if it was

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Speaker 1: any kind of other, any kind of other high quality

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Speaker 1: asset on the grid. And there's a little bit of

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Speaker 1: decline in that overtime, but really not very much, like

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Speaker 1: it goes down slightly to about nine. So that must

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Speaker 1: make solar plus storage, you know, something we've seen kind

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Speaker 1: of emerging right now. It's kind of a no brainer

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Speaker 1: for the future. I think it may. It may. It's

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Speaker 1: the case very clear if there is any sort of

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Speaker 1: concern about how an asset is going to interact with

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Speaker 1: the grid, it makes it very clear that storage is probably,

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Speaker 1: if not essential, then at least very very important. You

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Speaker 1: would probably be leaving benefit on the table to not

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Speaker 1: be doing storage in a in a situation like this.

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Speaker 1: You know, and if you compare the effective mode carrying

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Speaker 1: capability in tracking PV with four hours of storage to

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Speaker 1: tracking PD without storage, one point seven percent. I think

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Speaker 1: you'll probably find that there is sufficient reason from a

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Speaker 1: developer's perspective to go ahead and build that storage, and

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Speaker 1: and to make it even even perhaps more compelling, you

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Speaker 1: may find regulatory imperative to do so. It may be

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Speaker 1: a requirement that if you were to be building, you know,

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Speaker 1: more than fifty megawatts of somewhere in any good installation,

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Speaker 1: you have to build with it four hours of energy storage,

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Speaker 1: or you have to in one way another contract for

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Speaker 1: the same thing. It doesn't have to be on site.

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Speaker 1: But developers being developers, it's probably pretty easy to bundle

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Speaker 1: rather than to do separate parallel tracks for development. And

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Speaker 1: guess you're a fewer place storage developer. So what does

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Speaker 1: this mean for build? Maybe I'm just not thinking about

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Speaker 1: this right, but would you build more capacity than you

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Speaker 1: than you think you would need or would you right

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Speaker 1: size it to supply the grid for when it needs

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Speaker 1: it most? I mean, I think you're you're gonna build

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Speaker 1: my math and this super reductive. You're gonna build basically

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Speaker 1: what you get paid for it, right, if you're gonna

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Speaker 1: if you can get paid, if you're gonna get paid

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Speaker 1: for reliability, and you build the storage to do that

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Speaker 1: if you're gonna get paid to shift your generation curve

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Speaker 1: right to times when it's more valuable than you might

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Speaker 1: do that as well. I mean, there there would be

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Speaker 1: many dueling imperatives. One would be the imperative to make

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Speaker 1: more money by selling more lectrons at certain times. The

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Speaker 1: other imperative would be preserved whatever contract you've established by

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Speaker 1: increasing your load carrying capability. We tend to not see

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Speaker 1: these conversations happening, you know, I live were at real time,

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Speaker 1: but they definitely are happening, Like these are conversations that

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Speaker 1: developers and utilities are having, that grid operators are having

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Speaker 1: with asset owners, and so I think that we need

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Speaker 1: to sort of view them in a fairly supple fashion,

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Speaker 1: which is a good thing. I mean, I think that

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Speaker 1: you can build for it out four hours of storage

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Speaker 1: for multiple sets of benefits. You could do it to

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Speaker 1: make more money at certain times, or you could do

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Speaker 1: it because you have to either Either way, I think

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Speaker 1: there will be imperatives to do so. So who's taking

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Speaker 1: the lead on this. Are there developers that are saying, hey,

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Speaker 1: give me storage, or their storage companies that are approaching developers.

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Speaker 1: How's the corpor dynamic playing out. It's a good question.

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Speaker 1: We see a bit of both. I think that the

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Speaker 1: most common right now is that you have a large

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Speaker 1: soilar developer that has essentially embedded storage as part of

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Speaker 1: its development process and proposition. So you know, we also

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Speaker 1: see some large puer play storage developers who are also

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Speaker 1: developers of of large steel generation assets. So it's kind

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Speaker 1: of difficult to say which, you know, is it a

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Speaker 1: separate development track, are they separate groups, or are they

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Speaker 1: just sort of making this assumption that they're the kind

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Speaker 1: of thing that you can integrate if you want or debt.

