Speaker 1: Hi, I'm Danna Perkins, and you're listening to Switch It
Speaker 1: on the B and F podcast. More than any other region,
Speaker 1: the transition to a low carbon economy has been at
Speaker 1: the center of policy making in the European Union over
Speaker 1: the last decade. For the first time in three years,
Speaker 1: Europe has overtaken China when it comes to electric vehicle adoption.
Speaker 1: The EU has made strong financial commitments to investing in
Speaker 1: clean energy, with a willingness to explore important technology developments
Speaker 1: such as hydrogen, and member states have made net zero commitments. However,
Speaker 1: Europe is still not on track to meet its twenty
Speaker 1: clean energy and climate goals. Eleven out of twenty seven
Speaker 1: member states recorded less than two hundred million euros in
Speaker 1: clean energy investment over the last three years. But one
Speaker 1: thing I think I can say that we have all
Speaker 1: learned over the last year is that change can happen
Speaker 1: much faster than we might anticipate. Cold generation in Europe
Speaker 1: today is about half of what it was just five
Speaker 1: years ago. Talk of peak oil demand looked a decade
Speaker 1: or more away, and now it's possible that it has
Speaker 1: already happened. So net zero emissions, while they can seem
Speaker 1: just out of reach is it? And that is the
Speaker 1: question that BNFS team looked to address in the European
Speaker 1: Energy Transition Outlook. So today I speak with the primary authors,
Speaker 1: Dario Trump, who is our global head of Energy Transition Research,
Speaker 1: and Andrea's Gondolfo, the head of European Power Research here
Speaker 1: at BIENF. The report, the European Energy Transition Outlook can
Speaker 1: be found at BENF dot com via our app or
Speaker 1: at b NF go on the Bloomberg terminal. Additionally, you
Speaker 1: can find the research that it was built off of,
Speaker 1: which is an extensive flagship piece we published every year
Speaker 1: titled the New Energy Outlook. Now note that BENNF does
Speaker 1: not provide investment of strategy advice and we always have
Speaker 1: a full disclaimer at the end of the show. But
Speaker 1: for now, let's dive in regarding the European energy transition.
Speaker 1: Andreas and Dario, let's start at the beginning. Tell us
Speaker 1: why this is the right time for us to be
Speaker 1: talking about Europe in particular when it comes to the
Speaker 1: energy transition. Last year, I mean the main topic for
Speaker 1: everyone was of course COVID, but most of the listeners
Speaker 1: of the podcast and being at followers would have noticed
Speaker 1: that was also really big year for climate ambition. So
Speaker 1: we've seen a number of key economies commit to net
Speaker 1: zero targets for the first time. That has included South Korea, Japan.
Speaker 1: We've even had a carbon neutrality pledge in China, and
Speaker 1: of course Europe, wanting to stay ahead and continue to
Speaker 1: to to raise its climate ambition, FLAG managed to essentially
Speaker 1: get all twenty seven member state to commit to common
Speaker 1: neutrality net zero by but more importantly, and that's what
Speaker 1: makes it very concrete and and and really something to
Speaker 1: to look at right away minus emissions reduction by twenties
Speaker 1: thirty from from so real ratchetting of ambition, of ambition,
Speaker 1: and it means many more sectors than the typically affected
Speaker 1: to date power sector will have to be looked at
Speaker 1: and coming is great. So there's a lot happening in
Speaker 1: Europe right now and policy is actively changing the landscape
Speaker 1: as we go forward into this next year and beyond. Now,
Speaker 1: we at bing F do like to look at what
Speaker 1: the potential is for a lot of the different technologies
Speaker 1: that we look at out into the future. And Andreas,
Speaker 1: can you talk to all of us listening today about
Speaker 1: what that exercises and how do we kind of look
Speaker 1: at the world without policy and why is it so
Speaker 1: important then that we layer that on right now? So,
Speaker 1: as you said, yeah, Bloomberg, every year at being if
Speaker 1: we do this big report and energy outco, everyone knows
Speaker 1: about it, everyone hears about it, then essentially it's UH
Speaker 1: an exercise on how a nomics can drive the energy transition. Essentially,
Speaker 1: it's a mostly cost driven scenario that looks at what's
Speaker 1: the cheapest system that we can build in the future
Speaker 1: that essentially can make sure the lights stay on UM.
