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Speaker 1: Hi, I'm Danna Perkins, and you're listening to Switch It

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Speaker 1: on the B and F podcast. More than any other region,

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Speaker 1: the transition to a low carbon economy has been at

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Speaker 1: the center of policy making in the European Union over

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Speaker 1: the last decade. For the first time in three years,

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Speaker 1: Europe has overtaken China when it comes to electric vehicle adoption.

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Speaker 1: The EU has made strong financial commitments to investing in

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Speaker 1: clean energy, with a willingness to explore important technology developments

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Speaker 1: such as hydrogen, and member states have made net zero commitments. However,

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Speaker 1: Europe is still not on track to meet its twenty

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Speaker 1: clean energy and climate goals. Eleven out of twenty seven

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Speaker 1: member states recorded less than two hundred million euros in

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Speaker 1: clean energy investment over the last three years. But one

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Speaker 1: thing I think I can say that we have all

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Speaker 1: learned over the last year is that change can happen

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Speaker 1: much faster than we might anticipate. Cold generation in Europe

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Speaker 1: today is about half of what it was just five

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Speaker 1: years ago. Talk of peak oil demand looked a decade

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Speaker 1: or more away, and now it's possible that it has

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Speaker 1: already happened. So net zero emissions, while they can seem

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Speaker 1: just out of reach is it? And that is the

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Speaker 1: question that BNFS team looked to address in the European

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Speaker 1: Energy Transition Outlook. So today I speak with the primary authors,

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Speaker 1: Dario Trump, who is our global head of Energy Transition Research,

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Speaker 1: and Andrea's Gondolfo, the head of European Power Research here

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Speaker 1: at BIENF. The report, the European Energy Transition Outlook can

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Speaker 1: be found at BENF dot com via our app or

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Speaker 1: at b NF go on the Bloomberg terminal. Additionally, you

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Speaker 1: can find the research that it was built off of,

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Speaker 1: which is an extensive flagship piece we published every year

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Speaker 1: titled the New Energy Outlook. Now note that BENNF does

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Speaker 1: not provide investment of strategy advice and we always have

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Speaker 1: a full disclaimer at the end of the show. But

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Speaker 1: for now, let's dive in regarding the European energy transition.

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Speaker 1: Andreas and Dario, let's start at the beginning. Tell us

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Speaker 1: why this is the right time for us to be

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Speaker 1: talking about Europe in particular when it comes to the

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Speaker 1: energy transition. Last year, I mean the main topic for

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Speaker 1: everyone was of course COVID, but most of the listeners

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Speaker 1: of the podcast and being at followers would have noticed

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Speaker 1: that was also really big year for climate ambition. So

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Speaker 1: we've seen a number of key economies commit to net

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Speaker 1: zero targets for the first time. That has included South Korea, Japan.

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Speaker 1: We've even had a carbon neutrality pledge in China, and

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Speaker 1: of course Europe, wanting to stay ahead and continue to

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Speaker 1: to to raise its climate ambition, FLAG managed to essentially

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Speaker 1: get all twenty seven member state to commit to common

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Speaker 1: neutrality net zero by but more importantly, and that's what

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Speaker 1: makes it very concrete and and and really something to

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Speaker 1: to look at right away minus emissions reduction by twenties

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Speaker 1: thirty from from so real ratchetting of ambition, of ambition,

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Speaker 1: and it means many more sectors than the typically affected

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Speaker 1: to date power sector will have to be looked at

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Speaker 1: and coming is great. So there's a lot happening in

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Speaker 1: Europe right now and policy is actively changing the landscape

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Speaker 1: as we go forward into this next year and beyond. Now,

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Speaker 1: we at bing F do like to look at what

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Speaker 1: the potential is for a lot of the different technologies

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Speaker 1: that we look at out into the future. And Andreas,

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Speaker 1: can you talk to all of us listening today about

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Speaker 1: what that exercises and how do we kind of look

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Speaker 1: at the world without policy and why is it so

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Speaker 1: important then that we layer that on right now? So,

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Speaker 1: as you said, yeah, Bloomberg, every year at being if

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Speaker 1: we do this big report and energy outco, everyone knows

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Speaker 1: about it, everyone hears about it, then essentially it's UH

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Speaker 1: an exercise on how a nomics can drive the energy transition. Essentially,

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Speaker 1: it's a mostly cost driven scenario that looks at what's

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Speaker 1: the cheapest system that we can build in the future

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Speaker 1: that essentially can make sure the lights stay on UM.

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Speaker 1: That is a very good exercise. It it sets down

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Speaker 1: a very good foundation. But when it came to Europe,

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Speaker 1: we found that NEO was essentially too global for it

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Speaker 1: to answer some specific questions that we had in Europe,

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Speaker 1: and at the same time, because of the neutral approach

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Speaker 1: that he wants to take and for it to be

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Speaker 1: able to compare different regions, essentially strips out completely the

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Speaker 1: effect of policies, which in Europe and in the European

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Speaker 1: context has been very important in the past and at

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Speaker 1: the moment, as Daria told us, essentially is going to

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Speaker 1: be very important going forward. So we wanted to add

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Speaker 1: that back in and keeping our economic transition scenario as

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Speaker 1: a starting point, and keeping the fundamental methodology of you know,

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Speaker 1: this is still at least cost system, so it's the

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Speaker 1: cheapest way to to do all of this, but adding

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Speaker 1: in there the effects of electrifying energy demand, for example,

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Speaker 1: the effects of reducing the cost of offshore wind by socializing,

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Speaker 1: for example, the transmission expands. You know what's happening in

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Speaker 1: Germany where you know, they essentially develop a project up

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Speaker 1: to a specific point and they hold an auction and

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Speaker 1: by the right to build a project that has a

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Speaker 1: cable going to it. You know, the effect of targets

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Speaker 1: to any thirty targets. Europe has an increased ambition and

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Speaker 1: he wants to hit some specific numbers by twenty thirty.

