1 00:00:00,080 --> 00:00:02,640 Speaker 1: This is Dana Perkins and you're listening to Switched on 2 00:00:02,880 --> 00:00:06,440 Speaker 1: the BNAF podcast. As you know if you have listened 3 00:00:06,480 --> 00:00:09,400 Speaker 1: to this show before. We speak with BNAF analysts about 4 00:00:09,400 --> 00:00:13,040 Speaker 1: their research, and we really hear about those themes that 5 00:00:13,080 --> 00:00:15,560 Speaker 1: cut across so many of the sectors that we cover. 6 00:00:16,000 --> 00:00:18,639 Speaker 1: One of those themes is supply chains. While we have 7 00:00:18,680 --> 00:00:21,400 Speaker 1: discussed that affair a few times, and then there are 8 00:00:21,520 --> 00:00:25,640 Speaker 1: transmission grids, this critical part of infrastructure that enables the 9 00:00:25,720 --> 00:00:29,560 Speaker 1: rollout of renewables. Whether it was our episode about India 10 00:00:29,600 --> 00:00:32,800 Speaker 1: with our analyst row Hit, or the interview with Jiggershaw 11 00:00:32,840 --> 00:00:36,519 Speaker 1: from the US government, or this previous week's episode on URKAT, 12 00:00:36,600 --> 00:00:40,400 Speaker 1: it's clear that the grid is increasingly in focus. And 13 00:00:40,479 --> 00:00:42,959 Speaker 1: then there are supply chains again, and today we get 14 00:00:43,000 --> 00:00:46,560 Speaker 1: into the equipment required to build grid infrastructure and quite 15 00:00:46,560 --> 00:00:49,919 Speaker 1: literally connect power generation to the companies and people that 16 00:00:50,080 --> 00:00:53,360 Speaker 1: need those electrons. On today's show, I speak with benf's 17 00:00:53,400 --> 00:00:56,000 Speaker 1: head of Clean Power, Meredith Annex, and the head of 18 00:00:56,040 --> 00:00:59,800 Speaker 1: Grids and Utilities at BEENEF, Sunjeet Sangera. Together we just 19 00:01:00,000 --> 00:01:03,360 Speaker 1: discuss the transmission grid, what it is, what purpose it serves, 20 00:01:03,360 --> 00:01:07,160 Speaker 1: and why it's so important. We also discuss which countries 21 00:01:07,240 --> 00:01:11,080 Speaker 1: are successful in implementing policy reforms that encourage grid rollout 22 00:01:11,440 --> 00:01:13,640 Speaker 1: and which are not. And finally, we get to the 23 00:01:13,640 --> 00:01:17,080 Speaker 1: components and materials required for upgrading the grid and how 24 00:01:17,160 --> 00:01:20,440 Speaker 1: some countries are securing their supply chain. If you like 25 00:01:20,520 --> 00:01:23,520 Speaker 1: this podcast, make sure to subscribe to receive updates on 26 00:01:23,600 --> 00:01:26,720 Speaker 1: future episodes, and consider giving us a review on Apple 27 00:01:26,760 --> 00:01:29,960 Speaker 1: Podcasts or Spotify to make us more discoverable by others. 28 00:01:30,520 --> 00:01:33,440 Speaker 1: But right now, let's jump into our conversation with Meredith 29 00:01:33,440 --> 00:01:46,920 Speaker 1: and sen Jeet about transmission grids. Hey, Meredith, thank you 30 00:01:47,000 --> 00:01:48,000 Speaker 1: for joining us today. 31 00:01:48,160 --> 00:01:49,560 Speaker 2: Hi Dana, thanks for having us. 32 00:01:49,600 --> 00:01:51,200 Speaker 1: And Senji thank you for coming back. 33 00:01:51,280 --> 00:01:52,360 Speaker 3: Hey Dana, how's it going. 34 00:01:52,640 --> 00:01:55,440 Speaker 1: Well, it's going pretty well because we are about to 35 00:01:55,480 --> 00:02:00,200 Speaker 1: have a conversation around grids, some very critical infrastructure. And 36 00:02:00,480 --> 00:02:03,200 Speaker 1: let's start with just jumping right in on what are 37 00:02:03,200 --> 00:02:06,440 Speaker 1: the problems and really transmission bottlenecks that we are seeing 38 00:02:06,560 --> 00:02:08,440 Speaker 1: and you know, really, I guess why are we here 39 00:02:08,520 --> 00:02:10,560 Speaker 1: to discuss this and why is it so critical? 40 00:02:10,800 --> 00:02:13,280 Speaker 2: Look, I think grids is coming up more and more 41 00:02:13,280 --> 00:02:15,800 Speaker 2: and more, not just within our research, but also within 42 00:02:15,840 --> 00:02:18,880 Speaker 2: our client interactions here at BNF that's why we now 43 00:02:18,919 --> 00:02:21,640 Speaker 2: have a full dedicated team to the topic within clean power, 44 00:02:22,000 --> 00:02:25,200 Speaker 2: and what we're seeing is a change in the way 45 00:02:25,240 --> 00:02:28,080 Speaker 2: that grids are being used. The grids that were built 46 00:02:28,200 --> 00:02:30,639 Speaker 2: that we know and see today, those were built for 47 00:02:30,680 --> 00:02:33,919 Speaker 2: the industrial revolution. What we're talking about now is a 48 00:02:34,000 --> 00:02:38,080 Speaker 2: massive amount of electrification all being met by renewable power. 49 00:02:38,120 --> 00:02:40,440 Speaker 2: It's a complete change in the system, and that means 50 00:02:40,440 --> 00:02:42,880 Speaker 2: that we're going to have to effectively double the size 51 00:02:43,040 --> 00:02:45,440 Speaker 2: of the global ectricity grid by twenty fifty and we're 52 00:02:45,440 --> 00:02:47,320 Speaker 2: also going to have to change the way that it operates. 53 00:02:47,639 --> 00:02:50,760 Speaker 2: It's going to have to become smart, flexible, responsive, and 54 00:02:51,280 --> 00:02:54,680 Speaker 2: enable the renewable power to move around. Right now, we're 55 00:02:54,760 --> 00:02:57,000 Speaker 2: kind of at the point where the grid of today 56 00:02:57,360 --> 00:02:59,480 Speaker 2: is at its breaking point of what it can handle. 57 00:02:59,800 --> 00:03:03,760 Speaker 2: That's starting to affect the development timelines for wind and solar. 58 00:03:03,960 --> 00:03:07,040 Speaker 2: It's starting to affect the cost of new generation regardless 59 00:03:07,080 --> 00:03:10,200 Speaker 2: of what the source is, and it's also affecting things 60 00:03:10,520 --> 00:03:13,800 Speaker 2: like delivery of electrons to customers and the actual impact 61 00:03:13,840 --> 00:03:17,440 Speaker 2: on people, especially when you look at natural disasters impacts 62 00:03:17,680 --> 00:03:18,040 Speaker 2: on the. 63 00:03:18,000 --> 00:03:20,600 Speaker 1: Grid, and actually when we think about the fact that 64 00:03:20,880 --> 00:03:24,520 Speaker 1: grids for us is living within clean power. It says 65 00:03:24,560 --> 00:03:27,720 Speaker 1: a lot about how critical it is to the rollout 66 00:03:27,800 --> 00:03:30,760 Speaker 1: of the industries that live within that space, and argument 67 00:03:30,800 --> 00:03:33,320 Speaker 1: can be made that maybe grids could also live within 68 00:03:33,400 --> 00:03:36,800 Speaker 1: the advanced transportation side and what it is that we 69 00:03:36,880 --> 00:03:40,160 Speaker 1: need to do in terms of rollout of charging infrastructure. 70 00:03:40,320 --> 00:03:42,720 Speaker 1: So I guess make your best pitch right now as 71 00:03:42,720 --> 00:03:45,960 Speaker 1: to why it firmly lives within clean power and why 72 00:03:46,040 --> 00:03:47,720 Speaker 1: the two of you were on the show together as 73 00:03:47,760 --> 00:03:49,040 Speaker 1: opposed to Senjeet with Colin. 74 00:03:49,240 --> 00:03:53,280 Speaker 2: Look, you're absolutely right, but it's more than just ev charging. 75 00:03:53,320 --> 00:03:55,120 Speaker 2: I think that's the thing that we're seeing taking off 76 00:03:55,200 --> 00:03:57,760 Speaker 2: right now. But what's going to happen on distribution networks 77 00:03:57,760 --> 00:04:00,640 Speaker 2: and well, we'll come to definitions of distribution transmission in 78 00:04:00,640 --> 00:04:04,560 Speaker 2: a moment. It's not just electric vehicle charging. It's also 79 00:04:04,960 --> 00:04:09,240 Speaker 2: heat pumps, it's other electric technologies, it's air conditioning, it's 80 00:04:09,280 --> 00:04:11,880 Speaker 2: all of these new electricity demands that are coming into 81 00:04:11,880 --> 00:04:14,000 Speaker 2: the system. And at the same time as that, you're 82 00:04:14,080 --> 00:04:17,320 Speaker 2: changing the entire way that electricity is being generated because 83 00:04:17,320 --> 00:04:21,800 Speaker 2: we're moving to more decentralized systems, more renewable electricity like 84 00:04:22,160 --> 00:04:24,839 Speaker 2: solar and storage that's being connected at the household or 85 00:04:24,880 --> 00:04:28,520 Speaker 2: at the end consumer, And because of that overarching impact, 86 00:04:28,560 --> 00:04:31,359 Speaker 2: it really is a system's question, and it's really affecting 87 00:04:31,360 --> 00:04:33,360 Speaker 2: the way that the supply side is being delivered as 88 00:04:33,360 --> 00:04:33,920 Speaker 2: well well. 89 00:04:33,960 --> 00:04:36,200 Speaker 1: So then let's get into that definition that we're going 90 00:04:36,200 --> 00:04:38,160 Speaker 1: to come to. Senji, Maybe you could tell us a 91 00:04:38,160 --> 00:04:40,520 Speaker 1: little bit about what are we going to talk about 92 00:04:40,520 --> 00:04:43,160 Speaker 1: today When we say transmission grid, what does that mean? 93 00:04:43,200 --> 00:04:44,920 Speaker 1: And paint a picture in my mind. 94 00:04:45,560 --> 00:04:48,200 Speaker 3: Yeah, the word grid can be kind of ambiguous, so 95 00:04:48,240 --> 00:04:50,640 Speaker 3: I think it's good to get the definitions upfront. So 96 00:04:50,920 --> 00:04:53,080 Speaker 3: when we talk about the grid, what we're talking about 97 00:04:53,360 --> 00:04:55,960 Speaker 3: is the piece of infrastructure that's going to move power 98 00:04:56,000 --> 00:04:58,880 Speaker 3: from where it's being produced to where it's ultimately consumed. 