Speaker 1: Hi everyone. We all know wind and solar are intermittent.
Speaker 1: Eventually the sun stops shining and the wind stops blowing,
Speaker 1: but as wind and solar power unreliable. In a recent episode,
Speaker 1: we talked about how the government in Mexico is saying
Speaker 1: it is that intermittent wind and solar capacity puts the
Speaker 1: grid at risk? But is that true. To help us
Speaker 1: dig into this a bit this week on the show,
Speaker 1: We've got Nat Bullard, chief content officer for benf Our.
Speaker 1: Discussion is based on a couple of recent pieces he
Speaker 1: did for Bloomberg Green as part of his spark Lines series.
Speaker 1: One is peaker gas plants may have peaked after all,
Speaker 1: and the other is aging renewable energy assets are future options.
Speaker 1: You can get these reports on the Bloomberg terminal under
Speaker 1: an I Bullard, or you can actually subscribe on Bloomberg
Speaker 1: dot com as a reminder being if it does not
Speaker 1: provide investment or strategy advice. And you can hear the
Speaker 1: fullest claimer at the end of the show him Mark Taylor,
Speaker 1: and you're listening to switch on to ben f podcast. Nat,
Speaker 1: thanks for joining us, Thanks for having me here. Mark,
Speaker 1: It's nice to be back. You've done a couple of
Speaker 1: reports recently on renewable reliability. Can you kind of explain
Speaker 1: where those came from and why we're talking about this today.
Speaker 1: The history of renewable energy being integrated into grids is
Speaker 1: that for every few percent more renewable energy that gets
Speaker 1: integrated into the grid, people sort of tear their hair
Speaker 1: out and run around like the houses on fire, thinking
Speaker 1: that reliability is going to go through the floor and
Speaker 1: we're never going to be able to integrate more than
Speaker 1: the current percentage of renewable energy in the grid. You know,
Speaker 1: first it was five percent, that was ten minutes twenty.
Speaker 1: You can look at grids in say Germany for instance,
Speaker 1: that are able to handle the integrate more than renewable
Speaker 1: same in Denmark as well. When you get to some
Speaker 1: other grids, like in the United States, you start to
Speaker 1: have some real challenges and thinking about what are we
Speaker 1: gonna do with this much renewable energy in our grid?
Speaker 1: How is it going to impact reliability? How is a
Speaker 1: grid planner, how is the developer, how is an asset owner?
Speaker 1: Do I need to be thinking about that and what
Speaker 1: do I need to do? And California is a great
Speaker 1: sort of test bed for this as as you would imagine.
Speaker 1: One thing is big state in the big mark it too.
Speaker 1: It has a lot of renewable energy. And three, it
Speaker 1: has quite a lot of wind and solar that tend
Speaker 1: to arrive on the grid at specific times. Right. Wind
Speaker 1: tends to have its peaks in the early morning and
Speaker 1: in the late evening, whereas solar tends to have its
Speaker 1: peak obviously in the middle of the day. And what
Speaker 1: those what those things I'll do together is they make
Speaker 1: the grid more variable in terms of the generation that's
Speaker 1: coming in. They also mean that you have to still
Speaker 1: plan for reliability in a time of greater variability, especially
Speaker 1: as California looks out towards a hundred percent renewable energy
Speaker 1: at some point zero carbon electricity. Then you have to
Speaker 1: you have to start thinking, how is a grid full
Speaker 1: of these variable assets going to play well with all
Speaker 1: the other children? Right? How is solar or wind going
Speaker 1: to maintain the integrity and quality of the grid as
Speaker 1: you reach very high penetrations. And so California ran the
Speaker 1: study on a term that I would imagine, honestly, not
Speaker 1: that many people are familiar with, which is the effective
Speaker 1: load carry in capable, which is how much of a
Speaker 1: plant's total theoretical capacity of any kind can you be
Speaker 1: counted on to provide when the grid needs it most? So,
Speaker 1: if you've got a hundred megawat wind or a hundred
Speaker 1: megawat soilar plant at the time when the grid needs
Speaker 1: it most, how much of that energy can you count on?