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Speaker 1: And finally, and probably one of the most important things

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Speaker 1: that we've tweaked here is increased the carbonization ambition. So

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Speaker 1: one of the parameters we've changed is looking at what

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Speaker 1: happens if Europe increases its twenty thirty emissions reduction target

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Speaker 1: from today fifty in our let's say, current policy scenario

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Speaker 1: and up to fifty five percent in our ambitious policy scenario. However,

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Speaker 1: I think Daria cannot test that. Essentially our current politicys

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Speaker 1: scenari is very too likely going to have fiftent as

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Speaker 1: it's a mission reduction target, and our ambitious policy center

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Speaker 1: will have to be updated for the next iteration next

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Speaker 1: year to probably look at even higher targets. Maybe one

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Speaker 1: reference to the podcast of Ian Barryman, who is the

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Speaker 1: man behind the machine and the tool we we used

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Speaker 1: to explore these different scenarios made he mentioned that and

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Speaker 1: the Avengers, This character goes to all these parallel universes

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Speaker 1: to to figure out which one is the one in

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Speaker 1: which they managed to be the bad guy for him.

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Speaker 1: NEO was essentially about playing out all these alternate scenarios

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Speaker 1: and finding which one is where we can meet demand

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Speaker 1: in the cheapest possible way. And unfortunately we in Europe

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Speaker 1: that that wasn't challenging enough. So so what we decided

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Speaker 1: to do with Andrea's was too goes to all these

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Speaker 1: alternets at universes and find the one where not only

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Speaker 1: do we optimize forecasts, but we also deliver on on

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Speaker 1: the climate ambition after European Union. So so climate neutrality.

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Speaker 1: I love how you said not challenging enough. Come on, guys,

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Speaker 1: you guys are overachievers and for those listening if you

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Speaker 1: haven't heard in Barriman's podcast, he gets into the complexity

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Speaker 1: of just how incredibly detailed this model is. You know,

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Speaker 1: it takes us a year to really turn the crank,

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Speaker 1: so to speak, and find out all the different things.

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Speaker 1: But talking about this expansion on that incredible piece of work,

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Speaker 1: so that this europe specific look what we essentially have done.

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Speaker 1: Here are more scenarios. So you've got scenario one, which

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Speaker 1: is the new energy outlook, and then there's two additional

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Speaker 1: ones at their most basic sense, Can you just explain

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Speaker 1: what the two scenario offshoots are that we come up

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Speaker 1: with for this piece of work. Yeah, I mean, at

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Speaker 1: the most basic level, we app the de carbonization ambition.

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Speaker 1: So we go from an economic transition scenario that assumes,

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Speaker 1: essentially lead that everybody just wants to do what's right

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Speaker 1: in terms of economics, right, you want to do things

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Speaker 1: that are the cheapest. Yeah, yeah, and it strips out

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Speaker 1: all policy beyond the one that we already see. Then

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Speaker 1: we created a current policy scenario where we essentially try

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Speaker 1: to see what's announced today some targets that we usually

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Speaker 1: tend to exclude because we think there is no exact

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Speaker 1: way of how to get there, and then we add

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Speaker 1: on top of that, let's say some delayed electrification, So Europe,

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Speaker 1: we assume that Europe will start electrifying energy demand, but

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Speaker 1: that comes late into any thirty, and then our ambitious

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Speaker 1: policies and builds on top of that. And it's just

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Speaker 1: essentially because a step further, it says Europe starts electrifying tomorrow,

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Speaker 1: it also starts building deep the carbonization technologies by tw

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Speaker 1: any thirty at large scale to replace gas and core,

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Speaker 1: and it phases out core completely by twenty forty, and

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Speaker 1: it also ups it's a mission reduction target for twenty thirty.

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Speaker 1: So this is the policy scenario for overachievers, or maybe

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Speaker 1: it's a policy scenario for actually getting to net zero. Right. Yes,

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Speaker 1: unfortunately we've called it ambitious policy scenario, but in reality

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Speaker 1: it itself doesn't get us exactly to zero emissions, by

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Speaker 1: gets us close, so that the net becomes an important

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Speaker 1: detail in the way this whole target has been praised.

