WEBVTT - Current Investments: Expanding the World’s Power Grids 0:00:00.560 --> 0:00:03.800 This is Dana Perkins and you're listening to Switched on 0:00:04.120 --> 0:00:06.920 the B and EF podcast. And today I'm joined again 0:00:07.000 --> 0:00:09.760 by Tom Rowlands Reese as my co host and we 0:00:09.880 --> 0:00:12.880 have a conversation with Felicia Amanov from our Grids and 0:00:13.000 --> 0:00:15.760 Utilities team. We talk about how much money is going 0:00:15.760 --> 0:00:19.080 into grid investment, whether it's enough, and why now more 0:00:19.120 --> 0:00:21.760 than ever, it is needed. We all know that grids 0:00:21.800 --> 0:00:24.880 are a pretty critical part of infrastructure, from the transmission 0:00:24.920 --> 0:00:29.160 systems operators who connect electricity generation sources to the distribution 0:00:29.280 --> 0:00:33.080 systems operators and how they then connect to consumers. It's 0:00:33.200 --> 0:00:36.680 all of these lines that make the energy transition possible. 0:00:37.000 --> 0:00:40.080 Despite increased investment in the power grid in twenty twenty three, 0:00:40.440 --> 0:00:43.080 up seven percent from the year before, it's still not 0:00:43.280 --> 0:00:45.840 enough to meet a net zero pathway in the majority 0:00:45.840 --> 0:00:48.640 of markets around the world. This is for a variety 0:00:48.640 --> 0:00:53.440 of reasons, including increased grid requirements owing to artificial intelligence 0:00:53.440 --> 0:00:56.800 and data centers, alongside the need for more expensive grids 0:00:56.960 --> 0:01:00.360 as lines are moved underground in order to adapt to 0:01:00.400 --> 0:01:04.000 a changing climate that includes extreme weather events. This is 0:01:04.000 --> 0:01:07.039 in addition to the sheer number of new projects waiting 0:01:07.080 --> 0:01:09.720 in line to connect to the grid where renewable energy 0:01:09.800 --> 0:01:12.960 is trying to grow. Felicia pulls from research found in 0:01:13.000 --> 0:01:16.160 the twenty twenty four Power Grid Investment Outlook, and I 0:01:16.240 --> 0:01:19.400 also recommend taking a look at the New Energy Outlook 0:01:19.440 --> 0:01:23.000 twenty twenty four colon grids. This was a grid specific 0:01:23.000 --> 0:01:25.759 report founded on research found in b and EF's long 0:01:25.840 --> 0:01:29.320 term scenarios and was published on the twenty eighth of October. 0:01:29.400 --> 0:01:31.760 BNF clients will be able to find these at b 0:01:31.920 --> 0:01:34.400 and EF go on the Bloomberg terminal or at BNF 0:01:34.400 --> 0:01:37.440 dot com. Right now, let's jump into Tom and my 0:01:37.520 --> 0:01:53.960 discussion with Felicia about grid investments, expectations, and our current reality. Felicia, 0:01:54.000 --> 0:01:55.440 thank you very much for joining the show. 0:01:55.640 --> 0:01:56.440 Thank you for having me. 0:01:56.720 --> 0:01:58.760 You've got two of us asking you questions today. So 0:01:58.800 --> 0:02:01.320 I'm on with Tom hosting again. Nice to have you. 0:02:01.360 --> 0:02:01.560 Tom. 0:02:01.720 --> 0:02:02.440 Hi that DNA. 0:02:02.760 --> 0:02:05.120 So a common theme that we've talked about in so 0:02:05.280 --> 0:02:08.919 many of these podcasts has been this need for updating 0:02:08.960 --> 0:02:11.520 the grid. We need to build new infrastructure, so we 0:02:11.560 --> 0:02:14.520 need more grid connections, we need more reliable grids, and 0:02:14.600 --> 0:02:16.720 then we're going to talk about this today. We're going 0:02:16.760 --> 0:02:19.360 to actually talk about how demand is increasing as well. 0:02:19.440 --> 0:02:21.600 We've had you on the show to talk about grids before, 0:02:21.639 --> 0:02:23.520 but as we get into this update where we really 0:02:23.639 --> 0:02:26.560 are going to follow also how much investment is required. 0:02:26.600 --> 0:02:29.280 Can you just frame the problem for everybody, so we're 0:02:29.280 --> 0:02:30.640 all starting from the same place. 