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Speaker 1: I think it will be very curious to see how

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Speaker 1: in future you have an interplay between the off site

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Speaker 1: sort of like third party four our storage that could

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Speaker 1: be contracted alongside the generation asset, a solar generation asset.

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Speaker 1: That will come down to wonky bits of technical specification

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Speaker 1: I think, or requirements written by regulators. So at the

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Speaker 1: end of the day, are we saying that wind and

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Speaker 1: solar are reliable that you can factor in you know,

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Speaker 1: a high percentage of renewables and deer mix. So I

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Speaker 1: think we're getting we're getting to this point. I mean

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Speaker 1: we we in a sense look at the lead presented

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Speaker 1: to us by the regulatory bodies in the In this sense,

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Speaker 1: I think that like studies that have been commissioned by

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Speaker 1: the grid operators and by the regulators are important guidance

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Speaker 1: to us because that internal shape what developers are able

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Speaker 1: to do, which in turn will help shape the grid.

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Speaker 1: I think on an economic basis, we certainly see this

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Speaker 1: being possible, like we already you see the case that

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Speaker 1: there's an overlap between the levelies cost of energy from

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Speaker 1: four hours of battery storage and from a gas speaker plant,

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Speaker 1: depending on where you are in the world, and that

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Speaker 1: certainly is the kind of compelling market signal that makes

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Speaker 1: people want to go out and start developing like this.

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Speaker 1: But greater reliability, just I think we're greater effective mode

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Speaker 1: carrying capability. Think of that as a proxy for greater reliability.

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Speaker 1: Here enables people that have confidence in in in planning

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Speaker 1: for greater penetration to renewable energy. Having having witnessed as

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Speaker 1: you have as well more than a decade of these

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Speaker 1: development cycles. They go from seeming crazy outlandish and definitely

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Speaker 1: pushing the boundaries of what's technically capable to business as

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Speaker 1: usual within a couple of years. So you're in washing

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Speaker 1: in DC. Tell me about how this can or can't

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Speaker 1: play out in an area that's not California. Well, it's

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Speaker 1: all about it's all about what what's the imperative at

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Speaker 1: the moment in time. So I think if you were building,

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Speaker 1: for instance, song or in Nebraska, you may not particularly

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Speaker 1: have this kind of requirement early on in the in

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Speaker 1: the life cycle of greening the grid. At the same time,

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Speaker 1: you have to look very closely at what the nature

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Speaker 1: of that individual grid is. Like if if the rest

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Speaker 1: of the generation assets do not ramp very quickly, you know,

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Speaker 1: if they're mostly plants that have a snower ramping rate

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Speaker 1: and comes of how much power they can add permitted

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Speaker 1: to the grid, then maybe you do end up sort

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Speaker 1: of ahead of time having some kind of some kind

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Speaker 1: of storage assets there to enhance the good carrying capability

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Speaker 1: because you need it earlier. I also just think that

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Speaker 1: it's it's the sort of useful guidance as you think

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Speaker 1: else sort of like, if this is the trend that

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Speaker 1: has begun in California, will probably propagate elsewhere. You know,

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Speaker 1: if this is if this is the sort of thing

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Speaker 1: that begins, it begins in one of the world's biggest,

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Speaker 1: highest renewable penetration, multi resource power markets that's very professionally run,

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Speaker 1: that has a way of propagating elsewhere. So California also,

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Speaker 1: I mean, I guess we have to talk about the

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Speaker 1: elephant the room, right, California also has a lot of

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Speaker 1: gas that that serves this role is to supply power

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Speaker 1: and when the grid needs it most. How does that

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Speaker 1: play out into the future. So I think this is