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Speaker 1: I just wanted to go back on the economics approach

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Speaker 1: and and people are doing what is the cheapest and

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Speaker 1: that it is right. I mean, the reality is in

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Speaker 1: energy systems there's quite a lot of cultural preferences and

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Speaker 1: inertia and approaches, and so it's really benf and and

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Speaker 1: some other entities who like to look at things from

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Speaker 1: the economicsperiment when cost optimization way that rely on these

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Speaker 1: on the scenario, but actually governments tend to favor one

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Speaker 1: sector of the other because they're interested in the jobs

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Speaker 1: they can create, or obviously the French, you know, we

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Speaker 1: have a long love for nuclear So it's not so

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Speaker 1: that economics is the main driver in reality. And I

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Speaker 1: think what those scenarios allowed us to explore here in Europe,

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Speaker 1: where we have a very dense set of countries with

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Speaker 1: each other, their targets and their goals was on one hand,

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Speaker 1: to check, you know, what is current plans and current

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Speaker 1: ambition getting us too, is it aligned with what the

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Speaker 1: EU is is hoping to achieve And turns out actually

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Speaker 1: current national plans aren't delivering. And then the third one,

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Speaker 1: which is one where I guess, you know, we have

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Speaker 1: a bit more fun, was to say, you know, how

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Speaker 1: close can we get to net zero? And that's where

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Speaker 1: we we pushed the boat out, and as Undress said,

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Speaker 1: there is a little bit left at the end, but

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Speaker 1: but it's quite quite um, it's quite close, and but

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Speaker 1: but the implications that it has in terms of renewables deployment,

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Speaker 1: in terms of of dispatchable capacity extal, which we'll talk

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Speaker 1: about more, are quite enormous. So it's it's really interesting

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Speaker 1: to see those numbers come out. Well, so let's talk

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Speaker 1: about that. So we know now that Europe has announced

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Speaker 1: some of the most ambitious targets, but those aren't going

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Speaker 1: to get us to net zero. So that's kind of

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Speaker 1: let's not fixate on the not quite getting an A

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Speaker 1: on the scorecard, and let's say, what's that next step.

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Speaker 1: How far away are we in Europe to getting to

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Speaker 1: net zero and what do the targets need to look

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Speaker 1: like in order for us to get there. I mean,

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Speaker 1: if I could start, maybe on on all things renewables,

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Speaker 1: I think one thing we're seeing across boast of current

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Speaker 1: policy scenari and ambitiousy scenarios that renewables deployment needs to

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Speaker 1: right away double from the record levels we've we've seen

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Speaker 1: to date. And if we look at that next zero

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Speaker 1: scenario in the later parts of the modeling periods of IS,

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Speaker 1: you actually see almost a tripling of renewables deployment and

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Speaker 1: I think when we talk about you know, what, what

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Speaker 1: does zero need to do and is the current reality

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Speaker 1: aligned with with this ambition. Clearly there is a gap

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Speaker 1: in the volumes of investment and commitments. We've had some

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Speaker 1: good news on the side of investment activity in despite COVID,

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Speaker 1: so our our investment numbers came out a week ago.

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Speaker 1: I think around now in Europe was actually really coming

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Speaker 1: out on top. But it's been limited to some asset

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Speaker 1: classes in countries. So offshore wind is going through a

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Speaker 1: really good period, but then you have some serious buttonnecks

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Speaker 1: and onshore wind in Germany and Italy options not clearing.

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Speaker 1: So I think one of the first takeaways from from

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Speaker 1: the economic to the ambitious policy scenario renewables deployment conditions

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Speaker 1: need to improve on the ground if we are to

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Speaker 1: have both the economic power system and one that helps

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Speaker 1: us and deliver our goals. Now for a very short break,

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Speaker 1: stay with us. Okay, So we need to electrify many

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Speaker 1: tons of clean power to do it, and what does

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Speaker 1: that mean for everything else? As you said, Dana, we

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Speaker 1: need to electrify. And one of the things that we

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Speaker 1: see actually throw modeling is that electrification drives renewable growth.

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Speaker 1: At this point in Europe, these are the cheapest options

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Speaker 1: for meeting electricity needs pretty much up or around until

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Speaker 1: eight of our electricity needs. Even if these grow, and

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Speaker 1: this is one of the things that mainly drives our

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Speaker 1: outlook in the European energy transitional. However, this means that

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Speaker 1: we have a bunch of plants that are going to

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Speaker 1: shut down, and this is primarily called but also gas

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Speaker 1: will have to make way in Europe. A lot of

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Speaker 1: it is just you know, comes at the end of

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Speaker 1: technical lifetime, but some of it is also displaced by renewables. However,

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Speaker 1: in this whole process of the energy transition and us

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Speaker 1: calling a shut down, what we do find is that

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Speaker 1: actually there is still some market opportunity in our outlook

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Speaker 1: is gas and a combination of some unknown technologies. On

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Speaker 1: an economic basis, renewables can get you to around beyond that,

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Speaker 1: we need to start doing some very weird mental exercises

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Speaker 1: to go to a dent of our electricity needs with

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Speaker 1: wind solar. We start building systems that just don't make sense.

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Speaker 1: You know, we deploy a small country's worth of batteries.

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Speaker 1: We start making statements such as like a third of

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Speaker 1: German and needs to be covered in solar panels, and

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Speaker 1: that's how you get to your energy needs. And and

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Speaker 1: this essentially shows that that and this is one of

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Speaker 1: the reasons why in our outlook we don't get to

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Speaker 1: zero in twenty fifty, even in our most ambitious And

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Speaker 1: that's a lot of solar panels for a country that

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Speaker 1: already has a lot of solar panels. Yes it is.

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Speaker 1: And actually, worryingly enough, you're you're building that many solar

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Speaker 1: panels and you end up wasting about eight of your energy.