0:02:31.160 --> 0:02:33.760 So about a year or two ago, I feel like 0:02:33.800 --> 0:02:38.440 everyone was complaining about the grids. Renewables couldn't connect, ev chargers, 0:02:38.480 --> 0:02:42.520 couldn't connect, and unfortunately we haven't quite yet solved that. 0:02:42.680 --> 0:02:45.680 But what we have now is the plans for how 0:02:45.720 --> 0:02:48.160 to solve that. So what we did in the grids 0:02:48.200 --> 0:02:51.320 team is we looked at the grid development plants. We're 0:02:51.320 --> 0:02:55.000 ten major markets across the globe, so this represents about 0:02:55.040 --> 0:02:57.960 half of global grid investment, and what we can see 0:02:58.120 --> 0:03:03.040 is the significant plan ramp up and spend. So between 0:03:03.040 --> 0:03:05.280 twenty twenty two and twenty twenty three, you saw grid 0:03:05.320 --> 0:03:08.520 investment rising seven percent, and we think that for this 0:03:08.680 --> 0:03:11.400 year the growth will hit thirteen percent. So you really 0:03:11.440 --> 0:03:13.880 see that that annual growth coming in and that is 0:03:13.960 --> 0:03:16.280 even when we net out the effect of inflation. 0:03:16.760 --> 0:03:19.720 Well, I can't wait to talk about plans because we 0:03:19.880 --> 0:03:22.360 love thinking about what could be in the future, especially 0:03:22.400 --> 0:03:26.200 as things are gaining momentum, but just to help us 0:03:26.240 --> 0:03:29.160 think a little bit about this demand end of things. 0:03:29.400 --> 0:03:32.240 While grids have featured and have been certainly a buzzword 0:03:32.280 --> 0:03:35.040 on this show, a buzzword that a lot of people 0:03:35.080 --> 0:03:38.120 are talking about right now is AI and artificial intelligence, 0:03:38.120 --> 0:03:40.800 how we're going to build it into all of our jobs, 0:03:40.880 --> 0:03:42.280 and how it's going to. 0:03:42.920 --> 0:03:43.960 Revolutionize the world. 0:03:44.040 --> 0:03:47.760 But it also is incredibly data heavy and energy consuming. 0:03:48.000 --> 0:03:49.960 So can you just talk a little bit about how 0:03:50.080 --> 0:03:53.440 AI and data centers feature in terms of grid demand. 0:03:53.640 --> 0:03:57.320 Yeah, absolutely, So this is a topic that's increasingly come 0:03:57.400 --> 0:04:00.000 up over the last year. And truth is, we don't 0:04:00.000 --> 0:04:04.320 don't yet know where AI energy demand will be in 0:04:04.360 --> 0:04:07.040 a few years time, but what we do see in 0:04:07.360 --> 0:04:10.160 especially the US, but also to some extent in Europe, 0:04:10.320 --> 0:04:15.320 is increasing grid connection requests from these large scale data centers. 0:04:15.360 --> 0:04:17.320 And these data centers are often huge. 0:04:17.360 --> 0:04:20.280 They are like larger than your typical coal or gas 0:04:20.400 --> 0:04:21.200 power plant. 0:04:21.279 --> 0:04:24.440 And for the US, we have a number from a 0:04:24.520 --> 0:04:27.880 PRI so that's the Electric Power Research Institute that estimates 0:04:27.880 --> 0:04:32.240 that by twenty thirty, about nine percent of all electricity 0:04:32.440 --> 0:04:35.800 generation in the US might have to go to data centers. 0:04:36.120 --> 0:04:39.120 And that's compared to four percent today and in Europe 0:04:39.160 --> 0:04:42.720 we don't yet know where this will go, but there's yeah, 0:04:42.800 --> 0:04:44.480 a lot of connection requests. 0:04:44.800 --> 0:04:46.919 So let's talk about then the plans to fix it. 0:04:47.040 --> 0:04:49.600 So what categories would you break that down in? Where 0:04:49.640 --> 0:04:51.400 were going to take the conversation today? 