Speaker 1: That is a very good exercise. It it sets down
Speaker 1: a very good foundation. But when it came to Europe,
Speaker 1: we found that NEO was essentially too global for it
Speaker 1: to answer some specific questions that we had in Europe,
Speaker 1: and at the same time, because of the neutral approach
Speaker 1: that he wants to take and for it to be
Speaker 1: able to compare different regions, essentially strips out completely the
Speaker 1: effect of policies, which in Europe and in the European
Speaker 1: context has been very important in the past and at
Speaker 1: the moment, as Daria told us, essentially is going to
Speaker 1: be very important going forward. So we wanted to add
Speaker 1: that back in and keeping our economic transition scenario as
Speaker 1: a starting point, and keeping the fundamental methodology of you know,
Speaker 1: this is still at least cost system, so it's the
Speaker 1: cheapest way to to do all of this, but adding
Speaker 1: in there the effects of electrifying energy demand, for example,
Speaker 1: the effects of reducing the cost of offshore wind by socializing,
Speaker 1: for example, the transmission expands. You know what's happening in
Speaker 1: Germany where you know, they essentially develop a project up
Speaker 1: to a specific point and they hold an auction and
Speaker 1: by the right to build a project that has a
Speaker 1: cable going to it. You know, the effect of targets
Speaker 1: to any thirty targets. Europe has an increased ambition and
Speaker 1: he wants to hit some specific numbers by twenty thirty.
Speaker 1: And finally, and probably one of the most important things
Speaker 1: that we've tweaked here is increased the carbonization ambition. So
Speaker 1: one of the parameters we've changed is looking at what
Speaker 1: happens if Europe increases its twenty thirty emissions reduction target
Speaker 1: from today fifty in our let's say, current policy scenario
Speaker 1: and up to fifty five percent in our ambitious policy scenario. However,
Speaker 1: I think Daria cannot test that. Essentially our current politicys
Speaker 1: scenari is very too likely going to have fiftent as
Speaker 1: it's a mission reduction target, and our ambitious policy center
Speaker 1: will have to be updated for the next iteration next
Speaker 1: year to probably look at even higher targets. Maybe one
Speaker 1: reference to the podcast of Ian Barryman, who is the
Speaker 1: man behind the machine and the tool we we used
Speaker 1: to explore these different scenarios made he mentioned that and
Speaker 1: the Avengers, This character goes to all these parallel universes
Speaker 1: to to figure out which one is the one in
Speaker 1: which they managed to be the bad guy for him.
Speaker 1: NEO was essentially about playing out all these alternate scenarios
Speaker 1: and finding which one is where we can meet demand
Speaker 1: in the cheapest possible way. And unfortunately we in Europe
Speaker 1: that that wasn't challenging enough. So so what we decided
Speaker 1: to do with Andrea's was too goes to all these
Speaker 1: alternets at universes and find the one where not only
Speaker 1: do we optimize forecasts, but we also deliver on on
Speaker 1: the climate ambition after European Union. So so climate neutrality.
Speaker 1: I love how you said not challenging enough. Come on, guys,
Speaker 1: you guys are overachievers and for those listening if you
Speaker 1: haven't heard in Barriman's podcast, he gets into the complexity
Speaker 1: of just how incredibly detailed this model is. You know,
Speaker 1: it takes us a year to really turn the crank,
Speaker 1: so to speak, and find out all the different things.
Speaker 1: But talking about this expansion on that incredible piece of work,
Speaker 1: so that this europe specific look what we essentially have done.
Speaker 1: Here are more scenarios. So you've got scenario one, which
Speaker 1: is the new energy outlook, and then there's two additional
Speaker 1: ones at their most basic sense, Can you just explain
Speaker 1: what the two scenario offshoots are that we come up
Speaker 1: with for this piece of work. Yeah, I mean, at
Speaker 1: the most basic level, we app the de carbonization ambition.