Speaker 1: And this is where things start to get a little
Speaker 1: bit interested before we get into that more deeply, can
Speaker 1: we put something to bed the grids in Germany and Denmark?
Speaker 1: Are they fundamentally different than what we find in California
Speaker 1: or the US? Or is it more of a dogma
Speaker 1: you know that more renewables equals less reliable grid. It's
Speaker 1: a bit of both. But but on the technical side,
Speaker 1: the grids are just better integrated, like they're better built interact.
Speaker 1: But it very plainly and very candidate. And also they're
Speaker 1: very different different they're very different types of systems. I mean,
Speaker 1: California is sort to buy its nature, long and linear
Speaker 1: in many cases, and they're still designed around central station
Speaker 1: generation historically, right, you know, the grids of the US
Speaker 1: are designed around a small number of large and then
Speaker 1: then eventually very large bulk generation plants way far out
Speaker 1: of town, and then a large number of small assets,
Speaker 1: probably closer into load centers, but they're not designed for
Speaker 1: hundreds of thousands or millions of generators like in the
Speaker 1: really distributed fashion, or even for that matter, they're not
Speaker 1: really designed for I don't know, potentially thousands of utility scale.
Speaker 1: It's the relatively small solar projects that have variability in
Speaker 1: their output, even though that variability is pretty well known
Speaker 1: at this point. Okay, so let's go into that variability
Speaker 1: and reliability. So the effective load carrying capacity or capability,
Speaker 1: what is that for wind and solar. The study which
Speaker 1: looked out to the end of this decade in California
Speaker 1: shows that the effective load carrying capability for wind it's
Speaker 1: been nineteen cent next year, meaning if you have a
Speaker 1: hundred megawat project, you could ring eye on nineteen megawats
Speaker 1: and that when the grid needs it most, and it's
Speaker 1: it's fairly stable measure out to the end of this decade.
Speaker 1: If you add four hours of energy storage to it,
Speaker 1: it performs better, but it doesn't do like amazingly well.
Speaker 1: It's definitely very far from like the kind of load
Speaker 1: carrying capability you would get out of a natural gas plant.
Speaker 1: Just to clarify, four hour storage is a battery, right,
Speaker 1: that's about well, they say say four hours of energy
Speaker 1: storage in the study, so we we I think it's
Speaker 1: safe to assume in most cases that that is a battery,
Speaker 1: but that could be a gigantic kinetic energy storage system,
Speaker 1: that could be pump hydros And about that, the study
Speaker 1: very deliberately does not specified batteries. However, let's be honest,
Speaker 1: most people that they're going to be developing four hours
Speaker 1: of storage right now are probably developing it using a
Speaker 1: lithi ion storage battery. Now, let's talk about solar, which
Speaker 1: is not wind solar. Even the big industrial scale installations
Speaker 1: are pretty much useless from an effective load carrying capability
Speaker 1: in two it's it gets even worse as you go
Speaker 1: further into the future, because you've got you have more
Speaker 1: of you have more in the grid, you have more
Speaker 1: sort of collected variability. Reliability of each individual assets is
Speaker 1: less significant over the breadth of this entire grid. But
Speaker 1: where it gets interesting and where it gets sort of fundamental,
Speaker 1: I think, is that if you add storage to that
Speaker 1: four hours of storage to get doesn't say that it's
Speaker 1: a battery, but not just assume that it's a battery,
Speaker 1: you get to an effective load care and capability of
Speaker 1: which i'll call it pretty close to a hundred in
Speaker 1: this case. So basically, at the time when the grid
Speaker 1: is most going to need power from solar, if you
Speaker 1: have a battery attached to it for four hours of storage,
Speaker 1: you can pretty much treat it as if it was
Speaker 1: any kind of other, any kind of other high quality
Speaker 1: asset on the grid. And there's a little bit of
Speaker 1: decline in that overtime, but really not very much, like
Speaker 1: it goes down slightly to about nine. So that must
Speaker 1: make solar plus storage, you know, something we've seen kind
Speaker 1: of emerging right now. It's kind of a no brainer
Speaker 1: for the future. I think it may. It may. It's
Speaker 1: the case very clear if there is any sort of
Speaker 1: concern about how an asset is going to interact with
Speaker 1: the grid, it makes it very clear that storage is probably,
Speaker 1: if not essential, then at least very very important. You
Speaker 1: would probably be leaving benefit on the table to not
Speaker 1: be doing storage in a in a situation like this.