0:04:51.600 --> 0:04:56.080 So a grid investment plan is really trying to predict 0:04:56.080 --> 0:04:59.320 the future for the next few years, and in getting 0:04:59.320 --> 0:05:01.240 that right, you need to have an idea of where 0:05:01.279 --> 0:05:04.480 your electricity demand is going, but you also need to 0:05:04.520 --> 0:05:07.160 know where your generation is going to come from. So 0:05:07.400 --> 0:05:10.080 a big part of the investment going on in Europe 0:05:10.120 --> 0:05:13.600 at the moment is rewiring the grids to go from 0:05:13.640 --> 0:05:17.800 supporting your old fashioned fossil fuel power plants to your 0:05:17.839 --> 0:05:20.760 new renewables which is mainly wind and solar. And you 0:05:20.839 --> 0:05:23.320 have some countries like the UK and Germany where this 0:05:23.640 --> 0:05:27.200 shift is huge because in the past you've had these 0:05:27.720 --> 0:05:31.440 large electricity demand centers in Germany industry for example, that 0:05:31.480 --> 0:05:33.360 has been in the south of the country and now 0:05:33.360 --> 0:05:36.360 you're building a lot of offshore wind, which in germany's 0:05:36.400 --> 0:05:38.760 in the north of the country, so suddenly you're having 0:05:39.040 --> 0:05:41.520 generation come from the wrong place. 0:05:41.680 --> 0:05:43.919 So what you need to do is build. 0:05:43.720 --> 0:05:47.160 These enormous power lines all the way across the country 0:05:47.240 --> 0:05:49.880 to get the power to where the industry needs it. 0:05:50.080 --> 0:05:54.039 And this takes time and it gets expensive, and it 0:05:54.080 --> 0:05:58.120 gets especially expensive because a lot of people don't love pilons. 0:05:58.360 --> 0:06:01.520 They're those big transmission towers that you often see next 0:06:01.520 --> 0:06:04.000 to the roads when you're driving. Maybe not what you 0:06:04.040 --> 0:06:07.560 want in your backyard. It's slightly same issue as those 0:06:07.640 --> 0:06:10.159 onshore winter turbines, which is why we went offshore in 0:06:10.160 --> 0:06:13.360 the first place. So now what Germany is doing is 0:06:13.520 --> 0:06:17.279 they're putting their cables underground and that can double or 0:06:17.320 --> 0:06:19.000 sometimes even triple. 0:06:18.680 --> 0:06:20.720 The cost of the line per mile. 0:06:20.839 --> 0:06:24.239 So that's why you see these huge investment plans coming. 0:06:24.520 --> 0:06:27.160 The UK has this slightly easier time. It doesn't need 0:06:27.200 --> 0:06:30.239 to dig these trenches for the cables because it's an island, 0:06:30.320 --> 0:06:33.680 so it can go offshore. But the cost implications there 0:06:33.480 --> 0:06:36.640 are similar. So in the UK, you're bringing wind power 0:06:36.680 --> 0:06:39.560 from north to south by going offshore and putting those 0:06:39.600 --> 0:06:41.239 cables under the sea instead. 0:06:41.600 --> 0:06:44.520 Can I ask a question about these plans because I 0:06:44.600 --> 0:06:47.919 understand all the problems you've identified and how they're intensifying, 0:06:48.000 --> 0:06:50.920 But those problems maybe the AI one is a little 0:06:50.960 --> 0:06:52.520 bit of a new dynamic, but a lot of these 0:06:52.839 --> 0:06:55.960 problems around where renewables are located and not new. And 0:06:56.160 --> 0:06:58.120 you know, as you say, we've been complaining about this 0:06:58.320 --> 0:06:59.960 for two years, I would say for longer than two year, 0:07:00.040 --> 0:07:03.320 as people have been saying the grid is inadequate and insufficient. 0:07:03.520 --> 0:07:06.839 So these plans, I suppose, from what you've described there 0:07:06.920 --> 0:07:10.280 identifying what the grid needs to look like physically, but 0:07:10.600 --> 0:07:13.440 do they address some of the issues as to why 0:07:13.560 --> 0:07:17.280 the necessary change that has needed to happen hasn't happened 0:07:17.400 --> 0:07:18.480 in the different markets. 