1 00:00:00,560 --> 00:00:03,800 Speaker 1: This is Dana Perkins and you're listening to Switched on 2 00:00:04,120 --> 00:00:06,920 Speaker 1: the B and EF podcast. And today I'm joined again 3 00:00:07,000 --> 00:00:09,760 Speaker 1: by Tom Rowlands Reese as my co host and we 4 00:00:09,880 --> 00:00:12,880 Speaker 1: have a conversation with Felicia Amanov from our Grids and 5 00:00:13,000 --> 00:00:15,760 Speaker 1: Utilities team. We talk about how much money is going 6 00:00:15,760 --> 00:00:19,080 Speaker 1: into grid investment, whether it's enough, and why now more 7 00:00:19,120 --> 00:00:21,760 Speaker 1: than ever, it is needed. We all know that grids 8 00:00:21,800 --> 00:00:24,880 Speaker 1: are a pretty critical part of infrastructure, from the transmission 9 00:00:24,920 --> 00:00:29,160 Speaker 1: systems operators who connect electricity generation sources to the distribution 10 00:00:29,280 --> 00:00:33,080 Speaker 1: systems operators and how they then connect to consumers. It's 11 00:00:33,200 --> 00:00:36,680 Speaker 1: all of these lines that make the energy transition possible. 12 00:00:37,000 --> 00:00:40,080 Speaker 1: Despite increased investment in the power grid in twenty twenty three, 13 00:00:40,440 --> 00:00:43,080 Speaker 1: up seven percent from the year before, it's still not 14 00:00:43,280 --> 00:00:45,840 Speaker 1: enough to meet a net zero pathway in the majority 15 00:00:45,840 --> 00:00:48,640 Speaker 1: of markets around the world. This is for a variety 16 00:00:48,640 --> 00:00:53,440 Speaker 1: of reasons, including increased grid requirements owing to artificial intelligence 17 00:00:53,440 --> 00:00:56,800 Speaker 1: and data centers, alongside the need for more expensive grids 18 00:00:56,960 --> 00:01:00,360 Speaker 1: as lines are moved underground in order to adapt to 19 00:01:00,400 --> 00:01:04,000 Speaker 1: a changing climate that includes extreme weather events. This is 20 00:01:04,000 --> 00:01:07,039 Speaker 1: in addition to the sheer number of new projects waiting 21 00:01:07,080 --> 00:01:09,720 Speaker 1: in line to connect to the grid where renewable energy 22 00:01:09,800 --> 00:01:12,960 Speaker 1: is trying to grow. Felicia pulls from research found in 23 00:01:13,000 --> 00:01:16,160 Speaker 1: the twenty twenty four Power Grid Investment Outlook, and I 24 00:01:16,240 --> 00:01:19,400 Speaker 1: also recommend taking a look at the New Energy Outlook 25 00:01:19,440 --> 00:01:23,000 Speaker 1: twenty twenty four colon grids. This was a grid specific 26 00:01:23,000 --> 00:01:25,759 Speaker 1: report founded on research found in b and EF's long 27 00:01:25,840 --> 00:01:29,320 Speaker 1: term scenarios and was published on the twenty eighth of October. 28 00:01:29,400 --> 00:01:31,760 Speaker 1: BNF clients will be able to find these at b 29 00:01:31,920 --> 00:01:34,400 Speaker 1: and EF go on the Bloomberg terminal or at BNF 30 00:01:34,400 --> 00:01:37,440 Speaker 1: dot com. Right now, let's jump into Tom and my 31 00:01:37,520 --> 00:01:53,960 Speaker 1: discussion with Felicia about grid investments, expectations, and our current reality. Felicia, 32 00:01:54,000 --> 00:01:55,440 Speaker 1: thank you very much for joining the show. 33 00:01:55,640 --> 00:01:56,440 Speaker 2: Thank you for having me. 34 00:01:56,720 --> 00:01:58,760 Speaker 1: You've got two of us asking you questions today. So 35 00:01:58,800 --> 00:02:01,320 Speaker 1: I'm on with Tom hosting again. Nice to have you. 36 00:02:01,360 --> 00:02:01,560 Speaker 2: Tom. 37 00:02:01,720 --> 00:02:02,440 Speaker 3: Hi that DNA. 38 00:02:02,760 --> 00:02:05,120 Speaker 1: So a common theme that we've talked about in so 39 00:02:05,280 --> 00:02:08,919 Speaker 1: many of these podcasts has been this need for updating 40 00:02:08,960 --> 00:02:11,520 Speaker 1: the grid. We need to build new infrastructure, so we 41 00:02:11,560 --> 00:02:14,520 Speaker 1: need more grid connections, we need more reliable grids, and 42 00:02:14,600 --> 00:02:16,720 Speaker 1: then we're going to talk about this today. We're going 43 00:02:16,760 --> 00:02:19,360 Speaker 1: to actually talk about how demand is increasing as well. 44 00:02:19,440 --> 00:02:21,600 Speaker 1: We've had you on the show to talk about grids before, 45 00:02:21,639 --> 00:02:23,520 Speaker 1: but as we get into this update where we really 46 00:02:23,639 --> 00:02:26,560 Speaker 1: are going to follow also how much investment is required. 47 00:02:26,600 --> 00:02:29,280 Speaker 1: Can you just frame the problem for everybody, so we're 48 00:02:29,280 --> 00:02:30,640 Speaker 1: all starting from the same place. 49 00:02:31,160 --> 00:02:33,760 Speaker 2: So about a year or two ago, I feel like 50 00:02:33,800 --> 00:02:38,440 Speaker 2: everyone was complaining about the grids. Renewables couldn't connect, ev chargers, 51 00:02:38,480 --> 00:02:42,520 Speaker 2: couldn't connect, and unfortunately we haven't quite yet solved that. 52 00:02:42,680 --> 00:02:45,680 Speaker 2: But what we have now is the plans for how 53 00:02:45,720 --> 00:02:48,160 Speaker 2: to solve that. So what we did in the grids 54 00:02:48,200 --> 00:02:51,320 Speaker 2: team is we looked at the grid development plants. We're 55 00:02:51,320 --> 00:02:55,000 Speaker 2: ten major markets across the globe, so this represents about 56 00:02:55,040 --> 00:02:57,960 Speaker 2: half of global grid investment, and what we can see 57 00:02:58,120 --> 00:03:03,040 Speaker 2: is the significant plan ramp up and spend. So between 58 00:03:03,040 --> 00:03:05,280 Speaker 2: twenty twenty two and twenty twenty three, you saw grid 59 00:03:05,320 --> 00:03:08,520 Speaker 2: investment rising seven percent, and we think that for this 60 00:03:08,680 --> 00:03:11,400 Speaker 2: year the growth will hit thirteen percent. So you really 61 00:03:11,440 --> 00:03:13,880 Speaker 2: see that that annual growth coming in and that is 62 00:03:13,960 --> 00:03:16,280 Speaker 2: even when we net out the effect of inflation. 63 00:03:16,760 --> 00:03:19,720 Speaker 1: Well, I can't wait to talk about plans because we 64 00:03:19,880 --> 00:03:22,360 Speaker 1: love thinking about what could be in the future, especially 65 00:03:22,400 --> 00:03:26,200 Speaker 1: as things are gaining momentum, but just to help us 66 00:03:26,240 --> 00:03:29,160 Speaker 1: think a little bit about this demand end of things. 67 00:03:29,400 --> 00:03:32,240 Speaker 1: While grids have featured and have been certainly a buzzword 68 00:03:32,280 --> 00:03:35,040 Speaker 1: on this show, a buzzword that a lot of people 69 00:03:35,080 --> 00:03:38,120 Speaker 1: are talking about right now is AI and artificial intelligence, 70 00:03:38,120 --> 00:03:40,800 Speaker 1: how we're going to build it into all of our jobs, 71 00:03:40,880 --> 00:03:42,280 Speaker 1: and how it's going to. 72 00:03:42,920 --> 00:03:43,960 Speaker 4: Revolutionize the world. 