Speaker 1: You know, and if you compare the effective mode carrying
Speaker 1: capability in tracking PV with four hours of storage to
Speaker 1: tracking PD without storage, one point seven percent. I think
Speaker 1: you'll probably find that there is sufficient reason from a
Speaker 1: developer's perspective to go ahead and build that storage, and
Speaker 1: and to make it even even perhaps more compelling, you
Speaker 1: may find regulatory imperative to do so. It may be
Speaker 1: a requirement that if you were to be building, you know,
Speaker 1: more than fifty megawatts of somewhere in any good installation,
Speaker 1: you have to build with it four hours of energy storage,
Speaker 1: or you have to in one way another contract for
Speaker 1: the same thing. It doesn't have to be on site.
Speaker 1: But developers being developers, it's probably pretty easy to bundle
Speaker 1: rather than to do separate parallel tracks for development. And
Speaker 1: guess you're a fewer place storage developer. So what does
Speaker 1: this mean for build? Maybe I'm just not thinking about
Speaker 1: this right, but would you build more capacity than you
Speaker 1: than you think you would need or would you right
Speaker 1: size it to supply the grid for when it needs
Speaker 1: it most? I mean, I think you're you're gonna build
Speaker 1: my math and this super reductive. You're gonna build basically
Speaker 1: what you get paid for it, right, if you're gonna
Speaker 1: if you can get paid, if you're gonna get paid
Speaker 1: for reliability, and you build the storage to do that
Speaker 1: if you're gonna get paid to shift your generation curve
Speaker 1: right to times when it's more valuable than you might
Speaker 1: do that as well. I mean, there there would be
Speaker 1: many dueling imperatives. One would be the imperative to make
Speaker 1: more money by selling more lectrons at certain times. The
Speaker 1: other imperative would be preserved whatever contract you've established by
Speaker 1: increasing your load carrying capability. We tend to not see
Speaker 1: these conversations happening, you know, I live were at real time,
Speaker 1: but they definitely are happening, Like these are conversations that
Speaker 1: developers and utilities are having, that grid operators are having
Speaker 1: with asset owners, and so I think that we need
Speaker 1: to sort of view them in a fairly supple fashion,
Speaker 1: which is a good thing. I mean, I think that
Speaker 1: you can build for it out four hours of storage
Speaker 1: for multiple sets of benefits. You could do it to
Speaker 1: make more money at certain times, or you could do
Speaker 1: it because you have to either Either way, I think
Speaker 1: there will be imperatives to do so. So who's taking
Speaker 1: the lead on this. Are there developers that are saying, hey,
Speaker 1: give me storage, or their storage companies that are approaching developers.
Speaker 1: How's the corpor dynamic playing out. It's a good question.
Speaker 1: We see a bit of both. I think that the
Speaker 1: most common right now is that you have a large
Speaker 1: soilar developer that has essentially embedded storage as part of
Speaker 1: its development process and proposition. So you know, we also
Speaker 1: see some large puer play storage developers who are also
Speaker 1: developers of of large steel generation assets. So it's kind
Speaker 1: of difficult to say which, you know, is it a
Speaker 1: separate development track, are they separate groups, or are they
Speaker 1: just sort of making this assumption that they're the kind
Speaker 1: of thing that you can integrate if you want or debt.
Speaker 1: I think it will be very curious to see how
Speaker 1: in future you have an interplay between the off site
Speaker 1: sort of like third party four our storage that could
Speaker 1: be contracted alongside the generation asset, a solar generation asset.
