WEBVTT - Graichen on Germany’s Way Out of the Energy Crisis 0:00:01.400 --> 0:00:04.559 Hi, Mrs Dana Perkins, and you're listening to Switch It 0:00:04.640 --> 0:00:07.960 on the b n OF podcast. So this winter there 0:00:08.000 --> 0:00:12.600 have been some unusually warm and unusually cold weeks, and 0:00:12.760 --> 0:00:15.560 certainly people are talking not just about the weather, but 0:00:15.800 --> 0:00:19.600 the energy crisis. The conversation around natural gas and how 0:00:19.600 --> 0:00:22.320 it fits into the future of the energy system and 0:00:22.400 --> 0:00:25.479 really what that energy system overall looks like as the 0:00:25.560 --> 0:00:29.720 energy transition gets underway, has something that has been front 0:00:29.760 --> 0:00:32.559 of mine for many people, certainly the companies in the 0:00:32.680 --> 0:00:37.400 energy transition and of course policymakers. So today we have 0:00:37.440 --> 0:00:41.560 the opportunity to investigate the policy aspect more deeply. M 0:00:41.600 --> 0:00:45.040 A Champion here at BNF is head of Regional Energy 0:00:45.080 --> 0:00:48.040 Transitions Research, and she was able to sit down in 0:00:48.120 --> 0:00:52.080 conversation with Dr Patrick Greign, State Secretary at the Federal 0:00:52.120 --> 0:00:56.000 Ministry for Economic Affairs and Climate Action for Germany, and 0:00:56.040 --> 0:00:59.800 they discuss the ongoing energy crisis. Even as the days 0:00:59.800 --> 0:01:02.200 are longer and we can almost see spring approaching on 0:01:02.200 --> 0:01:05.240 our calendars, this conversation is not going to stop when 0:01:05.240 --> 0:01:08.280 we get to the summer. So what steps can and 0:01:08.319 --> 0:01:11.520 should be taken? Well, I'm going to leave that conversation 0:01:11.560 --> 0:01:15.080 with Emma and Dr Gregan. As a reminder, being a 0:01:15.120 --> 0:01:17.680 F does not provide investment of strategy advice, and we 0:01:17.800 --> 0:01:20.520 have a complete disclaimer at the very end of the show. 0:01:22.800 --> 0:01:25.520 Hi everyone, my name is Emma Champion. I sit on 0:01:25.560 --> 0:01:28.759 the analyst side at BENF working on our energy transitions 0:01:28.760 --> 0:01:32.120 coverage of the European region, and today I am actually 0:01:32.160 --> 0:01:35.640 so excited and in fact honored to be playing MC 0:01:35.880 --> 0:01:39.200 for today's episode because we get to have a really 0:01:39.240 --> 0:01:43.039 important conversation with an exceptional guest. So joining us on 0:01:43.040 --> 0:01:46.120 the show today to discuss some of the policy responses 0:01:46.160 --> 0:01:49.720 to the ongoing energy crisis here in Europe and transition 0:01:49.760 --> 0:01:52.640 opportunities that might help us get out of this situation 0:01:53.320 --> 0:01:56.800 is Germany's State Secretary of the Ministry for Economic Affairs 0:01:56.800 --> 0:02:00.480 and Climate Action, Dr Patrick Gregn. Thank you so much 0:02:00.640 --> 0:02:04.760 for joining us today, Patrick, and welcome to Switched On. Yeah, 0:02:04.800 --> 0:02:08.800 thanks for having me, Emma. I'm really delighted to discuss 0:02:08.919 --> 0:02:12.720 because there's so much going on. Absolutely, I think to 0:02:12.800 --> 0:02:15.480 start with needless to say, at least from my perspective, 0:02:15.520 --> 0:02:18.480 it's been a particularly eventful eighteen months to be an 0:02:18.520 --> 0:02:23.160 analyst covering European energy markets. We've seen gas prices hit 0:02:23.240 --> 0:02:26.680 those unprecedented highs energy costs adding to a lot of 0:02:26.720 --> 0:02:30.760 the inflationary pressures that are facing European economies and governments 0:02:30.760 --> 0:02:35.160 as a result, staging quite deep and unprecedented interventions into 0:02:35.200 --> 0:02:39.240 our energy markets to help contain those costs, support the 0:02:39.400 --> 0:02:43.520 struggling industries and households as well as utilities in some cases, 0:02:44.200 --> 0:02:48.079 and markets have been almost haywire. Over two following Russia's 0:02:48.080 --> 0:02:52.480 invasion of Ukraine, we've seen extreme volatility in energy prices. 