73 00:03:44,040 --> 00:03:47,760 Speaker 1: But it also is incredibly data heavy and energy consuming. 74 00:03:48,000 --> 00:03:49,960 Speaker 1: So can you just talk a little bit about how 75 00:03:50,080 --> 00:03:53,440 Speaker 1: AI and data centers feature in terms of grid demand. 76 00:03:53,640 --> 00:03:57,320 Speaker 2: Yeah, absolutely, So this is a topic that's increasingly come 77 00:03:57,400 --> 00:04:00,000 Speaker 2: up over the last year. And truth is, we don't 78 00:04:00,000 --> 00:04:04,320 Speaker 2: don't yet know where AI energy demand will be in 79 00:04:04,360 --> 00:04:07,040 Speaker 2: a few years time, but what we do see in 80 00:04:07,360 --> 00:04:10,160 Speaker 2: especially the US, but also to some extent in Europe, 81 00:04:10,320 --> 00:04:15,320 Speaker 2: is increasing grid connection requests from these large scale data centers. 82 00:04:15,360 --> 00:04:17,320 Speaker 2: And these data centers are often huge. 83 00:04:17,360 --> 00:04:20,280 Speaker 4: They are like larger than your typical coal or gas 84 00:04:20,400 --> 00:04:21,200 Speaker 4: power plant. 85 00:04:21,279 --> 00:04:24,440 Speaker 2: And for the US, we have a number from a 86 00:04:24,520 --> 00:04:27,880 Speaker 2: PRI so that's the Electric Power Research Institute that estimates 87 00:04:27,880 --> 00:04:32,240 Speaker 2: that by twenty thirty, about nine percent of all electricity 88 00:04:32,440 --> 00:04:35,800 Speaker 2: generation in the US might have to go to data centers. 89 00:04:36,120 --> 00:04:39,120 Speaker 2: And that's compared to four percent today and in Europe 90 00:04:39,160 --> 00:04:42,720 Speaker 2: we don't yet know where this will go, but there's yeah, 91 00:04:42,800 --> 00:04:44,480 Speaker 2: a lot of connection requests. 92 00:04:44,800 --> 00:04:46,919 Speaker 1: So let's talk about then the plans to fix it. 93 00:04:47,040 --> 00:04:49,600 Speaker 1: So what categories would you break that down in? Where 94 00:04:49,640 --> 00:04:51,400 Speaker 1: were going to take the conversation today? 95 00:04:51,600 --> 00:04:56,080 Speaker 2: So a grid investment plan is really trying to predict 96 00:04:56,080 --> 00:04:59,320 Speaker 2: the future for the next few years, and in getting 97 00:04:59,320 --> 00:05:01,240 Speaker 2: that right, you need to have an idea of where 98 00:05:01,279 --> 00:05:04,480 Speaker 2: your electricity demand is going, but you also need to 99 00:05:04,520 --> 00:05:07,160 Speaker 2: know where your generation is going to come from. So 100 00:05:07,400 --> 00:05:10,080 Speaker 2: a big part of the investment going on in Europe 101 00:05:10,120 --> 00:05:13,600 Speaker 2: at the moment is rewiring the grids to go from 102 00:05:13,640 --> 00:05:17,800 Speaker 2: supporting your old fashioned fossil fuel power plants to your 103 00:05:17,839 --> 00:05:20,760 Speaker 2: new renewables which is mainly wind and solar. And you 104 00:05:20,839 --> 00:05:23,320 Speaker 2: have some countries like the UK and Germany where this 105 00:05:23,640 --> 00:05:27,200 Speaker 2: shift is huge because in the past you've had these 106 00:05:27,720 --> 00:05:31,440 Speaker 2: large electricity demand centers in Germany industry for example, that 107 00:05:31,480 --> 00:05:33,360 Speaker 2: has been in the south of the country and now 108 00:05:33,360 --> 00:05:36,360 Speaker 2: you're building a lot of offshore wind, which in germany's 109 00:05:36,400 --> 00:05:38,760 Speaker 2: in the north of the country, so suddenly you're having 110 00:05:39,040 --> 00:05:41,520 Speaker 2: generation come from the wrong place. 111 00:05:41,680 --> 00:05:43,919 Speaker 4: So what you need to do is build. 112 00:05:43,720 --> 00:05:47,160 Speaker 2: These enormous power lines all the way across the country 113 00:05:47,240 --> 00:05:49,880 Speaker 2: to get the power to where the industry needs it. 114 00:05:50,080 --> 00:05:54,039 Speaker 2: And this takes time and it gets expensive, and it 115 00:05:54,080 --> 00:05:58,120 Speaker 2: gets especially expensive because a lot of people don't love pilons. 116 00:05:58,360 --> 00:06:01,520 Speaker 2: They're those big transmission towers that you often see next 117 00:06:01,520 --> 00:06:04,000 Speaker 2: to the roads when you're driving. Maybe not what you 118 00:06:04,040 --> 00:06:07,560 Speaker 2: want in your backyard. It's slightly same issue as those 119 00:06:07,640 --> 00:06:10,159 Speaker 2: onshore winter turbines, which is why we went offshore in 120 00:06:10,160 --> 00:06:13,360 Speaker 2: the first place. So now what Germany is doing is 121 00:06:13,520 --> 00:06:17,279 Speaker 2: they're putting their cables underground and that can double or 122 00:06:17,320 --> 00:06:19,000 Speaker 2: sometimes even triple. 123 00:06:18,680 --> 00:06:20,720 Speaker 4: The cost of the line per mile. 124 00:06:20,839 --> 00:06:24,239 Speaker 2: So that's why you see these huge investment plans coming. 125 00:06:24,520 --> 00:06:27,160 Speaker 2: The UK has this slightly easier time. It doesn't need 126 00:06:27,200 --> 00:06:30,239 Speaker 2: to dig these trenches for the cables because it's an island, 127 00:06:30,320 --> 00:06:33,680 Speaker 2: so it can go offshore. But the cost implications there 128 00:06:33,480 --> 00:06:36,640 Speaker 2: are similar. So in the UK, you're bringing wind power 129 00:06:36,680 --> 00:06:39,560 Speaker 2: from north to south by going offshore and putting those 130 00:06:39,600 --> 00:06:41,239 Speaker 2: cables under the sea instead. 131 00:06:41,600 --> 00:06:44,520 Speaker 3: Can I ask a question about these plans because I 132 00:06:44,600 --> 00:06:47,919 Speaker 3: understand all the problems you've identified and how they're intensifying, 133 00:06:48,000 --> 00:06:50,920 Speaker 3: But those problems maybe the AI one is a little 134 00:06:50,960 --> 00:06:52,520 Speaker 3: bit of a new dynamic, but a lot of these 135 00:06:52,839 --> 00:06:55,960 Speaker 3: problems around where renewables are located and not new. And 136 00:06:56,160 --> 00:06:58,120 Speaker 3: you know, as you say, we've been complaining about this 137 00:06:58,320 --> 00:06:59,960 Speaker 3: for two years, I would say for longer than two year, 138 00:07:00,040 --> 00:07:03,320 Speaker 3: as people have been saying the grid is inadequate and insufficient. 139 00:07:03,520 --> 00:07:06,839 Speaker 3: So these plans, I suppose, from what you've described there 140 00:07:06,920 --> 00:07:10,280 Speaker 3: identifying what the grid needs to look like physically, but 141 00:07:10,600 --> 00:07:13,440 Speaker 3: do they address some of the issues as to why 142 00:07:13,560 --> 00:07:17,280 Speaker 3: the necessary change that has needed to happen hasn't happened 143 00:07:17,400 --> 00:07:18,480 Speaker 3: in the different markets. 