WEBVTT - In Stockpiles and Order Backlogs We Trust 0:00:03.279 --> 0:00:05.560 It took a pandemic to get me to ride a 0:00:05.600 --> 0:00:09.080 bicycle to work. I live in London and studies show 0:00:09.240 --> 0:00:12.320 that the air quality along a busy road is actually 0:00:12.360 --> 0:00:14.840 cleaner than the air quality on my train ride to 0:00:14.880 --> 0:00:19.120 the office. I do my best to think about personal sustainability, 0:00:19.520 --> 0:00:22.800 yet I only started biking to work in March, when 0:00:22.840 --> 0:00:26.160 the term social distancing was already firmly in the lexicon. 0:00:27.280 --> 0:00:30.600 People all over the world have made major changes to 0:00:30.640 --> 0:00:33.680 their daily lives in the past weeks and months, far 0:00:33.760 --> 0:00:36.600 more significant than my morning commute when I used to 0:00:36.640 --> 0:00:40.440 go into the office. So from a BNF perspective, we're 0:00:40.440 --> 0:00:43.320 going to explore what these changes mean for road transport 0:00:43.560 --> 0:00:46.599 as well as clean energy. On the show today are 0:00:46.640 --> 0:00:50.600 Colin mccarrickre and Logan Goldie Scott. Colin is head of 0:00:50.640 --> 0:00:53.360 Advanced Transport at BENF and Logan is head of Clean 0:00:53.400 --> 0:00:56.440 Power Research. They're going to give us their views on 0:00:56.480 --> 0:01:00.200 how clean energy and transportation are changing right now and 0:01:00.360 --> 0:01:02.360 what we might be able to expect in the future. 0:01:03.240 --> 0:01:05.920 Be an F is currently writing a series of indicators 0:01:05.920 --> 0:01:08.319 reports on the impact of COVID Night Team on the 0:01:08.319 --> 0:01:12.520 industries we cover. These include indicators reports on clean power 0:01:12.760 --> 0:01:16.560 as well as global road traffic. These reports are available 0:01:16.600 --> 0:01:19.160 at b NF dot com and on the Bloomberg terminal 0:01:19.200 --> 0:01:22.119 at b NF Go. And please remember that BNF does 0:01:22.120 --> 0:01:24.520 not provide investment or strategy advice, and we have a 0:01:24.560 --> 0:01:26.720 full disclaimer that can be found at the end of 0:01:26.720 --> 0:01:37.440 the show. Hi Colin, Hi Logan, thank you for joining today. 0:01:37.840 --> 0:01:40.559 Hi Dina, good to be here. Hey Danny, great to speak. 0:01:40.920 --> 0:01:44.000 So that was Colin's voice first and Logan's voice second 0:01:44.080 --> 0:01:46.080 for those who are wondering now, one of the things 0:01:46.120 --> 0:01:51.640 that is really great about recording remote podcasts is that 0:01:51.880 --> 0:01:55.480 we actually have the ability to bring in guests from 0:01:55.520 --> 0:01:58.760 different parts of the world. We have this lovely studio 0:01:58.800 --> 0:02:01.400 in London that I haven't stepped put in about three weeks. 0:02:02.000 --> 0:02:05.160 But now we're joined today by Logan, who is located 0:02:05.200 --> 0:02:07.080 in the San Francisco Bay area, which is where I'm 0:02:07.120 --> 0:02:08.720 originally from. I guess we've got a little bit of 0:02:08.760 --> 0:02:12.280 a swap going on here, and I am curious, from 0:02:12.360 --> 0:02:16.720 a city that has a lot of mobility, when's the 0:02:16.800 --> 0:02:19.840 last time you were in a taxi? So San Francisco 0:02:20.120 --> 0:02:23.320 ended up actually moving relatively early, so we've had shelter 0:02:23.480 --> 0:02:27.120 in place since March sixteenth, and then I was actually 0:02:27.200 --> 0:02:30.120 in an uber on March fifteenth, So that was my 0:02:30.320 --> 0:02:34.160 final social interaction that wasn't via camera and virus screen 0:02:34.480 --> 0:02:36.680 and the final time I was in the uber. So 0:02:36.680 --> 0:02:38.600 it's been a couple of weeks. Callin, when's the last 0:02:38.639 --> 0:02:41.120 time you were in a taxi? For me, it's further 0:02:41.160 --> 0:02:44.280 back actually, So we were out in San Francisco actually 0:02:44.480 --> 0:02:47.040 for the San Francisco Summit and the theme is the 0:02:47.080 --> 0:02:49.160 future of mobility, so we were all there at the 0:02:49.160 --> 0:02:51.359 beginning of February for that, and that's the last