Speaker 1: That will come down to wonky bits of technical specification
Speaker 1: I think, or requirements written by regulators. So at the
Speaker 1: end of the day, are we saying that wind and
Speaker 1: solar are reliable that you can factor in you know,
Speaker 1: a high percentage of renewables and deer mix. So I
Speaker 1: think we're getting we're getting to this point. I mean
Speaker 1: we we in a sense look at the lead presented
Speaker 1: to us by the regulatory bodies in the In this sense,
Speaker 1: I think that like studies that have been commissioned by
Speaker 1: the grid operators and by the regulators are important guidance
Speaker 1: to us because that internal shape what developers are able
Speaker 1: to do, which in turn will help shape the grid.
Speaker 1: I think on an economic basis, we certainly see this
Speaker 1: being possible, like we already you see the case that
Speaker 1: there's an overlap between the levelies cost of energy from
Speaker 1: four hours of battery storage and from a gas speaker plant,
Speaker 1: depending on where you are in the world, and that
Speaker 1: certainly is the kind of compelling market signal that makes
Speaker 1: people want to go out and start developing like this.
Speaker 1: But greater reliability, just I think we're greater effective mode
Speaker 1: carrying capability. Think of that as a proxy for greater reliability.
Speaker 1: Here enables people that have confidence in in in planning
Speaker 1: for greater penetration to renewable energy. Having having witnessed as
Speaker 1: you have as well more than a decade of these
Speaker 1: development cycles. They go from seeming crazy outlandish and definitely
Speaker 1: pushing the boundaries of what's technically capable to business as
Speaker 1: usual within a couple of years. So you're in washing
Speaker 1: in DC. Tell me about how this can or can't
Speaker 1: play out in an area that's not California. Well, it's
Speaker 1: all about it's all about what what's the imperative at
Speaker 1: the moment in time. So I think if you were building,
Speaker 1: for instance, song or in Nebraska, you may not particularly
Speaker 1: have this kind of requirement early on in the in
Speaker 1: the life cycle of greening the grid. At the same time,
Speaker 1: you have to look very closely at what the nature
Speaker 1: of that individual grid is. Like if if the rest
Speaker 1: of the generation assets do not ramp very quickly, you know,
Speaker 1: if they're mostly plants that have a snower ramping rate
Speaker 1: and comes of how much power they can add permitted
Speaker 1: to the grid, then maybe you do end up sort
Speaker 1: of ahead of time having some kind of some kind
Speaker 1: of storage assets there to enhance the good carrying capability
Speaker 1: because you need it earlier. I also just think that
Speaker 1: it's it's the sort of useful guidance as you think
Speaker 1: else sort of like, if this is the trend that
Speaker 1: has begun in California, will probably propagate elsewhere. You know,
Speaker 1: if this is if this is the sort of thing
Speaker 1: that begins, it begins in one of the world's biggest,
Speaker 1: highest renewable penetration, multi resource power markets that's very professionally run,
Speaker 1: that has a way of propagating elsewhere. So California also,
Speaker 1: I mean, I guess we have to talk about the
Speaker 1: elephant the room, right, California also has a lot of
Speaker 1: gas that that serves this role is to supply power
Speaker 1: and when the grid needs it most. How does that
Speaker 1: play out into the future. So I think this is
Speaker 1: this is very worth watching, you know, on on a
Speaker 1: pure economics basis, right now, we definitely anticipate the world's
Speaker 1: development shift in gas assets goes from combined cycle plants
Speaker 1: meeting basically baseload and to some extent shoulder generation too,
Speaker 1: mostly speakers because you get so much cheap, variable renewable
Speaker 1: energy in the grid that that that basically sets your
Speaker 1: merit order. But there are the times of day and
Speaker 1: the times of year in which you probably need to
Speaker 1: quickly ramp up generation and the best way to do
Speaker 1: that historically has been with an open cycle or peak
Speaker 1: or gas plant. But if it turns out that a
Speaker 1: renewables have a much higher load carrying capability sol with
Speaker 1: storage typically than previously anticipated, then that means that you
Speaker 1: probably have fewer of those moments uh in in in
Speaker 1: the grid operation space wherein you definitely need to turn
Speaker 1: something on with a few minutes notice, especially because the
Speaker 1: battery can respond pretty much instantaneously. And two, it doesn't
Speaker 1: mean that you're necessarily having your revenue go away from
Speaker 1: doing operations with say peaker cast plan. But I think
Speaker 1: it's our view that you you are going to compress
Speaker 1: the operational sphere of that plant from hundreds of hours
Speaker 1: a year or two maybe dozens of hours a year.
