1 00:00:00,280 --> 00:00:04,440 Speaker 1: Before COVID nineteen Biennia, we're already looking at European coal 2 00:00:04,480 --> 00:00:07,800 Speaker 1: having only five to ten years of life left, but 3 00:00:07,880 --> 00:00:11,920 Speaker 1: that timeline is shortening further and it's possible that coronavirus 4 00:00:12,160 --> 00:00:15,000 Speaker 1: may be something that the coal industry won't be able 5 00:00:15,040 --> 00:00:19,160 Speaker 1: to recover from. We recently had a record breaking number 6 00:00:19,160 --> 00:00:21,640 Speaker 1: of days without coal in the UK and it appears 7 00:00:21,680 --> 00:00:25,480 Speaker 1: that these records are poised to continue as coal fired 8 00:00:25,560 --> 00:00:30,720 Speaker 1: generation declines across Europe. Today we'll be speaking with Katherine Poseidon, 9 00:00:30,880 --> 00:00:33,880 Speaker 1: a member of the AMIA Energy Transition Team whose work 10 00:00:33,920 --> 00:00:37,839 Speaker 1: includes coal phase out, and Andrea Skendalfo, the head of 11 00:00:37,880 --> 00:00:40,640 Speaker 1: AMA Power at b NF. Today will be calling upon 12 00:00:40,760 --> 00:00:45,040 Speaker 1: a series that BIENNF produces, which are titled EU Power Weeklies. 13 00:00:45,800 --> 00:00:48,280 Speaker 1: As of late, there have been several of these research 14 00:00:48,360 --> 00:00:51,720 Speaker 1: notes that have touched upon the role of coal. These 15 00:00:51,720 --> 00:00:54,560 Speaker 1: reports can be accessed at biennf Go, on the Bloomberg 16 00:00:54,640 --> 00:00:58,440 Speaker 1: terminal at biennif dot com or on biennifs mobile app. 17 00:00:58,960 --> 00:01:02,960 Speaker 1: They are titled YOU Power Weekly. Poland eyes German style 18 00:01:03,040 --> 00:01:06,520 Speaker 1: Cole spinoff as well as coal industry is exposed by 19 00:01:06,560 --> 00:01:11,720 Speaker 1: COVID nineteen and Poland clings to Cole Beyond B and 20 00:01:11,760 --> 00:01:14,640 Speaker 1: E F does not provide investment strategy advice, and you 21 00:01:14,640 --> 00:01:16,640 Speaker 1: can hear the full disclaimer at the end of the show. 22 00:01:17,200 --> 00:01:20,800 Speaker 1: I'm Dana Perkins, joined by Mark Taylor and you're listening 23 00:01:20,840 --> 00:01:24,399 Speaker 1: to Switched on the bn F podcast. Let's hear from 24 00:01:24,400 --> 00:01:37,400 Speaker 1: today's guests regarding Cole Faceoff. Katherine Andreas, thank you for 25 00:01:37,480 --> 00:01:40,240 Speaker 1: joining us today, Thank you, thank you for having us 26 00:01:40,319 --> 00:01:43,360 Speaker 1: d So today is actually a pretty important day I 27 00:01:43,360 --> 00:01:45,560 Speaker 1: think in the UK when it comes to coal. We 28 00:01:45,600 --> 00:01:48,240 Speaker 1: are recording on the day that for the first time, 29 00:01:48,520 --> 00:01:52,720 Speaker 1: the UK has not using any coal for power generation 30 00:01:52,880 --> 00:01:56,520 Speaker 1: for two full months. This is pretty significant and maybe 31 00:01:56,640 --> 00:01:58,680 Speaker 1: let's pring that back over to you guys to talk 32 00:01:58,720 --> 00:02:01,720 Speaker 1: about why and a little history of last in here. 33 00:02:02,320 --> 00:02:05,880 Speaker 1: Maybe we can start with the economics and why the UK. 34 00:02:06,360 --> 00:02:08,600 Speaker 1: Even though it's a big mouston for the country, it's 35 00:02:08,639 --> 00:02:11,639 Speaker 1: not the first time this has happened. So the UK 36 00:02:11,880 --> 00:02:14,839 Speaker 1: has taken a lot of steps to kick call out, 37 00:02:15,480 --> 00:02:19,480 Speaker 1: the most important one being that they actually have their 38 00:02:19,480 --> 00:02:24,000 Speaker 1: own carbon price floor and so essentially UK coal generators 39 00:02:24,000 --> 00:02:27,680 Speaker 1: need to pay extra for emitting, which it comes on 40 00:02:27,720 --> 00:02:30,200 Speaker 1: top of what they really need to pay under the 41 00:02:30,200 --> 00:02:32,799 Speaker 1: EU carbon price SKME. Just to be clear, what is 42 00:02:32,840 --> 00:02:36,960 Speaker 1: that floor? No one really knows. It's said very vaguely 43 00:02:37,040 --> 00:02:39,959 Speaker 1: by the government and they say, uh, we want to 44 00:02:40,040 --> 00:02:43,359 Speaker 1: keep the whole, the entire carbon price at current levels. 45 00:02:43,400 --> 00:02:45,079 Speaker 1: That's what they told us a couple of years ago, 46 00:02:45,120 --> 00:02:48,079 Speaker 1: and that was around twenty five pounds per time. Uh. 47 00:02:48,120 --> 00:02:51,200 Speaker 1: And so it looks like they're targeting something around twenty 48 00:02:51,240 --> 00:02:53,800 Speaker 1: five pounds per time. And the second big thing that 49 00:02:53,840 --> 00:02:56,840 Speaker 1: has happened in the UK is that essentially they have 50 00:02:56,960 --> 00:02:59,200 Speaker 1: a core phase out there and they were the first 51 00:02:59,240 --> 00:03:02,640 Speaker 1: ones to announce um, a big one like that, uh. 52 00:03:02,760 --> 00:03:07,400 Speaker 1: And they started the trend and essentially within the matter 53 00:03:07,600 --> 00:03:12,720 Speaker 1: of a few years from twenty fourteen to twenty eighteen, 54 00:03:13,000 --> 00:03:16,240 Speaker 1: we saw core capacity in the UK declining very very 55 00:03:16,280 --> 00:03:20,480 Speaker 1: quickly and core use also the calining very very quickly. 