time 0:02:51.400 --> 0:02:53.639 I think I was in an uber. Once I'm back 0:02:53.639 --> 0:02:56.119 in London. I'm a big advocate of cycling everywhere, so 0:02:56.480 --> 0:02:59.320 despite being someone who spends their time deeply immersed in 0:02:59.360 --> 0:03:02.760 auto market, I prefer two wheels over four whenever I can. 0:03:03.760 --> 0:03:05.880 So it was that same week before I kind of 0:03:05.960 --> 0:03:09.359 moved into my house full time. But I must say 0:03:09.520 --> 0:03:11.920 the last couple of days at work, I started renting 0:03:11.919 --> 0:03:13.720 bikes and I've become a bit of a cyclist and 0:03:13.800 --> 0:03:15.400 I think that will stick with me for a while. 0:03:15.480 --> 0:03:19.160 So then that leads to another important point and something 0:03:19.200 --> 0:03:22.440 that we are tracking now here at b an Epso Collin, 0:03:23.160 --> 0:03:26.880 we're looking at transport and we're looking at traffic and congestion. 0:03:27.600 --> 0:03:29.480 What are we seeing right now and what sort of 0:03:29.520 --> 0:03:31.480 developed over the last couple of weeks Because we are 0:03:31.520 --> 0:03:33.600 tracking this on a weekly basis around the world, are 0:03:33.639 --> 0:03:36.520 we not? We are? And what you're seeing is predictable 0:03:36.680 --> 0:03:39.000 in some sense. Everybody's been told to stay in their house, 0:03:39.040 --> 0:03:41.720 and for the most part, everybody is staying in their house. 0:03:42.200 --> 0:03:46.760 Traffic is plummeted, use of public transit has plummeted. It's 0:03:46.800 --> 0:03:49.480 not all on the same timeline. Some of them are 0:03:49.520 --> 0:03:51.360 sort of a week or two staggered, or in the 0:03:51.400 --> 0:03:54.920 case of say China versus the US or Europe, it's 0:03:54.920 --> 0:03:56.400 more like a month or two. But you see sort 0:03:56.400 --> 0:03:58.600 of the same wave. And when you look at the 0:03:58.640 --> 0:04:02.000 data really closely, you see that ramps down very steeply. 0:04:02.040 --> 0:04:04.960 People really stop moving around when these shelter and place 0:04:05.080 --> 0:04:08.160 rules or these lockdowns come in. And then we're starting 0:04:08.200 --> 0:04:10.000 to see that move again. In China, we're starting to 0:04:10.040 --> 0:04:12.680 see much more people moving around. It's still not back 0:04:12.720 --> 0:04:16.360 to pre COVID levels, but that ice is starting a 0:04:16.400 --> 0:04:18.240 thought and people are moving around pretty much in all 0:04:18.320 --> 0:04:20.560 forms more than they were at the height of this. 0:04:20.680 --> 0:04:22.719 So it kind of looks like about a ten week 0:04:22.760 --> 0:04:25.160 wave that peaks around week five or six and then 0:04:25.200 --> 0:04:27.520 starts to come down. Hopefully that's the pattern we see 0:04:27.520 --> 0:04:30.680 in other countries as well, but of course that's hard 0:04:30.720 --> 0:04:33.920 to predict right now. So is this individual transport or 0:04:33.960 --> 0:04:37.440 we also seeing a pretty massive slowdown in logistics, So 0:04:37.520 --> 0:04:40.440 logistics is a bit less affected, it looks like, and 0:04:40.480 --> 0:04:42.800 I think this lines up with everybody's personal experience. Right 0:04:42.839 --> 0:04:45.680 There're still ordering parcels on Amazon, and grocery trucks are 0:04:45.720 --> 0:04:48.400 still moving things around, so some of that has been 0:04:48.400 --> 0:04:50.359 a bit more resilient than personal mobility, because some of 0:04:50.360 --> 0:04:52.679 it is critical and we need to get more goods 0:04:52.680 --> 0:04:54.840 delivered or at least the same amount of goods delivered 0:04:54.839 --> 0:04:57.400 in quite a few cases. But even that is down 0:04:57.400 --> 0:04:59.159 in some place as well. You think about how much 0:04:59.520 --> 0:05:02.120 stuff is moved around, for say the construction industry or 0:05:02.160 --> 0:05:04.800 just commodities being moved by road and rail and things 0:05:04.839 --> 0:05:07.360 like that, so that is down as well, but probably 0:05:07.640 --> 0:05:09.440 it looks like a little bit less dramatically than on 0:05:09.480 --> 0:05:13.520 the passenger