99 00:04:59,120 --> 00:05:02,360 Speaker 3: We tend to segment this into two major categories. One 100 00:05:02,400 --> 00:05:05,840 Speaker 3: is transmission and one is distribution. So transmission you can 101 00:05:05,839 --> 00:05:09,360 Speaker 3: think of the highways that connect cities together, and distribution 102 00:05:09,600 --> 00:05:12,280 Speaker 3: you can think of the roads that connect from a 103 00:05:12,360 --> 00:05:14,960 Speaker 3: highway back to a person's home. So these are two 104 00:05:15,040 --> 00:05:17,880 Speaker 3: kind of segments that run together. Now, the real distinction 105 00:05:18,200 --> 00:05:21,640 Speaker 3: is in voltage. So voltage is a characteristic of these 106 00:05:21,680 --> 00:05:25,360 Speaker 3: power lines, and the distinction can be different for each markets. 107 00:05:25,400 --> 00:05:29,159 Speaker 3: But it's meaningful because the companies in this space have 108 00:05:29,320 --> 00:05:32,080 Speaker 3: aligned themselves with these definitions. So you tend to have 109 00:05:32,160 --> 00:05:35,240 Speaker 3: companies that are transmission utilities, you have companies that are 110 00:05:35,279 --> 00:05:37,640 Speaker 3: distribution utilities, and you have some that are both T 111 00:05:37,800 --> 00:05:40,200 Speaker 3: and D, so they run both sides of the network 112 00:05:40,320 --> 00:05:42,520 Speaker 3: in terms of what you're actually seeing when you're driving 113 00:05:42,520 --> 00:05:44,039 Speaker 3: in a car on the side of the road. So yes, 114 00:05:44,120 --> 00:05:46,599 Speaker 3: these are the wires and the poles, the pylons that 115 00:05:46,640 --> 00:05:49,919 Speaker 3: are stringing together to move energy. The second major component 116 00:05:49,960 --> 00:05:53,720 Speaker 3: that we typically see is transformers and circuit breakers. So 117 00:05:53,839 --> 00:06:00,400 Speaker 3: transformers are not aliens, robots from another planet, So these 118 00:06:00,400 --> 00:06:03,600 Speaker 3: are specialized devices that allow you to change that voltage 119 00:06:03,720 --> 00:06:05,400 Speaker 3: up or down, which you need to be able to 120 00:06:05,480 --> 00:06:08,640 Speaker 3: move power long distances. And circuit breakers are just switches 121 00:06:08,760 --> 00:06:11,640 Speaker 3: and these when power lines come together at a certain point, 122 00:06:11,720 --> 00:06:14,680 Speaker 3: you need to build a station. We call these substations, 123 00:06:14,839 --> 00:06:17,159 Speaker 3: and these end up being the nodes for the power system. 124 00:06:17,520 --> 00:06:20,240 Speaker 1: We're going to rely pretty heavily on our conversation today 125 00:06:20,279 --> 00:06:23,480 Speaker 1: on thinking about different case studies, and before we get 126 00:06:23,520 --> 00:06:26,360 Speaker 1: into those case studies, though again on the definition end 127 00:06:26,360 --> 00:06:30,080 Speaker 1: of things. When we're talking about the transmission grid, and bottlenecks. 128 00:06:30,200 --> 00:06:33,160 Speaker 1: Are we talking about a grid that largely needs to 129 00:06:33,200 --> 00:06:35,960 Speaker 1: be retrofitted that's existing or is a lot of the 130 00:06:36,000 --> 00:06:39,000 Speaker 1: activity and is a lot of the friction really in 131 00:06:39,120 --> 00:06:43,599 Speaker 1: creating new infrastructure and assets on the energy generation side 132 00:06:43,600 --> 00:06:46,520 Speaker 1: and then connecting that to the rest of the system 133 00:06:46,640 --> 00:06:48,000 Speaker 1: that we all interact with. 134 00:06:48,400 --> 00:06:50,039 Speaker 3: So we need to do a bit of both. We 135 00:06:50,080 --> 00:06:53,240 Speaker 3: need to retrofit the existing grid because it's not really 136 00:06:53,240 --> 00:06:55,919 Speaker 3: fit for purpose, and we also need to expand the 137 00:06:55,960 --> 00:06:58,520 Speaker 3: grid that we have today, right, and so let me 138 00:06:58,520 --> 00:07:01,200 Speaker 3: talk a bit about this expansion. So we've expanded the 139 00:07:01,240 --> 00:07:04,720 Speaker 3: grid over history number of times. There's usually these cycles 140 00:07:04,760 --> 00:07:07,839 Speaker 3: of build out that are very regionally confined. Now what 141 00:07:07,839 --> 00:07:11,680 Speaker 3: we're seeing unfold is a global need to expand the 142 00:07:11,720 --> 00:07:14,640 Speaker 3: grid to meet net zero targets. So the grid today, 143 00:07:14,760 --> 00:07:16,720 Speaker 3: if you add up all the kilometers in the world 144 00:07:16,800 --> 00:07:20,800 Speaker 3: both transmission and distribution, is about seventy two million kilometers, 145 00:07:20,960 --> 00:07:23,240 Speaker 3: and when we do our modeling for net zero, we 146 00:07:23,400 --> 00:07:25,400 Speaker 3: find that it needs to grow to about one hundred 147 00:07:25,400 --> 00:07:28,160 Speaker 3: and fifty two million kilometers. One hundred and fifty two 148 00:07:28,160 --> 00:07:31,360 Speaker 3: million kilometers happens to be the distance from the Earth 149 00:07:31,480 --> 00:07:33,640 Speaker 3: to the Sun. Wow, right, which is I think a 150 00:07:33,640 --> 00:07:36,239 Speaker 3: bit poetic given that solar has to play a critical 151 00:07:36,320 --> 00:07:38,600 Speaker 3: role in the transition. But if we put this into 152 00:07:38,840 --> 00:07:42,120 Speaker 3: mathematical terms, so that's a two point seven percent compound 153 00:07:42,280 --> 00:07:44,840 Speaker 3: annual growth rate on the grid, and when we look 154 00:07:44,880 --> 00:07:47,360 Speaker 3: back in time, the grid has really only been expanding. 155 00:07:47,360 --> 00:07:50,280 Speaker 3: So if we look at like say the US transmission grid, historically, 156 00:07:50,360 --> 00:07:52,360 Speaker 3: it's been growing at a rate of about one percent, 157 00:07:52,560 --> 00:07:54,120 Speaker 3: and so you can see the kind of the step 158 00:07:54,200 --> 00:07:55,640 Speaker 3: up that we need to do to get to two 159 00:07:55,680 --> 00:07:58,680 Speaker 3: point seven percent. We do need to modernize the grid 160 00:07:58,760 --> 00:08:01,240 Speaker 3: as well, and there's a numberumber of technologies it will 161 00:08:01,240 --> 00:08:04,080 Speaker 3: inevitably have to pursue, just because building a grid that 162 00:08:04,200 --> 00:08:06,400 Speaker 3: large is going to come with some challenges when it 163 00:08:06,400 --> 00:08:08,840 Speaker 3: comes to permitting and dealing with stakeholder issues and the 164 00:08:08,920 --> 00:08:12,200 Speaker 3: environmental impacts. So every bit of infrastructure that's there today 165 00:08:12,400 --> 00:08:15,880 Speaker 3: will have to be reevaluated. We're looking at digitalizing the grid, 166 00:08:16,040 --> 00:08:18,960 Speaker 3: so this is stuff like dynamic line ratings, where you 167 00:08:19,040 --> 00:08:22,800 Speaker 3: have capacity on a transmission line that is being calculated 168 00:08:22,960 --> 00:08:25,840 Speaker 3: our hour as opposed to just two numbers that we've 169 00:08:25,840 --> 00:08:29,880 Speaker 3: conservatively picked. And looking forward, like looking further out, we're 170 00:08:29,960 --> 00:08:33,240 Speaker 3: looking at a number of powerflow control devices as well 171 00:08:33,240 --> 00:08:36,440 Speaker 3: that allow you to throttle the amount of energy that's 172 00:08:36,520 --> 00:08:39,800 Speaker 3: moving through given transmission and distribution links as well. 173 00:08:40,040 --> 00:08:43,040 Speaker 1: Now, when we're thinking about the new infrastructure and this 174 00:08:43,200 --> 00:08:45,880 Speaker 1: kind of rapid rollout of clean energy that is actually 175 00:08:45,880 --> 00:08:48,840 Speaker 1: coming online, certainly after you've built the project, you need 176 00:08:48,880 --> 00:08:51,079 Speaker 1: to connect it. Hence why we're here talking about grids, 177 00:08:51,320 --> 00:08:54,000 Speaker 1: and I'm aware that there's a waiting time, So what 178 00:08:54,200 --> 00:08:56,559 Speaker 1: is the average waiting time for this sort of connection. 179 00:08:57,200 --> 00:09:00,880 Speaker 2: What we're finding is that we have giga now not 180 00:09:01,200 --> 00:09:04,160 Speaker 2: you know, a small number of literal gigawatts of solar 181 00:09:04,160 --> 00:09:07,240 Speaker 2: and wind projects waiting to connect just within Europe and 182 00:09:07,320 --> 00:09:10,120 Speaker 2: the US. But as Sanji said, this is a global problem. 