144 00:07:18,960 --> 00:07:21,400 Speaker 2: Yeah. Part of it is now that these plans are 145 00:07:21,440 --> 00:07:25,000 Speaker 2: not just identifying where you need the grid, but they're 146 00:07:25,040 --> 00:07:30,080 Speaker 2: actually sort of concrete plans with dedicated amounts of investment 147 00:07:30,440 --> 00:07:33,960 Speaker 2: that you're going to build these projects. And part of 148 00:07:34,000 --> 00:07:37,640 Speaker 2: why this hasn't happened in the past is that over 149 00:07:37,680 --> 00:07:41,080 Speaker 2: the last couple of decades, in a lot of the 150 00:07:41,480 --> 00:07:46,440 Speaker 2: industrialized world, you've seen a decline in electricity demand, so 151 00:07:46,600 --> 00:07:50,880 Speaker 2: industries have moved abroad and you've had energy efficiency, meaning 152 00:07:50,920 --> 00:07:53,720 Speaker 2: that yeah, overall power demand is lower, and in that 153 00:07:53,840 --> 00:07:57,680 Speaker 2: kind of environment, you do end up with spare capacity 154 00:07:57,680 --> 00:07:58,160 Speaker 2: on the grid. 155 00:07:58,400 --> 00:07:59,240 Speaker 4: So the grid. 156 00:07:59,000 --> 00:08:01,320 Speaker 2: Companies have sort of gotten used to being in this 157 00:08:01,440 --> 00:08:04,320 Speaker 2: mindset that actually what they need to do is to 158 00:08:04,400 --> 00:08:09,320 Speaker 2: save money and have low grid fees for customers. And 159 00:08:09,640 --> 00:08:13,720 Speaker 2: this whole culture of saving is like, you know, it 160 00:08:13,760 --> 00:08:16,640 Speaker 2: came with a good purpose. The regulators and the grid 161 00:08:16,680 --> 00:08:19,600 Speaker 2: companies were trying to keep those rates low. But then 162 00:08:20,120 --> 00:08:24,120 Speaker 2: as your renewable energy projects really started taking off, then 163 00:08:24,200 --> 00:08:28,120 Speaker 2: you were suddenly in a situation where you actually should 164 00:08:28,120 --> 00:08:31,120 Speaker 2: have invested ahead of need. You would have needed to 165 00:08:31,160 --> 00:08:35,120 Speaker 2: build your grid slightly larger just in case. And this 166 00:08:35,480 --> 00:08:39,840 Speaker 2: paradigm of anticipatory or investment or investing ahead of need 167 00:08:40,120 --> 00:08:43,760 Speaker 2: is something that's only now just starting to gain traction. 168 00:08:44,080 --> 00:08:46,560 Speaker 2: And yeah, in the UK you've had a whole new 169 00:08:46,800 --> 00:08:50,000 Speaker 2: regulatory scheme to allow this type of investment, but yeah, 170 00:08:50,080 --> 00:08:52,320 Speaker 2: they weren't thinking like this five years ago, and that's 171 00:08:52,960 --> 00:08:53,880 Speaker 2: why we're where we are. 172 00:08:54,200 --> 00:08:57,040 Speaker 3: So in a way, demand growth is like a catalyst 173 00:08:57,400 --> 00:08:58,239 Speaker 3: for the paradigm. 174 00:08:58,720 --> 00:09:02,520 Speaker 2: Well, partially in the US you are now seeing a 175 00:09:02,520 --> 00:09:06,280 Speaker 2: lot of demand growth, and that's because of data centers mainly. 176 00:09:06,720 --> 00:09:10,880 Speaker 2: You'd also see new demand from electric vehicles and heat pumps. 177 00:09:11,000 --> 00:09:15,400 Speaker 2: But actually in Europe demand hasn't quite taken off as 178 00:09:15,679 --> 00:09:19,959 Speaker 2: fast as it would need to from these new electrified, 179 00:09:20,280 --> 00:09:23,840 Speaker 2: low carbon sectors, and as a result of that, there 180 00:09:23,960 --> 00:09:26,760 Speaker 2: was for a while a hesitancy to invest a lot 181 00:09:26,800 --> 00:09:29,280 Speaker 2: in grids, and I think it just took a couple 182 00:09:29,240 --> 00:09:32,960 Speaker 2: of years for their regulators that ultimately can cap the 183 00:09:33,000 --> 00:09:36,000 Speaker 2: grid spend to come around and just realize that the 184 00:09:36,040 --> 00:09:38,800 Speaker 2: grid rates will have to go up. We need to 185 00:09:39,360 --> 00:09:42,840 Speaker 2: get that offshore wind especially integrated, because at the moment, 186 00:09:43,320 --> 00:09:46,280 Speaker 2: those wind farms are often getting paid to shut off 187 00:09:46,559 --> 00:09:50,800 Speaker 2: and that is just money down the drain, that's energy wasted. 188 00:09:51,120 --> 00:09:55,160 Speaker 2: And in Europe you don't have nodle electricity pricing, so 189 00:09:55,400 --> 00:09:57,480 Speaker 2: a lot of the time it's the grid operator that 190 00:09:57,760 --> 00:10:01,480 Speaker 2: instructs the plants what to do. And this cost has 191 00:10:01,679 --> 00:10:04,320 Speaker 2: just massively increased in the last couple of years. So 192 00:10:04,360 --> 00:10:07,960 Speaker 2: now consumer rates have gone up even without that increase 193 00:10:08,000 --> 00:10:10,920 Speaker 2: in investment. So now that the investment will happen, it 194 00:10:10,960 --> 00:10:13,640 Speaker 2: will be a while of higher grid fees, but in 195 00:10:13,679 --> 00:10:14,280 Speaker 2: the long time it. 196 00:10:14,280 --> 00:10:17,600 Speaker 1: Will cheaper, which then is the question is you know, 197 00:10:17,679 --> 00:10:21,720 Speaker 1: in order to figure out how to increase investment, let's 198 00:10:21,720 --> 00:10:23,600 Speaker 1: talk about who's actually paying for it. So is it 199 00:10:23,640 --> 00:10:26,600 Speaker 1: tax dollars and is this essentially a policy discussion and 200 00:10:26,840 --> 00:10:29,680 Speaker 1: grids are something that we need to see collectively like roads, 201 00:10:29,760 --> 00:10:32,079 Speaker 1: where they're more or less a common good or is 202 00:10:32,080 --> 00:10:33,600 Speaker 1: it going to be paid a play? And is it 203 00:10:33,720 --> 00:10:36,160 Speaker 1: those of us who are consuming, whether it's a company 204 00:10:36,280 --> 00:10:39,360 Speaker 1: or an individual ultimately or seeing higher prices because it's 205 00:10:39,400 --> 00:10:43,719 Speaker 1: so directly linked to consumption and therefore that's how it's 206 00:10:43,760 --> 00:10:44,520 Speaker 1: being funded. 207 00:10:44,880 --> 00:10:48,360 Speaker 2: Yeah, so grid companies throughout Europe and the US are 208 00:10:48,480 --> 00:10:50,199 Speaker 2: actually they're private companies. 209 00:10:50,360 --> 00:10:52,480 Speaker 4: So this is this is not tax money. 210 00:10:52,520 --> 00:10:57,200 Speaker 2: This is private capital that's invested with an expectation to 211 00:10:57,280 --> 00:11:01,160 Speaker 2: make a return. That said, there are some government grant 212 00:11:01,200 --> 00:11:05,280 Speaker 2: schemes and in the US you saw both the Infation 213 00:11:05,400 --> 00:11:09,240 Speaker 2: Reduction Act and the Bipartisan Infrastructure Bill dedicating a lot 214 00:11:09,240 --> 00:11:12,600 Speaker 2: of funding to grids. So we've checked around ten billion 215 00:11:12,679 --> 00:11:16,760 Speaker 2: US dollars that are going out in these different grant programs. 