side. And then what is the actual impact 0:05:13.640 --> 0:05:17.839 this is having on emissions, and then as second but 0:05:18.040 --> 0:05:21.560 related note, air quality, because I've seen some pictures of 0:05:21.640 --> 0:05:24.480 the Himalayas visible from India for the first time in 0:05:24.520 --> 0:05:28.159 several decades, or even pictures of Los Angeles in the 0:05:28.240 --> 0:05:31.600 valley and having these beautiful blue skies and the ability 0:05:31.640 --> 0:05:34.600 to see hills nearby. Is air pollution down by a 0:05:34.680 --> 0:05:37.760 ton or are we just seeing short term kick and 0:05:37.839 --> 0:05:41.400 air quality? I mean it's noticeably down. If you look 0:05:41.400 --> 0:05:43.600 at pretty much any measure of air quality, whether it's 0:05:43.640 --> 0:05:47.560 Knox emissions or particulates, they're pretty much all way way 0:05:47.600 --> 0:05:50.200 down overall CEO two emissions of course too, as you'd expect. 0:05:50.839 --> 0:05:53.640 And so yeah, you are seeing urban air quality dramatically change. 0:05:53.680 --> 0:05:56.400 I mean, I'm here in central London and looking out 0:05:56.440 --> 0:05:58.520 from my window, not only is the sky a different 0:05:58.560 --> 0:06:02.200 shade of blue, but you can see stars. That's certainly 0:06:02.200 --> 0:06:05.120 not something you would have seen at any point previously 0:06:05.160 --> 0:06:07.320 in the ten years that I've lived here. The open 0:06:07.400 --> 0:06:09.600 question is how much of that stays versus how much 0:06:09.600 --> 0:06:11.840 of that just returns to normal, And I think there 0:06:11.839 --> 0:06:14.159 are some big unknowns in that right now, but certainly 0:06:14.360 --> 0:06:18.080 we are in a very strange and unique window in 0:06:18.160 --> 0:06:21.880 which urban air quality is dramatically better than it's been 0:06:21.920 --> 0:06:24.839 in living memory. I think, so I am enjoying nice 0:06:24.839 --> 0:06:27.760 air quality, I must say, and I've already been somebody 0:06:27.800 --> 0:06:31.840 who's been pretty fascinated enthusiastic about electric vehicles. Now the 0:06:31.920 --> 0:06:35.279 question is do you think other parts of the world 0:06:35.920 --> 0:06:39.159 will be equally as enthralled by electric vehicles? And will 0:06:39.240 --> 0:06:41.760 they when we come out of this fair the same 0:06:41.839 --> 0:06:46.320 as better than or worse than internal combustion engines, because 0:06:46.680 --> 0:06:48.720 with the backdrop of all of this is also an 0:06:48.720 --> 0:06:54.400 extraordinarily low oil price, and the low barrel price also 0:06:54.440 --> 0:06:58.680 makes internal combustion engines much cheaper to operate. Yeah, there's 0:06:58.680 --> 0:07:00.600 a lot of moving pieces in that question of do 0:07:00.680 --> 0:07:03.160 they fare better or worse Because there's a lot of 0:07:03.200 --> 0:07:06.720 moving pieces in what's driving ev adoption. I think in 0:07:06.760 --> 0:07:09.520 the long term, so we go out five to ten years, 0:07:09.560 --> 0:07:12.280 I don't think much has changed. Look, the battery technology 0:07:12.320 --> 0:07:14.600 is going to continue to get better. There's still rising 0:07:14.600 --> 0:07:17.440 pressure around CEO two emissions. There's this pressure around urban 0:07:17.480 --> 0:07:19.440 air quality. I don't think any of that's going away. 0:07:20.080 --> 0:07:22.160 But in the short term there are really big questions 0:07:22.160 --> 0:07:24.120 so you're probably heading for the first year and your 0:07:24.200 --> 0:07:28.320 drop in auto sales certainly since the financial crisis and 0:07:28.440 --> 0:07:30.600 a few thousand eight and nine. The thing about the 0:07:30.600 --> 0:07:33.680 financial crisis is that it hit different countries at a 0:07:33.680 --> 0:07:35.960 more staggered timeframe, right So the US gets hit hard 0:07:35.960 --> 0:07:38.960 in two thousand eight nine auto sales plummeted into thousand nine. 0:07:39.280 --> 0:07:41.760 Europe it's a much more delayed hit. Asia doesn't get 0:07:41.800 --> 0:07:43.320 it as bad. All these sorts of things where it 0:07:43.320 --> 0:07:45.640 was a bit more staggered. We're pretty unique right now 0:07:45.680 --> 0:07:48.400 and that this is hitting everywhere quite at once, but 0:07:48.560 --> 0:07:53.000 pretty close. And cars are large pieces of discretionary spending 0:07:53.040 --> 0:07:55.920 from consumers. So in a time of big economic uncertainty, 0:07:56.200 --> 0:07:58.440 let alone a time where everyone's walked in their houses, 0:07:58.880 --> 0:08:01.160 people don't go out and buy a lot of cars predictably. 