183 00:09:10,240 --> 00:09:12,840 Speaker 2: If we looked in Japan and Australia, you would see 184 00:09:12,840 --> 00:09:16,040 Speaker 2: similar stories coming about. If we stick with Europe for second, 185 00:09:16,120 --> 00:09:19,040 Speaker 2: since that's where we're recording, what our analysis finds is 186 00:09:19,080 --> 00:09:23,160 Speaker 2: that in five markets the UK, Italy, Spain and Germany 187 00:09:23,320 --> 00:09:25,800 Speaker 2: as well as France, there's a total of about six 188 00:09:25,880 --> 00:09:29,679 Speaker 2: hundred gigawatts waiting for an interconnection at the moment for 189 00:09:29,760 --> 00:09:33,000 Speaker 2: the grid. That's about twice as much installed capacity for 190 00:09:33,120 --> 00:09:35,480 Speaker 2: win in solar as we have today and eighty percent 191 00:09:35,640 --> 00:09:38,000 Speaker 2: of the twenty thirty targets for the European Union, So 192 00:09:38,200 --> 00:09:40,960 Speaker 2: that just shows you the scale of what's currently waiting 193 00:09:41,000 --> 00:09:44,040 Speaker 2: to connect now. The waiting times are also growing right 194 00:09:44,120 --> 00:09:48,320 Speaker 2: so we're talking about anywhere from three to eight years 195 00:09:48,400 --> 00:09:51,840 Speaker 2: usually just for the grid interconnection. That's not even including 196 00:09:51,880 --> 00:09:54,840 Speaker 2: things like environmental and construction permits. When you get to 197 00:09:54,880 --> 00:09:58,000 Speaker 2: that point, the development timelines now can be so long 198 00:09:58,000 --> 00:10:00,000 Speaker 2: that it's putting twenty thirty targets at rest. 199 00:10:00,920 --> 00:10:03,480 Speaker 1: So in which countries or general parts of the world 200 00:10:03,480 --> 00:10:06,559 Speaker 1: if you prefer? But where are we finding these wait 201 00:10:06,679 --> 00:10:09,360 Speaker 1: times to be the longest? And I guess the situation 202 00:10:09,480 --> 00:10:10,760 Speaker 1: to be most dire So. 203 00:10:10,720 --> 00:10:13,160 Speaker 2: In terms of wait times, parts of Europe are looking 204 00:10:13,280 --> 00:10:15,839 Speaker 2: pretty hard right now. I think the UK is one 205 00:10:15,840 --> 00:10:17,920 Speaker 2: of the worst markets that we've looked at in depth. 206 00:10:18,000 --> 00:10:22,280 Speaker 2: The Nordics have antcdotally also heard are extremely long waiting times. 207 00:10:22,520 --> 00:10:24,680 Speaker 2: But it's not just about the length of time that 208 00:10:24,720 --> 00:10:26,800 Speaker 2: it takes to get the permit. It's also the cost 209 00:10:27,200 --> 00:10:30,080 Speaker 2: of the great interconnection when that happens. And what we've 210 00:10:30,120 --> 00:10:33,200 Speaker 2: seen is some recent data in the United States that 211 00:10:33,240 --> 00:10:36,400 Speaker 2: came out earlier this year from the Lawrence Berkeley lapse, 212 00:10:36,640 --> 00:10:39,880 Speaker 2: which is showing us that the costs are doubling now 213 00:10:40,120 --> 00:10:44,439 Speaker 2: for interconnection for wind and solar in MISO, which is 214 00:10:44,480 --> 00:10:48,560 Speaker 2: the Midwestern ISO independent system operator in the US, as 215 00:10:48,600 --> 00:10:52,640 Speaker 2: well as PJM, So you're really talking about like Minnesota, Illinois, Pennsylvania, 216 00:10:52,679 --> 00:10:55,640 Speaker 2: those types of states within the United States. What we're 217 00:10:55,679 --> 00:10:58,800 Speaker 2: finding now is that the cost of these systems has 218 00:10:58,840 --> 00:11:01,439 Speaker 2: gone up to the point that you're seeing them erase 219 00:11:01,480 --> 00:11:04,880 Speaker 2: the benefits of the Inflation Reduction Act production tax credits. 220 00:11:04,880 --> 00:11:07,199 Speaker 2: They're about equal in size the cost of a high 221 00:11:07,240 --> 00:11:10,160 Speaker 2: grade connection and the benefit that you get from the 222 00:11:10,320 --> 00:11:14,200 Speaker 2: new US tax credits. Now, median costs are still pretty low. 223 00:11:14,320 --> 00:11:16,880 Speaker 2: The issue is that you have a lot of geographic 224 00:11:16,920 --> 00:11:21,199 Speaker 2: clustering when it comes especially to wind, so you're finding 225 00:11:21,240 --> 00:11:25,280 Speaker 2: wind industry being hit particularly hard by this new grade interconnection. 226 00:11:25,320 --> 00:11:28,680 Speaker 2: Applications from wind are dropping in these markets because developers 227 00:11:28,720 --> 00:11:31,560 Speaker 2: are having a harder time getting an economic connection, and 228 00:11:31,600 --> 00:11:34,480 Speaker 2: then the risk to developers is also high. Another market 229 00:11:34,520 --> 00:11:36,720 Speaker 2: where that's the case is in the UK. In the UK, 230 00:11:36,880 --> 00:11:39,400 Speaker 2: if your project is going to connect and trigger an 231 00:11:39,480 --> 00:11:42,800 Speaker 2: upgrade to the transmission system, you and any other project 232 00:11:42,880 --> 00:11:46,240 Speaker 2: in that connection. Who's causing that upgrade need to share 233 00:11:46,320 --> 00:11:49,040 Speaker 2: the cost of the upgrade. So if there's ten of 234 00:11:49,080 --> 00:11:52,360 Speaker 2: you and the cost is say one hundred thousand, but 235 00:11:52,480 --> 00:11:54,600 Speaker 2: one of those projects drops out all of a sudden, 236 00:11:54,640 --> 00:11:57,800 Speaker 2: your individual project just got hit by a higher bill. 237 00:11:58,040 --> 00:12:00,640 Speaker 2: So this is adding In markets where develop sloppers pay 238 00:12:00,720 --> 00:12:03,480 Speaker 2: for the cost of interconnection, you're seeing a greater risk 239 00:12:03,520 --> 00:12:06,200 Speaker 2: on development and the greater risk on the upfront cost 240 00:12:06,280 --> 00:12:07,320 Speaker 2: of a project as well. 241 00:12:07,480 --> 00:12:10,000 Speaker 1: So that risk is being borne by the developers, even 242 00:12:10,040 --> 00:12:12,680 Speaker 1: if they've secured a really good price at auction, there's 243 00:12:12,679 --> 00:12:14,840 Speaker 1: a lot of variables that they may not necessarily be 244 00:12:14,880 --> 00:12:16,840 Speaker 1: able to see the future for correct. 245 00:12:16,720 --> 00:12:19,120 Speaker 2: In markets like the UK and the US, Yes, that's 246 00:12:19,160 --> 00:12:19,559 Speaker 2: the case. 247 00:12:19,880 --> 00:12:22,640 Speaker 1: Are the cost of grade connection, which it seems like 248 00:12:22,679 --> 00:12:26,320 Speaker 1: we are not able to get around. Is it discouraging 249 00:12:26,559 --> 00:12:30,040 Speaker 1: companies and developers from wanting to go into some of 250 00:12:30,080 --> 00:12:30,800 Speaker 1: these markets? 251 00:12:31,040 --> 00:12:35,200 Speaker 2: Not always. What we're finding is that the threshold costs 252 00:12:35,320 --> 00:12:37,960 Speaker 2: for a great connection in the Midwest ISO in the 253 00:12:38,040 --> 00:12:40,960 Speaker 2: US is actually gone up before you'd see a project cancel. 254 00:12:41,240 --> 00:12:43,240 Speaker 2: It used to be that in myso if a win 255 00:12:43,360 --> 00:12:46,840 Speaker 2: project was hit by one hundred dollars per kilowatt grade 256 00:12:46,840 --> 00:12:49,080 Speaker 2: connection fee. That would usually be the point where the 257 00:12:49,080 --> 00:12:52,840 Speaker 2: project was deemed uneconomical by the developer. But now, according 258 00:12:52,880 --> 00:12:55,320 Speaker 2: to the Lawrence Berkeley Lab data that we've been reviewing, 259 00:12:55,559 --> 00:12:59,280 Speaker 2: that numbers nearly two hundred and fifty dollars per kilowatt, 260 00:12:59,360 --> 00:13:03,079 Speaker 2: So you're fine finding basically the cost appetitive developers is 261 00:13:03,120 --> 00:13:05,120 Speaker 2: going up because they need to bear it in order 262 00:13:05,160 --> 00:13:08,480 Speaker 2: to build their projects. And oftentimes there's still an economic 263 00:13:08,520 --> 00:13:12,840 Speaker 2: case because of policy programs that are encouraging additional renewables build, 264 00:13:12,880 --> 00:13:15,599 Speaker 2: because of higher demand for power purchase agreements, because of 265 00:13:15,679 --> 00:13:18,640 Speaker 2: higher wholesale power prices in Europe from the commodity crisis. 266 00:13:18,720 --> 00:13:21,080 Speaker 2: All of these factors are still helping developers build this. 267 00:13:21,360 --> 00:13:24,079 Speaker 2: But that's not to say that it's not causing a strain, right, 268 00:13:24,120 --> 00:13:27,240 Speaker 2: it's a more expensive transition than you would have had otherwise. 269 00:13:27,600 --> 00:13:29,959 Speaker 1: Let's talk about a case study that might be deemed 270 00:13:30,080 --> 00:13:33,560 Speaker 1: a turnaround story or something mildly positive in this space. 271 00:13:33,840 --> 00:13:37,160 Speaker 1: So Spain had a dysfunctional system, one might say that 272 00:13:37,320 --> 00:13:38,880 Speaker 1: has actually turned out to be a bit of a 273 00:13:38,920 --> 00:13:41,720 Speaker 1: success story when it comes to grids. Can we go 274 00:13:41,840 --> 00:13:44,160 Speaker 1: into some detail on what has happened and what is 275 00:13:44,240 --> 00:13:47,679 Speaker 1: now currently happening when it comes to Spain, and not 276 00:13:47,720 --> 00:13:50,280 Speaker 1: only their clean energy roll out, but their transmission grid. 277 00:13:50,440 --> 00:13:52,800 Speaker 3: I think Spain's a good case study because it shows 278 00:13:52,800 --> 00:13:55,640 Speaker 3: this really comeback kid type of story. So Spain has 279 00:13:55,640 --> 00:13:59,120 Speaker 3: an interconnection queue. It's about one hundred and forty four gigawatts, 280 00:13:59,160 --> 00:14:02,000 Speaker 3: so those are projects with permission to connect as of 281 00:14:02,000 --> 00:14:05,520 Speaker 3: March twenty twenty three. For contexts, Spain has a ninety 282 00:14:05,520 --> 00:14:09,680 Speaker 3: three gigawatt solar and wind target for twenty thirty And 283 00:14:09,760 --> 00:14:12,560 Speaker 3: Spain also has a few characteristics that are probably relevant 284 00:14:12,559 --> 00:14:16,080 Speaker 3: to note. So developers can request a grid connection before 285 00:14:16,120 --> 00:14:19,320 Speaker 3: they secure site planning permission. So what that means is 286 00:14:19,640 --> 00:14:22,080 Speaker 3: the barrier to get nominated in the queue is kind 287 00:14:22,080 --> 00:14:23,840 Speaker 3: of low, so you end up with a lot of 288 00:14:23,840 --> 00:14:26,960 Speaker 3: these speculative projects that may not all get built sitting 289 00:14:26,960 --> 00:14:29,280 Speaker 3: in the interconnection queue. And so that's been a problem 290 00:14:29,320 --> 00:14:31,720 Speaker 3: for Spain historically, and so they did a number of 291 00:14:31,760 --> 00:14:34,880 Speaker 3: things to try and address these issues. And the net 292 00:14:34,960 --> 00:14:36,680 Speaker 3: result of this is that they've actually been able to 293 00:14:36,720 --> 00:14:39,080 Speaker 3: keep the interconnection queue at this one hundred and forty 294 00:14:39,080 --> 00:14:42,320 Speaker 3: four gigawatts for the last several years by implementing these measures. 