0:02:52.480 --> 0:02:54.360 So I kind of want to start off with a 0:02:54.440 --> 0:02:56.640 really quite broad question, but one I think a lot 0:02:56.680 --> 0:02:59.720 of people have been asking themselves at various moments over 0:02:59.760 --> 0:03:03.560 this crisis. Patrick, do you think our energy markets are broken? 0:03:03.800 --> 0:03:05.519 And I guess what we're really getting out here is 0:03:05.560 --> 0:03:07.639 what do you think is the cause of the crisis. 0:03:08.040 --> 0:03:10.799 The real cause of the crisis is very simple. We're 0:03:10.840 --> 0:03:16.360 lacking one hundred third gbcm of gas from Russia, and 0:03:16.680 --> 0:03:22.040 that of course has a substantial reaction from Europe to 0:03:22.320 --> 0:03:25.359 somehow hope with that, and of course that means high 0:03:25.440 --> 0:03:31.840 gas prices, it means public activity to increase the availability 0:03:32.080 --> 0:03:35.360 of energy to Europe, and it will take a while 0:03:35.560 --> 0:03:40.080 until global markets have rearranged, and of course, because the 0:03:40.160 --> 0:03:44.080 power market is linked to the gas market in the 0:03:44.120 --> 0:03:46.960 sense that gas power plants are setting the price in 0:03:47.000 --> 0:03:51.880 the power market, we're seeing those high electricity prices. But 0:03:52.040 --> 0:03:57.440 at the end of the day, I'd say markets are functioning. Yeah, absolutely. 0:03:57.760 --> 0:03:59.720 I kind of want to reflect on some of the 0:03:59.800 --> 0:04:02.480 lasts that we can and maybe should already be taking 0:04:02.480 --> 0:04:05.840 away from crisis management, particularly from your perspective and time 0:04:05.880 --> 0:04:08.760 now as a policymaker during this time, and so let's 0:04:08.800 --> 0:04:10.600 dig into some of the measures that are already being 0:04:10.600 --> 0:04:14.360 implemented for this winter. I'm in London. We've already seen 0:04:14.400 --> 0:04:16.640 over some of this month, indeed across much of the 0:04:16.680 --> 0:04:20.440 rest of Europe snow and sustain subzero temperatures. This is 0:04:20.480 --> 0:04:23.880 generating more and more concern around energy costs and looking forward, 0:04:24.160 --> 0:04:26.920 I guess I want to know what, in your mind 0:04:27.080 --> 0:04:31.440 should governments be prioritizing to minimize the negative effects of 0:04:31.560 --> 0:04:36.880 this crisis. It's very clear that we would need to 0:04:36.920 --> 0:04:41.320 reduce our guest demand by some twent over the next 0:04:41.400 --> 0:04:45.080 eighteen months in Europe, and essentially the price will do 0:04:45.360 --> 0:04:48.800 part of this. We see already how a price have 0:04:49.160 --> 0:04:52.480 driven down guest demanding industry. But then there are other 0:04:52.760 --> 0:04:56.440 effects where we would also need to government intervention, lower 0:04:56.480 --> 0:05:00.200 heat demand, to boost energy efficiency, to boost renewables, to 0:05:00.640 --> 0:05:04.400 basically we did the call back online in order to 0:05:04.480 --> 0:05:08.800 get basically gas our plants less full of ours. So 0:05:09.400 --> 0:05:12.120 those are essentially all the things that we need to 0:05:12.160 --> 0:05:16.640 do when it comes to basically gas flows. Then of 0:05:16.680 --> 0:05:20.960 course we have the gas price issue, and there we have, 0:05:21.279 --> 0:05:25.600 of course for customers huge price increases. We somehow need 0:05:25.640 --> 0:05:28.640 to find a way that they can cope with it. 0:05:28.800 --> 0:05:32.240 That's why a lot of governments have handed out subsidies. 