0:08:01.200 --> 0:08:03.000 So this is gonna be very tough year for automakers 0:08:03.000 --> 0:08:05.560 for sure. The question then, is do evs hold up 0:08:05.600 --> 0:08:09.000 better or worse than internal combustion engine vehicles. If it 0:08:09.120 --> 0:08:11.240 wasn't for this all of this, you would have been 0:08:11.240 --> 0:08:14.280 heading for a record year for EV sales. Europe, especially 0:08:14.400 --> 0:08:16.920 sales in the first two months were doubling over last 0:08:17.000 --> 0:08:20.600 year because of this driver around CEO two regulations. China 0:08:20.680 --> 0:08:23.360 cut subsidies last year and sales fell in the second half, 0:08:23.360 --> 0:08:26.800 but it was probably gonna rise again this year, so 0:08:27.360 --> 0:08:29.400 we were heading for this real record. I think that's 0:08:29.440 --> 0:08:32.480 off now, at least in unit sales. But I think 0:08:32.480 --> 0:08:35.120 you can probably make an argument that on a percentage basis, 0:08:35.240 --> 0:08:39.520 that percentage adoption EV share of new car sales will 0:08:39.559 --> 0:08:43.000 be either flat or rising a little bit. If you 0:08:43.040 --> 0:08:46.800 look at most sort of conventional auto analysts, they will 0:08:46.840 --> 0:08:48.920 say that EV sales are gonna get hit harder by 0:08:48.920 --> 0:08:51.680 this than internal combustion engine vehicles, and that's because on 0:08:51.760 --> 0:08:55.559 average they're more expensive, and generally, in economic downturns, more 0:08:55.559 --> 0:08:58.880 expensive things get hit harder. Luxury cars go, but cheaper 0:08:58.920 --> 0:09:02.600 cars hold up a little better. Those are valid arguments generally. 0:09:02.640 --> 0:09:05.960 The arguments against that are that one, there are a 0:09:05.960 --> 0:09:08.480 lot of evs out there with long backlogs of pre 0:09:08.640 --> 0:09:11.280 orders that people have put a deposit on that some 0:09:11.360 --> 0:09:14.920 of the automakers are still ticking through those, so Tesla 0:09:15.200 --> 0:09:18.160 Model Why for example, or the Model Free in China, 0:09:18.280 --> 0:09:19.640 so I think a lot of those are still going 0:09:19.679 --> 0:09:22.080 to get shipped, and even you know in Europe a 0:09:22.080 --> 0:09:25.160 lot of automakers last year we're deliberately pushing orders into 0:09:25.640 --> 0:09:27.600 because they could then count them towards their fleet wide 0:09:27.600 --> 0:09:30.240 CEO to target, which they faced fines if they missed 0:09:30.240 --> 0:09:32.240 this year. But there was no fines in place last 0:09:32.280 --> 0:09:34.800 year because the targets didn't apply until this year. So 0:09:34.880 --> 0:09:36.480 I think there's a bit of a backlog there that 0:09:36.640 --> 0:09:40.080 might help. The other thing is that these are still, 0:09:40.200 --> 0:09:42.439 in large part early adopters who may be a little 0:09:42.440 --> 0:09:46.040 bit less sensitive, and then there's this question of policy support. 0:09:46.120 --> 0:09:49.760 So I've mentioned that they're already the European fleet CEO 0:09:49.800 --> 0:09:52.120 two targets. One of the things we've seen so far, 0:09:52.200 --> 0:09:55.280 even in March in Europe, where for about half of 0:09:55.320 --> 0:09:58.360 March most of the big European economies were under lockdown. 