0:07:18.960 --> 0:07:21.400 Yeah. Part of it is now that these plans are 0:07:21.440 --> 0:07:25.000 not just identifying where you need the grid, but they're 0:07:25.040 --> 0:07:30.080 actually sort of concrete plans with dedicated amounts of investment 0:07:30.440 --> 0:07:33.960 that you're going to build these projects. And part of 0:07:34.000 --> 0:07:37.640 why this hasn't happened in the past is that over 0:07:37.680 --> 0:07:41.080 the last couple of decades, in a lot of the 0:07:41.480 --> 0:07:46.440 industrialized world, you've seen a decline in electricity demand, so 0:07:46.600 --> 0:07:50.880 industries have moved abroad and you've had energy efficiency, meaning 0:07:50.920 --> 0:07:53.720 that yeah, overall power demand is lower, and in that 0:07:53.840 --> 0:07:57.680 kind of environment, you do end up with spare capacity 0:07:57.680 --> 0:07:58.160 on the grid. 0:07:58.400 --> 0:07:59.240 So the grid. 0:07:59.000 --> 0:08:01.320 Companies have sort of gotten used to being in this 0:08:01.440 --> 0:08:04.320 mindset that actually what they need to do is to 0:08:04.400 --> 0:08:09.320 save money and have low grid fees for customers. And 0:08:09.640 --> 0:08:13.720 this whole culture of saving is like, you know, it 0:08:13.760 --> 0:08:16.640 came with a good purpose. The regulators and the grid 0:08:16.680 --> 0:08:19.600 companies were trying to keep those rates low. But then 0:08:20.120 --> 0:08:24.120 as your renewable energy projects really started taking off, then 0:08:24.200 --> 0:08:28.120 you were suddenly in a situation where you actually should 0:08:28.120 --> 0:08:31.120 have invested ahead of need. You would have needed to 0:08:31.160 --> 0:08:35.120 build your grid slightly larger just in case. And this 0:08:35.480 --> 0:08:39.840 paradigm of anticipatory or investment or investing ahead of need 0:08:40.120 --> 0:08:43.760 is something that's only now just starting to gain traction. 0:08:44.080 --> 0:08:46.560 And yeah, in the UK you've had a whole new 0:08:46.800 --> 0:08:50.000 regulatory scheme to allow this type of investment, but yeah, 0:08:50.080 --> 0:08:52.320 they weren't thinking like this five years ago, and that's 0:08:52.960 --> 0:08:53.880 why we're where we are. 0:08:54.200 --> 0:08:57.040 So in a way, demand growth is like a catalyst 0:08:57.400 --> 0:08:58.239 for the paradigm. 0:08:58.720 --> 0:09:02.520 Well, partially in the US you are now seeing a 0:09:02.520 --> 0:09:06.280 lot of demand growth, and that's because of data centers mainly. 0:09:06.720 --> 0:09:10.880 You'd also see new demand from electric vehicles and heat pumps. 0:09:11.000 --> 0:09:15.400 But actually in Europe demand hasn't quite taken off as 0:09:15.679 --> 0:09:19.959 fast as it would need to from these new electrified, 0:09:20.280 --> 0:09:23.840 low carbon sectors, and as a result of that, there 0:09:23.960 --> 0:09:26.760 was for a while a hesitancy to invest a lot 0:09:26.800 --> 0:09:29.280 in grids, and I think it just took a couple 0:09:29.240 --> 0:09:32.960 of years for their regulators that ultimately can cap the 0:09:33.000 --> 0:09:36.000 grid spend to come around and just realize that the 0:09:36.040 --> 0:09:38.800 grid rates will have to go up. We need to 0:09:39.360 --> 0:09:42.840 get that offshore wind especially integrated, because at the moment, 0:09:43.320 --> 0:09:46.280 those wind farms are often getting paid to shut off 0:09:46.559 --> 0:09:50.800 and that is just money down the drain, that's energy wasted. 0:09:51.120 --> 0:09:55.160 And in Europe you don't have nodle electricity pricing, so 0:09:55.400 --> 0:09:57.480 a lot of the time it's the grid operator that 0:09:57.760 --> 0:10:01.480 instructs the plants what to do. And this cost has 0:10:01.679 --> 0:10:04.320 just massively increased in the last couple of years. So 0:10:04.360 --> 0:10:07.960 now consumer rates have gone up even without that increase 0:10:08.000 --> 0:10:10.920 in investment. So now that the investment will happen, it 0:10:10.960 --> 0:10:13.640 will be a while of higher grid fees, but in 0:10:13.679 --> 0:10:14.280 the long time it. 0:10:14.280 --> 0:10:17.600 Will cheaper, which then is the question is you know, 0:10:17.679 --> 0:10:21.720 in order to figure out how to increase investment, let's 0:10:21.720 --> 0:10:23.600 talk about who's actually paying for it. So is it 0:10:23.640 --> 0:10:26.600 tax dollars and is this essentially a policy discussion and 0:10:26.840 --> 0:10:29.680 grids are something that we need to see collectively like roads, 0:10:29.760 --> 0:10:32.079 where they're more or less a common good or is 0:10:32.080 --> 0:10:33.600 it going to be paid a play? And is it 0:10:33.720 --> 0:10:36.160 those of us who are consuming, whether it's a company 0:10:36.280 --> 0:10:39.360 or an individual ultimately or seeing higher prices because it's 0:10:39.400 --> 0:10:43.719 so directly linked to consumption and therefore that's how it's 0:10:43.760 --> 0:10:44.520 being funded. 