216 00:11:16,280 --> 00:11:19,600 Speaker 4: For grids across the US. But these grants tend to. 217 00:11:19,600 --> 00:11:23,520 Speaker 2: Be really focused on innovation and bringing something new. So 218 00:11:23,600 --> 00:11:28,600 Speaker 2: the bulk of grid investment, you know, the typical reinforcement, 219 00:11:28,880 --> 00:11:32,400 Speaker 2: making that power line larger, connecting that new demand, that 220 00:11:32,520 --> 00:11:34,520 Speaker 2: is really just that private capital. 221 00:11:34,920 --> 00:11:37,360 Speaker 1: But then what's the incentive to build them underground and 222 00:11:37,400 --> 00:11:39,959 Speaker 1: make them, you know, less visible to the eye, because 223 00:11:40,080 --> 00:11:44,960 Speaker 1: presumably the incentive for the ultimate retail end of this 224 00:11:45,200 --> 00:11:46,960 Speaker 1: is to keep prices as low as possible. 225 00:11:47,200 --> 00:11:51,800 Speaker 2: Yeah, So, how grid investment works because it's a natural monopoly. 226 00:11:51,880 --> 00:11:55,680 Speaker 2: You only have one grid company in your neighborhood, you 227 00:11:55,720 --> 00:11:58,840 Speaker 2: can't pick someone else, So that means the regulator has 228 00:11:58,960 --> 00:12:02,439 Speaker 2: a lot to say on how you invest. And that said, 229 00:12:02,600 --> 00:12:06,520 Speaker 2: these regulators tend to often be these independent government bodies, 230 00:12:06,559 --> 00:12:10,880 Speaker 2: so they're not directly political, but politicians of course give 231 00:12:10,920 --> 00:12:14,840 Speaker 2: them their mandate and their main goals, which has been 232 00:12:15,000 --> 00:12:19,079 Speaker 2: to protect consumers, but now that's shifted. So part of 233 00:12:19,120 --> 00:12:23,240 Speaker 2: what the regulators try to achieve is help their governments, 234 00:12:23,240 --> 00:12:27,200 Speaker 2: whether it's a state or country, governments achieve their renewable 235 00:12:27,240 --> 00:12:31,959 Speaker 2: energy targets and also protect consumers from interruptions to their 236 00:12:31,960 --> 00:12:36,800 Speaker 2: electricity supply. So in the US especially, you've seen extreme 237 00:12:37,200 --> 00:12:41,640 Speaker 2: weather starting to wreak havoc on grids across many parts 238 00:12:41,640 --> 00:12:46,920 Speaker 2: of the country, whether it's hurricanes or wildfires, and the 239 00:12:47,120 --> 00:12:52,240 Speaker 2: overheadlines especially are very sensitive to disruptions. So by making 240 00:12:52,559 --> 00:12:56,160 Speaker 2: targets for grid companies to put their lines underground. It 241 00:12:56,280 --> 00:12:58,959 Speaker 2: increases the quality of your supply and you can have 242 00:12:59,160 --> 00:13:02,000 Speaker 2: power even when there's extreme weather going on. 243 00:13:02,320 --> 00:13:05,520 Speaker 1: It's a form of climate adaptation. Ultimately, yeah, it is. 244 00:13:05,760 --> 00:13:08,439 Speaker 2: It is absolutely like the amount of spending on this 245 00:13:08,800 --> 00:13:13,080 Speaker 2: is quite significant. I think it's Southern California. Edison is 246 00:13:13,120 --> 00:13:17,200 Speaker 2: dedicating eighteen percent of its capital expenditure just for proofing 247 00:13:17,200 --> 00:13:18,319 Speaker 2: against wildfires. 248 00:13:18,720 --> 00:13:22,160 Speaker 3: Do you think though, I mean the way you've described it. Ultimately, 249 00:13:22,440 --> 00:13:25,319 Speaker 3: I mean, in these regulated monopolies, the incentive for private 250 00:13:25,520 --> 00:13:27,800 Speaker 3: investors is to invest as much as they possibly can 251 00:13:27,840 --> 00:13:30,320 Speaker 3: because they get a regulated rate of return which is 252 00:13:30,320 --> 00:13:32,640 Speaker 3: typically more favorable than what they'd get if they put 253 00:13:32,679 --> 00:13:35,160 Speaker 3: their money in the bank. So ultimately it's the gatekeepers 254 00:13:35,200 --> 00:13:38,000 Speaker 3: of this investment are the regulators. That's how I've always 255 00:13:38,160 --> 00:13:42,960 Speaker 3: understood it. Are we seeing a change in how regulators 256 00:13:43,040 --> 00:13:46,160 Speaker 3: are thinking? And is it even across the board? 257 00:13:46,520 --> 00:13:50,200 Speaker 2: I think there's been a definite change in how regulators 258 00:13:50,480 --> 00:13:55,120 Speaker 2: are thinking. And it's not only about keeping their investment 259 00:13:55,440 --> 00:13:59,280 Speaker 2: as low as possible anymore, because they have these other 260 00:13:59,360 --> 00:14:03,679 Speaker 2: goals now, which is to support the decarbonization and also 261 00:14:03,760 --> 00:14:07,640 Speaker 2: of course to protect the consumers against power cuts. Essentially, 262 00:14:07,720 --> 00:14:11,680 Speaker 2: so I think there's been a definite paradigm shift in that. 263 00:14:11,679 --> 00:14:14,560 Speaker 4: That said, though, with approving. 264 00:14:14,120 --> 00:14:16,679 Speaker 2: New grid spend, especially when it's going up a lot, 265 00:14:16,840 --> 00:14:20,000 Speaker 2: there is a lot of pressure from the public and 266 00:14:20,360 --> 00:14:24,160 Speaker 2: from politicians to get this right because you don't want 267 00:14:24,160 --> 00:14:26,520 Speaker 2: to spend a lot of money on building the grid 268 00:14:26,720 --> 00:14:29,000 Speaker 2: in the wrong place. So this is I think the 269 00:14:29,440 --> 00:14:33,480 Speaker 2: challenge where the regulators are currently sort of battling these 270 00:14:33,600 --> 00:14:36,920 Speaker 2: two opposing goals, of which one is affordability and one 271 00:14:37,000 --> 00:14:38,240 Speaker 2: is to make sure that the. 272 00:14:38,200 --> 00:14:40,120 Speaker 4: Grid is ready for the future. 273 00:14:40,280 --> 00:14:43,320 Speaker 2: And to get that balance right, you want to know 274 00:14:43,480 --> 00:14:46,240 Speaker 2: where to build the grid, and this is where the 275 00:14:46,640 --> 00:14:49,720 Speaker 2: long cues of renewable energy projects come in as a 276 00:14:49,720 --> 00:14:50,680 Speaker 2: bit of a problem. 277 00:14:50,760 --> 00:14:53,000 Speaker 4: So in both the US many. 278 00:14:52,840 --> 00:14:57,240 Speaker 2: European countries, you have so many renewable energy projects trying 279 00:14:57,280 --> 00:15:00,240 Speaker 2: to connect to the grid, and you don't always have 280 00:15:00,360 --> 00:15:03,840 Speaker 2: visibility of which ones are actually going to get built. 281 00:15:04,120 --> 00:15:06,760 Speaker 2: So if you're having projects all over the country but 282 00:15:06,880 --> 00:15:08,640 Speaker 2: only half of them are going to get built, how 283 00:15:08,680 --> 00:15:11,280 Speaker 2: do you know where to build out the grid? 284 00:15:11,560 --> 00:15:13,600 Speaker 4: And this is again where new. 285 00:15:13,480 --> 00:15:18,040 Speaker 2: Policy changes are helping make that predictability a bit easier. 