0:09:58.720 --> 0:10:00.959 March EV sales in the u K up a hundred 0:10:00.960 --> 0:10:04.640 and thirty three percent, overall internal combustion engine vehicle sales down. 0:10:06.120 --> 0:10:10.640 Germany EV sales up percent. In March, overall internal combustion 0:10:10.640 --> 0:10:15.400 engine vehicle sales down. For France, UM passenger vehicles sales down, 0:10:15.480 --> 0:10:19.840 sales up twelve So it looks like at least in 0:10:20.120 --> 0:10:22.720 Q one they're holding up a little better. The next 0:10:22.720 --> 0:10:24.679 three months are going to be really brutal for all 0:10:24.720 --> 0:10:27.760 parts of the auto market in North America Europe, but 0:10:27.960 --> 0:10:29.800 in China they're going to start to recover. And I 0:10:29.840 --> 0:10:32.160 think what you'll see is still a pretty strong push 0:10:32.160 --> 0:10:35.120 in China. And this is a bit uncomfortable, But my 0:10:35.200 --> 0:10:38.080 bad is that evs hold up slightly better and at 0:10:38.080 --> 0:10:41.120 the adoption rate, the percentage of new sales is flat 0:10:41.160 --> 0:10:43.360 to a little bit up maybe this year over last year, 0:10:43.360 --> 0:10:46.080 but down in absolute terms. Well, you can add this 0:10:46.160 --> 0:10:49.480 to your predictions that you make, for which we did 0:10:49.480 --> 0:10:52.040 a podcast earlier where we went into those we did. Yeah, 0:10:52.160 --> 0:10:55.280 we can talk the beginning of one and see whether 0:10:55.360 --> 0:10:58.080 or not you were on or off on this new 0:10:58.120 --> 0:11:00.199 prediction joining us a little bit later in the year. 0:11:00.760 --> 0:11:03.200 So in that you know, given that there will be 0:11:03.280 --> 0:11:06.080 some reduced demand since one of the many things that 0:11:06.080 --> 0:11:07.800 Logan has done for us here at b n F 0:11:08.080 --> 0:11:10.520 is look very closely at the energy storage market, so 0:11:10.559 --> 0:11:13.760 he knows the battery space pretty intimately well. And one 0:11:13.800 --> 0:11:16.280 of the potential views on our side is that if 0:11:16.320 --> 0:11:18.960 you have a reduction in electric vehicle sales, given they 0:11:18.960 --> 0:11:22.200 are the largest consumers, right now with the myan batteries, 0:11:22.240 --> 0:11:25.440 that this may depress prices for batteries and maybe therefore 0:11:25.480 --> 0:11:28.840 also battery metals. Do we think that that will end 0:11:28.920 --> 0:11:33.520 up being something that will be felt short term, medium term, 0:11:33.679 --> 0:11:38.000 long term come to pass, so the longer term to 0:11:38.000 --> 0:11:41.600 reject you for battery prices, it's fairly clear. We've observed 0:11:41.679 --> 0:11:45.920 this incredible reduction in battery prices nearly over the last decade, 0:11:46.520 --> 0:11:49.319 and we expect that to continue and battery prices to 0:11:49.400 --> 0:11:51.640 fall from sort of close to a hundred fifty dollars 0:11:51.640 --> 0:11:54.760 a kill it was, how today to nearly sixty dollars 0:11:54.760 --> 0:11:59.520 by so that longer term tige actually remains relatively unaffected 0:11:59.640 --> 0:12:03.800 by the near term issues. As Colin mentioned around electric vehicles, 0:12:03.880 --> 0:12:06.680 there are so many different overlapping factors that will impact 0:12:06.679 --> 0:12:10.040 the battery price. We've looked at VC investment in Q 0:12:10.240 --> 0:12:13.920 one and battery technology companies, lithium iron companies. It looked 0:12:14.040 --> 0:12:17.520 very similar to VC investment that we saw in previous quarters. 0:12:18.040 --> 0:12:20.439 Clearly there's a lag there in this may drop off 0:12:20.480 --> 0:12:23.280 over the coming months, but many of these investments were 0:12:23.360 --> 0:12:28.760 from strategic investors large automakers where the emission targets aren't 0:12:28.800 --> 0:12:32.760 going away, where desire for competitive attractive vehicles is not 0:12:32.840 --> 0:12:36.720 going away, and that needs the highest qualities actually, so 0:12:36.960 --> 0:12:39.280 longer term, we don't see this as a sort of 0:12:39.280 --> 0:12:44.360 particular disruption. The very immediate impact is that the uncertain 0:12:44.400 --> 0:12:48.240 demand has a really significant ripple effect across the supply chain. 