295 00:14:42,360 --> 00:14:44,360 Speaker 3: So one thing that they did is they started removing 296 00:14:44,440 --> 00:14:47,160 Speaker 3: stalled projects from the queue, and so if the projects 297 00:14:47,160 --> 00:14:49,920 Speaker 3: weren't progressing fast enough, they were removed. They started easing 298 00:14:49,960 --> 00:14:52,760 Speaker 3: the environmental process, so that was allowing projects to move 299 00:14:52,800 --> 00:14:55,600 Speaker 3: more quickly. But the most interesting thing that they actually 300 00:14:55,600 --> 00:15:00,000 Speaker 3: did was they implemented this tender process to award grid capacity. 301 00:15:00,160 --> 00:15:02,480 Speaker 3: It's kicked off in twenty twenty one, but the idea 302 00:15:02,600 --> 00:15:06,280 Speaker 3: basically is to flip the whole interconnection process on its head, 303 00:15:06,400 --> 00:15:10,200 Speaker 3: and so instead of developers applying for network capacity, operators 304 00:15:10,240 --> 00:15:14,880 Speaker 3: are actually offering connection capacity in specific regions, and the 305 00:15:14,960 --> 00:15:18,560 Speaker 3: developers are bidding in these competitive processes, and so the 306 00:15:18,720 --> 00:15:21,440 Speaker 3: operator gets to choose what the criteria is for who 307 00:15:21,480 --> 00:15:24,000 Speaker 3: gets to win. And this allows them to be much 308 00:15:24,040 --> 00:15:28,000 Speaker 3: more proactive in creating grid capacity, where the old model 309 00:15:28,240 --> 00:15:30,520 Speaker 3: you had to be very reactive. You'd wait for all 310 00:15:30,560 --> 00:15:32,640 Speaker 3: the connection requests to come in and say, oh, okay, 311 00:15:32,680 --> 00:15:34,320 Speaker 3: it looks like I need to upgrade this part of 312 00:15:34,360 --> 00:15:36,840 Speaker 3: the system. Which point you already have all this demand 313 00:15:36,840 --> 00:15:38,480 Speaker 3: and it's a little bit too late. So I think 314 00:15:38,560 --> 00:15:41,320 Speaker 3: these solutions are not really a panacea. We can't apply 315 00:15:41,400 --> 00:15:44,240 Speaker 3: them broadly across the world. That's part of what interconnection 316 00:15:44,480 --> 00:15:48,440 Speaker 3: processes have been challenging. But being open to innovating and 317 00:15:48,480 --> 00:15:50,640 Speaker 3: looking at different ways to do things is going to 318 00:15:50,640 --> 00:15:51,760 Speaker 3: be critical moving forward. 319 00:15:52,120 --> 00:15:55,680 Speaker 1: There's definitely something to be learned about taking something that 320 00:15:55,920 --> 00:15:58,960 Speaker 1: has long wait times and lots of administrative burden and 321 00:15:59,000 --> 00:16:01,840 Speaker 1: figuring out ways to streamline it. And there's one area 322 00:16:02,040 --> 00:16:05,320 Speaker 1: that you brought up, so streamlining the environmental permitting process 323 00:16:05,400 --> 00:16:07,880 Speaker 1: that I think can sometimes raise flags for people in 324 00:16:07,920 --> 00:16:11,760 Speaker 1: this industry because invariably these processes exist for a good 325 00:16:11,800 --> 00:16:14,960 Speaker 1: reason to protect certain parts of well the environment that 326 00:16:15,000 --> 00:16:17,520 Speaker 1: we live in. That oftentimes some of the reason why 327 00:16:17,520 --> 00:16:20,080 Speaker 1: people are building out clean energy infrastructure to begin with, 328 00:16:20,280 --> 00:16:23,440 Speaker 1: when we come down to the basic fundamental premise that 329 00:16:23,520 --> 00:16:26,200 Speaker 1: a drive to net zero is what is driving part 330 00:16:26,200 --> 00:16:30,320 Speaker 1: of this industry. Have there been negative outcomes to streamlining 331 00:16:30,320 --> 00:16:33,320 Speaker 1: that process or is it more of just a focus 332 00:16:33,360 --> 00:16:36,040 Speaker 1: on making sure that things are processed in a timely 333 00:16:36,120 --> 00:16:39,120 Speaker 1: fashion and that it's prioritized and it's more to do 334 00:16:39,160 --> 00:16:43,119 Speaker 1: with government bureaucracy rather than loosening the reins on our standards. 335 00:16:43,480 --> 00:16:47,200 Speaker 3: I've spoken about streamlining permitting processes before, and the feedback 336 00:16:47,280 --> 00:16:50,040 Speaker 3: I get is that actually we made a lot of progress, 337 00:16:50,120 --> 00:16:53,000 Speaker 3: like we've made a lot of environmental progress by creating 338 00:16:53,120 --> 00:16:56,200 Speaker 3: habitats and making the rules stricter for these projects, and 339 00:16:56,240 --> 00:16:59,560 Speaker 3: that's actually important to preserving the environment. And I would agree, 340 00:16:59,640 --> 00:17:02,080 Speaker 3: but there is a tension here because we have these 341 00:17:02,120 --> 00:17:06,080 Speaker 3: renewable energy targets and also to try and safeguard the environment, 342 00:17:06,160 --> 00:17:08,840 Speaker 3: and there's really no way to realize these projects without 343 00:17:08,960 --> 00:17:11,680 Speaker 3: also building out a power grid. And so I think 344 00:17:11,680 --> 00:17:15,520 Speaker 3: the narrative needs to shift towards cumulative impacts assessment, where 345 00:17:15,520 --> 00:17:18,520 Speaker 3: we're thinking holistically. So, yes, there's an impact to building 346 00:17:18,560 --> 00:17:21,320 Speaker 3: a transmission line, there's also an impact to not building 347 00:17:21,320 --> 00:17:23,360 Speaker 3: a transmission line, and so we need to make sure 348 00:17:23,359 --> 00:17:26,160 Speaker 3: that we're thinking of this in a centralized way and 349 00:17:26,200 --> 00:17:28,280 Speaker 3: that way we can manage impacts the best. 350 00:17:28,440 --> 00:17:30,600 Speaker 2: I think this also spreads not just to the grid, 351 00:17:30,640 --> 00:17:33,480 Speaker 2: but also to renewables development as well, where a lot 352 00:17:33,520 --> 00:17:35,760 Speaker 2: of effort is being made not just on speeding up 353 00:17:35,800 --> 00:17:39,120 Speaker 2: grid interconnections, but also environmental permits for wind and solar. 354 00:17:39,400 --> 00:17:42,359 Speaker 2: And in some cases the way that that's being done 355 00:17:42,400 --> 00:17:45,960 Speaker 2: is by putting a timestamp on how long an application 356 00:17:46,000 --> 00:17:48,640 Speaker 2: can be open, or how long you can be fielding 357 00:17:48,880 --> 00:17:51,760 Speaker 2: objections from the public for or how many objections can 358 00:17:51,760 --> 00:17:54,199 Speaker 2: be fielded from the public. Other times it's saying that 359 00:17:54,240 --> 00:17:57,400 Speaker 2: you can only take up an objection around certain criteria, 360 00:17:57,560 --> 00:18:00,560 Speaker 2: so it's limiting rather than saying everything to the sun 361 00:18:00,840 --> 00:18:03,679 Speaker 2: is acceptable as a complaint against this project, you have 362 00:18:03,720 --> 00:18:06,160 Speaker 2: to look at limited things. I think where that balance 363 00:18:06,240 --> 00:18:09,879 Speaker 2: falls in terms of helping to speed out renewable projects 364 00:18:10,119 --> 00:18:14,359 Speaker 2: without overlooking important environmental impacts is still being figured out 365 00:18:14,440 --> 00:18:17,880 Speaker 2: right now. The area where we're seeing perhaps the most 366 00:18:17,880 --> 00:18:21,520 Speaker 2: innovative changes on this is with offshore wind auctions. There's 367 00:18:21,560 --> 00:18:23,159 Speaker 2: a lot of data that we still need to be 368 00:18:23,200 --> 00:18:26,520 Speaker 2: gathering on biodiversity within the oceans the impact that these 369 00:18:26,560 --> 00:18:29,159 Speaker 2: site selections can have. So what you're starting to see 370 00:18:29,320 --> 00:18:32,080 Speaker 2: in parts of the US and Europe is the introduction 371 00:18:32,200 --> 00:18:37,080 Speaker 2: of biodiversity impacts in the original auctioning of the site, 372 00:18:37,280 --> 00:18:40,240 Speaker 2: and that's quite cool. It means that you're having non 373 00:18:40,440 --> 00:18:45,000 Speaker 2: cost impact considerations taken into account before the project's even awarded. 374 00:18:45,240 --> 00:18:48,320 Speaker 1: That's really interesting because biodiversity and how we quantify it 375 00:18:48,359 --> 00:18:50,600 Speaker 1: is certainly a topic under discussion right now, and I 376 00:18:50,640 --> 00:18:52,959 Speaker 1: expect to see a lot of development in that space. 377 00:18:53,000 --> 00:18:56,399 Speaker 1: Over the coming months and years. Sticking on this idea 378 00:18:56,520 --> 00:18:59,320 Speaker 1: of let's talk about some positive case studies. There's another one, 379 00:18:59,359 --> 00:19:02,360 Speaker 1: and let's stay in Europe for a minute. How about Germany? 380 00:19:02,600 --> 00:19:05,000 Speaker 1: What have they done and what lessons can we learn 381 00:19:05,080 --> 00:19:06,560 Speaker 1: about that on a global scale. 