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Speaker 1: this is very worth watching, you know, on on a

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Speaker 1: pure economics basis, right now, we definitely anticipate the world's

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Speaker 1: development shift in gas assets goes from combined cycle plants

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Speaker 1: meeting basically baseload and to some extent shoulder generation too,

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Speaker 1: mostly speakers because you get so much cheap, variable renewable

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Speaker 1: energy in the grid that that that basically sets your

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Speaker 1: merit order. But there are the times of day and

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Speaker 1: the times of year in which you probably need to

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Speaker 1: quickly ramp up generation and the best way to do

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Speaker 1: that historically has been with an open cycle or peak

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Speaker 1: or gas plant. But if it turns out that a

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Speaker 1: renewables have a much higher load carrying capability sol with

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Speaker 1: storage typically than previously anticipated, then that means that you

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Speaker 1: probably have fewer of those moments uh in in in

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Speaker 1: the grid operation space wherein you definitely need to turn

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Speaker 1: something on with a few minutes notice, especially because the

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Speaker 1: battery can respond pretty much instantaneously. And two, it doesn't

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Speaker 1: mean that you're necessarily having your revenue go away from

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Speaker 1: doing operations with say peaker cast plan. But I think

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Speaker 1: it's our view that you you are going to compress

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Speaker 1: the operational sphere of that plant from hundreds of hours

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Speaker 1: a year or two maybe dozens of hours a year.

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Speaker 1: I believe that that's going to be a challenging development proposition.

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Speaker 1: Why any hours per year? Well, that's that's another fair

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Speaker 1: question is at what point is this not viewed as

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Speaker 1: necessary at all? And I think again you're looking at

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Speaker 1: you have to think about the where the decision making

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Speaker 1: is distributed. So the development the wind and solar and

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Speaker 1: predicting the solar development decision making is highly distributed amongst

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Speaker 1: hundreds of different players. There's relatively smaller number of players

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Speaker 1: doing the same on gas, right, And so what I

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Speaker 1: tend to think is that like you'll have a kind

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Speaker 1: of you'll have a kind of high mind approach and

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Speaker 1: sol we're moving much more quickly than you will developing

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Speaker 1: thermal assets. So what does this mean for for solar

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Speaker 1: and wind developers? What are some of their options going

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Speaker 1: forward to put more power under the grid. So I

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Speaker 1: think the most basic one if you're a solar developer

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Speaker 1: is that you will be operating under the assumption that

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Speaker 1: you're probably going to add some quantum of energy storage

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Speaker 1: to your projects in the future. I think that it

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Speaker 1: would be probably a challenging proposition to say we don't

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Speaker 1: plan on doing this at all anywhere in our future

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Speaker 1: development life cycle. I think the second option is to

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Speaker 1: is to start considering putting storage into existing assets. And

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Speaker 1: that's something that we haven't really seen quite yet because

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Speaker 1: most assets are not really yet at the point in

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Speaker 1: their operational lives where they might where they might be

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Speaker 1: ready for that. Right, But we generally think about the

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Speaker 1: inverter the inverter replacement cycle being about ten years. We

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Speaker 1: really don't have that many ten year old assets yet,

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Speaker 1: at least in wind and so where in wind in

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Speaker 1: the United States, we have some wind projects that are

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Speaker 1: my age, but they're not big and there aren't that

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Speaker 1: many of them. We have solar projects that are ten

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Speaker 1: years old, but not yet at the point in their

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Speaker 1: operational life would probably make sense to replace them yet completely,

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Speaker 1: but that's probably coming and I think that is where

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Speaker 1: you'll find developers essentially viewing their in existing asset as

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Speaker 1: an embedded option on doing something different in the future.

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Speaker 1: So let's stick into that a bit. So just to clarify,

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Speaker 1: you're not saying adds storage or battery to an old asset.

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Speaker 1: You're saying effectively repower or tear down and rebuild an

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Speaker 1: existing asset. Is that right, I'm saying a bit of both.