Speaker 1: So we go from an economic transition scenario that assumes,
Speaker 1: essentially lead that everybody just wants to do what's right
Speaker 1: in terms of economics, right, you want to do things
Speaker 1: that are the cheapest. Yeah, yeah, and it strips out
Speaker 1: all policy beyond the one that we already see. Then
Speaker 1: we created a current policy scenario where we essentially try
Speaker 1: to see what's announced today some targets that we usually
Speaker 1: tend to exclude because we think there is no exact
Speaker 1: way of how to get there, and then we add
Speaker 1: on top of that, let's say some delayed electrification, So Europe,
Speaker 1: we assume that Europe will start electrifying energy demand, but
Speaker 1: that comes late into any thirty, and then our ambitious
Speaker 1: policies and builds on top of that. And it's just
Speaker 1: essentially because a step further, it says Europe starts electrifying tomorrow,
Speaker 1: it also starts building deep the carbonization technologies by tw
Speaker 1: any thirty at large scale to replace gas and core,
Speaker 1: and it phases out core completely by twenty forty, and
Speaker 1: it also ups it's a mission reduction target for twenty thirty.
Speaker 1: So this is the policy scenario for overachievers, or maybe
Speaker 1: it's a policy scenario for actually getting to net zero. Right. Yes,
Speaker 1: unfortunately we've called it ambitious policy scenario, but in reality
Speaker 1: it itself doesn't get us exactly to zero emissions, by
Speaker 1: gets us close, so that the net becomes an important
Speaker 1: detail in the way this whole target has been praised.
Speaker 1: I just wanted to go back on the economics approach
Speaker 1: and and people are doing what is the cheapest and
Speaker 1: that it is right. I mean, the reality is in
Speaker 1: energy systems there's quite a lot of cultural preferences and
Speaker 1: inertia and approaches, and so it's really benf and and
Speaker 1: some other entities who like to look at things from
Speaker 1: the economicsperiment when cost optimization way that rely on these
Speaker 1: on the scenario, but actually governments tend to favor one
Speaker 1: sector of the other because they're interested in the jobs
Speaker 1: they can create, or obviously the French, you know, we
Speaker 1: have a long love for nuclear So it's not so
Speaker 1: that economics is the main driver in reality. And I
Speaker 1: think what those scenarios allowed us to explore here in Europe,
Speaker 1: where we have a very dense set of countries with
Speaker 1: each other, their targets and their goals was on one hand,
Speaker 1: to check, you know, what is current plans and current
Speaker 1: ambition getting us too, is it aligned with what the
Speaker 1: EU is is hoping to achieve And turns out actually
Speaker 1: current national plans aren't delivering. And then the third one,
Speaker 1: which is one where I guess, you know, we have
Speaker 1: a bit more fun, was to say, you know, how
Speaker 1: close can we get to net zero? And that's where
Speaker 1: we we pushed the boat out, and as Undress said,
Speaker 1: there is a little bit left at the end, but
Speaker 1: but it's quite quite um, it's quite close, and but
Speaker 1: but the implications that it has in terms of renewables deployment,
Speaker 1: in terms of of dispatchable capacity extal, which we'll talk
Speaker 1: about more, are quite enormous. So it's it's really interesting
Speaker 1: to see those numbers come out. Well, so let's talk
Speaker 1: about that. So we know now that Europe has announced
Speaker 1: some of the most ambitious targets, but those aren't going
Speaker 1: to get us to net zero. So that's kind of
Speaker 1: let's not fixate on the not quite getting an A
Speaker 1: on the scorecard, and let's say, what's that next step.
Speaker 1: How far away are we in Europe to getting to
Speaker 1: net zero and what do the targets need to look
Speaker 1: like in order for us to get there. I mean,
Speaker 1: if I could start, maybe on on all things renewables,
Speaker 1: I think one thing we're seeing across boast of current
Speaker 1: policy scenari and ambitiousy scenarios that renewables deployment needs to
Speaker 1: right away double from the record levels we've we've seen
Speaker 1: to date. And if we look at that next zero
Speaker 1: scenario in the later parts of the modeling periods of IS,
Speaker 1: you actually see almost a tripling of renewables deployment and
Speaker 1: I think when we talk about you know, what, what
Speaker 1: does zero need to do and is the current reality
Speaker 1: aligned with with this ambition. Clearly there is a gap
Speaker 1: in the volumes of investment and commitments. We've had some
Speaker 1: good news on the side of investment activity in despite COVID,
Speaker 1: so our our investment numbers came out a week ago.