382 00:19:06,600 --> 00:19:09,280 Speaker 3: So Germany is also an interesting case study. We don't 383 00:19:09,320 --> 00:19:12,160 Speaker 3: have data on their interconnection cues because apparently they don't 384 00:19:12,200 --> 00:19:14,600 Speaker 3: track it, but when we talk to developers, everyone's quite 385 00:19:14,720 --> 00:19:16,920 Speaker 3: envious about what's going on in Germany. So there's a 386 00:19:16,920 --> 00:19:18,960 Speaker 3: few key things that it can highlight. So the German 387 00:19:19,040 --> 00:19:21,240 Speaker 3: grid is kind of unique because it's actually quite a 388 00:19:21,359 --> 00:19:24,200 Speaker 3: dense grid. So if you just take the total kilometers 389 00:19:24,240 --> 00:19:26,439 Speaker 3: of transmission and distribution grid and divide it by the 390 00:19:26,440 --> 00:19:29,080 Speaker 3: total land area, you end up finding that they're anomalous 391 00:19:29,160 --> 00:19:31,720 Speaker 3: compared to the European peers. And so we describe this 392 00:19:31,800 --> 00:19:34,600 Speaker 3: as having a very capillary grid system. So capillary is 393 00:19:34,680 --> 00:19:36,920 Speaker 3: kind of talk about bloodstreams. 394 00:19:36,640 --> 00:19:37,359 Speaker 1: Checking out the body. 395 00:19:37,480 --> 00:19:39,439 Speaker 3: Yeah, so it's like the grid's kind of similar, and 396 00:19:39,520 --> 00:19:42,040 Speaker 3: so you have this very branched out network and what 397 00:19:42,080 --> 00:19:45,040 Speaker 3: that means is if you have a renewable energy project 398 00:19:45,160 --> 00:19:47,560 Speaker 3: you want to connect to the grid, likelihood that you'll 399 00:19:47,600 --> 00:19:50,720 Speaker 3: have some viable connection spot that's close to you, that's 400 00:19:50,840 --> 00:19:53,960 Speaker 3: robust is there. And so we're finding that that Germany 401 00:19:54,119 --> 00:19:56,119 Speaker 3: has had that benefit because of the way the grid 402 00:19:56,119 --> 00:19:59,520 Speaker 3: has expanded over time. They're also using this connect and 403 00:19:59,640 --> 00:20:02,800 Speaker 3: manage approach. Now the UK is also doing something similar, 404 00:20:02,840 --> 00:20:05,320 Speaker 3: and this is a way of allowing grid connections to 405 00:20:05,400 --> 00:20:08,840 Speaker 3: happen before all of the wider upgrades to the grid 406 00:20:08,880 --> 00:20:11,120 Speaker 3: have happened. So you do need to connect the new 407 00:20:11,119 --> 00:20:14,119 Speaker 3: power plant to the grid. Sometimes you trigger an upgrade 408 00:20:14,119 --> 00:20:16,840 Speaker 3: that's very deep into the network. The question is should 409 00:20:16,880 --> 00:20:19,080 Speaker 3: you wait for that upgrade to be done before you 410 00:20:19,119 --> 00:20:21,920 Speaker 3: allow the power plant to start producing power or should 411 00:20:21,960 --> 00:20:24,440 Speaker 3: you maybe curtail the power plant from time to time 412 00:20:24,680 --> 00:20:27,920 Speaker 3: until that upgrade is completed. And in general, we feel 413 00:20:27,920 --> 00:20:30,560 Speaker 3: it's better to actually allow the connections to go forward 414 00:20:30,640 --> 00:20:33,320 Speaker 3: and then that'll creates some sort of momentum around where 415 00:20:33,359 --> 00:20:36,200 Speaker 3: these upgrades will ultimately need to be so Germany's been 416 00:20:36,240 --> 00:20:38,560 Speaker 3: doing that as well. You've got to make sure that 417 00:20:38,560 --> 00:20:40,800 Speaker 3: that doesn't get too far ahead, because then you end 418 00:20:40,880 --> 00:20:43,720 Speaker 3: up having to address a whole bunch of backlogged upgrades 419 00:20:43,760 --> 00:20:45,720 Speaker 3: to the grid, which we see is happening in the UK. 420 00:20:45,880 --> 00:20:47,600 Speaker 3: And maybe the final thing I'd point out is that 421 00:20:47,640 --> 00:20:51,040 Speaker 3: they have a dispute process for interconnections. Now this isn't 422 00:20:51,119 --> 00:20:53,680 Speaker 3: used extensively, but we've heard from developers that it's nice 423 00:20:53,680 --> 00:20:56,160 Speaker 3: to just have a conduit to have a conversation when 424 00:20:56,200 --> 00:20:58,920 Speaker 3: things don't go right, and this often isn't baked into 425 00:20:58,960 --> 00:21:02,160 Speaker 3: the interconnection process as a default, and so the developers 426 00:21:02,160 --> 00:21:05,000 Speaker 3: really don't have a recourse when something didn't go the 427 00:21:05,040 --> 00:21:06,119 Speaker 3: way they expected it to go. 428 00:21:06,680 --> 00:21:09,360 Speaker 2: We're talking about positive case studies here at the moment, 429 00:21:09,440 --> 00:21:12,400 Speaker 2: and that's because we're really at the start of this transition. 430 00:21:12,600 --> 00:21:16,000 Speaker 2: The grid is a challenge at the moment for renewable developers, 431 00:21:16,040 --> 00:21:18,560 Speaker 2: but it's not because they're not trying. We are seeing 432 00:21:18,560 --> 00:21:21,960 Speaker 2: a lot of efforts globally. So it's given some examples already, 433 00:21:22,000 --> 00:21:24,439 Speaker 2: and we'll talk about a couple more different ways that 434 00:21:24,440 --> 00:21:26,760 Speaker 2: people are trying. But it's as much of an opportunity 435 00:21:26,760 --> 00:21:29,760 Speaker 2: as it is anything else. If you think about EV 436 00:21:29,960 --> 00:21:34,639 Speaker 2: sales versus charging, you wouldn't nowadays say that EV charging 437 00:21:34,680 --> 00:21:36,640 Speaker 2: is the bottleneck on EV sales. You would say it's 438 00:21:36,640 --> 00:21:39,359 Speaker 2: the opportunity created from EV sales, And I think that's 439 00:21:39,359 --> 00:21:42,119 Speaker 2: what we're shifting towards in the grid. Right now, it's 440 00:21:42,200 --> 00:21:45,200 Speaker 2: a chicken and an egg renewables or grid, But increasingly, 441 00:21:45,240 --> 00:21:49,600 Speaker 2: as we figure out the right solutions for enabling grid 442 00:21:49,600 --> 00:21:51,639 Speaker 2: build out, that's not going to be the case anymore. 443 00:21:51,680 --> 00:21:53,679 Speaker 2: It's going to be a sort of combined opportunity with 444 00:21:53,720 --> 00:21:54,800 Speaker 2: the two scaling together. 445 00:21:57,240 --> 00:22:00,880 Speaker 1: When we think about opportunities only one of the themes 446 00:22:00,920 --> 00:22:03,240 Speaker 1: of this year has been the US Inflation Reduction Act 447 00:22:03,320 --> 00:22:06,159 Speaker 1: and what that really means for spurring a lot of 448 00:22:06,160 --> 00:22:09,119 Speaker 1: the industries we cover, including clean energy in the US 449 00:22:09,200 --> 00:22:11,520 Speaker 1: and in a way that they specifically do tend to 450 00:22:11,560 --> 00:22:14,960 Speaker 1: attack problems, which is through the capitalist marketplace, and how 451 00:22:14,960 --> 00:22:18,159 Speaker 1: this then becomes an opportunity for companies. And we actually 452 00:22:18,160 --> 00:22:21,560 Speaker 1: in a previous show had Jiggershaw, who is with the 453 00:22:21,680 --> 00:22:24,280 Speaker 1: US Loan's Office on here to talk about what that 454 00:22:24,440 --> 00:22:26,560 Speaker 1: really looks like in terms of some of the money 455 00:22:26,600 --> 00:22:29,520 Speaker 1: that's actually being allocated to certain projects. But you know, Meredith, 456 00:22:29,520 --> 00:22:32,280 Speaker 1: you had previously mentioned that some of the high costs 457 00:22:32,320 --> 00:22:35,960 Speaker 1: that are surprising developers later on are eating into some 458 00:22:36,040 --> 00:22:38,400 Speaker 1: of the profitability of these projects and in some case 459 00:22:38,520 --> 00:22:42,040 Speaker 1: making them perhaps neutral. And what I really want to 460 00:22:42,119 --> 00:22:46,119 Speaker 1: understand is is the Inflation Reduction Act going far enough 461 00:22:46,240 --> 00:22:49,280 Speaker 1: in order to inspire companies to want to do these 462 00:22:49,320 --> 00:22:53,280 Speaker 1: sorts of projects and really to get the end result 463 00:22:53,400 --> 00:22:57,199 Speaker 1: that we need. Taking into consideration that grids are a 464 00:22:57,240 --> 00:22:58,199 Speaker 1: necessary part of this. 465 00:22:58,760 --> 00:23:02,000 Speaker 3: The Inflation Reduction Act did a number of things for 466 00:23:02,280 --> 00:23:05,320 Speaker 3: clean power generation. It didn't do as much for grid, 467 00:23:05,359 --> 00:23:06,800 Speaker 3: so it didn't go as far as we would have 468 00:23:06,840 --> 00:23:09,800 Speaker 3: liked to have seen. So we've done an update on 469 00:23:09,800 --> 00:23:13,320 Speaker 3: our clean energy market outlook. We see six hundred gigawatts 470 00:23:13,440 --> 00:23:15,840 Speaker 3: of solar, wind and storage capacity that's going to come 471 00:23:15,840 --> 00:23:18,560 Speaker 3: online between twenty twenty three and twenty thirty, and that's 472 00:23:18,640 --> 00:23:22,040 Speaker 3: a boosted number from Inflation Reduction Act when we look 473 00:23:22,040 --> 00:23:25,240 Speaker 3: at the amount of money that was really allocated to grids, right, 474 00:23:25,280 --> 00:23:27,520 Speaker 3: So we've done the kind of done itally. We looked 475 00:23:27,560 --> 00:23:30,240 Speaker 3: at the Jobs Act and the IRA it's about twenty 476 00:23:30,320 --> 00:23:33,520 Speaker 3: nine billion in funds for grids, and about twenty percent 477 00:23:33,560 --> 00:23:36,920 Speaker 3: of that is actually just studying the grid to figure 478 00:23:36,960 --> 00:23:39,760 Speaker 3: out what the bottlenecks are, what the challenges are, where 479 00:23:39,800 --> 00:23:41,880 Speaker 3: we need to go next. So I think there's more 480 