0:10:44.880 --> 0:10:48.360 Yeah, so grid companies throughout Europe and the US are 0:10:48.480 --> 0:10:50.199 actually they're private companies. 0:10:50.360 --> 0:10:52.480 So this is this is not tax money. 0:10:52.520 --> 0:10:57.200 This is private capital that's invested with an expectation to 0:10:57.280 --> 0:11:01.160 make a return. That said, there are some government grant 0:11:01.200 --> 0:11:05.280 schemes and in the US you saw both the Infation 0:11:05.400 --> 0:11:09.240 Reduction Act and the Bipartisan Infrastructure Bill dedicating a lot 0:11:09.240 --> 0:11:12.600 of funding to grids. So we've checked around ten billion 0:11:12.679 --> 0:11:16.760 US dollars that are going out in these different grant programs. 0:11:16.280 --> 0:11:19.600 For grids across the US. But these grants tend to. 0:11:19.600 --> 0:11:23.520 Be really focused on innovation and bringing something new. So 0:11:23.600 --> 0:11:28.600 the bulk of grid investment, you know, the typical reinforcement, 0:11:28.880 --> 0:11:32.400 making that power line larger, connecting that new demand, that 0:11:32.520 --> 0:11:34.520 is really just that private capital. 0:11:34.920 --> 0:11:37.360 But then what's the incentive to build them underground and 0:11:37.400 --> 0:11:39.959 make them, you know, less visible to the eye, because 0:11:40.080 --> 0:11:44.960 presumably the incentive for the ultimate retail end of this 0:11:45.200 --> 0:11:46.960 is to keep prices as low as possible. 0:11:47.200 --> 0:11:51.800 Yeah, So, how grid investment works because it's a natural monopoly. 0:11:51.880 --> 0:11:55.680 You only have one grid company in your neighborhood, you 0:11:55.720 --> 0:11:58.840 can't pick someone else, So that means the regulator has 0:11:58.960 --> 0:12:02.439 a lot to say on how you invest. And that said, 0:12:02.600 --> 0:12:06.520 these regulators tend to often be these independent government bodies, 0:12:06.559 --> 0:12:10.880 so they're not directly political, but politicians of course give 0:12:10.920 --> 0:12:14.840 them their mandate and their main goals, which has been 0:12:15.000 --> 0:12:19.079 to protect consumers, but now that's shifted. So part of 0:12:19.120 --> 0:12:23.240 what the regulators try to achieve is help their governments, 0:12:23.240 --> 0:12:27.200 whether it's a state or country, governments achieve their renewable 0:12:27.240 --> 0:12:31.959 energy targets and also protect consumers from interruptions to their 0:12:31.960 --> 0:12:36.800 electricity supply. So in the US especially, you've seen extreme 0:12:37.200 --> 0:12:41.640 weather starting to wreak havoc on grids across many parts 0:12:41.640 --> 0:12:46.920 of the country, whether it's hurricanes or wildfires, and the 0:12:47.120 --> 0:12:52.240 overheadlines especially are very sensitive to disruptions. So by making 0:12:52.559 --> 0:12:56.160 targets for grid companies to put their lines underground. It 0:12:56.280 --> 0:12:58.959 increases the quality of your supply and you can have 0:12:59.160 --> 0:13:02.000 power even when there's extreme weather going on. 0:13:02.320 --> 0:13:05.520 It's a form of climate adaptation. Ultimately, yeah, it is. 0:13:05.760 --> 0:13:08.439 It is absolutely like the amount of spending on this 0:13:08.800 --> 0:13:13.080 is quite significant. I think it's Southern California. Edison is 0:13:13.120 --> 0:13:17.200 dedicating eighteen percent of its capital expenditure just for proofing 0:13:17.200 --> 0:13:18.319 against wildfires. 