56 00:03:20,600 --> 00:03:23,640 Speaker 1: And that coincides very well with the period when the 57 00:03:23,680 --> 00:03:27,280 Speaker 1: carbon price floor was doubling, so it doubled in that period, 58 00:03:27,639 --> 00:03:31,480 Speaker 1: and it also coincided with when the government announced the 59 00:03:31,520 --> 00:03:35,560 Speaker 1: core phase outdate, which in retrospect looks more like they 60 00:03:35,560 --> 00:03:41,440 Speaker 1: were just formalizing what utilities were later on going to do. Anyway, 61 00:03:41,480 --> 00:03:44,480 Speaker 1: So that's great context regarding the UK specifically, but how 62 00:03:44,480 --> 00:03:46,720 Speaker 1: about the rest of Europe. This is a European story, 63 00:03:46,800 --> 00:03:48,640 Speaker 1: is it not. It is for sure. And one of 64 00:03:48,680 --> 00:03:51,480 Speaker 1: the signals that we've seen from the UK that is 65 00:03:51,520 --> 00:03:56,000 Speaker 1: reflected across the continent really is the speed with which 66 00:03:56,840 --> 00:03:59,400 Speaker 1: coal is starting to move out of the system. And 67 00:03:59,480 --> 00:04:02,680 Speaker 1: in the UK, for example, the first full day without 68 00:04:02,760 --> 00:04:06,920 Speaker 1: coal was only in seventeen and at the time it 69 00:04:07,040 --> 00:04:08,760 Speaker 1: was it was a huge deal. It was followed by 70 00:04:08,760 --> 00:04:11,360 Speaker 1: the first week without coal, and then this year we 71 00:04:11,400 --> 00:04:13,920 Speaker 1: saw a full month and that was a record at 72 00:04:13,920 --> 00:04:16,480 Speaker 1: the time, and now here we are another month after 73 00:04:16,560 --> 00:04:20,200 Speaker 1: that's still with no coal in the system. And the 74 00:04:20,200 --> 00:04:22,680 Speaker 1: goal of the UK is to have no coal at 75 00:04:22,680 --> 00:04:26,520 Speaker 1: all by three but we're already at a very very 76 00:04:26,520 --> 00:04:29,640 Speaker 1: low share, something like two percent of total generation. And 77 00:04:29,640 --> 00:04:31,880 Speaker 1: so what we're starting to see is really a momentum 78 00:04:31,920 --> 00:04:35,720 Speaker 1: behind coal phase outs across the board, where a combination 79 00:04:35,960 --> 00:04:41,120 Speaker 1: of policy drivers and economics are really making it clear 80 00:04:41,279 --> 00:04:44,680 Speaker 1: that a cold phase out date is not necessarily you 81 00:04:44,720 --> 00:04:47,160 Speaker 1: know the reason why this is happening, And in many 82 00:04:47,200 --> 00:04:50,200 Speaker 1: cases it's likely that coal is going to, if not 83 00:04:50,279 --> 00:04:53,560 Speaker 1: officially closed, at least fall very dramatically, even before some 84 00:04:53,640 --> 00:04:58,120 Speaker 1: of those uh even optimistic dates of early twenties for 85 00:04:58,200 --> 00:05:00,360 Speaker 1: some of the whore in whish its European country. Back, 86 00:05:01,120 --> 00:05:03,640 Speaker 1: where do we start? In the UK? Roughly we presented 87 00:05:03,760 --> 00:05:06,679 Speaker 1: generation if I remember while we're looking at something around 88 00:05:06,760 --> 00:05:12,120 Speaker 1: twenty five coming from core. Wow, I mean, it's quite remarkable. 89 00:05:12,120 --> 00:05:14,520 Speaker 1: It's it's a huge drop. Can we go into both 90 00:05:14,560 --> 00:05:17,239 Speaker 1: of those drivers? So, Katie, you mentioned there's policy drivers, 91 00:05:17,279 --> 00:05:19,159 Speaker 1: there's economics drivers. Why don't we take those each in 92 00:05:19,200 --> 00:05:22,560 Speaker 1: turn and go through what those drivers are to explain 93 00:05:22,640 --> 00:05:25,440 Speaker 1: this drop and call across Europe. So on the one hand, 94 00:05:25,600 --> 00:05:28,719 Speaker 1: we have sort of a less well known policy driver, 95 00:05:28,920 --> 00:05:31,600 Speaker 1: but one that is becoming more important right now, which 96 00:05:31,640 --> 00:05:36,640 Speaker 1: is the use targets to reduce emissions, but not particularly 97 00:05:36,839 --> 00:05:40,440 Speaker 1: carbon emissions in general, but actually the pollutants. And so 98 00:05:40,760 --> 00:05:45,960 Speaker 1: the EU has been implementing gradually more strict limits on 99 00:05:46,040 --> 00:05:49,839 Speaker 1: what kind of pollutants in what quantities power plants can emit, 100 00:05:50,520 --> 00:05:52,840 Speaker 1: and just this year and next year essentially there will 101 00:05:52,880 --> 00:05:57,359 Speaker 1: be much stricter limitations coming into force where a number 102 00:05:57,400 --> 00:06:01,200 Speaker 1: of power plants are likely going to realized that putting 103 00:06:01,200 --> 00:06:03,880 Speaker 1: an investment into making you know, the the improvements to 104 00:06:03,920 --> 00:06:08,000 Speaker 1: reduce those pollutant emissions is probably just not going to 105 00:06:08,080 --> 00:06:09,720 Speaker 1: be worth it in the end, it's going to make 106 00:06:09,800 --> 00:06:13,520 Speaker 1: sense to actually close. But the other major policy driver 107 00:06:13,760 --> 00:06:16,800 Speaker 1: is really just the the e use move to a 108 