0:12:48.640 --> 0:12:51.960 It's essentially a bullwhip effects. By the time that you 0:12:52.040 --> 0:12:54.880 actually get to the raw materials, the lithium, the nickel, 0:12:54.960 --> 0:12:59.800 the cobalt, that uncertainty is magnified hugely, and there were 0:13:00.040 --> 0:13:04.719 ready issues from raw matail processes and miners desperate for 0:13:04.800 --> 0:13:08.800 greater certainty from automakers. They were already complaining about that 0:13:08.840 --> 0:13:12.400 because the investment time frames didn't line up, like a 0:13:12.520 --> 0:13:16.840 minor wanted many more years of certainty than an automaker 0:13:16.920 --> 0:13:20.880 was willing to give them. This collapse in certainty around 0:13:20.920 --> 0:13:25.600 demand is hugely problematic and will make aligning those timings 0:13:25.600 --> 0:13:29.640 on getting a mind, getting a processing fertility, and a 0:13:29.720 --> 0:13:33.719 battery manufacturing plant all online at the right times much 0:13:33.840 --> 0:13:35.960 much harder. Now that you just do not have this 0:13:36.080 --> 0:13:39.840 visibility on demand. We have seen lithium and nickel production 0:13:39.880 --> 0:13:44.240 capacity around ten percent has also been impacted by quarantine measures, 0:13:44.480 --> 0:13:47.679 which is this sort of additional layer of disruption and 0:13:47.720 --> 0:13:52.840 then delays surrounding COVID nineteen also means that we don't 0:13:52.840 --> 0:13:55.800 expect a coboard production in the Democratic Republic of Congo 0:13:56.040 --> 0:13:59.280 to increase as we had in our early predictions. Instead 0:13:59.320 --> 0:14:01.960 this year we think that will be flat. So Logan, 0:14:02.200 --> 0:14:04.440 let's throw on the other hat that you know quite 0:14:04.440 --> 0:14:07.040 a bit about right now, the clean energy space. Our 0:14:07.040 --> 0:14:10.640 colleagues over in the Bloomberg Economics team got an interview 0:14:10.800 --> 0:14:14.160 with the head of logistics at Longisolar, who was saying 0:14:14.200 --> 0:14:16.560 that these have been challenging times for them from a 0:14:16.559 --> 0:14:21.120 production standpoint due to some of the logistics concerns. Are 0:14:21.160 --> 0:14:25.640 we seeing supply chain issues and logistics as a challenge 0:14:26.080 --> 0:14:28.560 for what we would consider maybe some of the bigger 0:14:28.600 --> 0:14:32.440 clean energy markets, let's say wind and solar. Do you 0:14:32.480 --> 0:14:34.640 think that these supply chain issues are going to have 0:14:34.680 --> 0:14:36.720 a massive impact or is it going to be something 0:14:36.760 --> 0:14:40.080 further on the demand side. So let's stop with supply 0:14:40.160 --> 0:14:43.000 then we consider move on to demand for solar, for 0:14:43.280 --> 0:14:47.160 energy storage and for the domestic market for wind China 0:14:47.200 --> 0:14:49.960 and China supply chain is sort of hugely important, and 0:14:49.960 --> 0:14:53.520 it did face severe disruptions throughout Q one. China is 0:14:53.560 --> 0:14:58.040 almost completely resumed production now, so these factories are coming 0:14:58.040 --> 0:15:01.760 back online and lamping up acted their maximum capacity. So 0:15:01.840 --> 0:15:04.880 you have a few weeks of backlog, but production is 0:15:05.000 --> 0:15:09.200 coming back. Outside of China, some factories are also still 0:15:09.200 --> 0:15:12.360 operating in Europe and the US, but many have shut 0:15:12.400 --> 0:15:16.280 down due to sort of national or local shutdown orders. Well, actually, 0:15:16.320 --> 0:15:19.880 the other big thing is just related difficulties maintaining the 0:15:19.920 --> 0:15:24.440 safety of the workforce. So supply chain was severely disrupted. 0:15:24.640 --> 0:15:27.240 There were a couple of things in China that that 0:15:27.400 --> 0:15:31.880 offset that. Many companies had started stockpiling ahead of Chinese 0:15:31.920 --> 0:15:35.200 New Year, and so you had greater inventory, so you 0:15:35.320 --> 0:15:37.200 knew that many of these factories were going to be 0:15:37.240 --> 0:15:39.960 either shut down or operating at a lower rate. This 0:15:40.120 --> 0:15:43.960 extended it, but there was some preparation built in. The 0:15:44.000 --> 0:15:47.240 demand story is much more uncertain, and for US that 0:15:47.400 --> 0:15:50.520 is a much bigger concern in terms of understanding sort 0:15:50.520 --> 0:15:53.320 of broader decarbonization targets over the next couple of years. 