0:13:18.720 --> 0:13:22.160 Do you think though, I mean the way you've described it. Ultimately, 0:13:22.440 --> 0:13:25.319 I mean, in these regulated monopolies, the incentive for private 0:13:25.520 --> 0:13:27.800 investors is to invest as much as they possibly can 0:13:27.840 --> 0:13:30.320 because they get a regulated rate of return which is 0:13:30.320 --> 0:13:32.640 typically more favorable than what they'd get if they put 0:13:32.679 --> 0:13:35.160 their money in the bank. So ultimately it's the gatekeepers 0:13:35.200 --> 0:13:38.000 of this investment are the regulators. That's how I've always 0:13:38.160 --> 0:13:42.960 understood it. Are we seeing a change in how regulators 0:13:43.040 --> 0:13:46.160 are thinking? And is it even across the board? 0:13:46.520 --> 0:13:50.200 I think there's been a definite change in how regulators 0:13:50.480 --> 0:13:55.120 are thinking. And it's not only about keeping their investment 0:13:55.440 --> 0:13:59.280 as low as possible anymore, because they have these other 0:13:59.360 --> 0:14:03.679 goals now, which is to support the decarbonization and also 0:14:03.760 --> 0:14:07.640 of course to protect the consumers against power cuts. Essentially, 0:14:07.720 --> 0:14:11.680 so I think there's been a definite paradigm shift in that. 0:14:11.679 --> 0:14:14.560 That said, though, with approving. 0:14:14.120 --> 0:14:16.679 New grid spend, especially when it's going up a lot, 0:14:16.840 --> 0:14:20.000 there is a lot of pressure from the public and 0:14:20.360 --> 0:14:24.160 from politicians to get this right because you don't want 0:14:24.160 --> 0:14:26.520 to spend a lot of money on building the grid 0:14:26.720 --> 0:14:29.000 in the wrong place. So this is I think the 0:14:29.440 --> 0:14:33.480 challenge where the regulators are currently sort of battling these 0:14:33.600 --> 0:14:36.920 two opposing goals, of which one is affordability and one 0:14:37.000 --> 0:14:38.240 is to make sure that the. 0:14:38.200 --> 0:14:40.120 Grid is ready for the future. 0:14:40.280 --> 0:14:43.320 And to get that balance right, you want to know 0:14:43.480 --> 0:14:46.240 where to build the grid, and this is where the 0:14:46.640 --> 0:14:49.720 long cues of renewable energy projects come in as a 0:14:49.720 --> 0:14:50.680 bit of a problem. 0:14:50.760 --> 0:14:53.000 So in both the US many. 0:14:52.840 --> 0:14:57.240 European countries, you have so many renewable energy projects trying 0:14:57.280 --> 0:15:00.240 to connect to the grid, and you don't always have 0:15:00.360 --> 0:15:03.840 visibility of which ones are actually going to get built. 0:15:04.120 --> 0:15:06.760 So if you're having projects all over the country but 0:15:06.880 --> 0:15:08.640 only half of them are going to get built, how 0:15:08.680 --> 0:15:11.280 do you know where to build out the grid? 0:15:11.560 --> 0:15:13.600 And this is again where new. 0:15:13.480 --> 0:15:18.040 Policy changes are helping make that predictability a bit easier. 0:15:18.320 --> 0:15:20.840 So the UK is in the middle of the process 0:15:20.880 --> 0:15:24.000 of implementing a system where you kick projects out of 0:15:24.040 --> 0:15:27.320 the queue if they're not progressing, so you will get 0:15:27.440 --> 0:15:30.120 a little bit more update as the grid company on 0:15:30.480 --> 0:15:33.440 which projects are real projects, and that will help you 0:15:33.480 --> 0:15:36.640 plan the grid nowhere to build it out, because ultimately, 0:15:36.840 --> 0:15:40.480 as long as the generation and the demand which you 0:15:40.800 --> 0:15:45.200 forecasted turns up, that grid investment will make a return 0:15:45.280 --> 0:15:48.960 because you have enough generators and enough consumers that with 0:15:49.040 --> 0:15:52.480 their grid fees pay the grid company, and yeah, strong 0:15:52.520 --> 0:15:53.560 incentives for investment. 