00:23:41,920 --> 00:23:45,200 Speaker 3: to come on this rather than the Inflation Reduction act 481 00:23:45,240 --> 00:23:46,800 Speaker 3: was going to be the hammer that solves this. And 482 00:23:47,280 --> 00:23:50,479 Speaker 3: Meredith's point around these costs going up, that's not forever, 483 00:23:50,720 --> 00:23:54,119 Speaker 3: that's not a sustained cost. Eventually you reinforce the grid, 484 00:23:54,240 --> 00:23:57,919 Speaker 3: you create new connection opportunities, those costs come down. So 485 00:23:58,040 --> 00:24:00,919 Speaker 3: now wind and solar projects are able to get cheaper 486 00:24:00,920 --> 00:24:03,800 Speaker 3: connections and so those costs go down, and then the 487 00:24:03,840 --> 00:24:06,919 Speaker 3: developers have those opportunities. So it's good to understand that 488 00:24:06,960 --> 00:24:09,159 Speaker 3: those will eventually wear away. 489 00:24:09,560 --> 00:24:12,560 Speaker 2: Absolutely, and that's why we really do you think this 490 00:24:12,640 --> 00:24:15,760 Speaker 2: is a sort of combined investment. You have to invest 491 00:24:15,760 --> 00:24:17,560 Speaker 2: in renewables and you have to invest in the grid 492 00:24:17,560 --> 00:24:20,840 Speaker 2: as well. One of the concepts that we work on 493 00:24:20,960 --> 00:24:24,520 Speaker 2: to understand whether enough grid investment is happening is this 494 00:24:24,600 --> 00:24:26,960 Speaker 2: idea of a grid investment ratio. We think that you 495 00:24:27,000 --> 00:24:29,560 Speaker 2: need to be spending for every one dollar that you 496 00:24:29,680 --> 00:24:33,560 Speaker 2: put into investment for wind, solar and storage build you 497 00:24:33,600 --> 00:24:36,359 Speaker 2: need to be matching that with one dollar spent on 498 00:24:36,440 --> 00:24:39,720 Speaker 2: the grid to be on a net zero trajectory. Currently, 499 00:24:40,000 --> 00:24:43,639 Speaker 2: globally we're only seeing about fifty cents being spent on 500 00:24:43,680 --> 00:24:46,119 Speaker 2: the grid for every dollar spent on clean power, So 501 00:24:46,320 --> 00:24:48,200 Speaker 2: we're really going to have to see that that amount 502 00:24:48,359 --> 00:24:51,480 Speaker 2: grow over time. How that is going to happen could 503 00:24:51,520 --> 00:24:53,720 Speaker 2: be through rate bases, but it could also be through 504 00:24:53,760 --> 00:24:57,199 Speaker 2: merchant lines. That's something the US in particular is working 505 00:24:57,240 --> 00:25:00,080 Speaker 2: on outside of the Inflation Reduction Act, is trying to 506 00:25:00,119 --> 00:25:03,480 Speaker 2: make it easier to build some of these merchant power 507 00:25:03,520 --> 00:25:07,440 Speaker 2: lines are privately owned transmission lines that cross state boundaries, 508 00:25:07,600 --> 00:25:10,240 Speaker 2: things like that could help to balance that ratio out 509 00:25:10,280 --> 00:25:12,360 Speaker 2: and bring it more in line with a net zero pathway. 510 00:25:12,880 --> 00:25:15,120 Speaker 3: Just to put that into context, So we're spending about 511 00:25:15,160 --> 00:25:18,399 Speaker 3: two hundred and seventy four billion annually on the electricity 512 00:25:18,400 --> 00:25:20,640 Speaker 3: grid today. So that was as of twenty twenty two, 513 00:25:20,720 --> 00:25:22,960 Speaker 3: and if you assume that doesn't change all the way 514 00:25:22,960 --> 00:25:26,480 Speaker 3: out to twenty fifty, that's eight trillion and cumulative spend 515 00:25:26,520 --> 00:25:28,680 Speaker 3: between now and twenty fifty. Now, we've ran a few 516 00:25:28,680 --> 00:25:31,639 Speaker 3: scenarios to figure out what might actually happen and if 517 00:25:31,640 --> 00:25:34,720 Speaker 3: we use our economic transition scenario as a more likely outcome, 518 00:25:34,800 --> 00:25:37,920 Speaker 3: So here we're allowing certain policies that are infect today 519 00:25:37,960 --> 00:25:40,480 Speaker 3: to play out, and then we're allowing economics to guide 520 00:25:40,480 --> 00:25:43,760 Speaker 3: the long term. There, we end up spending thirteen trillion 521 00:25:43,920 --> 00:25:46,159 Speaker 3: on the grid between now and twenty fifty, So a 522 00:25:46,200 --> 00:25:48,480 Speaker 3: notable step up for me, but that does not get 523 00:25:48,560 --> 00:25:50,960 Speaker 3: US Paris aligned. That's not enough to limit warming to 524 00:25:50,960 --> 00:25:54,160 Speaker 3: two degrees. So our net zero scenario is actually twenty 525 00:25:54,240 --> 00:25:57,359 Speaker 3: one trillion in spend between now and twenty fifteen. That 526 00:25:57,440 --> 00:25:59,840 Speaker 3: just shows how much we need to ratchet up investment 527 00:26:00,080 --> 00:26:00,879 Speaker 3: in this area. 528 00:26:00,960 --> 00:26:03,160 Speaker 1: So let's do one more case study to another really 529 00:26:03,160 --> 00:26:05,880 Speaker 1: important part of the world when it comes to rollout 530 00:26:05,880 --> 00:26:08,800 Speaker 1: of renewable energy, because it's certainly happening at scale, and 531 00:26:08,800 --> 00:26:11,440 Speaker 1: that is China. What are they doing about their grid 532 00:26:11,480 --> 00:26:14,040 Speaker 1: and what does it look like, because certainly they're attacking 533 00:26:14,119 --> 00:26:16,000 Speaker 1: the problem of grid roll out in a way very 534 00:26:16,040 --> 00:26:17,880 Speaker 1: fundamentally differently than the US's. 535 00:26:18,160 --> 00:26:23,359 Speaker 3: So China has really mastered this long range transmission project 536 00:26:23,520 --> 00:26:25,800 Speaker 3: in a way that no one else on earth has. 537 00:26:25,920 --> 00:26:28,960 Speaker 3: So when I talked earlier about voltages for power lines, 538 00:26:29,040 --> 00:26:31,679 Speaker 3: so we have these terms, right, So the lowest voltage 539 00:26:31,720 --> 00:26:34,600 Speaker 3: we talk about for something to be transmissions called high voltage, 540 00:26:34,680 --> 00:26:37,040 Speaker 3: and then if things get really high in the voltage, 541 00:26:37,040 --> 00:26:39,479 Speaker 3: we call them extra high voltage. I'm not kidding. These 542 00:26:39,480 --> 00:26:42,600 Speaker 3: are the actual terms. In China, they have one further class. 543 00:26:42,760 --> 00:26:45,800 Speaker 3: It's called ultra high voltage, and here we're talking about 544 00:26:45,840 --> 00:26:48,479 Speaker 3: eight hundred thousand volts to a million volts. 545 00:26:48,560 --> 00:26:48,679 Speaker 2: Now. 546 00:26:48,880 --> 00:26:51,760 Speaker 3: You know, there's been projects in Canada and Brazil and 547 00:26:52,000 --> 00:26:53,840 Speaker 3: in India, but China has taken it to a whole 548 00:26:53,920 --> 00:26:56,720 Speaker 3: new level. So they have two hundred gigawants of capacity 549 00:26:56,880 --> 00:27:01,000 Speaker 3: commissioned today of these transmission lines that go thousands of kilometers, 550 00:27:01,040 --> 00:27:02,680 Speaker 3: like I think one of these projects is thirty three 551 00:27:02,760 --> 00:27:06,680 Speaker 3: hundred kilometers that have three six eight gigawatt links and 552 00:27:06,760 --> 00:27:09,680 Speaker 3: it allows them to move power from these very remote 553 00:27:09,720 --> 00:27:13,359 Speaker 3: regions to the coastal demand centers effectively. And this is 554 00:27:13,400 --> 00:27:16,479 Speaker 3: something that we see having to have play out in 555 00:27:16,560 --> 00:27:19,240 Speaker 3: many different markets. Germany is having to do this to 556 00:27:19,280 --> 00:27:22,280 Speaker 3: bring power from the wind rich north into the demand 557 00:27:22,280 --> 00:27:24,080 Speaker 3: centers that are more in the south. The UK is 558 00:27:24,119 --> 00:27:26,520 Speaker 3: having to do this, and they're using a wide array 559 00:27:26,560 --> 00:27:29,400 Speaker 3: of technologies. But this is a classical problem that even 560 00:27:29,440 --> 00:27:31,760 Speaker 3: the US will ultimately have to wrestle with as well. 561 00:27:31,960 --> 00:27:34,639 Speaker 3: And China's really done this in a fantastic way. 562 00:27:34,840 --> 00:27:37,879 Speaker 1: And this network is cutting edge technology and we're not 563 00:27:38,080 --> 00:27:41,640 Speaker 1: losing tons of energy and the transmission process because certainly 564 00:27:41,680 --> 00:27:43,920 Speaker 1: that distance you would imagine it would make the entire 565 00:27:43,960 --> 00:27:45,600 Speaker 1: project much less effective. 566 00:27:46,000 --> 00:27:50,120 Speaker 3: Going to ultra high voltages allows you to minimize losses, 567 00:27:50,400 --> 00:27:53,760 Speaker 3: So losses is dependent on the voltage that you're using, 568 00:27:53,920 --> 00:27:56,639 Speaker 3: and by going to these really high voltages, you can 569 00:27:56,880 --> 00:27:59,439 Speaker 3: transport over long distances and not lose a lot of. 570 00:27:59,440 --> 00:28:02,000 Speaker 1: The power long the way, everything is made of something, 571 00:28:02,160 --> 00:28:05,200 Speaker 1: and we BF certainly understand that we have entire teams 572 00:28:05,240 --> 00:28:08,520 Speaker 1: dedicated to the critical commodities that are needed for the transition, 573 00:28:08,720 --> 00:28:10,960 Speaker 1: and we also have a team dedicated to supply chains. 574 00:28:11,000 --> 00:28:14,240 Speaker 1: And supply chains have been in a period of disruption 575 00:28:14,359 --> 00:28:16,600 Speaker 1: as of late, and I want to know how do 576 00:28:16,680 --> 00:28:21,320 Speaker 1: supply chains fit into building out this infrastructure. Are countries 577 00:28:21,400 --> 00:28:24,159 Speaker 1: building all of their own kit or is this actually 578 00:28:24,200 --> 00:28:27,199 Speaker 1: adding to the bottlenecks as they've got to source it 579 00:28:27,240 --> 00:28:28,119 Speaker 1: from around the world. 