00:06:16,839 --> 00:06:19,599 Speaker 1: greener economy. And of course we've heard a lot about 109 00:06:19,680 --> 00:06:22,599 Speaker 1: the Green Deal and now the Green Recovery Package, but 110 00:06:22,680 --> 00:06:26,479 Speaker 1: even before that, the EU had twenty targets to reach 111 00:06:26,520 --> 00:06:31,520 Speaker 1: a certain share of renewables in energy consumption overall. And 112 00:06:31,600 --> 00:06:34,400 Speaker 1: did we reach those numbers by this year, Well, we 113 00:06:34,480 --> 00:06:37,680 Speaker 1: won't know for sure until sometime next year, but it 114 00:06:37,800 --> 00:06:40,320 Speaker 1: is looking like we are going to definitely reach the 115 00:06:40,360 --> 00:06:43,839 Speaker 1: EU level target. And then each country has had to 116 00:06:44,600 --> 00:06:48,279 Speaker 1: adopt its own overall target and then also granular targets 117 00:06:48,279 --> 00:06:52,039 Speaker 1: for power, transport and for heat. And one thing that 118 00:06:52,279 --> 00:06:56,880 Speaker 1: is pretty important is that the electricity sector targets tend 119 00:06:56,920 --> 00:06:59,599 Speaker 1: to be a lot easier because usually it's a case 120 00:06:59,640 --> 00:07:02,800 Speaker 1: of retiring some coal plants adding for renewables, and the 121 00:07:02,880 --> 00:07:06,560 Speaker 1: share of renewables in the mix increases pretty rapidly. So 122 00:07:06,839 --> 00:07:09,720 Speaker 1: that has been sort of one of the easier ways 123 00:07:09,840 --> 00:07:13,080 Speaker 1: for countries to reach their overall targets. And so we're seeing, 124 00:07:13,240 --> 00:07:16,320 Speaker 1: you know, more and more renewables are competing with coal, 125 00:07:16,480 --> 00:07:19,200 Speaker 1: and if we're talking about the economics and can say 126 00:07:19,240 --> 00:07:22,920 Speaker 1: more about why coal is becoming less and less competitive. 127 00:07:23,400 --> 00:07:26,760 Speaker 1: But the EU now is in a very much sort 128 00:07:26,760 --> 00:07:29,840 Speaker 1: of one directional path towards a greener economy overall, and 129 00:07:29,880 --> 00:07:33,000 Speaker 1: it's becoming very clear that the role that coal has 130 00:07:33,040 --> 00:07:38,200 Speaker 1: to play in a greener futures minimal and falling fast. 131 00:07:39,160 --> 00:07:42,520 Speaker 1: So there is coal and then there are renewables, but 132 00:07:42,600 --> 00:07:45,080 Speaker 1: actually between the two there's something that's actually a lot 133 00:07:45,160 --> 00:07:48,640 Speaker 1: cheaper than coal that maybe a little bit easier to 134 00:07:48,720 --> 00:07:51,520 Speaker 1: mix in, which is gas. And economics for gas have 135 00:07:51,640 --> 00:07:56,000 Speaker 1: actually come down dramatically very recently, making it very competitive 136 00:07:56,120 --> 00:07:59,080 Speaker 1: in number of contexts in locations, can you guys address 137 00:07:59,320 --> 00:08:03,640 Speaker 1: gas And it's into the future of coal in Europe. 138 00:08:03,960 --> 00:08:06,840 Speaker 1: The reason why the UTS was initially set up, so 139 00:08:06,920 --> 00:08:10,560 Speaker 1: the carbon pricing scheme for Europe. The first goal was 140 00:08:10,640 --> 00:08:16,040 Speaker 1: to actually at some point make coal expensive enough so 141 00:08:16,120 --> 00:08:19,360 Speaker 1: that it can no longer compete with gas, and we 142 00:08:19,440 --> 00:08:22,520 Speaker 1: achieved that about two years ago when we saw the 143 00:08:22,560 --> 00:08:26,480 Speaker 1: economics of coal around Europe turning a combination of cheap 144 00:08:26,760 --> 00:08:31,920 Speaker 1: gas coming from the US and carbon price modifications in policy. 145 00:08:32,000 --> 00:08:35,240 Speaker 1: So that they actually reduced the over supply of carbon 146 00:08:35,280 --> 00:08:39,680 Speaker 1: emissions that we had as a hangover from the two 147 00:08:38,559 --> 00:08:43,720 Speaker 1: thous financial crisis. The combination of these two essentially suddenly 148 00:08:43,760 --> 00:08:47,520 Speaker 1: made gas plants really competitive with coal. We were right 149 00:08:47,559 --> 00:08:50,320 Speaker 1: there at that point where running a gas plant and 150 00:08:50,360 --> 00:08:54,040 Speaker 1: running a coal plant was one and the same. Before that, 151 00:08:54,280 --> 00:08:58,560 Speaker 1: running a coal plant was dirty. Now with the COVID crisis, 152 00:08:58,600 --> 00:09:02,600 Speaker 1: in fact, we have a new status where gas prices 153 00:09:02,800 --> 00:09:05,880 Speaker 1: in Europe have collapsed to record levels. I think we're 154 00:09:05,920 --> 00:09:09,800 Speaker 1: talking about something like four euros per megawuath tour in 155 00:09:09,960 --> 00:09:14,600 Speaker 1: the Netherlands compared to like sixty euros per megat are 156 00:09:14,720 --> 00:09:18,079 Speaker 1: about a year ago. And what this is essentially doing, 157 00:09:18,160 --> 00:09:22,920 Speaker 1: it's saying that we don't need call for everything. And 158 00:09:23,080 --> 00:09:25,360 Speaker 1: one thing you need to keep in mind is that 159 00:09:25,800 --> 00:09:29,800 Speaker 1: many gas fleets around Europe have been sized to actually 160 00:09:29,800 --> 00:09:32,880 Speaker 1: be able