0:15:53.840 --> 0:15:55.720 So tell me a little bit more about that. So 0:15:55.720 --> 0:15:58.120 you're talking about real projects versus projects that are just 0:15:58.160 --> 0:16:00.040 not going to see the light of the day. A 0:16:00.520 --> 0:16:02.800 reel of a problem is that how many of these 0:16:02.800 --> 0:16:05.280 projects that are in the pipeline to be built are 0:16:05.360 --> 0:16:09.520 not happening and therefore making it really difficult for grids 0:16:09.560 --> 0:16:11.120 to go in in an effective way. 0:16:11.480 --> 0:16:15.760 So it's very hard to say what percentage of projects 0:16:15.920 --> 0:16:18.960 are never going to get built, because ultimately it could 0:16:19.040 --> 0:16:22.560 just be that they've been postponed forever. In the US, 0:16:22.800 --> 0:16:25.920 one of our research reports concluded that only about one 0:16:26.440 --> 0:16:29.880 in ten wind and solar projects that have applied for 0:16:29.960 --> 0:16:32.520 a grid connection in the last ten to fifteen years 0:16:32.600 --> 0:16:36.840 have actually received a permit to connectow. 0:16:36.680 --> 0:16:38.480 Very low rate and very slow. 0:16:38.640 --> 0:16:43.240 And in California and New York, where this is particularly bad, 0:16:43.480 --> 0:16:47.960 only about two percent of projects have been issued to 0:16:48.040 --> 0:16:51.320 the permit to connect and then the works can commence 0:16:51.400 --> 0:16:54.240 and the grid is upgraded. So yeah, you do have 0:16:54.280 --> 0:16:57.640 a lot of those projects that just hang around. And 0:16:58.000 --> 0:17:01.240 both in California and New York they've started implementing what 0:17:01.280 --> 0:17:04.359 they call cluster studies, so they sort of lump many 0:17:04.400 --> 0:17:07.320 projects together and try to process them at the same 0:17:07.400 --> 0:17:09.960 time do all the grid modeling, get an idea for 0:17:10.000 --> 0:17:13.320 what upgrades are needed, and this is meant to speed 0:17:13.400 --> 0:17:16.840 up the process. But we have still not yet seen 0:17:17.200 --> 0:17:21.160 the effects of this policy change, so it's just been 0:17:21.160 --> 0:17:23.720 in the last year when it's been implemented, so we 0:17:23.760 --> 0:17:25.920 need to wait a little bit longer. In the UK, 0:17:26.040 --> 0:17:30.119 the situation is also particularly bad, so BNF we model 0:17:30.320 --> 0:17:34.159 net zero scenario for various regions, and the wind and 0:17:34.200 --> 0:17:38.040 solar capacity that's currently in the queue trying to connect 0:17:38.080 --> 0:17:41.399 to the UK grid is four times larger than what 0:17:41.520 --> 0:17:44.560 we think the UK will need by twenty thirty and 0:17:44.600 --> 0:17:47.800 then at zero scenario, so that means that by this metric, 0:17:48.119 --> 0:17:50.879 it would mean that you have four times too many projects. 0:17:51.119 --> 0:17:54.680 And yeah, there's simply not a need in the power 0:17:54.720 --> 0:17:57.439 system for this much wind and solar, So that clearly 0:17:57.480 --> 0:17:59.800 shows that you have some projects that are are never 0:17:59.800 --> 0:18:00.639 going I get built. 0:18:00.920 --> 0:18:02.919 Do you think that's some of this? I mean, because 0:18:03.000 --> 0:18:05.600 it sounds to me like that one of the constraints 0:18:05.680 --> 0:18:09.240 on progress is the capacity of the grid to take 0:18:09.320 --> 0:18:13.000 on new projects. And then maybe in response to that, 0:18:13.080 --> 0:18:16.560 a lot of developers are like over populating the pipeline 0:18:16.600 --> 0:18:18.880 because they know not all of their projects can get accepted. 0:18:18.880 --> 0:18:20.679 So you have this this sort of Now you have 0:18:20.760 --> 0:18:23.320 this other problem, which is a lot of these projects 0:18:23.359 --> 0:18:25.520 aren't going to get built, and the developers know that 0:18:25.600 --> 0:18:28.240 from the start, and it's it's only partly because the 0:18:28.280 --> 0:18:31.000 grid constraints. Is also the way that the industry has 0:18:31.040 --> 0:18:35.159 responded to that that creates this very stark dichotomy between 0:18:35.400 --> 0:18:38.320 what is possible what is needed. It's not a dichotomy, 0:18:38.520 --> 0:18:41.560 it's a tricotomy between what is needed, what is possible, 0:18:41.640 --> 0:18:42.840 and what is in the pipeline. 