Speaker 1: I think around now in Europe was actually really coming
Speaker 1: out on top. But it's been limited to some asset
Speaker 1: classes in countries. So offshore wind is going through a
Speaker 1: really good period, but then you have some serious buttonnecks
Speaker 1: and onshore wind in Germany and Italy options not clearing.
Speaker 1: So I think one of the first takeaways from from
Speaker 1: the economic to the ambitious policy scenario renewables deployment conditions
Speaker 1: need to improve on the ground if we are to
Speaker 1: have both the economic power system and one that helps
Speaker 1: us and deliver our goals. Now for a very short break,
Speaker 1: stay with us. Okay, So we need to electrify many
Speaker 1: tons of clean power to do it, and what does
Speaker 1: that mean for everything else? As you said, Dana, we
Speaker 1: need to electrify. And one of the things that we
Speaker 1: see actually throw modeling is that electrification drives renewable growth.
Speaker 1: At this point in Europe, these are the cheapest options
Speaker 1: for meeting electricity needs pretty much up or around until
Speaker 1: eight of our electricity needs. Even if these grow, and
Speaker 1: this is one of the things that mainly drives our
Speaker 1: outlook in the European energy transitional. However, this means that
Speaker 1: we have a bunch of plants that are going to
Speaker 1: shut down, and this is primarily called but also gas
Speaker 1: will have to make way in Europe. A lot of
Speaker 1: it is just you know, comes at the end of
Speaker 1: technical lifetime, but some of it is also displaced by renewables. However,
Speaker 1: in this whole process of the energy transition and us
Speaker 1: calling a shut down, what we do find is that
Speaker 1: actually there is still some market opportunity in our outlook
Speaker 1: is gas and a combination of some unknown technologies. On
Speaker 1: an economic basis, renewables can get you to around beyond that,
Speaker 1: we need to start doing some very weird mental exercises
Speaker 1: to go to a dent of our electricity needs with
Speaker 1: wind solar. We start building systems that just don't make sense.
Speaker 1: You know, we deploy a small country's worth of batteries.
Speaker 1: We start making statements such as like a third of
Speaker 1: German and needs to be covered in solar panels, and
Speaker 1: that's how you get to your energy needs. And and
Speaker 1: this essentially shows that that and this is one of
Speaker 1: the reasons why in our outlook we don't get to
Speaker 1: zero in twenty fifty, even in our most ambitious And
Speaker 1: that's a lot of solar panels for a country that
Speaker 1: already has a lot of solar panels. Yes it is.
Speaker 1: And actually, worryingly enough, you're you're building that many solar
Speaker 1: panels and you end up wasting about eight of your energy.
Speaker 1: Right so, so you're building, building, building just so you
Speaker 1: can eke out always less and less and less, which
Speaker 1: essentially tells us that, you know, we need something else.
Speaker 1: And at the time it's at the moment it's gas.
Speaker 1: But of course if we want to get to zero
Speaker 1: net zero and eventually zero, it's going to to be
Speaker 1: something else. Well, so that brings up a good point.
Speaker 1: So right now it is gas, and new plants are
Speaker 1: going in and it's seen is you know, this isn't
Speaker 1: the perfect technology from decarbonization standpoint, but it's going to
Speaker 1: give us flexible dispatch and it's going to be something
Speaker 1: that we can do right now to really decarbonize, but
Speaker 1: these plants can stick around for a long time. So
Speaker 1: what do we do about all the infrastructure that we're
Speaker 1: building now and how useful is that going to be
Speaker 1: for us? Is it going to be really useful and
Speaker 1: bridging the gap for the next five years or ten years,
Speaker 1: or are these timelines changing. One of the things we've
Speaker 1: started to see in Europe is policy emerge on the
Speaker 1: side of legacy assets or the assets that will become legacy.
Speaker 1: So probably won't be a surprise to anyone that call
Speaker 1: phase out are quite in vogue. A large chunk of
Speaker 1: European call now is already covered by phase out schedules.
Speaker 1: We have some some of the few countries missing that
Speaker 1: are have ongoing discussions and even opponent now by joining
Speaker 1: the need Zerope by fifty's also kind of committing to
Speaker 1: to get out of core fight in And when you
Speaker 1: look at what these policy packages are made of, it's
Speaker 1: not just call has to be online and good risons.