to take over code for most of the time. 161 00:09:33,080 --> 00:09:35,760 Speaker 1: So what ends up happening is coal plants are now 162 00:09:35,840 --> 00:09:39,199 Speaker 1: asked to service the eight am to eight p m 163 00:09:40,120 --> 00:09:43,560 Speaker 1: and that area that like eight am to eight pm 164 00:09:43,640 --> 00:09:46,440 Speaker 1: because of COVID is lower because people are staying at home, 165 00:09:46,480 --> 00:09:49,040 Speaker 1: they're not going to work, and so cord plants are 166 00:09:49,040 --> 00:09:52,360 Speaker 1: not saying, well, no, we can't do that, like we 167 00:09:52,440 --> 00:09:55,440 Speaker 1: can't turn on for three or four hours and then 168 00:09:55,440 --> 00:09:59,720 Speaker 1: go away. So economics combined with the fact that these 169 00:10:00,000 --> 00:10:04,640 Speaker 1: assets are not built to service a few hours in 170 00:10:04,679 --> 00:10:07,400 Speaker 1: the day. They're built to run flat out like a 171 00:10:07,480 --> 00:10:10,800 Speaker 1: coal plant hates to turn on and off. The combination 172 00:10:10,800 --> 00:10:13,839 Speaker 1: of these two things has essentially completely pushed them out 173 00:10:13,840 --> 00:10:17,360 Speaker 1: of generation in countries like not just the UK, but 174 00:10:17,640 --> 00:10:20,000 Speaker 1: it is Spain. Wherever we have a large gas feat 175 00:10:20,080 --> 00:10:23,280 Speaker 1: you see this happening in Greece, a country that was 176 00:10:23,320 --> 00:10:26,280 Speaker 1: in love with lignite, and lignite was the beginning and 177 00:10:26,360 --> 00:10:30,679 Speaker 1: end all of everything. Now it's like we there is 178 00:10:30,720 --> 00:10:33,920 Speaker 1: speculation that has been like lignite three days or or 179 00:10:34,120 --> 00:10:37,839 Speaker 1: days when lignite contributed so little to the generation, it's that, 180 00:10:37,920 --> 00:10:40,040 Speaker 1: you know, it wasn't heard of. Is anyone still in 181 00:10:40,040 --> 00:10:42,560 Speaker 1: love with lignite? Are there countries that are are still 182 00:10:43,120 --> 00:10:47,360 Speaker 1: really resisting this, either for economic or political reasons? Definitely, 183 00:10:47,600 --> 00:10:51,280 Speaker 1: and I think the political sort of pushback is one 184 00:10:51,280 --> 00:10:54,600 Speaker 1: of the main reasons why a call plays out in 185 00:10:54,679 --> 00:10:58,880 Speaker 1: those words, is still not in discussion in several European countries. 186 00:10:59,400 --> 00:11:02,120 Speaker 1: It's just become a political kind of hot potato than 187 00:11:02,280 --> 00:11:05,280 Speaker 1: that nobody really wants to touch. One of the reasons 188 00:11:05,280 --> 00:11:08,640 Speaker 1: for that is, you know that lignite and hardcore power 189 00:11:08,720 --> 00:11:12,160 Speaker 1: production and especially in Eastern Europe still is linked to 190 00:11:12,240 --> 00:11:16,320 Speaker 1: the mining sector. So unfortunately the economic impact is being 191 00:11:16,400 --> 00:11:20,000 Speaker 1: felt very heavily in those places and countries such as Poland, 192 00:11:20,920 --> 00:11:27,400 Speaker 1: Czech Republic, Romania, Bulgaria, even Greece, where the government still 193 00:11:27,880 --> 00:11:30,600 Speaker 1: may not want to discuss col phase outs increase. They 194 00:11:30,640 --> 00:11:33,720 Speaker 1: have it has been announced, but the utilities in those 195 00:11:33,760 --> 00:11:37,000 Speaker 1: areas still need to come up with some kind of 196 00:11:37,480 --> 00:11:41,560 Speaker 1: option going forward, because although those regions may rely on jobs, 197 00:11:41,880 --> 00:11:44,800 Speaker 1: as Andreas said, the economics are putting more and more 198 00:11:44,800 --> 00:11:49,120 Speaker 1: pressure on that industry to the point where whether there's 199 00:11:49,280 --> 00:11:53,160 Speaker 1: political will or not, the industry is really struggling. I 200 00:11:53,160 --> 00:11:55,240 Speaker 1: actually used to live next to a giant coal plant 201 00:11:55,240 --> 00:11:57,920 Speaker 1: in Romania. The air quality from from for me personally, 202 00:11:58,000 --> 00:12:01,120 Speaker 1: was not that good, so I I personally, I think 203 00:12:01,120 --> 00:12:03,720 Speaker 1: I would welcome this change. The air quality is a 204 00:12:03,720 --> 00:12:06,120 Speaker 1: really interesting point because that is sort of the one 205 00:12:06,320 --> 00:12:09,480 Speaker 1: area where governments are starting to be able to gain 206 00:12:09,559 --> 00:12:12,280 Speaker 1: traction to discuss cold phase out. You know, just talking 207 00:12:12,320 --> 00:12:15,320 Speaker 1: about closing coal is very unpopular. But once you start 208 00:12:15,679 --> 00:12:19,400 Speaker 1: to actually speak with people and you know, they realize 209 00:12:19,400 --> 00:12:21,520 Speaker 1: that the reason the air quality is for is because 210 00:12:21,520 --> 00:12:24,280 Speaker 1: of cold power generation. That's been one of the sort 211 00:12:24,280 --> 00:12:27,800 Speaker 1: of main factors, especially in Eastern Europe, that is driving 212 00:12:27,800 --> 00:12:31,680 Speaker 1: the conversation towards moving beyond. I thought EU Power Weekly 213 