0:15:54.000 --> 0:15:56.200 On the demand side, Does it have to do with 0:15:56.240 --> 0:15:59.920 a lack of government attention because they're distracted in rightfully 0:16:00.160 --> 0:16:02.840 by these health concerns, or does it have to do 0:16:02.960 --> 0:16:06.040 with consumer demand, I mean, explain why demand is so 0:16:06.160 --> 0:16:09.560 uncertain in the medium to longer term. So success more 0:16:09.600 --> 0:16:14.000 broadly is held by continuity and economies of scale. So 0:16:14.120 --> 0:16:16.560 if you have those two things, success is likely to 0:16:16.600 --> 0:16:20.040 come your way. At the moment that disruption, supply chain 0:16:20.280 --> 0:16:23.840 caused ripples in terms of the timing of getting projects 0:16:23.920 --> 0:16:27.200 install of time, and so even though there's only a 0:16:27.200 --> 0:16:30.920 few weeks disruption in the US, for instance, the schedule 0:16:31.040 --> 0:16:34.320 for cranes to get win projects up and running, that's 0:16:34.360 --> 0:16:37.560 a very well managed schedule if there are any hiccups, 0:16:37.760 --> 0:16:40.400 and that has a ripple effect across the board. So 0:16:40.480 --> 0:16:44.000 you do have the supply chain impacting demand. Companies are 0:16:44.080 --> 0:16:46.480 rushing to get projects built by end of year or 0:16:46.480 --> 0:16:49.360 by certain deadlines in order to get that government support. 0:16:49.960 --> 0:16:53.640 We expect some leniency in many markets, so that should 0:16:53.720 --> 0:16:56.680 ease things, but clearly that's something that's just been a concern. 0:16:57.400 --> 0:17:01.560 The other piece is immediate government at engine is clearly elsewhere. 0:17:02.080 --> 0:17:06.320 We've seen around half of total wind and solar capacity 0:17:06.359 --> 0:17:10.320 that was due to be auctioned in has now been postponed. 0:17:10.800 --> 0:17:14.200 Governments are not planning on running the auctions as they were, 0:17:14.600 --> 0:17:17.720 but because clearly there are other priorities and companies don't 0:17:17.800 --> 0:17:20.439 know how to bid into those auctions. And so we 0:17:20.480 --> 0:17:23.439 saw that and File decide not to bid into an 0:17:23.440 --> 0:17:27.480 auction in Europe recently because of the broader uncertainty impacting 0:17:27.560 --> 0:17:30.240 their business. They didn't know where the appropriate place in 0:17:30.280 --> 0:17:33.440 the bid was. And so you do see supply chain 0:17:33.480 --> 0:17:38.119 issues impacting the timing, and that's this renumeration for these projects. 0:17:38.600 --> 0:17:42.160 You see near term policy being pushed back, and there's 0:17:42.200 --> 0:17:46.600 also this issue around longer term targets. Many observers that 0:17:46.680 --> 0:17:49.359 I followed have said, now is not the time to 0:17:49.440 --> 0:17:52.639 be talking about clean energy, to be talking about climate girls. 0:17:53.000 --> 0:17:55.119 This is a distant future and we really need to 0:17:55.160 --> 0:17:57.800 focus on the sort of COVID nineteen sort of pandemic 0:17:58.160 --> 0:18:01.959 right now. For me, that's a very misguided view. I 0:18:02.000 --> 0:18:04.600 think in any time where you're thinking about a long 0:18:04.720 --> 0:18:09.800 term massive stimulus package or any type of nationwide support, 0:18:09.960 --> 0:18:13.040 you want to be aligning that near to need with 0:18:13.119 --> 0:18:16.159 a longer term aim. As well. The fact that in 0:18:16.200 --> 0:18:20.280 some countries there is uncertainty around whether the government will 0:18:20.320 --> 0:18:24.320 continue to push your head with their previous targets around decoganization. 