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Speaker 1: Right so, so you're building, building, building just so you

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Speaker 1: can eke out always less and less and less, which

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Speaker 1: essentially tells us that, you know, we need something else.

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Speaker 1: And at the time it's at the moment it's gas.

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Speaker 1: But of course if we want to get to zero

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Speaker 1: net zero and eventually zero, it's going to to be

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Speaker 1: something else. Well, so that brings up a good point.

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Speaker 1: So right now it is gas, and new plants are

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Speaker 1: going in and it's seen is you know, this isn't

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Speaker 1: the perfect technology from decarbonization standpoint, but it's going to

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Speaker 1: give us flexible dispatch and it's going to be something

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Speaker 1: that we can do right now to really decarbonize, but

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Speaker 1: these plants can stick around for a long time. So

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Speaker 1: what do we do about all the infrastructure that we're

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Speaker 1: building now and how useful is that going to be

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Speaker 1: for us? Is it going to be really useful and

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Speaker 1: bridging the gap for the next five years or ten years,

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Speaker 1: or are these timelines changing. One of the things we've

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Speaker 1: started to see in Europe is policy emerge on the

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Speaker 1: side of legacy assets or the assets that will become legacy.

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Speaker 1: So probably won't be a surprise to anyone that call

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Speaker 1: phase out are quite in vogue. A large chunk of

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Speaker 1: European call now is already covered by phase out schedules.

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Speaker 1: We have some some of the few countries missing that

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Speaker 1: are have ongoing discussions and even opponent now by joining

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Speaker 1: the need Zerope by fifty's also kind of committing to

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Speaker 1: to get out of core fight in And when you

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Speaker 1: look at what these policy packages are made of, it's

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Speaker 1: not just call has to be online and good risons.

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Speaker 1: It's also looking at, you know, how do you make

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Speaker 1: sure that the owners of these plants are receiving endemization

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Speaker 1: for for the lost market activity, but also how the

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Speaker 1: community is working in these plants are getting supported and

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Speaker 1: so on the front of code at least it feels

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Speaker 1: like the legacy issue and and and giving away out

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Speaker 1: of the market to these assets that is not just

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Speaker 1: driven by their lack of economic potential which is suppressed

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Speaker 1: by the common price is happening what our outlook does?

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Speaker 1: And I think Andrew asking and talk well to to

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Speaker 1: the reason why there is a technology excess. It highlights

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Speaker 1: that gas actually is going to have to be taken

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Speaker 1: care of next and and but when I say taking

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Speaker 1: care of next, that probably means now for many policymakers,

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Speaker 1: because going to an zero means that an abated gas

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Speaker 1: has to be addressed relatively soon, both on the side

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Speaker 1: of the role it place in the short term, so

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Speaker 1: there will be some gas needed, how do we make

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Speaker 1: sure it comes online and and and receives the remuneration

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Speaker 1: it deserves. But also when we need to decarbonize it

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Speaker 1: or replace it with something clean, what do we do?

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Speaker 1: So I'm just going to come out and ask it,

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Speaker 1: are we creating a problem now with gas that we

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Speaker 1: have to clean up later or is gas a necessary

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Speaker 1: part of the solution and the path to NE zero.

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Speaker 1: To be honest, I think you know when we run

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Speaker 1: our economic transitions and that this is probably one of

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Speaker 1: the easiest questions to answer, and the answer is we

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Speaker 1: were notcturing ourselves in the foot by building gas today

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Speaker 1: and in fact, over the next decade, building gas is

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Speaker 1: essentially a one way street, especially as we're retiring core,

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Speaker 1: but we're also seeing some nuclear retirements in the question

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Speaker 1: is what type of gas do we build? And this

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Speaker 1: is where policy can can play a big role, right

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Speaker 1: making sure that, for example, where there is an option,

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Speaker 1: we build gas that maybe can burn an alternative fuel,

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Speaker 1: so that there is a kind of like insurance policy

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Speaker 1: in place that these assets, if they want to operate

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Speaker 1: post fifty, they can and they can burn something else

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Speaker 1: beyond gas. At the same time, I think policymakers need

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Speaker 1: to make it clear today what their expectation is going

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Speaker 1: to be into once we go past any thirty, Building

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Speaker 1: more gas is going to be lecturing ourselves. However, at

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Speaker 1: the at the moment, there is no alternative to it, right,

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Speaker 1: so we're going to build it unless something else comes in.

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Speaker 1: And this is where our whole idea around technology X,

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Speaker 1: which is this unknown perfect replacement for gas that doesn't

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Speaker 1: have the associated emissions, comes in and we've purposely named

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Speaker 1: the technology X because we just don't know right now

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Speaker 1: what's going to win. There are a few options, but costwise,

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Speaker 1: we just don't have data to be able to make

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Speaker 1: any kind of coal. And you know, we're being very honest.

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Speaker 1: Our assumptions are going to determine the outcome and as such,

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Speaker 1: this is not going to be a fair exercise if

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Speaker 1: we come out and say this is what it is. However,

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Speaker 1: you can expect some work from Ben if looking at

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Speaker 1: different pathways, so looking at what the future might look

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Speaker 1: like if this technology X is this or that like hydrogen, CCS, nuclear.

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Speaker 1: I love how you just casually drop that in there's

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Speaker 1: this technology X and we don't know what it is.