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Speaker 1: There's definitely the possibility for the former. I'm going to

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Speaker 1: go to my hundred megawatt project in the Central Valley

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Speaker 1: of California and add I'm gonna add a four hundred

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Speaker 1: meg one hour battery. Do it? Okay, that's one possibility.

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Speaker 1: But the other is to look across that site essentially

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Speaker 1: look at the package of permitted land and interconnection agreement

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Speaker 1: and off take agreement a solar resource, and look at

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Speaker 1: the grid of the future, what's it going to be

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Speaker 1: in five ten years time and say, you know what,

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Speaker 1: I could probably make more money by ripping up what

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Speaker 1: I have here and building something different. I'm probably going

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Speaker 1: to generate more power. I also have a load that

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Speaker 1: I can shape better with a battery, may be able

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Speaker 1: to enhance my load care and capability by adding a battery.

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Speaker 1: So maybe it's time to sort of re envision this,

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Speaker 1: this asset that I have. This is an idea that

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Speaker 1: I've been I've been pushing. I think it's fair to say,

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Speaker 1: pretty pretty hard in the last couple of months, is

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Speaker 1: that we should probably start thinking about assets as they

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Speaker 1: approach the end of their life, well before they approach

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Speaker 1: the end of their life, so to speak, we should

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Speaker 1: start thinking what would I do with this right now?

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Speaker 1: Knowing what I knowing the tech knowlogy at hand, and

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Speaker 1: knowing the market, how does a ten year old solar

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Speaker 1: project or a fifteen year old or twenty year old

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Speaker 1: wind project look like? What else can I do with this?

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Speaker 1: You mentioned this in your latest op ed that you

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Speaker 1: said with an old wind project, you just let it

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Speaker 1: run like an old used car. Is that right? Until

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Speaker 1: it start to fall apart and then you think about

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Speaker 1: replacing it. There's certainly, certainly that's been that's been the case.

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Speaker 1: You you work it hard, right like you you probably

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Speaker 1: you're maximizing your internal rate of return out of the

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Speaker 1: project for the sake of your investors. But there may

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Speaker 1: come a time when sort of running at ragged is

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Speaker 1: no longer the best way to generate a return. Right,

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Speaker 1: you may find that you're able to make more money

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Speaker 1: on a returns basis, on a cash flow basis by

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Speaker 1: doing something different. And certainly there are reasons, you know,

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Speaker 1: in the next couple of years to be to be

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Speaker 1: repowering a wind project for financial reasons like getting the

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Speaker 1: production tax credit again and things like that. But also

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Speaker 1: just think that's be clear that the technology is just

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Speaker 1: much much better. Hey, can you explain some of that.

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Speaker 1: You mentioned some of the numbers there that were just

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Speaker 1: kind of jaw dropping, certainly, so like like if you

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Speaker 1: if you look at a project in another project in California,

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Speaker 1: there was a wind farm not far from Palm Springs,

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Speaker 1: that is that is in the process of being of

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Speaker 1: being repowered, and it's set to be replacing four hundred

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Speaker 1: and sixty turbines and in order to doing like from

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Speaker 1: like replacement on an energy capacity basis to get the

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Speaker 1: thirty megawatts about but that comes from these four hundred

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Speaker 1: and sixty turbines. The new to the developer was looking

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Speaker 1: at building at most eleven new turbines or sixty four

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Speaker 1: eleven swap uh. And that's because well, look, the new

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Speaker 1: ones are bigger, much much bigger. You couldn't put four

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Speaker 1: hundred and sixty new turbines on the same plot as

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Speaker 1: Warrington sixty old turbines. There's always other issues you have

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Speaker 1: to look at, like how much more generation would you

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Speaker 1: be allowed to integrate? Like would you be about to

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Speaker 1: enhance your your your connection to the transmission grid and

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Speaker 1: therefore put in a lot more power, which case you

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Speaker 1: might build more. But this just gives an indication that