580 00:28:28,320 --> 00:28:31,160 Speaker 2: So at a high level, the scale of grid build 581 00:28:31,160 --> 00:28:33,480 Speaker 2: out that we're talking about is going to raak havoc 582 00:28:33,520 --> 00:28:34,800 Speaker 2: on supply chains, but. 583 00:28:34,800 --> 00:28:36,760 Speaker 1: It hasn't yet. This is a coming storm. 584 00:28:36,840 --> 00:28:37,840 Speaker 2: It is starting to. 585 00:28:38,400 --> 00:28:41,640 Speaker 3: So we're seeing the reality is that the supply chain 586 00:28:41,840 --> 00:28:45,320 Speaker 3: here is quite concentrated, so there's not a vast quantity 587 00:28:45,400 --> 00:28:48,160 Speaker 3: of people who can make these specialized pieces of equipment, 588 00:28:48,240 --> 00:28:51,040 Speaker 3: whether you're looking at cables, high voltage power cables, or 589 00:28:51,040 --> 00:28:54,040 Speaker 3: whether you're looking at transformers and these types of components. 590 00:28:54,080 --> 00:28:56,440 Speaker 3: There's a few players in the world that are doing this. 591 00:28:56,800 --> 00:28:59,040 Speaker 3: What are some of those, Yeah, so on the cable side, 592 00:28:59,040 --> 00:29:03,280 Speaker 3: this is like Prisme, nkt Nexon. On the station side, 593 00:29:03,360 --> 00:29:07,400 Speaker 3: abb Hatache, Siemens and ge for example, and there are 594 00:29:07,400 --> 00:29:10,080 Speaker 3: a few others. One I think benefit of the grid 595 00:29:10,080 --> 00:29:13,040 Speaker 3: supply chain is that it's not entirely consolidated within a 596 00:29:13,080 --> 00:29:15,800 Speaker 3: single country, which we have for a few other pieces 597 00:29:15,800 --> 00:29:18,160 Speaker 3: of the transition. We do have a lot of Western players, 598 00:29:18,320 --> 00:29:21,640 Speaker 3: but if you look at the order backlog for cable manufacturers, 599 00:29:21,760 --> 00:29:23,680 Speaker 3: it's in the billions. If you're looking at the lead 600 00:29:23,720 --> 00:29:27,240 Speaker 3: time for a transformer, it's gone from years to multiple years. 601 00:29:27,520 --> 00:29:29,960 Speaker 3: And so we are starting to see science that this 602 00:29:30,080 --> 00:29:33,960 Speaker 3: system has gone under constraint and utilities are responding. So 603 00:29:34,000 --> 00:29:37,560 Speaker 3: there's been multiple utilities that have now made large orders 604 00:29:37,680 --> 00:29:40,480 Speaker 3: worth billions of dollars years in advance, so kind of 605 00:29:40,480 --> 00:29:43,400 Speaker 3: batching them together to try and secure the equipment that 606 00:29:43,440 --> 00:29:46,200 Speaker 3: they'll need. So Tenet signed a five point five billion 607 00:29:46,200 --> 00:29:49,600 Speaker 3: euro deal to buy cables and engineering works for seven 608 00:29:49,680 --> 00:29:53,320 Speaker 3: thousand kilometers of offshore grid. France did something similar for 609 00:29:53,360 --> 00:29:56,680 Speaker 3: three thousand kilometers, and this itself can be quite disruptive. 610 00:29:56,800 --> 00:29:59,560 Speaker 3: So the markets that have this scale and are willing 611 00:29:59,560 --> 00:30:02,400 Speaker 3: to make so orders can basically buy up the supply 612 00:30:02,520 --> 00:30:05,080 Speaker 3: chain for multiple years. But ultimately, I think this is 613 00:30:05,240 --> 00:30:08,160 Speaker 3: an important part of creating certainty for the supply chain. 614 00:30:08,200 --> 00:30:10,280 Speaker 3: We've been in this kind of chicken and egg situation 615 00:30:10,600 --> 00:30:14,280 Speaker 3: where the supply chain manufacturers haven't been willing to expand 616 00:30:14,360 --> 00:30:17,040 Speaker 3: their production because they haven't really seen the order book, 617 00:30:17,200 --> 00:30:19,680 Speaker 3: and the utilities have been postponing some of the projects 618 00:30:19,720 --> 00:30:22,480 Speaker 3: because they're concerned about the delivery of their equipment, and 619 00:30:22,520 --> 00:30:24,640 Speaker 3: so somebody has to move first, and so I think 620 00:30:24,640 --> 00:30:26,240 Speaker 3: this is an important step for the industry. 621 00:30:26,560 --> 00:30:29,080 Speaker 1: It certainly seems like with all of the demand for 622 00:30:29,240 --> 00:30:32,960 Speaker 1: these components, given that rollout is looking to increase, that 623 00:30:32,960 --> 00:30:35,520 Speaker 1: there also might be an opportunity for new interests into 624 00:30:35,520 --> 00:30:37,600 Speaker 1: this space. And I want to know is are the 625 00:30:37,680 --> 00:30:40,920 Speaker 1: barriers to entry just too high and are we expecting 626 00:30:40,960 --> 00:30:44,120 Speaker 1: to see the current equipment manufacturers really grow or do 627 00:30:44,160 --> 00:30:45,920 Speaker 1: you think we're actually going to see this become a 628 00:30:46,240 --> 00:30:49,440 Speaker 1: really increasingly fragmented and maybe some day crowded space. 629 00:30:49,880 --> 00:30:53,480 Speaker 3: The barriers are high when it comes to traditional grid investments. 630 00:30:53,520 --> 00:30:56,320 Speaker 3: So these are very specialized pieces of equipment, and more 631 00:30:56,360 --> 00:30:58,880 Speaker 3: than that, the utilities that are buying them are very 632 00:30:58,960 --> 00:31:03,000 Speaker 3: risk averse, and so they've negotiated over years, over decades, 633 00:31:03,040 --> 00:31:06,840 Speaker 3: relationships with these manufacturers and they've come to trust the components. 634 00:31:06,880 --> 00:31:10,480 Speaker 3: So these are utilities that have regulated requirements for reliability 635 00:31:10,720 --> 00:31:13,120 Speaker 3: right and once you install something, to go back in 636 00:31:13,240 --> 00:31:15,880 Speaker 3: and have to retrofit it afterwards can be very costly, 637 00:31:16,000 --> 00:31:18,880 Speaker 3: and so it is possible that under severe constraints, so 638 00:31:18,920 --> 00:31:21,520 Speaker 3: you could see new manufacturers come into the frame, but 639 00:31:21,760 --> 00:31:24,520 Speaker 3: I don't see that as as a huge opportunity. Where 640 00:31:24,520 --> 00:31:27,200 Speaker 3: we are seeing a lot of new players is not 641 00:31:27,320 --> 00:31:30,360 Speaker 3: in the legacy development, but more on the modernization of 642 00:31:30,400 --> 00:31:33,160 Speaker 3: the grid. So on the digitalization front, we're seeing a 643 00:31:33,200 --> 00:31:36,440 Speaker 3: number of players coming into being able to help monitor 644 00:31:36,480 --> 00:31:38,440 Speaker 3: the grid and get the most out of every single 645 00:31:38,440 --> 00:31:39,600 Speaker 3: asset that is there. 646 00:31:40,240 --> 00:31:44,719 Speaker 1: What are the different metals that are required for grid infrastructure, 647 00:31:44,760 --> 00:31:49,520 Speaker 1: Because of course you can onshore or nearshore manufacturing, but 648 00:31:50,040 --> 00:31:52,800 Speaker 1: where certain commodities are located is something that we don't 649 00:31:52,800 --> 00:31:53,800 Speaker 1: have a lot of control over. 650 00:31:54,280 --> 00:31:56,920 Speaker 2: So the two big ones that you're talking about in 651 00:31:56,960 --> 00:31:59,960 Speaker 2: terms of metals demand for the grid are copper and aluminum. 652 00:32:00,080 --> 00:32:02,760 Speaker 2: It's also steal and lead, but copper and aluminum is 653 00:32:02,800 --> 00:32:06,920 Speaker 2: basically your main conduit for the electron. So given the 654 00:32:07,280 --> 00:32:11,000 Speaker 2: demands on those metals for other industries as well, do 655 00:32:11,040 --> 00:32:13,480 Speaker 2: we expect that there will be enough supply for this 656 00:32:13,600 --> 00:32:17,920 Speaker 2: industry going forward? I think both copper and aluminum are 657 00:32:17,920 --> 00:32:20,560 Speaker 2: going to be put under stress based on our energy 658 00:32:20,680 --> 00:32:25,400 Speaker 2: transition metals outlook, especially copper. Aluminum has an ability to 659 00:32:25,480 --> 00:32:29,040 Speaker 2: scale up supply using recycling. But with copper, what we're 660 00:32:29,080 --> 00:32:32,800 Speaker 2: seeing is that the grid today accounts for probably around 661 00:32:33,000 --> 00:32:36,640 Speaker 2: sixteen percent of current copper demand, but with the buildout 662 00:32:36,680 --> 00:32:39,200 Speaker 2: that we're talking about, it could reach thirty seven percent 663 00:32:39,320 --> 00:32:41,600 Speaker 2: of copper demand by twenty fifty. And that is in 664 00:32:41,720 --> 00:32:46,160 Speaker 2: a world where copper demand is massively growing across all 665 00:32:46,200 --> 00:32:48,600 Speaker 2: of the different parts of the energy transition. At the 666 00:32:48,600 --> 00:32:51,120 Speaker 2: same time, if we just look at current plans for 667 00:32:51,240 --> 00:32:54,040 Speaker 2: copper mining, you would see a decline in supply over time. 668 00:32:54,280 --> 00:32:57,240 Speaker 2: So you can see a mismatch between the direction the 669 00:32:57,320 --> 00:33:01,240 Speaker 2: energy transition is taking copper and what's actually happening today. 670 00:33:01,280 --> 00:33:04,360 Speaker 2: On the supply side, that could be a challenge. Fortunately, 671 00:33:04,400 --> 00:33:08,160 Speaker 2: there are substitutes. You can substitute aluminum for copper that 672 00:33:08,240 --> 00:33:10,360 Speaker 2: might help, especially on the grid side, and then other 673 00:33:10,440 --> 00:33:12,560 Speaker 2: sectors would have to look at substitutes as well, or 674 00:33:12,600 --> 00:33:14,960 Speaker 2: we'd have to be increasing copper supply globally. 