00:12:31,720 --> 00:12:34,680 Speaker 1: was really interesting. And in terms of company strategy that PGE. 214 00:12:35,360 --> 00:12:38,280 Speaker 1: What is that Poland's utility? Is that right? I think 215 00:12:38,280 --> 00:12:40,880 Speaker 1: it is the biggest utility in Poland? Yea, right, Okay, 216 00:12:40,880 --> 00:12:42,439 Speaker 1: So they have a strategy. They have an answered the 217 00:12:42,480 --> 00:12:44,319 Speaker 1: strategy to to phase out coal over the next twenty 218 00:12:44,320 --> 00:12:47,600 Speaker 1: five years, but also they're starting to entertain a strategy 219 00:12:47,640 --> 00:12:50,920 Speaker 1: of divesting or spinning off their coal assets into a 220 00:12:50,920 --> 00:12:54,640 Speaker 1: separate company to make PG itself more investable. Can you 221 00:12:54,679 --> 00:12:57,719 Speaker 1: describe some of the longer term utility strategies here? I 222 00:12:57,720 --> 00:13:00,520 Speaker 1: guess it's air quality, but it's also just utility strategy. Yeah. 223 00:13:00,559 --> 00:13:03,200 Speaker 1: I think on the one hand, utilities are feeling the 224 00:13:03,240 --> 00:13:07,079 Speaker 1: economic pressure that at this point, in many cases, if 225 00:13:07,160 --> 00:13:10,360 Speaker 1: we're looking for, you know, a new source of power generation, 226 00:13:10,440 --> 00:13:12,439 Speaker 1: it makes a lot more sense to build new renewables 227 00:13:12,480 --> 00:13:15,680 Speaker 1: plants rather than new fossil fuel plants, but we're also 228 00:13:15,760 --> 00:13:18,800 Speaker 1: at a point now where new renewables are even more 229 00:13:18,800 --> 00:13:23,720 Speaker 1: competitive with existing fossil assets. So replacing some of the 230 00:13:23,760 --> 00:13:28,880 Speaker 1: oldest and dirtiest, you know, coal powered plants, especially in 231 00:13:28,920 --> 00:13:33,920 Speaker 1: places like Poland, with renewables is actually makes just good 232 00:13:34,000 --> 00:13:37,360 Speaker 1: sense from an economics point of view. At the same time, 233 00:13:37,520 --> 00:13:40,240 Speaker 1: the EU level targets are making it clear that the 234 00:13:40,280 --> 00:13:42,720 Speaker 1: future is going to be with renewable and so utilities 235 00:13:42,760 --> 00:13:45,280 Speaker 1: are starting to realize that, you know, if if they're 236 00:13:45,320 --> 00:13:48,560 Speaker 1: looking to expand, renewables are going to be the place 237 00:13:48,600 --> 00:13:52,320 Speaker 1: to look, especially in Poland, is starting to investigate offshore 238 00:13:52,320 --> 00:13:55,960 Speaker 1: wind um. They're looking at more stable source of generation 239 00:13:56,000 --> 00:13:59,080 Speaker 1: that's still renewable, but also as a way to generate 240 00:13:59,440 --> 00:14:01,559 Speaker 1: jobs and you know a little bit more I on 241 00:14:01,679 --> 00:14:04,680 Speaker 1: my activity in the areas that are bordering to see 242 00:14:04,880 --> 00:14:08,160 Speaker 1: trying to bring more activity back to courts to Utilities 243 00:14:08,200 --> 00:14:11,360 Speaker 1: are trying to basically if they can't get away from 244 00:14:11,400 --> 00:14:14,559 Speaker 1: those costly assets that are really pulling them down, and 245 00:14:14,640 --> 00:14:17,520 Speaker 1: they're sending signals across the board that they're looking at, 246 00:14:17,720 --> 00:14:21,440 Speaker 1: you more sustainable options there. They've understood where the wind 247 00:14:21,520 --> 00:14:25,480 Speaker 1: is blowing and it's their pockets ultimately that are taking 248 00:14:25,760 --> 00:14:28,960 Speaker 1: the hit from from costly coal generation. I do sometimes 249 00:14:29,000 --> 00:14:31,920 Speaker 1: hear though from proponents of coal, and they point out 250 00:14:32,000 --> 00:14:35,800 Speaker 1: that we need baseload power and that's essentially what coal provides. 251 00:14:35,920 --> 00:14:38,440 Speaker 1: So maybe this is a question for you andres from 252 00:14:38,440 --> 00:14:41,640 Speaker 1: an economic standpoint and just from a general grid mix standpoint, 253 00:14:41,800 --> 00:14:44,800 Speaker 1: is everything else all added together? Is that going to 254 00:14:44,840 --> 00:14:48,040 Speaker 1: be consistent enough? And when we all start back at work, 255 00:14:48,200 --> 00:14:50,080 Speaker 1: we are physically going to the office, is there going 256 00:14:50,080 --> 00:14:52,200 Speaker 1: to be some sort of a rebound or a yoyo 257 00:14:52,240 --> 00:14:54,880 Speaker 1: effect that is going to put us exactly back where 258 00:14:54,880 --> 00:14:59,440 Speaker 1: we were regarding coal and everything else in the generation mix. 259 00:14:59,800 --> 00:15:02,240 Speaker 1: So I want to start by clarifying a thing that 260 00:15:02,360 --> 00:15:04,760 Speaker 1: I think a lot of people in the industry no, 261 00:15:05,120 --> 00:15:09,239 Speaker 1: but the people who work in coal often don't distinguish. 262 00:15:09,440 --> 00:15:12,840 Speaker 1: And you said, oh, coal is base load power. Also 263 00:15:12,960 --> 00:15:15,840 Speaker 1: is gas and if cause it's cheaper like it is 264 00:15:15,880 --> 00:15:18,880 Speaker 1: in the US, why should code be base or power. 