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Speaker 1: But you know, that's a really real way of looking

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Speaker 1: at the future because we can't predict what cost curves

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Speaker 1: are going to be for solutions, but we do know

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Speaker 1: that we need an investment into our indeed to figure

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Speaker 1: out what they are. And you mentioned hydrogen, you mentioned CCS.

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Speaker 1: Can you talk a little bit about the degree of

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Speaker 1: investment that's going to go into finding technology X which

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Speaker 1: will help us with the parts that we can't electrify.

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Speaker 1: So I mean, one of the things that that's clear

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Speaker 1: is that hydrogen has probably been the second most mentioned,

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Speaker 1: saying after COVID in the energy space in twenty I

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Speaker 1: don't know if that's necessarily a good or bat thing,

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Speaker 1: but I wanted to cover a few of the other

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Speaker 1: technology excess that I think are particularly relevant in the

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Speaker 1: European context before saying a bit more on hydrogen. In

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Speaker 1: the bucket Technology X, we have interconnectors, and one thing

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Speaker 1: that is important to mention is that, of course in Europe,

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Speaker 1: when you see these core power plants come off line,

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Speaker 1: or even in the latest term, the gas power plants

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Speaker 1: come offline, the flexibility we can give each other by

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Speaker 1: collaborating across boarders, by having these integrated power markets is

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Speaker 1: a huge asset in the objective of the cormonizing the

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Speaker 1: power sector. A lot of the countries that we look

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Speaker 1: at reaching a zero that cannot rely on a neighboring market,

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Speaker 1: like if Poland, you know, was to close all of

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Speaker 1: its call without interconnectors, that will make the challenge a

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Speaker 1: lot harder. So that's one. The other thing is mitigating

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Speaker 1: a little bit that that need for technology X. One

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Speaker 1: of the things we did in the Ambitious policy scenarios

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Speaker 1: that we we socialize the cost of the grid for

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Speaker 1: offshore wind and I think you know, some of the

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Speaker 1: people seeing our numbers in the ambitious policy you will

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Speaker 1: say that they're a bit below um what what Europe

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Speaker 1: is actually ambitioning for for the offshore wind sector. And

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Speaker 1: we're hearing a lot about countries collaborating to build red

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Speaker 1: platforms for offshore to to plow into, and so of

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Speaker 1: course there there is actually a bit of a lever

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Speaker 1: to pull. Now we do have hydrogen and in a

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Speaker 1: long section talking about it in a technology X basket,

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Speaker 1: and that's driven by the fact that the commitments to

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Speaker 1: hydrogen we've we've heard parent around Europe are very tangible

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Speaker 1: this time. So there there is money behind it, there's

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Speaker 1: capacity deployment targets and and all of them are more

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Speaker 1: ambitious than what we had anticipated just a year ago.

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Speaker 1: And what's interesting with hydrogen is that in Syria, you know,

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Speaker 1: hydrogen turbine burning on clean hydrogen can deliver that dispatchable

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Speaker 1: capacity that the system needs. However, the I mean Andreas

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Speaker 1: will be able to say that the implications in terms

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Speaker 1: of how much energy you need to produce the hydrogen,

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Speaker 1: of course quite quite meaningful. To Yeah, actually, that's that's

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Speaker 1: a very good point, Dario. And you know, I'm definitely

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Speaker 1: convinced that hydrogen is an option, but I'm not convinced

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Speaker 1: that it's yet the option. And probably the biggest reason

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Speaker 1: is exactly what is one of the biggest reasons is

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Speaker 1: exactly what that I just mentioned that essentially, you need

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Speaker 1: renewables to produce the hydrogen. Now, in the case of Europe,

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Speaker 1: in an ambitious policy scenario, at the moment, we do

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Speaker 1: see enough wasted renewables or wind and solar electricity. We

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Speaker 1: call it curtailed. Essentially, it's you know, you get moments

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Speaker 1: when there's just too much wind or too much solar

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Speaker 1: energy and you end up wasting that electricity. So there

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Speaker 1: is enough of that waste to power a good portion

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Speaker 1: essentially all of the technology ex that we see uh

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Speaker 1: in our outlook. But then when you go into the nuances,

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Speaker 1: you do realize that, for example, you need to oversize

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Speaker 1: your hydrogen production facility because you're essentially looking to capture

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Speaker 1: these moments of extreme over generation versus what the industry

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Speaker 1: tends to like, which is you know, stable, predictable outcome,

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Speaker 1: constantly producing at a good like seventy or eight percent

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Speaker 1: of my capacity, never going too high, never going too low.

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Speaker 1: Instead in our outlook, but we would see jumps up

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Speaker 1: and down. And this is just to get this little

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Speaker 1: portion of of grid powered. You know, if we then

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Speaker 1: go to long hole mobility, you know, whether it's like

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Speaker 1: long road transport or ships or airplanes industry, you start

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Speaker 1: adding more and more hydrogen capacity production, which in turn

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Speaker 1: requires more and more renewables. And you know, it might

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Speaker 1: be a way to get there. But at the same

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Speaker 1: time we need to to keep in mind that hydrogen

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Speaker 1: has a roughly sixty efficiency from electricity to hydrogen production,

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Speaker 1: and then in that you need to add whatever efficiency

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Speaker 1: you have on the other end, so on the use.