Speaker 1: It's also looking at, you know, how do you make
Speaker 1: sure that the owners of these plants are receiving endemization
Speaker 1: for for the lost market activity, but also how the
Speaker 1: community is working in these plants are getting supported and
Speaker 1: so on the front of code at least it feels
Speaker 1: like the legacy issue and and and giving away out
Speaker 1: of the market to these assets that is not just
Speaker 1: driven by their lack of economic potential which is suppressed
Speaker 1: by the common price is happening what our outlook does?
Speaker 1: And I think Andrew asking and talk well to to
Speaker 1: the reason why there is a technology excess. It highlights
Speaker 1: that gas actually is going to have to be taken
Speaker 1: care of next and and but when I say taking
Speaker 1: care of next, that probably means now for many policymakers,
Speaker 1: because going to an zero means that an abated gas
Speaker 1: has to be addressed relatively soon, both on the side
Speaker 1: of the role it place in the short term, so
Speaker 1: there will be some gas needed, how do we make
Speaker 1: sure it comes online and and and receives the remuneration
Speaker 1: it deserves. But also when we need to decarbonize it
Speaker 1: or replace it with something clean, what do we do?
Speaker 1: So I'm just going to come out and ask it,
Speaker 1: are we creating a problem now with gas that we
Speaker 1: have to clean up later or is gas a necessary
Speaker 1: part of the solution and the path to NE zero.
Speaker 1: To be honest, I think you know when we run
Speaker 1: our economic transitions and that this is probably one of
Speaker 1: the easiest questions to answer, and the answer is we
Speaker 1: were notcturing ourselves in the foot by building gas today
Speaker 1: and in fact, over the next decade, building gas is
Speaker 1: essentially a one way street, especially as we're retiring core,
Speaker 1: but we're also seeing some nuclear retirements in the question
Speaker 1: is what type of gas do we build? And this
Speaker 1: is where policy can can play a big role, right
Speaker 1: making sure that, for example, where there is an option,
Speaker 1: we build gas that maybe can burn an alternative fuel,
Speaker 1: so that there is a kind of like insurance policy
Speaker 1: in place that these assets, if they want to operate
Speaker 1: post fifty, they can and they can burn something else
Speaker 1: beyond gas. At the same time, I think policymakers need
Speaker 1: to make it clear today what their expectation is going
Speaker 1: to be into once we go past any thirty, Building
Speaker 1: more gas is going to be lecturing ourselves. However, at
Speaker 1: the at the moment, there is no alternative to it, right,
Speaker 1: so we're going to build it unless something else comes in.
Speaker 1: And this is where our whole idea around technology X,
Speaker 1: which is this unknown perfect replacement for gas that doesn't
Speaker 1: have the associated emissions, comes in and we've purposely named
Speaker 1: the technology X because we just don't know right now
Speaker 1: what's going to win. There are a few options, but costwise,
Speaker 1: we just don't have data to be able to make
Speaker 1: any kind of coal. And you know, we're being very honest.
Speaker 1: Our assumptions are going to determine the outcome and as such,
Speaker 1: this is not going to be a fair exercise if
Speaker 1: we come out and say this is what it is. However,
Speaker 1: you can expect some work from Ben if looking at
Speaker 1: different pathways, so looking at what the future might look
Speaker 1: like if this technology X is this or that like hydrogen, CCS, nuclear.
Speaker 1: I love how you just casually drop that in there's
Speaker 1: this technology X and we don't know what it is.
Speaker 1: But you know, that's a really real way of looking
Speaker 1: at the future because we can't predict what cost curves
Speaker 1: are going to be for solutions, but we do know
Speaker 1: that we need an investment into our indeed to figure
Speaker 1: out what they are. And you mentioned hydrogen, you mentioned CCS.
Speaker 1: Can you talk a little bit about the degree of
Speaker 1: investment that's going to go into finding technology X which
Speaker 1: will help us with the parts that we can't electrify.