286 00:15:18,320 --> 00:15:20,840 Speaker 2: So the UK is in the middle of the process 287 00:15:20,880 --> 00:15:24,000 Speaker 2: of implementing a system where you kick projects out of 288 00:15:24,040 --> 00:15:27,320 Speaker 2: the queue if they're not progressing, so you will get 289 00:15:27,440 --> 00:15:30,120 Speaker 2: a little bit more update as the grid company on 290 00:15:30,480 --> 00:15:33,440 Speaker 2: which projects are real projects, and that will help you 291 00:15:33,480 --> 00:15:36,640 Speaker 2: plan the grid nowhere to build it out, because ultimately, 292 00:15:36,840 --> 00:15:40,480 Speaker 2: as long as the generation and the demand which you 293 00:15:40,800 --> 00:15:45,200 Speaker 2: forecasted turns up, that grid investment will make a return 294 00:15:45,280 --> 00:15:48,960 Speaker 2: because you have enough generators and enough consumers that with 295 00:15:49,040 --> 00:15:52,480 Speaker 2: their grid fees pay the grid company, and yeah, strong 296 00:15:52,520 --> 00:15:53,560 Speaker 2: incentives for investment. 297 00:15:53,840 --> 00:15:55,720 Speaker 1: So tell me a little bit more about that. So 298 00:15:55,720 --> 00:15:58,120 Speaker 1: you're talking about real projects versus projects that are just 299 00:15:58,160 --> 00:16:00,040 Speaker 1: not going to see the light of the day. A 300 00:16:00,520 --> 00:16:02,800 Speaker 1: reel of a problem is that how many of these 301 00:16:02,800 --> 00:16:05,280 Speaker 1: projects that are in the pipeline to be built are 302 00:16:05,360 --> 00:16:09,520 Speaker 1: not happening and therefore making it really difficult for grids 303 00:16:09,560 --> 00:16:11,120 Speaker 1: to go in in an effective way. 304 00:16:11,480 --> 00:16:15,760 Speaker 2: So it's very hard to say what percentage of projects 305 00:16:15,920 --> 00:16:18,960 Speaker 2: are never going to get built, because ultimately it could 306 00:16:19,040 --> 00:16:22,560 Speaker 2: just be that they've been postponed forever. In the US, 307 00:16:22,800 --> 00:16:25,920 Speaker 2: one of our research reports concluded that only about one 308 00:16:26,440 --> 00:16:29,880 Speaker 2: in ten wind and solar projects that have applied for 309 00:16:29,960 --> 00:16:32,520 Speaker 2: a grid connection in the last ten to fifteen years 310 00:16:32,600 --> 00:16:36,840 Speaker 2: have actually received a permit to connectow. 311 00:16:36,680 --> 00:16:38,480 Speaker 4: Very low rate and very slow. 312 00:16:38,640 --> 00:16:43,240 Speaker 2: And in California and New York, where this is particularly bad, 313 00:16:43,480 --> 00:16:47,960 Speaker 2: only about two percent of projects have been issued to 314 00:16:48,040 --> 00:16:51,320 Speaker 2: the permit to connect and then the works can commence 315 00:16:51,400 --> 00:16:54,240 Speaker 2: and the grid is upgraded. So yeah, you do have 316 00:16:54,280 --> 00:16:57,640 Speaker 2: a lot of those projects that just hang around. And 317 00:16:58,000 --> 00:17:01,240 Speaker 2: both in California and New York they've started implementing what 318 00:17:01,280 --> 00:17:04,359 Speaker 2: they call cluster studies, so they sort of lump many 319 00:17:04,400 --> 00:17:07,320 Speaker 2: projects together and try to process them at the same 320 00:17:07,400 --> 00:17:09,960 Speaker 2: time do all the grid modeling, get an idea for 321 00:17:10,000 --> 00:17:13,320 Speaker 2: what upgrades are needed, and this is meant to speed 322 00:17:13,400 --> 00:17:16,840 Speaker 2: up the process. But we have still not yet seen 323 00:17:17,200 --> 00:17:21,160 Speaker 2: the effects of this policy change, so it's just been 324 00:17:21,160 --> 00:17:23,720 Speaker 2: in the last year when it's been implemented, so we 325 00:17:23,760 --> 00:17:25,920 Speaker 2: need to wait a little bit longer. In the UK, 326 00:17:26,040 --> 00:17:30,119 Speaker 2: the situation is also particularly bad, so BNF we model 327 00:17:30,320 --> 00:17:34,159 Speaker 2: net zero scenario for various regions, and the wind and 328 00:17:34,200 --> 00:17:38,040 Speaker 2: solar capacity that's currently in the queue trying to connect 329 00:17:38,080 --> 00:17:41,399 Speaker 2: to the UK grid is four times larger than what 330 00:17:41,520 --> 00:17:44,560 Speaker 2: we think the UK will need by twenty thirty and 331 00:17:44,600 --> 00:17:47,800 Speaker 2: then at zero scenario, so that means that by this metric, 332 00:17:48,119 --> 00:17:50,879 Speaker 2: it would mean that you have four times too many projects. 333 00:17:51,119 --> 00:17:54,680 Speaker 2: And yeah, there's simply not a need in the power 334 00:17:54,720 --> 00:17:57,439 Speaker 2: system for this much wind and solar, So that clearly 335 00:17:57,480 --> 00:17:59,800 Speaker 2: shows that you have some projects that are are never 336 00:17:59,800 --> 00:18:00,639 Speaker 2: going I get built. 337 00:18:00,920 --> 00:18:02,919 Speaker 3: Do you think that's some of this? I mean, because 338 00:18:03,000 --> 00:18:05,600 Speaker 3: it sounds to me like that one of the constraints 339 00:18:05,680 --> 00:18:09,240 Speaker 3: on progress is the capacity of the grid to take 340 00:18:09,320 --> 00:18:13,000 Speaker 3: on new projects. And then maybe in response to that, 341 00:18:13,080 --> 00:18:16,560 Speaker 3: a lot of developers are like over populating the pipeline 342 00:18:16,600 --> 00:18:18,880 Speaker 3: because they know not all of their projects can get accepted. 343 00:18:18,880 --> 00:18:20,679 Speaker 3: So you have this this sort of Now you have 344 00:18:20,760 --> 00:18:23,320 Speaker 3: this other problem, which is a lot of these projects 345 00:18:23,359 --> 00:18:25,520 Speaker 3: aren't going to get built, and the developers know that 346 00:18:25,600 --> 00:18:28,240 Speaker 3: from the start, and it's it's only partly because the 347 00:18:28,280 --> 00:18:31,000 Speaker 3: grid constraints. Is also the way that the industry has 348 00:18:31,040 --> 00:18:35,159 Speaker 3: responded to that that creates this very stark dichotomy between 349 00:18:35,400 --> 00:18:38,320 Speaker 3: what is possible what is needed. It's not a dichotomy, 350 00:18:38,520 --> 00:18:41,560 Speaker 3: it's a tricotomy between what is needed, what is possible, 351 00:18:41,640 --> 00:18:42,840 Speaker 3: and what is in the pipeline. 