0:18:43.200 --> 0:18:46.440 Yeah. I couldn't have said it better myself. That's exactly 0:18:46.480 --> 0:18:50.600 the problem. The chicken and egg grids are certainly featured 0:18:50.640 --> 0:18:53.000 on the show. But another theme that comes up often 0:18:53.000 --> 0:18:55.399 when we're talking about the energy transition is just how 0:18:55.520 --> 0:18:58.439 much additional money needs to be flowing into some of 0:18:58.480 --> 0:19:01.000 these areas in order for us to see this low 0:19:01.040 --> 0:19:04.560 carbon transition to these newer assets that are going to 0:19:04.600 --> 0:19:07.080 be less polluting. Now we know that some of this 0:19:07.119 --> 0:19:09.840 is going to come through policy, not everything is actually 0:19:09.880 --> 0:19:11.320 going to get the money that it needs. I mean, 0:19:11.320 --> 0:19:13.320 that's just seems to be what we're watching right now, 0:19:13.440 --> 0:19:16.840 is we're working towards these twenty thirty you know, missions targets, 0:19:16.880 --> 0:19:20.080 and some of them are maybe falling a little bit 0:19:20.160 --> 0:19:23.439 short halfway through this critical decade. So then let's pivot 0:19:23.480 --> 0:19:26.440 to a part of the world where we can essentially 0:19:26.440 --> 0:19:31.520 see what happens with capitalism and fewer rules, one might say, 0:19:31.560 --> 0:19:34.679 which is URKAT, which is Texas's grid with the absence 0:19:34.760 --> 0:19:39.119 of really involved policy. How are you seeing the grid 0:19:39.160 --> 0:19:43.119 play out there in this wild West, if you will, 0:19:43.320 --> 0:19:46.040 of what happens on a grid and in a power 0:19:46.040 --> 0:19:48.760 system overall, when you know, kind of left to see 0:19:48.760 --> 0:19:51.720 what happens with market forces. Yeah, so Texas and and 0:19:51.920 --> 0:19:55.240 ERCOT is an interesting example of that. And I think 0:19:55.320 --> 0:19:59.840 here we come back to the issue with predictability that 0:20:00.000 --> 0:20:02.879 we talked about a little bit before. So when you 0:20:03.000 --> 0:20:07.280 don't have the kind of top down, centralized you know, 0:20:07.400 --> 0:20:10.520 this is how we wander energy landscape to evolve. You 0:20:10.560 --> 0:20:13.439 don't have those like big, say offshore wind targets that 0:20:13.480 --> 0:20:16.720 you see in many European countries, then you can end 0:20:16.840 --> 0:20:19.840 up in this kind of situation where Texas is at 0:20:19.840 --> 0:20:23.679 the moment, where the amount of new demand trying to 0:20:23.720 --> 0:20:27.200 connect is just too much for the grid to handle. 0:20:27.400 --> 0:20:32.080 And in Texas, the new demand especially it's been from crypto, 0:20:32.119 --> 0:20:35.520 it's now aid in data centers. It's not just a 0:20:35.600 --> 0:20:38.119 lack of grid capacity, it's also partially a. 0:20:38.160 --> 0:20:39.080 Lack of generation. 0:20:39.280 --> 0:20:42.000 But I think Texas is a good example on how 0:20:42.320 --> 0:20:46.040 these two things, generation and enough gride capacity can be 0:20:46.160 --> 0:20:49.440 two sides of the same coin. So Urka, Texas is 0:20:49.480 --> 0:20:53.679 a grid region that's actually not interconnected with the rest. 0:20:53.600 --> 0:20:55.720 Of the US or with its. 0:20:55.240 --> 0:20:59.960 Neighboring states, and that also makes this whole capacity issue 0:21:00.520 --> 0:21:05.040 more acute because you cannot import power from somewhere else, 0:21:05.280 --> 0:21:09.760 and you also have a renewable energy generation is more 0:21:10.080 --> 0:21:13.840 concentrated in some parts of the state, and if you're 0:21:13.880 --> 0:21:16.800 trying to connect something in this region, you can have 0:21:16.840 --> 0:21:20.880 a slightly better chance because you have some local power generation. 0:21:21.119 --> 0:21:25.440 But even so, these data centers need baseload, so even 0:21:25.480 --> 0:21:27.959 when the wind doesn't blow and the sun doesn't shine, 0:21:28.000 --> 0:21:31.520