Speaker 1: So I mean, one of the things that that's clear
Speaker 1: is that hydrogen has probably been the second most mentioned,
Speaker 1: saying after COVID in the energy space in twenty I
Speaker 1: don't know if that's necessarily a good or bat thing,
Speaker 1: but I wanted to cover a few of the other
Speaker 1: technology excess that I think are particularly relevant in the
Speaker 1: European context before saying a bit more on hydrogen. In
Speaker 1: the bucket Technology X, we have interconnectors, and one thing
Speaker 1: that is important to mention is that, of course in Europe,
Speaker 1: when you see these core power plants come off line,
Speaker 1: or even in the latest term, the gas power plants
Speaker 1: come offline, the flexibility we can give each other by
Speaker 1: collaborating across boarders, by having these integrated power markets is
Speaker 1: a huge asset in the objective of the cormonizing the
Speaker 1: power sector. A lot of the countries that we look
Speaker 1: at reaching a zero that cannot rely on a neighboring market,
Speaker 1: like if Poland, you know, was to close all of
Speaker 1: its call without interconnectors, that will make the challenge a
Speaker 1: lot harder. So that's one. The other thing is mitigating
Speaker 1: a little bit that that need for technology X. One
Speaker 1: of the things we did in the Ambitious policy scenarios
Speaker 1: that we we socialize the cost of the grid for
Speaker 1: offshore wind and I think you know, some of the
Speaker 1: people seeing our numbers in the ambitious policy you will
Speaker 1: say that they're a bit below um what what Europe
Speaker 1: is actually ambitioning for for the offshore wind sector. And
Speaker 1: we're hearing a lot about countries collaborating to build red
Speaker 1: platforms for offshore to to plow into, and so of
Speaker 1: course there there is actually a bit of a lever
Speaker 1: to pull. Now we do have hydrogen and in a
Speaker 1: long section talking about it in a technology X basket,
Speaker 1: and that's driven by the fact that the commitments to
Speaker 1: hydrogen we've we've heard parent around Europe are very tangible
Speaker 1: this time. So there there is money behind it, there's
Speaker 1: capacity deployment targets and and all of them are more
Speaker 1: ambitious than what we had anticipated just a year ago.
Speaker 1: And what's interesting with hydrogen is that in Syria, you know,
Speaker 1: hydrogen turbine burning on clean hydrogen can deliver that dispatchable
Speaker 1: capacity that the system needs. However, the I mean Andreas
Speaker 1: will be able to say that the implications in terms
Speaker 1: of how much energy you need to produce the hydrogen,
Speaker 1: of course quite quite meaningful. To Yeah, actually, that's that's
Speaker 1: a very good point, Dario. And you know, I'm definitely
Speaker 1: convinced that hydrogen is an option, but I'm not convinced
Speaker 1: that it's yet the option. And probably the biggest reason
Speaker 1: is exactly what is one of the biggest reasons is
Speaker 1: exactly what that I just mentioned that essentially, you need
Speaker 1: renewables to produce the hydrogen. Now, in the case of Europe,
Speaker 1: in an ambitious policy scenario, at the moment, we do
Speaker 1: see enough wasted renewables or wind and solar electricity. We
Speaker 1: call it curtailed. Essentially, it's you know, you get moments
Speaker 1: when there's just too much wind or too much solar
Speaker 1: energy and you end up wasting that electricity. So there
Speaker 1: is enough of that waste to power a good portion
Speaker 1: essentially all of the technology ex that we see uh
Speaker 1: in our outlook. But then when you go into the nuances,
Speaker 1: you do realize that, for example, you need to oversize
Speaker 1: your hydrogen production facility because you're essentially looking to capture
Speaker 1: these moments of extreme over generation versus what the industry
Speaker 1: tends to like, which is you know, stable, predictable outcome,
Speaker 1: constantly producing at a good like seventy or eight percent
Speaker 1: of my capacity, never going too high, never going too low.
Speaker 1: Instead in our outlook, but we would see jumps up
Speaker 1: and down. And this is just to get this little
Speaker 1: portion of of grid powered. You know, if we then
Speaker 1: go to long hole mobility, you know, whether it's like
Speaker 1: long road transport or ships or airplanes industry, you start
Speaker 1: adding more and more hydrogen capacity production, which in turn
Speaker 1: requires more and more renewables. And you know, it might
Speaker 1: be a way to get there. But at the same
Speaker 1: time we need to to keep in mind that hydrogen
Speaker 1: has a roughly sixty efficiency from electricity to hydrogen production,
Speaker 1: and then in that you need to add whatever efficiency
Speaker 1: you have on the other end, so on the use.