352 00:18:43,200 --> 00:18:46,440 Speaker 2: Yeah. I couldn't have said it better myself. That's exactly 353 00:18:46,480 --> 00:18:50,600 Speaker 2: the problem. The chicken and egg grids are certainly featured 354 00:18:50,640 --> 00:18:53,000 Speaker 2: on the show. But another theme that comes up often 355 00:18:53,000 --> 00:18:55,399 Speaker 2: when we're talking about the energy transition is just how 356 00:18:55,520 --> 00:18:58,439 Speaker 2: much additional money needs to be flowing into some of 357 00:18:58,480 --> 00:19:01,000 Speaker 2: these areas in order for us to see this low 358 00:19:01,040 --> 00:19:04,560 Speaker 2: carbon transition to these newer assets that are going to 359 00:19:04,600 --> 00:19:07,080 Speaker 2: be less polluting. Now we know that some of this 360 00:19:07,119 --> 00:19:09,840 Speaker 2: is going to come through policy, not everything is actually 361 00:19:09,880 --> 00:19:11,320 Speaker 2: going to get the money that it needs. I mean, 362 00:19:11,320 --> 00:19:13,320 Speaker 2: that's just seems to be what we're watching right now, 363 00:19:13,440 --> 00:19:16,840 Speaker 2: is we're working towards these twenty thirty you know, missions targets, 364 00:19:16,880 --> 00:19:20,080 Speaker 2: and some of them are maybe falling a little bit 365 00:19:20,160 --> 00:19:23,439 Speaker 2: short halfway through this critical decade. So then let's pivot 366 00:19:23,480 --> 00:19:26,440 Speaker 2: to a part of the world where we can essentially 367 00:19:26,440 --> 00:19:31,520 Speaker 2: see what happens with capitalism and fewer rules, one might say, 368 00:19:31,560 --> 00:19:34,679 Speaker 2: which is URKAT, which is Texas's grid with the absence 369 00:19:34,760 --> 00:19:39,119 Speaker 2: of really involved policy. How are you seeing the grid 370 00:19:39,160 --> 00:19:43,119 Speaker 2: play out there in this wild West, if you will, 371 00:19:43,320 --> 00:19:46,040 Speaker 2: of what happens on a grid and in a power 372 00:19:46,040 --> 00:19:48,760 Speaker 2: system overall, when you know, kind of left to see 373 00:19:48,760 --> 00:19:51,720 Speaker 2: what happens with market forces. Yeah, so Texas and and 374 00:19:51,920 --> 00:19:55,240 Speaker 2: ERCOT is an interesting example of that. And I think 375 00:19:55,320 --> 00:19:59,840 Speaker 2: here we come back to the issue with predictability that 376 00:20:00,000 --> 00:20:02,879 Speaker 2: we talked about a little bit before. So when you 377 00:20:03,000 --> 00:20:07,280 Speaker 2: don't have the kind of top down, centralized you know, 378 00:20:07,400 --> 00:20:10,520 Speaker 2: this is how we wander energy landscape to evolve. You 379 00:20:10,560 --> 00:20:13,439 Speaker 2: don't have those like big, say offshore wind targets that 380 00:20:13,480 --> 00:20:16,720 Speaker 2: you see in many European countries, then you can end 381 00:20:16,840 --> 00:20:19,840 Speaker 2: up in this kind of situation where Texas is at 382 00:20:19,840 --> 00:20:23,679 Speaker 2: the moment, where the amount of new demand trying to 383 00:20:23,720 --> 00:20:27,200 Speaker 2: connect is just too much for the grid to handle. 384 00:20:27,400 --> 00:20:32,080 Speaker 2: And in Texas, the new demand especially it's been from crypto, 385 00:20:32,119 --> 00:20:35,520 Speaker 2: it's now aid in data centers. It's not just a 386 00:20:35,600 --> 00:20:38,119 Speaker 2: lack of grid capacity, it's also partially a. 387 00:20:38,160 --> 00:20:39,080 Speaker 4: Lack of generation. 388 00:20:39,280 --> 00:20:42,000 Speaker 2: But I think Texas is a good example on how 389 00:20:42,320 --> 00:20:46,040 Speaker 2: these two things, generation and enough gride capacity can be 390 00:20:46,160 --> 00:20:49,440 Speaker 2: two sides of the same coin. So Urka, Texas is 391 00:20:49,480 --> 00:20:53,679 Speaker 2: a grid region that's actually not interconnected with the rest. 392 00:20:53,600 --> 00:20:55,720 Speaker 4: Of the US or with its. 393 00:20:55,240 --> 00:20:59,960 Speaker 2: Neighboring states, and that also makes this whole capacity issue 394 00:21:00,520 --> 00:21:05,040 Speaker 2: more acute because you cannot import power from somewhere else, 395 00:21:05,280 --> 00:21:09,760 Speaker 2: and you also have a renewable energy generation is more 396 00:21:10,080 --> 00:21:13,840 Speaker 2: concentrated in some parts of the state, and if you're 397 00:21:13,880 --> 00:21:16,800 Speaker 2: trying to connect something in this region, you can have 398 00:21:16,840 --> 00:21:20,880 Speaker 2: a slightly better chance because you have some local power generation. 399 00:21:21,119 --> 00:21:25,440 Speaker 2: But even so, these data centers need baseload, so even 400 00:21:25,480 --> 00:21:27,959 Speaker 2: when the wind doesn't blow and the sun doesn't shine, 401 00:21:28,000 --> 00:21:31,520 Speaker 2: they need some generation. And when you have a situation 402 00:21:31,720 --> 00:21:35,720 Speaker 2: with a lot of variable renewables, having a large interconnected 403 00:21:35,800 --> 00:21:39,879 Speaker 2: grid is really advantageous because you get variability in weather 404 00:21:40,119 --> 00:21:44,800 Speaker 2: across vast distances. So Texas and are not being connected 405 00:21:44,840 --> 00:21:49,240 Speaker 2: with other grids in the US as it's a political decision, 406 00:21:49,359 --> 00:21:53,479 Speaker 2: but from a pure grid operation point of view, it 407 00:21:53,560 --> 00:21:56,200 Speaker 2: would make sense to have larger grid areas connected. 408 00:21:56,520 --> 00:22:00,159 Speaker 1: So with Texas, we're seeing in terms of population that 409 00:22:00,320 --> 00:22:02,879 Speaker 1: is a state that is growing in terms of energy demand, 410 00:22:02,920 --> 00:22:05,840 Speaker 1: it's also growing. There are more AI data centers actually 411 00:22:05,880 --> 00:22:08,520 Speaker 1: going into that state, So you know, can you just 412 00:22:08,600 --> 00:22:11,840 Speaker 1: walk me through what that investment is looking like in 413 00:22:12,080 --> 00:22:15,120 Speaker 1: Urkut in order to meet this increase in demand. 414 00:22:15,440 --> 00:22:18,560 Speaker 2: Yeah, absolutely, So to give some numbers on how much 415 00:22:18,880 --> 00:22:22,280 Speaker 2: peak power demand, which ultimately is what matters for grids, 416 00:22:22,320 --> 00:22:26,119 Speaker 2: has increased, So it has doubled since nineteen ninety and 417 00:22:26,480 --> 00:22:30,520 Speaker 2: reached eighty six gigawatts in twenty twenty three, and now 418 00:22:30,800 --> 00:22:36,920 Speaker 2: Urkott is anticipating that another sixty seven gigawatts of new load, 419 00:22:37,040 --> 00:22:41,080 Speaker 2: so that's almost doubling peak power demand by twenty thirty. 