265 00:15:19,160 --> 00:15:22,680 Speaker 1: So yes, coal is baseload power, but it's not the 266 00:15:22,720 --> 00:15:25,320 Speaker 1: only technology. And you look at the country like France 267 00:15:25,360 --> 00:15:28,160 Speaker 1: and your career is basedload power. So from that point 268 00:15:28,160 --> 00:15:30,360 Speaker 1: of view, I want to make that distinction that the 269 00:15:30,400 --> 00:15:33,120 Speaker 1: fact that core can do baseload power to me is 270 00:15:33,160 --> 00:15:36,520 Speaker 1: actually UH deficiency because if you ask me, well, core 271 00:15:36,680 --> 00:15:40,320 Speaker 1: gas can do both baseload and peak, so um, that 272 00:15:40,520 --> 00:15:43,440 Speaker 1: is a that is like the first thing to keep 273 00:15:43,480 --> 00:15:46,680 Speaker 1: in mind as far as the rebound for coal, if 274 00:15:46,720 --> 00:15:49,640 Speaker 1: you ask me, I struggled to see how core could rebound. 275 00:15:49,760 --> 00:15:54,480 Speaker 1: In Europe. Demand will rebound and UH probably will start 276 00:15:54,520 --> 00:15:57,520 Speaker 1: burning more gas, but we need to clear up the 277 00:15:57,560 --> 00:16:00,720 Speaker 1: gas over supply. It is clear that at the carbon 278 00:16:00,840 --> 00:16:05,440 Speaker 1: price will keep call out and I think increasingly utilities 279 00:16:05,480 --> 00:16:08,640 Speaker 1: are like well, policies against us, right, Like, it's pretty 280 00:16:08,680 --> 00:16:11,640 Speaker 1: clear we have called phaseouts in most of europe economics. 281 00:16:12,440 --> 00:16:14,880 Speaker 1: Whether they are against us or in our favor, it's 282 00:16:14,920 --> 00:16:17,840 Speaker 1: probably more against us than in our favor. And so 283 00:16:18,080 --> 00:16:20,840 Speaker 1: you see companies saying, well, let's call it quits, let's 284 00:16:20,960 --> 00:16:25,720 Speaker 1: you know, why have this bleeding wound running just like 285 00:16:25,920 --> 00:16:28,360 Speaker 1: cut it off and and and and throw away. Like 286 00:16:28,520 --> 00:16:32,400 Speaker 1: I'm sorry to be so so dramatic, but but that's 287 00:16:32,400 --> 00:16:35,440 Speaker 1: how they see it. And you know, we've been talking 288 00:16:35,480 --> 00:16:39,240 Speaker 1: about the UK, but we haven't touched, for example, in 289 00:16:39,320 --> 00:16:42,760 Speaker 1: Germany where there's like a cold phase out there going 290 00:16:42,840 --> 00:16:47,000 Speaker 1: on and right now in the crisis, lignite, right, a 291 00:16:47,120 --> 00:16:51,440 Speaker 1: fuel that costs nothing, is essentially still more expensive to 292 00:16:51,520 --> 00:16:54,520 Speaker 1: run than gas because of low gas prices and the 293 00:16:54,560 --> 00:16:58,280 Speaker 1: carbon price. You go to Italy and l announced early 294 00:16:58,800 --> 00:17:01,400 Speaker 1: closure of one of its plans. You go to Portugal, 295 00:17:01,640 --> 00:17:05,320 Speaker 1: sorry Spain e DP announced uh the early closure of 296 00:17:05,359 --> 00:17:08,400 Speaker 1: another coal plant there. The PPC in Greece has been 297 00:17:08,440 --> 00:17:11,679 Speaker 1: asking the government to shut down the core plants, and 298 00:17:11,720 --> 00:17:14,359 Speaker 1: the government's the one that's saying, hey, how about we 299 00:17:14,480 --> 00:17:17,240 Speaker 1: take this step easier than what you want to do 300 00:17:17,320 --> 00:17:20,160 Speaker 1: because it's you know, okay, we agree to a phase out, 301 00:17:20,200 --> 00:17:24,879 Speaker 1: but it's still political. So I think that there is 302 00:17:24,920 --> 00:17:27,920 Speaker 1: not going to be there's there might be an apparent rebound, 303 00:17:28,160 --> 00:17:31,399 Speaker 1: but the trend is set, is like this thing is 304 00:17:31,520 --> 00:17:34,639 Speaker 1: going away and it's going away fast. Are the same 305 00:17:34,680 --> 00:17:36,639 Speaker 1: companies that are shutting down co plants? Are those the 306 00:17:36,720 --> 00:17:39,000 Speaker 1: same ones that own the gas and renewable plants that 307 00:17:39,040 --> 00:17:40,520 Speaker 1: are that are taking in their place? Or they are 308 00:17:40,520 --> 00:17:42,359 Speaker 1: winners and losers here? Is it all just kind of 309 00:17:42,880 --> 00:17:45,240 Speaker 1: hera No, I wouldn't say there are winners and losers. 310 00:17:45,240 --> 00:17:48,840 Speaker 1: There are emerging strategies everywhere right. There are the ones 311 00:17:49,280 --> 00:17:53,000 Speaker 1: who bet on compensation for having to close core plants 312 00:17:53,040 --> 00:17:56,800 Speaker 1: are because that's a thing, right like, and so they say, 313 00:17:56,880 --> 00:18:00,000 Speaker 1: let's take the core assets and probably will get paid 314 00:18:00,040 --> 00:18:02,040 Speaker 1: to do that. A very good example is e p 315 00:18:02,280 --> 00:18:06,240 Speaker 1: H from the Czech Republic. They've been buying up all 316 00:18:06,359 --> 00:18:09,960 Speaker 1: coal plants and all glass plants for very cheap prices, 317 00:18:10,000 --> 00:18:14,080 Speaker 1: hoping that either they get used or they get paid 318 00:18:14,080 --> 00:18:16,880 Speaker 1: for that. R W to a certain extent, also bet 319 00:18:16,880 --> 00:18:20,080 Speaker 1: on that