Speaker 1: I believe that that's going to be a challenging development proposition.
Speaker 1: Why any hours per year? Well, that's that's another fair
Speaker 1: question is at what point is this not viewed as
Speaker 1: necessary at all? And I think again you're looking at
Speaker 1: you have to think about the where the decision making
Speaker 1: is distributed. So the development the wind and solar and
Speaker 1: predicting the solar development decision making is highly distributed amongst
Speaker 1: hundreds of different players. There's relatively smaller number of players
Speaker 1: doing the same on gas, right, And so what I
Speaker 1: tend to think is that like you'll have a kind
Speaker 1: of you'll have a kind of high mind approach and
Speaker 1: sol we're moving much more quickly than you will developing
Speaker 1: thermal assets. So what does this mean for for solar
Speaker 1: and wind developers? What are some of their options going
Speaker 1: forward to put more power under the grid. So I
Speaker 1: think the most basic one if you're a solar developer
Speaker 1: is that you will be operating under the assumption that
Speaker 1: you're probably going to add some quantum of energy storage
Speaker 1: to your projects in the future. I think that it
Speaker 1: would be probably a challenging proposition to say we don't
Speaker 1: plan on doing this at all anywhere in our future
Speaker 1: development life cycle. I think the second option is to
Speaker 1: is to start considering putting storage into existing assets. And
Speaker 1: that's something that we haven't really seen quite yet because
Speaker 1: most assets are not really yet at the point in
Speaker 1: their operational lives where they might where they might be
Speaker 1: ready for that. Right, But we generally think about the
Speaker 1: inverter the inverter replacement cycle being about ten years. We
Speaker 1: really don't have that many ten year old assets yet,
Speaker 1: at least in wind and so where in wind in
Speaker 1: the United States, we have some wind projects that are
Speaker 1: my age, but they're not big and there aren't that
Speaker 1: many of them. We have solar projects that are ten
Speaker 1: years old, but not yet at the point in their
Speaker 1: operational life would probably make sense to replace them yet completely,
Speaker 1: but that's probably coming and I think that is where
Speaker 1: you'll find developers essentially viewing their in existing asset as
Speaker 1: an embedded option on doing something different in the future.
Speaker 1: So let's stick into that a bit. So just to clarify,
Speaker 1: you're not saying adds storage or battery to an old asset.
Speaker 1: You're saying effectively repower or tear down and rebuild an
Speaker 1: existing asset. Is that right, I'm saying a bit of both.
Speaker 1: There's definitely the possibility for the former. I'm going to
Speaker 1: go to my hundred megawatt project in the Central Valley
Speaker 1: of California and add I'm gonna add a four hundred
Speaker 1: meg one hour battery. Do it? Okay, that's one possibility.
Speaker 1: But the other is to look across that site essentially
Speaker 1: look at the package of permitted land and interconnection agreement
Speaker 1: and off take agreement a solar resource, and look at
Speaker 1: the grid of the future, what's it going to be
Speaker 1: in five ten years time and say, you know what,
Speaker 1: I could probably make more money by ripping up what
Speaker 1: I have here and building something different. I'm probably going
Speaker 1: to generate more power. I also have a load that
Speaker 1: I can shape better with a battery, may be able
Speaker 1: to enhance my load care and capability by adding a battery.