0:18:24.720 --> 0:18:27.480 I think that threatens many of these sort of companies 0:18:27.560 --> 0:18:30.720 long term goals as well. I think green stimulus is 0:18:30.760 --> 0:18:33.840 something that is chatted about quite a bit in circles 0:18:33.880 --> 0:18:36.600 that we're in, But I would like to know are 0:18:36.680 --> 0:18:41.320 we actually seeing any tangible moves into this in any 0:18:41.359 --> 0:18:43.879 country in the world or is this just something that 0:18:44.560 --> 0:18:47.280 maybe people in our industry like to talk about. The 0:18:47.400 --> 0:18:49.359 one thing I can point to that we are seeing 0:18:49.600 --> 0:18:52.080 is out of China and is an indication that ev 0:18:52.240 --> 0:18:56.280 charging infrastructure might be part of that stimulus. The government 0:18:56.280 --> 0:18:58.760 has indicated that charging infrastructure might be one of the 0:18:58.760 --> 0:19:02.399 focus areas. Southern Grid, one of the power grid operators, 0:19:02.640 --> 0:19:04.440 has indicated that they're going to invest about three point 0:19:04.480 --> 0:19:06.879 six billion dollars in charging infrastructure. That just came at 0:19:06.920 --> 0:19:09.360 the end of last week. So that looks like one 0:19:09.440 --> 0:19:12.800 And we know governments do like shovel ready infrastructure projects. Right. 0:19:12.840 --> 0:19:15.480 You go back to the last financial crisis two thousand 0:19:15.560 --> 0:19:18.320 eight nine in the US, things like the whole grid 0:19:18.359 --> 0:19:21.520 modernization effort. The smart grid was a big part of 0:19:21.560 --> 0:19:24.600 the American Recovery and Reinvestment Act was pushing money into 0:19:24.680 --> 0:19:26.840 some of these infrastructure ready projects where you could go 0:19:26.920 --> 0:19:29.640 and spend money and get things moving right away. Now, 0:19:29.720 --> 0:19:31.840 I do think there's sort of a hierarchy of needs 0:19:31.960 --> 0:19:33.480 and in the places that are still in the very 0:19:33.560 --> 0:19:36.520 much the acute phase of this. This is all about 0:19:37.040 --> 0:19:40.400 managing the pandemic, managing the health crisis and the humanitarian 0:19:40.440 --> 0:19:43.920 crisis on that side of it. But then again, looking 0:19:43.920 --> 0:19:45.800 to China as an example, is sort of starting to 0:19:45.840 --> 0:19:47.800 come out of this and thinking where to go with 0:19:47.840 --> 0:19:51.359 how you push the recovery. I think it probably depends 0:19:51.359 --> 0:19:53.440 a lot on the politics of who's in power at 0:19:53.440 --> 0:19:56.080 the time, so you will have that reflected in the 0:19:56.119 --> 0:19:59.760 stimulus packages that come out. So I don't think, for example, 0:19:59.760 --> 0:20:03.359 in Europe, you will see a big relaxation of the 0:20:03.400 --> 0:20:05.520 push on the green deal or just sort of generally 0:20:05.560 --> 0:20:08.840 around the green economy that Europe is trying to push 0:20:08.880 --> 0:20:11.320 and these twenty thirty targets that are in place, that 0:20:11.400 --> 0:20:14.199 would be very hard I think to justify, given all 0:20:14.200 --> 0:20:15.840 the things that have gone into getting it to where 0:20:15.840 --> 0:20:18.160 it is. In the U S, it's a bit more uncertain. 0:20:18.480 --> 0:20:20.719 I don't see much of a push coming on the 0:20:21.080 --> 0:20:24.800 clean transport side as a result of stimulus and recovery efforts. 0:20:24.800 --> 0:20:27.280 In the US. I think that is in line with 0:20:27.840 --> 0:20:31.760 also the Trump administration's recent rollback of fuel economy standards, 0:20:31.760 --> 0:20:33.440 which of course are going to get tied up in court, 0:20:33.480 --> 0:20:35.800 but that's consistent with what they've said there. This is 0:20:35.800 --> 0:20:38.040 not a higher priority. So I think a lot of 0:20:38.040 --> 0:20:41.399 this ends up reflecting the politics and the priorities of 0:20:41.400 --> 0:20:43.520 the groups that are in power in those countries today, 0:20:43.920 --> 0:20:45.360 and that means there's going to be a very big 0:20:45.359 --> 0:20:48.679 patchwork of types of stimulus measures and focus of those 0:20:48.680 --> 0:20:53.040 stimulus measures between countries. I'd agree completely. In the US, 0:20:53.280 --> 0:20:56.960 clean power and dcomganization is much more contentious than it 0:20:57.080 --> 0:20:59.680 is in most parts of EU and many other markets. 0:21:00.080 --> 0:21:03.160 There was nothing relating to clean power in the first 0:21:03.200 --> 0:21:06.160 stimulus package that was passed here in the US. If 0:21:06.200 --> 0:21:09.280