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Speaker 1: So for example, for electricity, if you have green elect

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Speaker 1: let's say you have a hundred units of green electricity

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Speaker 1: going into an electrolyzer, you can expect to get around

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Speaker 1: of around thirty back, which is a pretty big loss.

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Speaker 1: And I mean, you know, when you think about the

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Speaker 1: fact that when are committing to zero by that means

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Speaker 1: in thirty years from now, I think very few of

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Speaker 1: us would have imagined that in the in the lifetime

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Speaker 1: we'll ever get to zero to net zero, and so

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Speaker 1: it would be weird if the challenges and changes that

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Speaker 1: are ambitious policy scenario comes out with wearing a bit crazy.

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00:25:09,760 --> 00:25:13,760
Speaker 1: But really to make all of this possible, that the messages,

435
00:25:14,040 --> 00:25:17,360
Speaker 1: renewables deployment needs to grow to skills that we were

436
00:25:17,359 --> 00:25:19,920
Speaker 1: struggling to think about. And if hydrogen has to play

437
00:25:19,960 --> 00:25:22,159
Speaker 1: its role, we're going to need even more of those renewables.

438
00:25:22,160 --> 00:25:25,080
Speaker 1: And so I think, really that's the exercise that we

439
00:25:25,160 --> 00:25:27,280
Speaker 1: try to do, is it's it's all good and fair

440
00:25:27,320 --> 00:25:29,800
Speaker 1: to raise ambition, but now we need to make what

441
00:25:29,880 --> 00:25:33,359
Speaker 1: it looked pretty impossible not so long ago possible and

442
00:25:33,400 --> 00:25:36,119
Speaker 1: we need to start like today and for that stuff

443
00:25:36,160 --> 00:25:38,840
Speaker 1: at the edge. Is it possible that technology acts is

444
00:25:38,880 --> 00:25:43,440
Speaker 1: actually just a really messy mix of technologies plural that

445
00:25:43,560 --> 00:25:47,679
Speaker 1: aren't economically the clearest route to the end we like

446
00:25:47,760 --> 00:25:50,480
Speaker 1: to think. I think oftentimes that a lot of technologies

447
00:25:50,480 --> 00:25:54,280
Speaker 1: will experience these cost of clients that we've seen in

448
00:25:54,400 --> 00:25:57,440
Speaker 1: solar and we've seen in when where people actually want

449
00:25:57,480 --> 00:26:00,480
Speaker 1: to build them because they're cheaper. Maybe we don't get there,

450
00:26:00,480 --> 00:26:03,720
Speaker 1: maybe not everything ends up being the cheaper solution, but

451
00:26:03,840 --> 00:26:06,520
Speaker 1: that's when we're considering things on a different economic basis,

452
00:26:06,560 --> 00:26:08,879
Speaker 1: and we're not taking into consideration all the costs that

453
00:26:08,920 --> 00:26:13,880
Speaker 1: are associated with volatile climate and ultimately us having a

454
00:26:13,920 --> 00:26:16,400
Speaker 1: goal that we're trying to get to. Do you think

455
00:26:16,400 --> 00:26:19,320
Speaker 1: that the direction of the individual countries and the Commission

456
00:26:19,840 --> 00:26:24,280
Speaker 1: are willing to accept this idea that it's about the

457
00:26:24,280 --> 00:26:27,879
Speaker 1: finish line isn't necessarily an economic finish line, it's a

458
00:26:28,119 --> 00:26:30,720
Speaker 1: emissions finish line. I mean, I think it takes me

459
00:26:30,800 --> 00:26:32,639
Speaker 1: back a little bit to that point earlier of the

460
00:26:32,680 --> 00:26:36,080
Speaker 1: different cultures and and certainly each country will end up

461
00:26:36,080 --> 00:26:40,199
Speaker 1: with a mixed bag of technology excess. I think, you know,

462
00:26:40,400 --> 00:26:42,960
Speaker 1: as a team, we see that, and we see that,

463
00:26:43,040 --> 00:26:46,520
Speaker 1: for example, some center in Eastern European countries are still

464
00:26:46,600 --> 00:26:51,480
Speaker 1: quite serious about nuclear, the UK has nuclear development, France

465
00:26:51,520 --> 00:26:55,160
Speaker 1: will certainly, you know, not fully give up on the sector.

466
00:26:55,480 --> 00:26:57,840
Speaker 1: So I think you'll end up with a mix. But

467
00:26:58,000 --> 00:27:01,840
Speaker 1: the U is also this could active planning exercise, and

468
00:27:01,840 --> 00:27:04,600
Speaker 1: there's actually a lot of sort of pure pressure but

469
00:27:04,640 --> 00:27:08,760
Speaker 1: also pure encouragement ongoing. And and now that this energy

470
00:27:08,760 --> 00:27:12,840
Speaker 1: transition is on everyone's mind and that you get investors following,

471
00:27:13,320 --> 00:27:15,639
Speaker 1: you've got the regulators looking at what how do we

472
00:27:15,720 --> 00:27:18,280
Speaker 1: make sure all of this transition happens at a curse

473
00:27:18,400 --> 00:27:22,240
Speaker 1: that isn't going to get you know, completely tank everyone's

474
00:27:22,280 --> 00:27:24,639
Speaker 1: economy or take too much out of the savings of

475
00:27:24,680 --> 00:27:28,960
Speaker 1: the individuals paying for it. You do see things crystallize