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Speaker 1: you know, the new technology is better. Definitely you will

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Speaker 1: generate probably more power from these new assets, um though

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Speaker 1: you may not be able to get more peak power

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Speaker 1: out of it given the great connection issues. But there's

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Speaker 1: also other stuff, I mean, like they're just going to

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Speaker 1: perform better, Like a fourty year old winter turbine generator

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Speaker 1: has probably got zero semiconductors in it, whereas a new

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Speaker 1: one was going to have dozens of sensors. It's going

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Speaker 1: to have all kinds of sophisticated telemetry and communication capabilities.

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Speaker 1: It's going to be far easier to maintain in a

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Speaker 1: predictive maintenance kind of fashion. Uh, it's it's going to

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Speaker 1: be a power quality. It's probably less and likely to

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Speaker 1: surge power at times. And so you know, you're, you're, you're,

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Speaker 1: you start to view this wind turbine project as an

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Speaker 1: embedded in an embedded option. As I said before, like

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Speaker 1: the asset isn't the forgency turbines, it's their grid connection,

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Speaker 1: the site, the set of options that you can then

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Speaker 1: do with that within your your planning and permission capability.

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Speaker 1: So what are some of the other options that you

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Speaker 1: might have besides repowering. Besides repowering, Well, you could just

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Speaker 1: run it. You can run it into the ground. I've

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Speaker 1: certainly seen older solar projects in California that are that

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Speaker 1: are really run quite ragged right there. There's there's there's

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Speaker 1: little reason to make incremental improvements over time. You can

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Speaker 1: do something else complete with the site, though, I would

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Speaker 1: have to say, and I'm sure you're familiar with this

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Speaker 1: from from not only driving in the West and seeing

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Speaker 1: these wind sites, but also for that that are going

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Speaker 1: to geo thermal sites, is whatever was within human capability

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Speaker 1: to identify as a good site four decades ago is

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Speaker 1: a great site to do stuff. So you would probably

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Speaker 1: not go to the San Gorgonio Pass with this wind

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Speaker 1: project is and decide to make it a dissolber. It's like,

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Speaker 1: if it was within the rather rustic capabilities of developers

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Speaker 1: forty five years ago to identify as a good site,

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Speaker 1: then by today's standards, it would be tremendous. So you

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Speaker 1: probably would want to keep doing the same thing. I mean,

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Speaker 1: I don't know, Mark, I would actually throw this question

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Speaker 1: back to you from a from a geothermal old hands perspective, like,

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Speaker 1: how good are the resources in uh forty to fifty

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Speaker 1: year old geothermal site now? Fantastic? Exactly? So you would

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Speaker 1: you you would be hard pressed to do any kind

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Speaker 1: of substitution. I think you're overwhelmingly likely to do the

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Speaker 1: same kind of asset there. But I will add one

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Speaker 1: wrinkle of that. If you're gonna replace four ins in

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Speaker 1: the sixty turbines with eleven, you are going to have

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Speaker 1: a lot of area on site that you could fill

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Speaker 1: up with other stuff matteries for instance, And you wouldn't

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Speaker 1: even have to necessarily have it be a battery integrated

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Speaker 1: to that project. It could be you know, it could

435
00:22:53,680 --> 00:22:56,160
Speaker 1: be done by a different developer, It could be done

436
00:22:56,200 --> 00:22:59,520
Speaker 1: by the same developer not be attached to this asset.

437
00:23:00,280 --> 00:23:02,200
Speaker 1: You could also fill up a lot of that land

438
00:23:02,760 --> 00:23:07,520
Speaker 1: with solar, again very California partlots, but it's considered disturbed land,

439
00:23:07,680 --> 00:23:11,719
Speaker 1: meaning it's already been messed with essentially, So given that,

440
00:23:11,760 --> 00:23:14,120
Speaker 1: why not when I treat some of that asset as

441
00:23:14,320 --> 00:23:18,159
Speaker 1: space to fill in with with other technologies. Again, I

442
00:23:18,640 --> 00:23:21,000
Speaker 1: think that we to to an extent, actually we may

443
00:23:21,119 --> 00:23:25,760
Speaker 1: almost over analyze the technicals here rather than view this

444
00:23:25,840 --> 00:23:29,080
Speaker 1: the way that the real estate developer. It's a site,

445
00:23:29,119 --> 00:23:30,919
Speaker 1: What am I going to do with it? You know?