when it essentially decided to take all of 320 00:18:20,680 --> 00:18:23,119 Speaker 1: all of the coal generation and and and keep it 321 00:18:23,119 --> 00:18:25,560 Speaker 1: on its books. And then you have the companies who say, look, 322 00:18:25,600 --> 00:18:29,720 Speaker 1: I want nothing to do with code. Ian was well inside, 323 00:18:29,720 --> 00:18:32,640 Speaker 1: I want nothing to do with generation in general. But 324 00:18:32,960 --> 00:18:36,120 Speaker 1: maybe we can think of like Vatonfel that a few 325 00:18:36,200 --> 00:18:39,080 Speaker 1: years ago essentially paid e p H to take to 326 00:18:39,240 --> 00:18:42,439 Speaker 1: lignite plants away from its books. And then you have 327 00:18:42,560 --> 00:18:46,080 Speaker 1: the companies that like an L or e DP, very 328 00:18:46,200 --> 00:18:49,920 Speaker 1: large European utilities that have a mix, have a very 329 00:18:50,040 --> 00:18:53,560 Speaker 1: low call in their mix, and essentially they're saying, look, 330 00:18:53,600 --> 00:18:56,280 Speaker 1: we're looking to phase it out. We're looking to free 331 00:18:56,359 --> 00:18:59,720 Speaker 1: up money to then invest in new technologies. If you 332 00:18:59,760 --> 00:19:04,240 Speaker 1: ask me, obviously, anyone who's like massively exposed to code 333 00:19:04,240 --> 00:19:09,240 Speaker 1: today's suffering. But even you know, there are counter examples 334 00:19:09,240 --> 00:19:12,439 Speaker 1: to that, like the Greek formerly state owned utility, the 335 00:19:12,560 --> 00:19:16,639 Speaker 1: public Park Court. Now it's created. Everyone was betting that 336 00:19:17,080 --> 00:19:20,280 Speaker 1: we're going to have a very bad first quarter and 337 00:19:20,560 --> 00:19:23,439 Speaker 1: because of the coronavirus crisis and a second quarter, and 338 00:19:23,520 --> 00:19:27,160 Speaker 1: in fact, for some iraculous reason, you managed to post 339 00:19:27,160 --> 00:19:29,800 Speaker 1: a profit. If I'm not wrong, Katic and correct me there. 340 00:19:30,240 --> 00:19:34,280 Speaker 1: And it was because of their grids division. So there 341 00:19:34,320 --> 00:19:37,639 Speaker 1: are surprises everywhere, and and and I think this is 342 00:19:37,640 --> 00:19:42,199 Speaker 1: a period where companies like our w or PPC or 343 00:19:42,240 --> 00:19:45,400 Speaker 1: others that are heavily exposed to CODE are discovering new 344 00:19:45,440 --> 00:19:50,760 Speaker 1: profit making sectors of their business. This is definitely involves 345 00:19:50,800 --> 00:19:53,080 Speaker 1: a lot of economic signals, but I want to know 346 00:19:53,240 --> 00:19:58,960 Speaker 1: at the end of the line emissions targets, how much 347 00:19:59,160 --> 00:20:02,159 Speaker 1: of that success or failure of hitting those targets it 348 00:20:02,200 --> 00:20:04,399 Speaker 1: has to do with coal? How big is it as 349 00:20:04,440 --> 00:20:06,840 Speaker 1: a part of the whole when it comes to emissions, 350 00:20:07,160 --> 00:20:10,040 Speaker 1: coal is going to play a key role in whether 351 00:20:10,160 --> 00:20:11,840 Speaker 1: or not the EU is able to meet its twenty 352 00:20:11,920 --> 00:20:16,200 Speaker 1: thirty target. And then it's it's ultimate goal of economy 353 00:20:16,240 --> 00:20:20,159 Speaker 1: wide net zero emissions. So cole in the power sector 354 00:20:20,280 --> 00:20:24,840 Speaker 1: accounts for about two thirds of total power sector emissions 355 00:20:24,920 --> 00:20:29,080 Speaker 1: in the EU now, and so if if the Block 356 00:20:29,160 --> 00:20:31,960 Speaker 1: is really serious about reducing you know, that that chunk 357 00:20:32,000 --> 00:20:33,879 Speaker 1: of emissions, it's going to have to take a very 358 00:20:33,880 --> 00:20:36,960 Speaker 1: serious step towards reducing emissions from cold But as they 359 00:20:37,040 --> 00:20:40,439 Speaker 1: mentioned earlier as well, the electricity sector is one of 360 00:20:40,480 --> 00:20:44,280 Speaker 1: the more straightforward sectors of the economy to de carbonized. 361 00:20:44,640 --> 00:20:47,439 Speaker 1: And so the EU, if they want to meet net zero, 362 00:20:47,640 --> 00:20:49,399 Speaker 1: is going to have to do quite a lot of 363 00:20:49,400 --> 00:20:54,400 Speaker 1: work in buildings and heating and transport, and that's gonna 364 00:20:54,440 --> 00:20:56,480 Speaker 1: be harder. So it's gonna make a lot more sense 365 00:20:56,560 --> 00:21:00,920 Speaker 1: to try and take bigger, more straightforward steps in decarbonizing 366 00:21:00,960 --> 00:21:04,560 Speaker 1: the power sector. Um, the you has put you know, 367 00:21:04,640 --> 00:21:08,080 Speaker 1: this green recovery really front and center in its post 368 00:21:08,160 --> 00:21:12,440 Speaker 1: COVID stimulus plans UM and especially it has set out 369 00:21:12,560 --> 00:21:16,640 Speaker 1: this mechanism that is really designed to help bring the 370 00:21:16,680 --> 00:21:18,840 Speaker 1: countries and regions that are going to have, you know, 371 00:21:18,920 --> 00:21:21,919 Speaker 1: a much steeper path towards decarbonization on board. So the 372 00:21:22,359 --> 00:21:24,960 Speaker 1: Just Transition mechanism was set up as part of the 373 