420 00:22:41,320 --> 00:22:45,359 Speaker 2: So with that anticipation, you would really expect to see 421 00:22:45,359 --> 00:22:49,080 Speaker 2: the grid investment numbers going up. And we looked at 422 00:22:49,119 --> 00:22:53,640 Speaker 2: the spend plans in Urkot and checked nine point two 423 00:22:53,720 --> 00:22:57,760 Speaker 2: billion of investment for twenty twenty six. So it again 424 00:22:57,800 --> 00:23:00,639 Speaker 2: it shows how with that lack of central planning, the 425 00:23:00,680 --> 00:23:04,960 Speaker 2: plans just don't go very far out and you can't 426 00:23:05,240 --> 00:23:09,160 Speaker 2: have that sphere capacity sort of planned in for when 427 00:23:09,200 --> 00:23:11,960 Speaker 2: demand suddenly increases. So yeah, we're going to need to 428 00:23:11,960 --> 00:23:14,000 Speaker 2: see a lot more grid investment in Texas for this 429 00:23:14,119 --> 00:23:14,800 Speaker 2: is square out. 430 00:23:15,160 --> 00:23:17,240 Speaker 3: And can I just ask that nine point two billion 431 00:23:17,320 --> 00:23:20,920 Speaker 3: dollars how much of that is for the distribution grid 432 00:23:20,960 --> 00:23:23,080 Speaker 3: and how much is for transmission? A lot of the 433 00:23:23,080 --> 00:23:25,600 Speaker 3: issues I've been talking about just now are more related 434 00:23:25,640 --> 00:23:28,920 Speaker 3: to transmission, but obviously I know that there's a big 435 00:23:29,000 --> 00:23:30,760 Speaker 3: drive for distribution investment as well. 436 00:23:31,000 --> 00:23:33,040 Speaker 2: Yeah, so what the plans for showing at the moment 437 00:23:33,320 --> 00:23:37,960 Speaker 2: is about fifty to fifty on transmission and distribution in Texas, 438 00:23:38,119 --> 00:23:42,000 Speaker 2: and that's actually a slightly higher share for transmission than 439 00:23:42,080 --> 00:23:44,679 Speaker 2: what we've seen in California. 440 00:23:44,160 --> 00:23:45,800 Speaker 4: Where we also looked at the grid plans. 441 00:23:46,000 --> 00:23:49,440 Speaker 2: In California, the grid spend is a lot more concentrated 442 00:23:49,480 --> 00:23:52,520 Speaker 2: on the distribution grid side of things because California has 443 00:23:52,560 --> 00:23:55,720 Speaker 2: all that rooftop solar, it has very ambitious target for 444 00:23:55,760 --> 00:24:00,000 Speaker 2: electric vehicles, whereas in Texas well, electric vehicles have an 445 00:24:00,359 --> 00:24:04,479 Speaker 2: quite taken off yet. And the largest spent driver that 446 00:24:04,520 --> 00:24:07,119 Speaker 2: we see again on the distribution grid is to prove 447 00:24:07,280 --> 00:24:13,720 Speaker 2: against extreme weather. Hurricanes, storms, wildfires take down those overheadlines 448 00:24:13,760 --> 00:24:16,680 Speaker 2: and you need undergrounding. So there's actually been a quite 449 00:24:16,720 --> 00:24:20,879 Speaker 2: a big public outcry for increasing that resiliency spend in 450 00:24:21,280 --> 00:24:24,280 Speaker 2: Texas to avoid power cuts. So that's really what you 451 00:24:24,359 --> 00:24:27,760 Speaker 2: need on the distribution grid. Transmission. You need to connect 452 00:24:27,760 --> 00:24:31,600 Speaker 2: all those renewables, large scale renewables, whether it's solar, wind 453 00:24:31,760 --> 00:24:33,760 Speaker 2: and these huge, huge data centers. 454 00:24:34,160 --> 00:24:36,520 Speaker 1: Let's head to a different continent. You looked at a 455 00:24:36,560 --> 00:24:39,080 Speaker 1: couple of different countries in Europe. Can you give me 456 00:24:39,119 --> 00:24:42,480 Speaker 1: an example of one that is making progress in terms 457 00:24:42,520 --> 00:24:45,399 Speaker 1: of gridspend? Where are we seeing this as a priority 458 00:24:45,440 --> 00:24:46,080 Speaker 1: in Europe. 459 00:24:46,200 --> 00:24:49,080 Speaker 2: I think the UK is really the prime example of 460 00:24:49,520 --> 00:24:53,879 Speaker 2: making grid spend a priority, particularly on the transmission grid 461 00:24:54,000 --> 00:24:57,040 Speaker 2: side of things. So in the UK you have this 462 00:24:57,160 --> 00:25:00,760 Speaker 2: type of top down certainty when it comes to political 463 00:25:00,800 --> 00:25:04,159 Speaker 2: targets for decarbonization. So even though we now have a 464 00:25:04,200 --> 00:25:08,439 Speaker 2: new government, the decarbonized station targets are still in place. 465 00:25:08,480 --> 00:25:11,480 Speaker 2: They've actually increased the ambition a little bit and that 466 00:25:11,560 --> 00:25:15,119 Speaker 2: means that the grid operator can start planning for a 467 00:25:15,160 --> 00:25:19,560 Speaker 2: grid system where you don't yet have the actual projects 468 00:25:19,720 --> 00:25:22,439 Speaker 2: applying for a connection. So normally you would start building 469 00:25:22,440 --> 00:25:25,359 Speaker 2: out the grid only after you've had a sufficient volume 470 00:25:25,400 --> 00:25:29,800 Speaker 2: of say windforms applying for connection. Now the UK transmission grid, 471 00:25:30,000 --> 00:25:33,119 Speaker 2: according to the most recent plan, is being built out 472 00:25:33,440 --> 00:25:37,920 Speaker 2: to the amount of capacity that the government targets shows 473 00:25:38,200 --> 00:25:42,280 Speaker 2: for twenty thirty five and twenty thirty so that really helps. 474 00:25:42,440 --> 00:25:45,399 Speaker 2: Even though the grid is currently under strain, it means 475 00:25:45,400 --> 00:25:48,560 Speaker 2: that there's now a real chance to solve these problems 476 00:25:48,600 --> 00:25:52,119 Speaker 2: in the next ten years. Because transmission is still slow 477 00:25:52,200 --> 00:25:55,959 Speaker 2: to build out. On the distribution grid side, we're not, 478 00:25:56,320 --> 00:26:01,440 Speaker 2: unfortunately seeing the same type of progress almost anywhere in Europe, 479 00:26:01,520 --> 00:26:04,840 Speaker 2: and part of that is because you don't have the 480 00:26:05,080 --> 00:26:10,080 Speaker 2: same type of strong government targets. We don't know how 481 00:26:10,080 --> 00:26:13,400 Speaker 2: many electric vehicles there will be in five or ten 482 00:26:13,480 --> 00:26:16,120 Speaker 2: years time. Like of course there's targets, but currently we're 483 00:26:16,200 --> 00:26:19,200 Speaker 2: lagging on those targets. Electric vehicles sales have dropped, so 484 00:26:19,240 --> 00:26:22,600 Speaker 2: the distribution grade operators are still doing a little bit 485 00:26:22,600 --> 00:26:27,320 Speaker 2: more business as usual, and their major headache is from 486 00:26:27,560 --> 00:26:31,040 Speaker 2: rooftop solar, which you've seen increase a lot in Germany. 487 00:26:31,200 --> 00:26:34,760 Speaker 2: So there the easy solution has been to start pairing 488 00:26:34,840 --> 00:26:39,440 Speaker 2: rooftop solar with batteries, then immediately causes a lot less problems. 489 00:26:39,600 --> 00:26:43,359 Speaker 2: So sometimes the distribution grade operators can you know, they 490 00:26:43,359 --> 00:26:45,120 Speaker 2: can have a little bit of an easier time if 491 00:26:45,119 --> 00:26:49,280 Speaker 2: you solve the problem partially behind the meter then letting 492 00:26:49,280 --> 00:26:52,000 Speaker 2: it all flood and cause nuisance on the grids. 