446
00:23:31,640 --> 00:23:34,359
Speaker 1: What is what is today's taste to dictate is for

447
00:23:34,440 --> 00:23:37,720
Speaker 1: real estate is the equivalent for the creative, Like what

448
00:23:37,760 --> 00:23:42,560
Speaker 1: does tomorrow's power market necessitate? And you mentioned in the

449
00:23:42,560 --> 00:23:44,399
Speaker 1: outbed that you know, it might not be a power

450
00:23:44,480 --> 00:23:48,800
Speaker 1: generation asset that you would use with the extra space

451
00:23:48,840 --> 00:23:51,240
Speaker 1: that you have, but you might put a demand center there,

452
00:23:51,320 --> 00:23:53,400
Speaker 1: so like a server farm or something that would eat

453
00:23:53,440 --> 00:23:55,800
Speaker 1: up a lot of electricity. There is also that, right,

454
00:23:56,359 --> 00:23:59,560
Speaker 1: So what if I've got the ability to build more

455
00:23:59,600 --> 00:24:02,479
Speaker 1: power and the grid wants to take I should probably

456
00:24:02,480 --> 00:24:06,800
Speaker 1: start looking for somebody who wants that power at my

457
00:24:06,880 --> 00:24:11,159
Speaker 1: marginal cost of production. So yeah, maybe it's a server farm.

458
00:24:11,320 --> 00:24:15,840
Speaker 1: It could be cryptocurrency mining. I think, and I know

459
00:24:15,880 --> 00:24:17,600
Speaker 1: that you and I have talked about this before in

460
00:24:17,680 --> 00:24:21,679
Speaker 1: other in other context, if not here on the podcast.

461
00:24:22,359 --> 00:24:25,560
Speaker 1: If you give people very very cheap electricity, they will

462
00:24:25,560 --> 00:24:28,919
Speaker 1: figure out something to do with it. Like right, I

463
00:24:28,960 --> 00:24:33,399
Speaker 1: think again, we we may perhaps over analyze, well, you know,

464
00:24:34,000 --> 00:24:37,160
Speaker 1: this industry uses this kind of cheap electricity. The classic

465
00:24:37,160 --> 00:24:41,560
Speaker 1: case would be, well, you you you do aluminum smell

466
00:24:41,640 --> 00:24:44,639
Speaker 1: thing in Iceland because you want to make it clean,

467
00:24:44,680 --> 00:24:47,639
Speaker 1: and there's a lot of cheap geothermal available there. But

468
00:24:47,680 --> 00:24:49,440
Speaker 1: I think we should turn it around and just say,

469
00:24:49,520 --> 00:24:54,159
Speaker 1: if you provide electricity of this type of this quality,

470
00:24:54,320 --> 00:24:57,400
Speaker 1: what will people do with it? So rather than saying, oh,

471
00:24:57,560 --> 00:25:03,920
Speaker 1: this industry can't use capacity factor variable wind power, even

472
00:25:03,960 --> 00:25:06,560
Speaker 1: if it is only I don't know, fifteen dollars a

473
00:25:06,640 --> 00:25:10,359
Speaker 1: Mega one hour, and think instead about what industries would do.