00:21:24,960 --> 00:21:28,240 Speaker 1: Green Deal announced at the end of twenty nineteen. But 374 00:21:28,680 --> 00:21:32,200 Speaker 1: from seven and a half billion euros that were meant 375 00:21:32,320 --> 00:21:35,760 Speaker 1: to go towards that fund in the Green Deal, the 376 00:21:35,800 --> 00:21:39,240 Speaker 1: new recovery package has increased that by more than four times, 377 00:21:39,240 --> 00:21:42,760 Speaker 1: so it's now forty billion euros that will go to 378 00:21:42,920 --> 00:21:46,679 Speaker 1: making sure that you know, no, no regions or or 379 00:21:46,800 --> 00:21:50,320 Speaker 1: areas are left behind from the transition. One of the 380 00:21:50,400 --> 00:21:53,160 Speaker 1: key points though, is that no funding will be available 381 00:21:53,240 --> 00:21:57,560 Speaker 1: unless those regions produce a just transition plan, so they'll 382 00:21:57,600 --> 00:22:01,240 Speaker 1: have to actually, you know, lay out targets concrete steps 383 00:22:01,320 --> 00:22:04,320 Speaker 1: on how to de carbonize, and it's very unlikely that 384 00:22:04,800 --> 00:22:07,680 Speaker 1: they'll be receiving funds if they don't acknowledge at least 385 00:22:07,680 --> 00:22:10,080 Speaker 1: it needs to move past cold and start taking steps 386 00:22:10,560 --> 00:22:13,159 Speaker 1: concrete steps in that direction. Andreas, you mentioned you had 387 00:22:13,160 --> 00:22:14,800 Speaker 1: a sum up thought can you bring us on home? 388 00:22:15,480 --> 00:22:18,199 Speaker 1: So yeah, like, I think what we're seeing here is 389 00:22:18,200 --> 00:22:20,600 Speaker 1: that call is on the way out in Europe. What 390 00:22:20,800 --> 00:22:23,840 Speaker 1: what we're essentially seeing is, you know, low gas prices, 391 00:22:23,960 --> 00:22:29,600 Speaker 1: high carbon prices are making the economics of coal plants unbearable. However, 392 00:22:29,640 --> 00:22:32,119 Speaker 1: as we've seen in the past, gas prices do not 393 00:22:32,320 --> 00:22:34,760 Speaker 1: need to stay low and carbon prices do not need 394 00:22:34,840 --> 00:22:37,440 Speaker 1: to stay high. And I think this is where European 395 00:22:37,520 --> 00:22:44,000 Speaker 1: policy comes in. European policies essentially the continents insurance to say, 396 00:22:44,240 --> 00:22:48,359 Speaker 1: no matter what the economics do, we are kicking this 397 00:22:48,520 --> 00:22:52,240 Speaker 1: thing out. And I think this period right now gave 398 00:22:52,280 --> 00:22:55,359 Speaker 1: a future vision. The COVID period gave a vision of 399 00:22:55,400 --> 00:22:59,080 Speaker 1: the future to call operators. But there are still the 400 00:22:59,119 --> 00:23:02,160 Speaker 1: ones let's say, well, well, maybe things change for us, 401 00:23:02,600 --> 00:23:05,280 Speaker 1: And that's where European policy comes in and says, even 402 00:23:05,320 --> 00:23:08,120 Speaker 1: if they do, don't hope on it, don't go out 403 00:23:08,200 --> 00:23:11,520 Speaker 1: investing in these things. And I think that's the key 404 00:23:11,560 --> 00:23:15,359 Speaker 1: difference between now and let's say European policy ten or 405 00:23:15,400 --> 00:23:18,679 Speaker 1: fifteen years ago that essentially wasn't clear enough, and you 406 00:23:18,960 --> 00:23:21,560 Speaker 1: see new code, we would see new coal blensing countries 407 00:23:21,560 --> 00:23:25,360 Speaker 1: like German, countries like the UK, you would see updates 408 00:23:25,359 --> 00:23:28,840 Speaker 1: and retrofits. And I think that's really important to keep 409 00:23:28,840 --> 00:23:31,480 Speaker 1: in mind that there's been this shift and probably that's 410 00:23:31,760 --> 00:23:34,000 Speaker 1: you know, we we saw an acceleration of the shift 411 00:23:34,359 --> 00:23:37,679 Speaker 1: during the COVID nineteen crisis. Thank you so much for 412 00:23:37,760 --> 00:23:40,520 Speaker 1: providing the perspective both from the economics and the policy 413 00:23:40,600 --> 00:23:43,520 Speaker 1: landscape for the future of coal Katie and Andreas great 414 00:23:43,520 --> 00:23:45,399 Speaker 1: having you with Mark and I here today. Thank you 415 00:23:45,440 --> 00:23:54,719 Speaker 1: for having us. Bloomberg an app is a service provided 416 00:23:54,720 --> 00:23:57,560 Speaker 1: by Bloomberg Finance LP and its affiliates. This recording does 417 00:23:57,600 --> 00:24:00,679 Speaker 1: not constitute, nor should it be construed as in austment advice, 418 00:24:00,800 --> 00:24:04,280 Speaker 1: investment recommendations, or a recommendation as to an investment or 419 00:24:04,320 --> 00:24:07,400 Speaker 1: other strategy. Bloomberginny F should not be considered as information 420 00:24:07,440 --> 00:24:10,720 Speaker 1: sufficient upon which to base an investment decision. Neither Bloomberg 421 00:24:10,760 --> 00:24:14,280 Speaker 1: Finance LP nor any of its affiliates makes any representation 422 00:24:14,400 --> 00:24:16,800 Speaker 1: or warranty as to the accuracy or completeness of the 423 00:24:16,840 --> 00:24:19,840 Speaker 1: information contained in this recording, and any liability as a 424 00:24:19,880 --> 00:24:21,920 Speaker 1: result of this recording is expressly disclaimed.