Speaker 1: So maybe it's time to sort of re envision this,
Speaker 1: this asset that I have. This is an idea that
Speaker 1: I've been I've been pushing. I think it's fair to say,
Speaker 1: pretty pretty hard in the last couple of months, is
Speaker 1: that we should probably start thinking about assets as they
Speaker 1: approach the end of their life, well before they approach
Speaker 1: the end of their life, so to speak, we should
Speaker 1: start thinking what would I do with this right now?
Speaker 1: Knowing what I knowing the tech knowlogy at hand, and
Speaker 1: knowing the market, how does a ten year old solar
Speaker 1: project or a fifteen year old or twenty year old
Speaker 1: wind project look like? What else can I do with this?
Speaker 1: You mentioned this in your latest op ed that you
Speaker 1: said with an old wind project, you just let it
Speaker 1: run like an old used car. Is that right? Until
Speaker 1: it start to fall apart and then you think about
Speaker 1: replacing it. There's certainly, certainly that's been that's been the case.
Speaker 1: You you work it hard, right like you you probably
Speaker 1: you're maximizing your internal rate of return out of the
Speaker 1: project for the sake of your investors. But there may
Speaker 1: come a time when sort of running at ragged is
Speaker 1: no longer the best way to generate a return. Right,
Speaker 1: you may find that you're able to make more money
Speaker 1: on a returns basis, on a cash flow basis by
Speaker 1: doing something different. And certainly there are reasons, you know,
Speaker 1: in the next couple of years to be to be
Speaker 1: repowering a wind project for financial reasons like getting the
Speaker 1: production tax credit again and things like that. But also
Speaker 1: just think that's be clear that the technology is just
Speaker 1: much much better. Hey, can you explain some of that.
Speaker 1: You mentioned some of the numbers there that were just
Speaker 1: kind of jaw dropping, certainly, so like like if you
Speaker 1: if you look at a project in another project in California,
Speaker 1: there was a wind farm not far from Palm Springs,
Speaker 1: that is that is in the process of being of
Speaker 1: being repowered, and it's set to be replacing four hundred
Speaker 1: and sixty turbines and in order to doing like from
Speaker 1: like replacement on an energy capacity basis to get the
Speaker 1: thirty megawatts about but that comes from these four hundred
Speaker 1: and sixty turbines. The new to the developer was looking
Speaker 1: at building at most eleven new turbines or sixty four
Speaker 1: eleven swap uh. And that's because well, look, the new
Speaker 1: ones are bigger, much much bigger. You couldn't put four
Speaker 1: hundred and sixty new turbines on the same plot as
Speaker 1: Warrington sixty old turbines. There's always other issues you have
Speaker 1: to look at, like how much more generation would you
Speaker 1: be allowed to integrate? Like would you be about to
Speaker 1: enhance your your your connection to the transmission grid and
Speaker 1: therefore put in a lot more power, which case you
Speaker 1: might build more. But this just gives an indication that
Speaker 1: you know, the new technology is better. Definitely you will
Speaker 1: generate probably more power from these new assets, um though
Speaker 1: you may not be able to get more peak power
Speaker 1: out of it given the great connection issues. But there's
Speaker 1: also other stuff, I mean, like they're just going to
Speaker 1: perform better, Like a fourty year old winter turbine generator
Speaker 1: has probably got zero semiconductors in it, whereas a new
Speaker 1: one was going to have dozens of sensors. It's going
Speaker 1: to have all kinds of sophisticated telemetry and communication capabilities.
Speaker 1: It's going to be far easier to maintain in a
Speaker 1: predictive maintenance kind of fashion. Uh, it's it's going to
Speaker 1: be a power quality. It's probably less and likely to
Speaker 1: surge power at times. And so you know, you're, you're, you're,
Speaker 1: you start to view this wind turbine project as an
Speaker 1: embedded in an embedded option. As I said before, like
Speaker 1: the asset isn't the forgency turbines, it's their grid connection,
Speaker 1: the site, the set of options that you can then
Speaker 1: do with that within your your planning and permission capability.