474
00:25:10,480 --> 00:25:15,040
Speaker 1: Something who exists that would say take fifteen dollar Omega

475
00:25:15,040 --> 00:25:18,520
Speaker 1: one hour wind anytime they can get it. A classic

476
00:25:18,560 --> 00:25:20,480
Speaker 1: example that we've been looking at quite a bit would

477
00:25:20,520 --> 00:25:25,600
Speaker 1: be hydrogen production using an electrolyzer. You may not want

478
00:25:25,600 --> 00:25:28,960
Speaker 1: to run an entirety of a mission critical data center

479
00:25:29,000 --> 00:25:31,399
Speaker 1: on it knowing that there's a variability. But if you're

480
00:25:31,400 --> 00:25:34,399
Speaker 1: talking about running an electrocalizer where you have potentially a

481
00:25:34,520 --> 00:25:38,720
Speaker 1: much higher sort of appetite for variability than great, you know,

482
00:25:38,760 --> 00:25:40,679
Speaker 1: we need to start thinking about this as a feature

483
00:25:41,000 --> 00:25:44,760
Speaker 1: rather than a bug like variability and ultra low cost

484
00:25:45,760 --> 00:25:49,400
Speaker 1: or the ultralow cost offsets the variability to make a

485
00:25:49,440 --> 00:25:52,879
Speaker 1: price point. That's a feature for somebody, and we should

486
00:25:52,920 --> 00:25:55,560
Speaker 1: keep an open mind able what that might be. Okay,

487
00:25:55,560 --> 00:25:57,520
Speaker 1: So now you've got me excited about going to find

488
00:25:57,520 --> 00:26:00,800
Speaker 1: an old solar wind project and terry down and billing

489
00:26:00,840 --> 00:26:02,760
Speaker 1: it new, or finding something to do with the power.

490
00:26:02,920 --> 00:26:05,560
Speaker 1: So yesterday we came out with our Portfolio Hunters Report

491
00:26:05,600 --> 00:26:08,520
Speaker 1: where we talk about operational assets that are changing hands.

492
00:26:08,560 --> 00:26:11,920
Speaker 1: I would expect that as time goes on, we'll see

493
00:26:11,960 --> 00:26:14,480
Speaker 1: more and more of these older assets exchanging hands, given

494
00:26:14,480 --> 00:26:17,239
Speaker 1: that companies to see the optionality in them. Is that

495
00:26:17,240 --> 00:26:19,439
Speaker 1: what we're seeing or or what do you see? So

496
00:26:19,520 --> 00:26:21,960
Speaker 1: I agree with your assessment about the future. That is

497
00:26:21,960 --> 00:26:24,000
Speaker 1: not what we're seeing at the moment. So last year

498
00:26:24,160 --> 00:26:27,800
Speaker 1: there were just over ten giga wats of operational PV

499
00:26:27,920 --> 00:26:31,280
Speaker 1: projects that changed hands new buyers, which is down thirty

500
00:26:31,359 --> 00:26:37,080
Speaker 1: from and the investment volume sold was about thirteen million

501
00:26:37,119 --> 00:26:41,200
Speaker 1: dollars was down thirty seven. So definitely in the last

502
00:26:41,280 --> 00:26:44,479
Speaker 1: year we didn't we didn't see that, but a lot

503
00:26:44,520 --> 00:26:46,680
Speaker 1: of these things we had, like having of the market

504
00:26:46,680 --> 00:26:49,080
Speaker 1: the United States which had which had previously been very,

505
00:26:49,119 --> 00:26:51,280
Speaker 1: very huge, this is still chunky. It's still early days

506
00:26:51,760 --> 00:26:56,320
Speaker 1: considering how much somewhere has been installed in later years. Right.

507
00:26:56,560 --> 00:26:58,600
Speaker 1: What we're also seeing that was that the stages of

508
00:26:58,680 --> 00:27:02,000
Speaker 1: acquisition are becoming a lot and as apparent. This is

509
00:27:02,040 --> 00:27:04,600
Speaker 1: actually very interesting to see. There's there's historically been a

510
00:27:04,640 --> 00:27:08,880
Speaker 1: kind of classical path from man and cowboy hat wandering

511
00:27:08,880 --> 00:27:13,800
Speaker 1: around a desert to slightly bigger developer to more institutionally

512
00:27:13,840 --> 00:27:17,879
Speaker 1: capitalized developer to eventually an institutional investor owning the asset.