Speaker 1: So for example, for electricity, if you have green elect
Speaker 1: let's say you have a hundred units of green electricity
Speaker 1: going into an electrolyzer, you can expect to get around
Speaker 1: of around thirty back, which is a pretty big loss.
Speaker 1: And I mean, you know, when you think about the
Speaker 1: fact that when are committing to zero by that means
Speaker 1: in thirty years from now, I think very few of
Speaker 1: us would have imagined that in the in the lifetime
Speaker 1: we'll ever get to zero to net zero, and so
Speaker 1: it would be weird if the challenges and changes that
Speaker 1: are ambitious policy scenario comes out with wearing a bit crazy.
Speaker 1: But really to make all of this possible, that the messages,
Speaker 1: renewables deployment needs to grow to skills that we were
Speaker 1: struggling to think about. And if hydrogen has to play
Speaker 1: its role, we're going to need even more of those renewables.
Speaker 1: And so I think, really that's the exercise that we
Speaker 1: try to do, is it's it's all good and fair
Speaker 1: to raise ambition, but now we need to make what
Speaker 1: it looked pretty impossible not so long ago possible and
Speaker 1: we need to start like today and for that stuff
Speaker 1: at the edge. Is it possible that technology acts is
Speaker 1: actually just a really messy mix of technologies plural that
Speaker 1: aren't economically the clearest route to the end we like
Speaker 1: to think. I think oftentimes that a lot of technologies
Speaker 1: will experience these cost of clients that we've seen in
Speaker 1: solar and we've seen in when where people actually want
Speaker 1: to build them because they're cheaper. Maybe we don't get there,
Speaker 1: maybe not everything ends up being the cheaper solution, but
Speaker 1: that's when we're considering things on a different economic basis,
Speaker 1: and we're not taking into consideration all the costs that
Speaker 1: are associated with volatile climate and ultimately us having a
Speaker 1: goal that we're trying to get to. Do you think
Speaker 1: that the direction of the individual countries and the Commission
Speaker 1: are willing to accept this idea that it's about the
Speaker 1: finish line isn't necessarily an economic finish line, it's a
Speaker 1: emissions finish line. I mean, I think it takes me
Speaker 1: back a little bit to that point earlier of the
Speaker 1: different cultures and and certainly each country will end up
Speaker 1: with a mixed bag of technology excess. I think, you know,
Speaker 1: as a team, we see that, and we see that,
Speaker 1: for example, some center in Eastern European countries are still
Speaker 1: quite serious about nuclear, the UK has nuclear development, France
Speaker 1: will certainly, you know, not fully give up on the sector.
Speaker 1: So I think you'll end up with a mix. But
Speaker 1: the U is also this could active planning exercise, and
Speaker 1: there's actually a lot of sort of pure pressure but
Speaker 1: also pure encouragement ongoing. And and now that this energy
Speaker 1: transition is on everyone's mind and that you get investors following,
Speaker 1: you've got the regulators looking at what how do we
Speaker 1: make sure all of this transition happens at a curse
Speaker 1: that isn't going to get you know, completely tank everyone's
Speaker 1: economy or take too much out of the savings of
Speaker 1: the individuals paying for it. You do see things crystallize
Speaker 1: around the cooler or more favorable technologies fast, but hydrogen
Speaker 1: is not a cool technology or one that we talk
Speaker 1: a lot about because it's cheap. It's not cheap yet,
Speaker 1: it's just one that people look at a lot because
Speaker 1: of its potential. What I would like to add, we
Speaker 1: need that technology X, as we said earlier, kind of
Speaker 1: like we have about a decade to to start building
Speaker 1: this instead of gas. Otherwise we might be building things
Speaker 1: twice and we're already building quite a bit of capacity
Speaker 1: for backups, so to add gas to then run for
Speaker 1: ten years and close it is really going to add
Speaker 1: to cost. The other thing that it may might be
Speaker 1: worth adding here as a thought for technology X, is
Speaker 1: that we're obviously looking at the power sector, and yes,
Speaker 1: we are electrifying a big portion of energy used, but
Speaker 1: that doesn't mean we've managed to electrify everything, and there
Speaker 1: are still other sectors that cannot be electrified realistically at least,
Speaker 1: so it might be worth thinking that you know, the
Speaker 1: last ten percent of our electricity use will be decarbonized,
Speaker 1: not by a technology that necessarily is the cheapest to
Speaker 1: produce electricity with, but it is the cheapest to dicarbonize
Speaker 1: some other sector, and it just happens to be a
Speaker 1: healthy byproduct that it can also produce electricity. I think
Speaker 1: a good example of this is some gas and coal
Speaker 1: plants around Europe today whose main purpose is to produce
Speaker 1: heat for industry, for um a city, and as a
Speaker 1: healthy byproduct, also produce electricity. And you know, you see
Speaker 1: these these plants increase their utilization and efficiency similarly, uh
Speaker 1: and it's probably one of the big bets with hydrogen.