675 00:33:15,360 --> 00:33:19,240 Speaker 1: Now you'd referenced Senji, that's there were certain parts of 676 00:33:19,280 --> 00:33:22,959 Speaker 1: the world where the materials and the components that are 677 00:33:23,000 --> 00:33:26,560 Speaker 1: required have been stockpiled. And my question really has to 678 00:33:26,560 --> 00:33:29,200 Speaker 1: do with or all the parts truly global in nature, 679 00:33:29,240 --> 00:33:31,040 Speaker 1: and is this a global supply chain or is there 680 00:33:31,120 --> 00:33:32,320 Speaker 1: a density somewhere. 681 00:33:32,680 --> 00:33:35,680 Speaker 3: Yeah, I characterize this supply chain as fairly global. So 682 00:33:35,840 --> 00:33:39,720 Speaker 3: you have manufacturing sites across Europe, the US, North America, 683 00:33:39,880 --> 00:33:43,440 Speaker 3: and so at present it is a global supply chain. 684 00:33:43,600 --> 00:33:46,520 Speaker 3: Now there are pressures to start to localize that as 685 00:33:46,520 --> 00:33:50,640 Speaker 3: we've seen across other clean power technologies, and the manufacturers 686 00:33:50,640 --> 00:33:54,240 Speaker 3: are resisting this. Ultimately, that's going to increase costs that 687 00:33:54,280 --> 00:33:57,600 Speaker 3: are already rising with metal prices have been higher than normal, 688 00:33:57,680 --> 00:33:59,720 Speaker 3: right and so at present we do have a global 689 00:33:59,720 --> 00:34:02,040 Speaker 3: supply chain, but how that plays out in the future 690 00:34:02,160 --> 00:34:02,840 Speaker 3: we don't yet know. 691 00:34:03,120 --> 00:34:06,000 Speaker 2: And that's fair across the whole clean power space. I'd 692 00:34:06,000 --> 00:34:08,720 Speaker 2: say that the two biggest themes that we're hearing about 693 00:34:08,840 --> 00:34:12,719 Speaker 2: from our clients today are grids and supply chain localization. 694 00:34:13,000 --> 00:34:15,680 Speaker 2: We're to looking at policies like the Inflation Reduction Act, 695 00:34:15,840 --> 00:34:19,480 Speaker 2: which will offer subsidies in order to localize say solar 696 00:34:19,560 --> 00:34:23,440 Speaker 2: manufacturing within the United States, but then other industries in 697 00:34:23,480 --> 00:34:27,680 Speaker 2: other countries are just looking to enforce and mandate local 698 00:34:28,000 --> 00:34:32,200 Speaker 2: manufacturing without any subsidy to the manufacturing itself, and that 699 00:34:32,239 --> 00:34:35,320 Speaker 2: could really really raise the prices of equipment even before 700 00:34:35,360 --> 00:34:37,040 Speaker 2: you get to the point of the grid connection, right, 701 00:34:37,120 --> 00:34:39,600 Speaker 2: we're just talking about the pure equipment that's going into 702 00:34:39,640 --> 00:34:42,720 Speaker 2: a battery of solar or wind project. How that starts 703 00:34:42,719 --> 00:34:45,920 Speaker 2: to affect the cost of product development, the economics for 704 00:34:45,960 --> 00:34:49,279 Speaker 2: developers is still to be seen, because how effective these 705 00:34:49,280 --> 00:34:52,600 Speaker 2: policies are at forcing supply chain localization really hasn't been 706 00:34:52,600 --> 00:34:53,280 Speaker 2: tested yet. 707 00:34:53,480 --> 00:34:55,480 Speaker 1: So the last thing I want to discuss is actually 708 00:34:55,520 --> 00:35:00,160 Speaker 1: really at the very other end of the line. It's consumers. Well, 709 00:35:00,239 --> 00:35:02,680 Speaker 1: certainly over the course of the last year, we've seen 710 00:35:02,760 --> 00:35:05,600 Speaker 1: electricity prices go up and gas prices go up, and 711 00:35:05,640 --> 00:35:10,280 Speaker 1: you see different governments actually intervening on the end consumer 712 00:35:10,320 --> 00:35:14,279 Speaker 1: electricity price. Do you see these costs that invariably are 713 00:35:14,320 --> 00:35:17,759 Speaker 1: going to need to be passed on somewhere, ultimately impacting 714 00:35:17,840 --> 00:35:20,600 Speaker 1: consumers in what is already a very constrained and very 715 00:35:20,600 --> 00:35:24,200 Speaker 1: expensive electricity market. Or is this something where between the 716 00:35:24,239 --> 00:35:26,560 Speaker 1: companies and the consumers, governments are going to have to 717 00:35:26,600 --> 00:35:27,600 Speaker 1: get heavily involved. 718 00:35:28,040 --> 00:35:29,920 Speaker 3: So who's ultimately going to pay for this? 719 00:35:30,160 --> 00:35:31,000 Speaker 1: That is the question. 720 00:35:31,160 --> 00:35:33,880 Speaker 3: Yeah, it is a big question. And where we allocate 721 00:35:33,960 --> 00:35:38,560 Speaker 3: those costs it's important, right, So this is a natural monopoly. 722 00:35:38,880 --> 00:35:42,799 Speaker 3: We have regulated assets, and a regulator comes in and 723 00:35:42,840 --> 00:35:45,520 Speaker 3: allocates costs to rate pairs. There's only so much rate 724 00:35:45,560 --> 00:35:48,960 Speaker 3: pairs can absorb the rate increases. You can't just ratchet 725 00:35:49,000 --> 00:35:51,440 Speaker 3: them up very heavily in a single year, and so 726 00:35:51,520 --> 00:35:54,600 Speaker 3: that ultimately starts to constrain the path that we can 727 00:35:54,640 --> 00:35:57,239 Speaker 3: take here. How fast we can really scale up is 728 00:35:57,239 --> 00:36:01,360 Speaker 3: in part depends on what could the average homeowner absorb 729 00:36:01,560 --> 00:36:04,920 Speaker 3: in a rate increase today, and so that is a factor. 730 00:36:05,120 --> 00:36:07,000 Speaker 3: So now who else could pay? So we could allocate 731 00:36:07,040 --> 00:36:09,560 Speaker 3: some of the costs to developers, and we've talked about 732 00:36:09,600 --> 00:36:11,600 Speaker 3: some of that already. So there's a share of costs 733 00:36:11,600 --> 00:36:13,960 Speaker 3: that developers are already paying to connect to the grid, 734 00:36:14,040 --> 00:36:16,760 Speaker 3: and those deeper upgrades on the grid, should they be 735 00:36:16,800 --> 00:36:18,799 Speaker 3: paid off by the rate base or should they be 736 00:36:18,800 --> 00:36:21,920 Speaker 3: paid off by developers, And so there is a complicated 737 00:36:22,000 --> 00:36:25,359 Speaker 3: question and different markets have divided that up a little 738 00:36:25,400 --> 00:36:28,239 Speaker 3: bit differently. But there's an allocation of risk there and 739 00:36:28,280 --> 00:36:30,520 Speaker 3: how fast we want to move that needs to be considered. 740 00:36:30,640 --> 00:36:33,799 Speaker 3: But we're also seeing consumers, like power consumers and I'm 741 00:36:33,800 --> 00:36:37,000 Speaker 3: talking about largely like large power consumers, who are also 742 00:36:37,280 --> 00:36:39,879 Speaker 3: starting to take a large part of the bill too, right, 743 00:36:40,000 --> 00:36:42,839 Speaker 3: And they're upgrading the kit that they have in their 744 00:36:42,840 --> 00:36:47,160 Speaker 3: own facilities, they're buying storage, they're buying solar, right, you know, 745 00:36:47,160 --> 00:36:49,960 Speaker 3: they're putting in these variable frequency drives and they're able 746 00:36:50,000 --> 00:36:52,960 Speaker 3: to modulate how their load is going over time. And 747 00:36:52,960 --> 00:36:55,880 Speaker 3: that flexibility is a resource that the grid will ultimately 748 00:36:55,880 --> 00:36:58,120 Speaker 3: be able to use as well. And so that becomes 749 00:36:58,160 --> 00:37:00,920 Speaker 3: part of the solution. And let's even extend into homeowners 750 00:37:01,040 --> 00:37:04,560 Speaker 3: with buying small scale solar and storage systems at their houses. 751 00:37:04,640 --> 00:37:06,920 Speaker 3: And there's a rule for governments to play as well, 752 00:37:07,000 --> 00:37:10,920 Speaker 3: like subsidies, loans, grants, especially when it comes to interconnectors 753 00:37:11,080 --> 00:37:14,520 Speaker 3: that they've been critical to getting these projects funded and approved. 754 00:37:14,920 --> 00:37:17,600 Speaker 1: So Meredith and Senji, thank you very much for joining 755 00:37:17,680 --> 00:37:20,840 Speaker 1: today and walking me through all things grid. 756 00:37:21,000 --> 00:37:23,759 Speaker 2: It's been an absolute pleasure, Dana, thanks for having us 757 00:37:23,960 --> 00:37:32,720 Speaker 2: absolutely thanks Dana. 758 00:37:33,800 --> 00:37:37,120 Speaker 1: Bloomberg NEF is a service provided by Bloomberg Finance LP 759 00:37:37,280 --> 00:37:40,720 Speaker 1: and its affiliates. This recording does not constitute, nor should 760 00:37:40,719 --> 00:37:44,759 Speaker 1: it be construed, as investment advice, investment recommendations, or a 761 00:37:44,800 --> 00:37:48,360 Speaker 1: recommendation as to an investment or other strategy. Bloomberg n 762 00:37:48,360 --> 00:37:51,879 Speaker 1: EF should not be considered as information sufficient upon which 763 00:37:51,920 --> 00:37:55,600 Speaker 1: to base an investment decision. Neither Bloomberg Finance LP nor 764 00:37:55,640 --> 00:37:59,080 Speaker 1: any of its affiliates makes any representation or warranty as 765 00:37:59,120 --> 00:38:01,960 Speaker 1: to the accuracy our completeness of the information contained in 766 00:38:02,000 --> 00:38:05,120 Speaker 1: this recording, and any liability as a result of this 767 00:38:05,200 --> 00:38:06,920 Speaker 1: recording is expressly disclaimed