513
00:27:18,480 --> 00:27:20,160
Speaker 1: We're starting to see some things actually be a little

514
00:27:20,160 --> 00:27:22,400
Speaker 1: bit more flexible there. So the the kind of distinction

515
00:27:22,440 --> 00:27:25,280
Speaker 1: between the primary and the secondary markets is becoming less apparent.

516
00:27:25,359 --> 00:27:28,119
Speaker 1: You get meeting that, you get investors who are seeking

517
00:27:28,160 --> 00:27:31,320
Speaker 1: assets at earlier stages in their life. Um that can

518
00:27:31,440 --> 00:27:34,679
Speaker 1: that can improve margins and it can reduce competition. They

519
00:27:34,680 --> 00:27:37,880
Speaker 1: can also allow you to retain some flexibility when you're

520
00:27:37,960 --> 00:27:41,480
Speaker 1: signing an eventual power purchase agreement. That's interesting. So they're

521
00:27:41,520 --> 00:27:44,760
Speaker 1: seeking young assets rather than old assets for the optional

522
00:27:44,840 --> 00:27:48,320
Speaker 1: and they're seeking the stable return right which which is

523
00:27:48,359 --> 00:27:50,879
Speaker 1: which is which is well, they're seeking young younger, and

524
00:27:50,880 --> 00:27:54,639
Speaker 1: they're seeking assets earlier in the development cycle uh to

525
00:27:54,920 --> 00:27:58,160
Speaker 1: be acquired, meaning that they have generally speaking more confidence

526
00:27:58,160 --> 00:28:00,600
Speaker 1: in the market or potentially more confidence you're only stage

527
00:28:00,640 --> 00:28:04,640
Speaker 1: developer themselves. We're also seeing that yields are are coming in,

528
00:28:04,800 --> 00:28:08,560
Speaker 1: so the target deals have decreased, which is generally speaking

529
00:28:08,600 --> 00:28:12,320
Speaker 1: a good sign, and also again assigned it more institutional capital.

530
00:28:12,800 --> 00:28:16,440
Speaker 1: That's that means that you've got lead stage, made stage

531
00:28:16,480 --> 00:28:19,199
Speaker 1: money willing to play from lower from lower yields than

532
00:28:20,160 --> 00:28:24,520
Speaker 1: say that that aforementioned person in cowboy hat and boots

533
00:28:24,520 --> 00:28:27,840
Speaker 1: walking around in the desert. Not thanks for coming in,

534
00:28:28,160 --> 00:28:36,440
Speaker 1: Thanks for having me, Mark, It's always a pleasure. Bloomberginia

535
00:28:36,640 --> 00:28:39,560
Speaker 1: is a service provided by Bloomberg Finance LP and its affiliates.

536
00:28:39,560 --> 00:28:41,800
Speaker 1: This recording does not constitute, nor it should it be

537
00:28:41,840 --> 00:28:46,040
Speaker 1: construed as investment advice, investment recommendations, or recommendation as to

538
00:28:46,280 --> 00:28:49,440
Speaker 1: an investment or other strategy Bloombergunia should not be considered

539
00:28:49,480 --> 00:28:52,480
Speaker 1: as information sufficient upon which to base an investment decision.

540
00:28:52,640 --> 00:28:56,040
Speaker 1: Neither Bloomberg Finance LP nor any of its affiliates makes

541
00:28:56,080 --> 00:28:59,320
Speaker 1: any representation or warranty as to the accuracy or completeness

542
00:28:59,360 --> 00:29:01,640
Speaker 1: of the information and contained in this recording, and any

543
00:29:01,760 --> 00:29:04,640
Speaker 1: liability as a result of this recording is expressly disclaimed