Speaker 1: You know, you could have hydrogen essentially going into sectors
Speaker 1: that can't be electrified but that do need you know, uh,
Speaker 1: an energy molecule, and at the same time, as a
Speaker 1: healthy byproduct, you're also running your newest gas plants on
Speaker 1: hydrogen rather than on gas, which is where policy would
Speaker 1: also you know, fit in to say from twenty thirty
Speaker 1: onwards or gas plants need to be able to burn
Speaker 1: hydrogen at some point because that might be the case.
Speaker 1: And so yes, this is probably a good view for
Speaker 1: the what technology X could be in the future. So
Speaker 1: I think I say this every time that I really
Speaker 1: look forward to seeing what is going to happen in
Speaker 1: the future. It's almost like, you know, every day I
Speaker 1: wake up and read the news and I'm like, oh,
Speaker 1: let's see how this is a all thing and whether
Speaker 1: or not some of the things that we think about
Speaker 1: are actually coming to pass. So on that, you know,
Speaker 1: just as a closing question, we took a look at
Speaker 1: this very much from a European perspective and layered that
Speaker 1: on top of the new energy outlook. Now, I know
Speaker 1: that both of you approached this as europe specific analysts
Speaker 1: at the time that we wrote this, But if you
Speaker 1: had to, let's say, maybe we've got other colleagues listening. Now,
Speaker 1: if you had to give advice to others, what region
Speaker 1: do you want to see a policy outlook coming for?
Speaker 1: Maybe you can choose one each and I'll think the
Speaker 1: easiest one. Joe Biden's obviously committing to Anzio power sector
Speaker 1: by but some of our colleagues they're saying that actually,
Speaker 1: when you're trying to decordnize the whole economy, necessarily so
Speaker 1: they're going really hard on the power sector. Right away.
Speaker 1: What's you're also electrifying at the same time, might be
Speaker 1: trying to do two things at the same time that
Speaker 1: they are a bit more difficult. So I would love
Speaker 1: to see the US go next. How about you Andress,
Speaker 1: I'm gonna say, the other big elephant in the room China.
Speaker 1: They've announced six at zero target. There are known to
Speaker 1: get things done their powerhouse when it comes to renewables,
Speaker 1: and it's going to be a very very interesting paths
Speaker 1: and I think the country as a whole might be
Speaker 1: able to take a leading position on on some new
Speaker 1: technologies to kind of like set the cost trend like
Speaker 1: Europe has been for wind and solar over the past
Speaker 1: ten years, essentially set the cost trand for some the
Speaker 1: carbonizing some other parts of the economy, and that that
Speaker 1: would be a very interesting exercise to see what an
Speaker 1: ambitious policies and it could look like for China to
Speaker 1: maybe the carbonize even before twenty six, which anecdotally, my brother,
Speaker 1: who's in love with the country, says he keeps some
Speaker 1: time me it's it's very likely that would be the
Speaker 1: case that China will will get there before all right, Well,
Speaker 1: we'll see. I certainly plan to be around in to
Speaker 1: see whether or not that is true. No, let's uh,
Speaker 1: let's crash that finish line. On that note, thank you
Speaker 1: very much for joining today. Andrea Sandario, thank you, thank
Speaker 1: you for having us. Today's episode of Switched On was
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