476
00:27:29,040 --> 00:27:34,040
Speaker 1: around the cooler or more favorable technologies fast, but hydrogen

477
00:27:34,200 --> 00:27:36,959
Speaker 1: is not a cool technology or one that we talk

478
00:27:37,000 --> 00:27:39,040
Speaker 1: a lot about because it's cheap. It's not cheap yet,

479
00:27:39,119 --> 00:27:41,040
Speaker 1: it's just one that people look at a lot because

480
00:27:41,040 --> 00:27:43,280
Speaker 1: of its potential. What I would like to add, we

481
00:27:43,359 --> 00:27:46,320
Speaker 1: need that technology X, as we said earlier, kind of

482
00:27:46,320 --> 00:27:49,880
Speaker 1: like we have about a decade to to start building

483
00:27:49,920 --> 00:27:53,639
Speaker 1: this instead of gas. Otherwise we might be building things

484
00:27:53,680 --> 00:27:57,720
Speaker 1: twice and we're already building quite a bit of capacity

485
00:27:57,760 --> 00:28:01,919
Speaker 1: for backups, so to add gas to then run for

486
00:28:02,000 --> 00:28:04,280
Speaker 1: ten years and close it is really going to add

487
00:28:04,280 --> 00:28:07,080
Speaker 1: to cost. The other thing that it may might be

488
00:28:07,160 --> 00:28:09,840
Speaker 1: worth adding here as a thought for technology X, is

489
00:28:09,880 --> 00:28:13,520
Speaker 1: that we're obviously looking at the power sector, and yes,

490
00:28:13,600 --> 00:28:16,879
Speaker 1: we are electrifying a big portion of energy used, but

491
00:28:17,000 --> 00:28:20,280
Speaker 1: that doesn't mean we've managed to electrify everything, and there

492
00:28:20,320 --> 00:28:24,600
Speaker 1: are still other sectors that cannot be electrified realistically at least,

493
00:28:24,800 --> 00:28:26,960
Speaker 1: so it might be worth thinking that you know, the

494
00:28:27,040 --> 00:28:31,360
Speaker 1: last ten percent of our electricity use will be decarbonized,

495
00:28:31,400 --> 00:28:36,119
Speaker 1: not by a technology that necessarily is the cheapest to

496
00:28:36,240 --> 00:28:39,840
Speaker 1: produce electricity with, but it is the cheapest to dicarbonize

497
00:28:40,240 --> 00:28:43,040
Speaker 1: some other sector, and it just happens to be a

498
00:28:43,120 --> 00:28:46,360
Speaker 1: healthy byproduct that it can also produce electricity. I think

499
00:28:46,360 --> 00:28:49,400
Speaker 1: a good example of this is some gas and coal

500
00:28:49,520 --> 00:28:53,600
Speaker 1: plants around Europe today whose main purpose is to produce

501
00:28:53,680 --> 00:28:59,160
Speaker 1: heat for industry, for um a city, and as a

502
00:28:59,160 --> 00:29:03,280
Speaker 1: healthy byproduct, also produce electricity. And you know, you see

503
00:29:03,320 --> 00:29:08,760
Speaker 1: these these plants increase their utilization and efficiency similarly, uh

504
00:29:08,760 --> 00:29:11,000
Speaker 1: and it's probably one of the big bets with hydrogen.

505
00:29:11,440 --> 00:29:15,240
Speaker 1: You know, you could have hydrogen essentially going into sectors

506
00:29:15,240 --> 00:29:19,280
Speaker 1: that can't be electrified but that do need you know, uh,

507
00:29:19,880 --> 00:29:22,640
Speaker 1: an energy molecule, and at the same time, as a

508
00:29:22,640 --> 00:29:28,880
Speaker 1: healthy byproduct, you're also running your newest gas plants on

509
00:29:29,040 --> 00:29:34,040
Speaker 1: hydrogen rather than on gas, which is where policy would

510
00:29:34,080 --> 00:29:37,320
Speaker 1: also you know, fit in to say from twenty thirty

511
00:29:37,360 --> 00:29:39,880
Speaker 1: onwards or gas plants need to be able to burn

512
00:29:39,960 --> 00:29:42,480
Speaker 1: hydrogen at some point because that might be the case.

513
00:29:42,680 --> 00:29:46,000
Speaker 1: And so yes, this is probably a good view for

514
00:29:46,080 --> 00:29:50,160
Speaker 1: the what technology X could be in the future. So

515
00:29:50,200 --> 00:29:52,200
Speaker 1: I think I say this every time that I really

516
00:29:52,240 --> 00:29:54,640
Speaker 1: look forward to seeing what is going to happen in

517
00:29:54,640 --> 00:29:57,280
Speaker 1: the future. It's almost like, you know, every day I

518
00:29:57,320 --> 00:29:58,840
Speaker 1: wake up and read the news and I'm like, oh,

519
00:29:58,960 --> 00:30:00,720
Speaker 1: let's see how this is a all thing and whether

520
00:30:00,840 --> 00:30:02,560
Speaker 1: or not some of the things that we think about

521
00:30:02,560 --> 00:30:05,120
Speaker 1: are actually coming to pass. So on that, you know,

522
00:30:05,240 --> 00:30:08,400
Speaker 1: just as a closing question, we took a look at

523
00:30:08,440 --> 00:30:11,600
Speaker 1: this very much from a European perspective and layered that

524
00:30:11,720 --> 00:30:14,320
Speaker 1: on top of the new energy outlook. Now, I know

525
00:30:14,440 --> 00:30:18,080
Speaker 1: that both of you approached this as europe specific analysts

526
00:30:18,080 --> 00:30:20,040
Speaker 1: at the time that we wrote this, But if you

527
00:30:20,400 --> 00:30:23,520
Speaker 1: had to, let's say, maybe we've got other colleagues listening. Now,

528
00:30:23,800 --> 00:30:26,920
Speaker 1: if you had to give advice to others, what region

529
00:30:27,040 --> 00:30:29,880
Speaker 1: do you want to see a policy outlook coming for?