Speaker 1: So what are some of the other options that you
Speaker 1: might have besides repowering. Besides repowering, Well, you could just
Speaker 1: run it. You can run it into the ground. I've
Speaker 1: certainly seen older solar projects in California that are that
Speaker 1: are really run quite ragged right there. There's there's there's
Speaker 1: little reason to make incremental improvements over time. You can
Speaker 1: do something else complete with the site, though, I would
Speaker 1: have to say, and I'm sure you're familiar with this
Speaker 1: from from not only driving in the West and seeing
Speaker 1: these wind sites, but also for that that are going
Speaker 1: to geo thermal sites, is whatever was within human capability
Speaker 1: to identify as a good site four decades ago is
Speaker 1: a great site to do stuff. So you would probably
Speaker 1: not go to the San Gorgonio Pass with this wind
Speaker 1: project is and decide to make it a dissolber. It's like,
Speaker 1: if it was within the rather rustic capabilities of developers
Speaker 1: forty five years ago to identify as a good site,
Speaker 1: then by today's standards, it would be tremendous. So you
Speaker 1: probably would want to keep doing the same thing. I mean,
Speaker 1: I don't know, Mark, I would actually throw this question
Speaker 1: back to you from a from a geothermal old hands perspective, like,
Speaker 1: how good are the resources in uh forty to fifty
Speaker 1: year old geothermal site now? Fantastic? Exactly? So you would
Speaker 1: you you would be hard pressed to do any kind
Speaker 1: of substitution. I think you're overwhelmingly likely to do the
Speaker 1: same kind of asset there. But I will add one
Speaker 1: wrinkle of that. If you're gonna replace four ins in
Speaker 1: the sixty turbines with eleven, you are going to have
Speaker 1: a lot of area on site that you could fill
Speaker 1: up with other stuff matteries for instance, And you wouldn't
Speaker 1: even have to necessarily have it be a battery integrated
Speaker 1: to that project. It could be you know, it could
Speaker 1: be done by a different developer, It could be done
Speaker 1: by the same developer not be attached to this asset.
Speaker 1: You could also fill up a lot of that land
Speaker 1: with solar, again very California partlots, but it's considered disturbed land,
Speaker 1: meaning it's already been messed with essentially, So given that,
Speaker 1: why not when I treat some of that asset as
Speaker 1: space to fill in with with other technologies. Again, I
Speaker 1: think that we to to an extent, actually we may
Speaker 1: almost over analyze the technicals here rather than view this
Speaker 1: the way that the real estate developer. It's a site,
Speaker 1: What am I going to do with it? You know?
Speaker 1: What is what is today's taste to dictate is for
Speaker 1: real estate is the equivalent for the creative, Like what
Speaker 1: does tomorrow's power market necessitate? And you mentioned in the
Speaker 1: outbed that you know, it might not be a power
Speaker 1: generation asset that you would use with the extra space
Speaker 1: that you have, but you might put a demand center there,
Speaker 1: so like a server farm or something that would eat
Speaker 1: up a lot of electricity. There is also that, right,
Speaker 1: So what if I've got the ability to build more
Speaker 1: power and the grid wants to take I should probably
Speaker 1: start looking for somebody who wants that power at my
Speaker 1: marginal cost of production. So yeah, maybe it's a server farm.
Speaker 1: It could be cryptocurrency mining. I think, and I know
Speaker 1: that you and I have talked about this before in
Speaker 1: other in other context, if not here on the podcast.
Speaker 1: If you give people very very cheap electricity, they will
Speaker 1: figure out something to do with it. Like right, I
Speaker 1: think again, we we may perhaps over analyze, well, you know,
Speaker 1: this industry uses this kind of cheap electricity. The classic
Speaker 1: case would be, well, you you you do aluminum smell
Speaker 1: thing in Iceland because you want to make it clean,
Speaker 1: and there's a lot of cheap geothermal available there. But
Speaker 1: I think we should turn it around and just say,
Speaker 1: if you provide electricity of this type of this quality,
Speaker 1: what will people do with it? So rather than saying, oh,
Speaker 1: this industry can't use capacity factor variable wind power, even
Speaker 1: if it is only I don't know, fifteen dollars a
Speaker 1: Mega one hour, and think instead about what industries would do.