493 00:26:52,240 --> 00:26:55,600 Speaker 3: Presumably, a big part of the disparacy between distribution grid 494 00:26:55,680 --> 00:26:58,560 Speaker 3: investment between the US and Europe is a lot of 495 00:26:58,680 --> 00:27:02,360 Speaker 3: where the investment is going in the US is in undergrounding, 496 00:27:02,600 --> 00:27:05,679 Speaker 3: which isn't necessary in Europe so much because in a 497 00:27:05,680 --> 00:27:07,240 Speaker 3: lot of countries it's already happened. 498 00:27:07,680 --> 00:27:10,640 Speaker 2: Yeah, Indeed, a lot of the distribution grids in Europe 499 00:27:10,680 --> 00:27:14,440 Speaker 2: are already underground and have been so for a long time. 500 00:27:14,560 --> 00:27:17,359 Speaker 2: You see this more in North Europe where you get 501 00:27:17,680 --> 00:27:20,760 Speaker 2: cold winters, so there's been a long time need. 502 00:27:20,600 --> 00:27:23,679 Speaker 4: To protect the grid. What you do see in Europe 503 00:27:23,680 --> 00:27:25,439 Speaker 4: in terms of undergrounding is. 504 00:27:25,440 --> 00:27:28,840 Speaker 2: Now on the transmission side, so that has nothing to 505 00:27:28,880 --> 00:27:33,000 Speaker 2: do with protecting against weather, but that is because people 506 00:27:33,080 --> 00:27:36,920 Speaker 2: don't like those pilots. So both in France and Germany 507 00:27:37,080 --> 00:27:41,600 Speaker 2: you're now seeing an increasing amount of transmission projects going underground, 508 00:27:41,880 --> 00:27:45,680 Speaker 2: and that at cost, but it makes the landscape look 509 00:27:45,800 --> 00:27:48,280 Speaker 2: a little bit prettier unless you happen to love pilots. 510 00:27:48,520 --> 00:27:50,120 Speaker 3: We talk a lot about the way that the grid 511 00:27:50,160 --> 00:27:52,879 Speaker 3: is constraining the energy could transition and more investment is 512 00:27:52,960 --> 00:27:56,160 Speaker 3: needed and regulate as a bottlenecks. This is a narrative 513 00:27:56,400 --> 00:27:59,720 Speaker 3: that is everywhere. Sometimes to hear people talk about it, it 514 00:27:59,680 --> 00:28:01,960 Speaker 3: sounds like it's an unsolvable problem. But at the start 515 00:28:02,000 --> 00:28:05,040 Speaker 3: of the show, you mentioned seven percent growth of investment 516 00:28:05,160 --> 00:28:08,399 Speaker 3: last year. We're expecting thirteen percent this year. This is 517 00:28:08,440 --> 00:28:11,080 Speaker 3: not a low base that we're talking about, so those 518 00:28:11,080 --> 00:28:14,720 Speaker 3: are really quite impressive numbers. So should we be being 519 00:28:14,880 --> 00:28:17,600 Speaker 3: optimistic about the direction things are going in. 520 00:28:17,720 --> 00:28:20,720 Speaker 2: I definitely think there's reason to be optimistic about the 521 00:28:21,280 --> 00:28:24,800 Speaker 2: course of directions. There has been a massive recognition that 522 00:28:24,840 --> 00:28:27,840 Speaker 2: the grid build out needs to happen, and now those 523 00:28:27,880 --> 00:28:32,080 Speaker 2: plans have actually been approved and the thing is building 524 00:28:32,400 --> 00:28:35,159 Speaker 2: out the grid, especially on the transmission side. It just 525 00:28:35,280 --> 00:28:39,080 Speaker 2: takes time, so whatever new policies you put in place, 526 00:28:39,280 --> 00:28:42,600 Speaker 2: you're going to see a few years lag before that's solved. 527 00:28:42,800 --> 00:28:46,520 Speaker 2: On the distribution grid side, you've also seen significant optic 528 00:28:46,720 --> 00:28:51,840 Speaker 2: in new technological solutions, so for example, putting batteries on 529 00:28:51,880 --> 00:28:55,520 Speaker 2: the grid can really help balance renewables, it can help 530 00:28:55,560 --> 00:28:58,200 Speaker 2: with stability issues, and now there is more and more 531 00:28:58,400 --> 00:29:04,440 Speaker 2: regulatory regimes that actually reward grid companies for taking innovative approaches, 532 00:29:04,680 --> 00:29:06,960 Speaker 2: so there's a lot of things you can do also 533 00:29:07,040 --> 00:29:11,200 Speaker 2: in the meantime while you're waiting for those large slow upgrades. 534 00:29:11,720 --> 00:29:14,560 Speaker 2: In the US, there's been numerous studies about how if 535 00:29:14,600 --> 00:29:17,400 Speaker 2: you put sensors on the grid and you measure the temperature, 536 00:29:17,480 --> 00:29:20,320 Speaker 2: then you can safely push through more power at many 537 00:29:20,320 --> 00:29:23,480 Speaker 2: times of the day, and we are seeing these solutions 538 00:29:23,520 --> 00:29:26,440 Speaker 2: being rolled out. It just takes time, but yeah, I 539 00:29:26,480 --> 00:29:29,160 Speaker 2: would still be optimistic that and a fere as time 540 00:29:29,200 --> 00:29:29,760 Speaker 2: will be there. 541 00:29:29,920 --> 00:29:32,320 Speaker 1: So we've really spent the show today talking about the 542 00:29:32,520 --> 00:29:35,400 Speaker 1: US and Europe, but we know that the story often 543 00:29:35,440 --> 00:29:39,000 Speaker 1: differs continent by continent and country by country. What would 544 00:29:39,000 --> 00:29:41,240 Speaker 1: you consider to be the parts of the world that 545 00:29:41,280 --> 00:29:44,760 Speaker 1: are extremely different than the countries that we've talked about today. 546 00:29:44,960 --> 00:29:47,400 Speaker 2: I think China is a good example of a grid 547 00:29:47,480 --> 00:29:51,320 Speaker 2: that's operated quite differently. You have a much larger state 548 00:29:51,440 --> 00:29:55,400 Speaker 2: involvement and that top down level. Even so you still 549 00:29:55,440 --> 00:29:59,000 Speaker 2: see issues on the distribution grids in China. So even 550 00:29:59,360 --> 00:30:02,960 Speaker 2: in kind trees where the policy system and the groids 551 00:30:03,000 --> 00:30:06,560 Speaker 2: are operated differently, you see the same kind of challenges 552 00:30:06,560 --> 00:30:09,760 Speaker 2: from the energy transition. A lot of new renewables in 553 00:30:09,800 --> 00:30:12,720 Speaker 2: a very short time. It's just challenging to build enough 554 00:30:12,760 --> 00:30:15,960 Speaker 2: grid for that. So yeah, we're seeing differences but a 555 00:30:16,000 --> 00:30:18,120 Speaker 2: lot of similarities across the world. 556 00:30:18,520 --> 00:30:20,560 Speaker 1: Perhaps we can pair up with our China team next 557 00:30:20,600 --> 00:30:22,800 Speaker 1: time and get them on here to talk about, you know, 558 00:30:23,080 --> 00:30:26,520 Speaker 1: very different dynamic Felicia, thank you so much for joining today, 559 00:30:26,560 --> 00:30:28,840 Speaker 1: and Tom, it's always good to be talking with you. 560 00:30:29,080 --> 00:30:30,320 Speaker 4: Thanks, Dina, thank you. 561 00:30:39,480 --> 00:30:42,600 Speaker 1: Today's episode of Switched On was produced by cam Gray 562 00:30:42,840 --> 00:30:46,400 Speaker 1: with production assistance from Kamala shelling. 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