530
00:30:30,960 --> 00:30:33,800
Speaker 1: Maybe you can choose one each and I'll think the

531
00:30:34,280 --> 00:30:39,680
Speaker 1: easiest one. Joe Biden's obviously committing to Anzio power sector

532
00:30:39,720 --> 00:30:43,560
Speaker 1: by but some of our colleagues they're saying that actually,

533
00:30:43,560 --> 00:30:47,960
Speaker 1: when you're trying to decordnize the whole economy, necessarily so

534
00:30:48,080 --> 00:30:50,920
Speaker 1: they're going really hard on the power sector. Right away.

535
00:30:50,960 --> 00:30:54,120
Speaker 1: What's you're also electrifying at the same time, might be

536
00:30:55,000 --> 00:30:56,600
Speaker 1: trying to do two things at the same time that

537
00:30:56,640 --> 00:30:58,760
Speaker 1: they are a bit more difficult. So I would love

538
00:30:58,800 --> 00:31:03,400
Speaker 1: to see the US go next. How about you Andress,

539
00:31:03,480 --> 00:31:06,800
Speaker 1: I'm gonna say, the other big elephant in the room China.

540
00:31:07,080 --> 00:31:12,080
Speaker 1: They've announced six at zero target. There are known to

541
00:31:13,200 --> 00:31:17,560
Speaker 1: get things done their powerhouse when it comes to renewables,

542
00:31:17,600 --> 00:31:22,040
Speaker 1: and it's going to be a very very interesting paths

543
00:31:22,080 --> 00:31:25,760
Speaker 1: and I think the country as a whole might be

544
00:31:25,800 --> 00:31:28,880
Speaker 1: able to take a leading position on on some new

545
00:31:29,040 --> 00:31:32,120
Speaker 1: technologies to kind of like set the cost trend like

546
00:31:32,160 --> 00:31:35,480
Speaker 1: Europe has been for wind and solar over the past

547
00:31:35,480 --> 00:31:40,600
Speaker 1: ten years, essentially set the cost trand for some the

548
00:31:40,640 --> 00:31:43,960
Speaker 1: carbonizing some other parts of the economy, and that that

549
00:31:44,000 --> 00:31:46,520
Speaker 1: would be a very interesting exercise to see what an

550
00:31:46,520 --> 00:31:49,920
Speaker 1: ambitious policies and it could look like for China to

551
00:31:49,960 --> 00:31:55,000
Speaker 1: maybe the carbonize even before twenty six, which anecdotally, my brother,

552
00:31:55,000 --> 00:31:58,120
Speaker 1: who's in love with the country, says he keeps some

553
00:31:58,200 --> 00:32:00,480
Speaker 1: time me it's it's very likely that would be the

554
00:32:00,560 --> 00:32:05,000
Speaker 1: case that China will will get there before all right, Well,

555
00:32:05,000 --> 00:32:08,000
Speaker 1: we'll see. I certainly plan to be around in to

556
00:32:08,080 --> 00:32:12,040
Speaker 1: see whether or not that is true. No, let's uh,

557
00:32:12,120 --> 00:32:14,640
Speaker 1: let's crash that finish line. On that note, thank you

558
00:32:14,760 --> 00:32:18,120
Speaker 1: very much for joining today. Andrea Sandario, thank you, thank

559
00:32:18,120 --> 00:32:28,280
Speaker 1: you for having us. Today's episode of Switched On was

560
00:32:28,400 --> 00:32:31,360
Speaker 1: edited by Rex Warner of Gray Stoak Media. Bloomberg an

561
00:32:31,400 --> 00:32:33,640
Speaker 1: e F is a service provided by Bloomberg Finance LP

562
00:32:33,720 --> 00:32:36,680
Speaker 1: and its affiliates. This recording does not constitute, nor should

563
00:32:36,680 --> 00:32:40,000
Speaker 1: it be construed, as investment advice, investment recommendations, or a

564
00:32:40,080 --> 00:32:43,840
Speaker 1: recommendation as to an investment or other strategy. Bloombergunia should

565
00:32:43,840 --> 00:32:46,440
Speaker 1: not be considered as information sufficient upon which to base

566
00:32:46,480 --> 00:32:50,000
Speaker 1: an investment decision. Neither Bloomberg Finance LP nor any of

567
00:32:50,040 --> 00:32:53,000
Speaker 1: its affiliates makes any representation or warranty as to the

568
00:32:53,080 --> 00:32:56,320
Speaker 1: accuracy or completeness of the information contained in this recording,

569
00:32:56,360 --> 00:32:58,680
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00:32:58,720 --> 00:33:03,160
Speaker 1: expressly disclaimed. S