Speaker 1: Something who exists that would say take fifteen dollar Omega
Speaker 1: one hour wind anytime they can get it. A classic
Speaker 1: example that we've been looking at quite a bit would
Speaker 1: be hydrogen production using an electrolyzer. You may not want
Speaker 1: to run an entirety of a mission critical data center
Speaker 1: on it knowing that there's a variability. But if you're
Speaker 1: talking about running an electrocalizer where you have potentially a
Speaker 1: much higher sort of appetite for variability than great, you know,
Speaker 1: we need to start thinking about this as a feature
Speaker 1: rather than a bug like variability and ultra low cost
Speaker 1: or the ultralow cost offsets the variability to make a
Speaker 1: price point. That's a feature for somebody, and we should
Speaker 1: keep an open mind able what that might be. Okay,
Speaker 1: So now you've got me excited about going to find
Speaker 1: an old solar wind project and terry down and billing
Speaker 1: it new, or finding something to do with the power.
Speaker 1: So yesterday we came out with our Portfolio Hunters Report
Speaker 1: where we talk about operational assets that are changing hands.
Speaker 1: I would expect that as time goes on, we'll see
Speaker 1: more and more of these older assets exchanging hands, given
Speaker 1: that companies to see the optionality in them. Is that
Speaker 1: what we're seeing or or what do you see? So
Speaker 1: I agree with your assessment about the future. That is
Speaker 1: not what we're seeing at the moment. So last year
Speaker 1: there were just over ten giga wats of operational PV
Speaker 1: projects that changed hands new buyers, which is down thirty
Speaker 1: from and the investment volume sold was about thirteen million
Speaker 1: dollars was down thirty seven. So definitely in the last
Speaker 1: year we didn't we didn't see that, but a lot
Speaker 1: of these things we had, like having of the market
Speaker 1: the United States which had which had previously been very,
Speaker 1: very huge, this is still chunky. It's still early days
Speaker 1: considering how much somewhere has been installed in later years. Right.
Speaker 1: What we're also seeing that was that the stages of
Speaker 1: acquisition are becoming a lot and as apparent. This is
Speaker 1: actually very interesting to see. There's there's historically been a
Speaker 1: kind of classical path from man and cowboy hat wandering
Speaker 1: around a desert to slightly bigger developer to more institutionally
Speaker 1: capitalized developer to eventually an institutional investor owning the asset.
Speaker 1: We're starting to see some things actually be a little
Speaker 1: bit more flexible there. So the the kind of distinction
Speaker 1: between the primary and the secondary markets is becoming less apparent.
Speaker 1: You get meeting that, you get investors who are seeking
Speaker 1: assets at earlier stages in their life. Um that can
Speaker 1: that can improve margins and it can reduce competition. They
Speaker 1: can also allow you to retain some flexibility when you're
Speaker 1: signing an eventual power purchase agreement. That's interesting. So they're
Speaker 1: seeking young assets rather than old assets for the optional
Speaker 1: and they're seeking the stable return right which which is
Speaker 1: which is which is well, they're seeking young younger, and
Speaker 1: they're seeking assets earlier in the development cycle uh to
Speaker 1: be acquired, meaning that they have generally speaking more confidence
Speaker 1: in the market or potentially more confidence you're only stage
Speaker 1: developer themselves. We're also seeing that yields are are coming in,
Speaker 1: so the target deals have decreased, which is generally speaking
Speaker 1: a good sign, and also again assigned it more institutional capital.
Speaker 1: That's that means that you've got lead stage, made stage
Speaker 1: money willing to play from lower from lower yields than
Speaker 1: say that that aforementioned person in cowboy hat and boots
Speaker 1: walking around in the desert. Not thanks for coming in,
Speaker 1: Thanks for having me, Mark, It's always a pleasure. Bloomberginia
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