0:05:32.600 --> 0:05:34.800 But on the other hand, there are also people who 0:05:34.839 --> 0:05:37.800 make a lot of money now and we should also 0:05:38.520 --> 0:05:41.840 take some of those extra profits and give them back 0:05:41.880 --> 0:05:44.120 to customers. I want to dig into some of those 0:05:44.160 --> 0:05:46.479 ideas a little further, so maybe let's talk about the 0:05:46.520 --> 0:05:49.200 demand and price dynamics. We've already seen to your point 0:05:49.320 --> 0:05:52.960 that many consumers across the segments from residential to industry 0:05:53.000 --> 0:05:56.719 are already responding to this higher price environment and reducing 0:05:56.720 --> 0:05:59.760 that consumption. My colleagues on the BENF Gas team are 0:05:59.800 --> 0:06:02.520 trying king gas demand destruction in Germany at over fift 0:06:03.080 --> 0:06:05.840 even since it got colder over the recent weeks um 0:06:05.920 --> 0:06:08.320 and that's according to our provision or kind of implied 0:06:08.360 --> 0:06:12.000 demand data. But we've also seen to your point about 0:06:12.160 --> 0:06:15.960 many governments, including in Germany, you're rightly putting in place 0:06:16.000 --> 0:06:19.040 measures to help contain costs for consumers and support their 0:06:19.120 --> 0:06:21.800 energy bills. I guess the question here is, is there 0:06:21.800 --> 0:06:24.800 a dilemma where there are risks of going too far 0:06:24.960 --> 0:06:29.279 in shielding consumers from price increases and thereby actually muting 0:06:29.279 --> 0:06:32.039 the effect of some of those price signals to reduce demand. 0:06:32.240 --> 0:06:35.640 I guess, like, what's the sweet spot? Well, what we 0:06:35.680 --> 0:06:39.640 are doing is the shielding of customers has to still 0:06:39.760 --> 0:06:44.320 have a full incentive to reduce demand, which is why 0:06:44.560 --> 0:06:46.799 at the end of the day, it is a lump 0:06:46.920 --> 0:06:52.360 some money calculated on previous demand, but it's a lumpsome 0:06:52.560 --> 0:06:56.680 transfer that we're doing. That means you still have the 0:06:56.880 --> 0:07:01.239 full incentive to reduce your gas demand because you still 0:07:01.320 --> 0:07:05.640 see the gas high prices on your marginal demand. And 0:07:05.680 --> 0:07:10.600 therefore I think that's what is needed, shield customers through 0:07:10.840 --> 0:07:15.680 a mechanism which still gives the full incentive to reduce Yeah, 0:07:15.720 --> 0:07:18.360 I understand it's certainly a tricky one though to get 0:07:18.400 --> 0:07:20.320 the balance right, and I mean to be fair to 0:07:20.400 --> 0:07:23.000 my point, we are still tracking demand destruction happening in 0:07:23.000 --> 0:07:25.520 real time, so I think we're not quite at that 0:07:25.560 --> 0:07:29.040 point where it's completely in elastic. If you look at 0:07:29.080 --> 0:07:33.400 now the cold times, then essentially what is happening and 0:07:33.440 --> 0:07:38.160 that is our problem. Because French nukes are down demand 0:07:38.400 --> 0:07:42.840 from France and electricity is so high to the imports, 0:07:43.000 --> 0:07:46.400 especially when it gets cold, that then gas power plants 0:07:46.400 --> 0:07:50.080 in all neighboring countries are producing for France. That is, 0:07:50.120 --> 0:07:54.200 in essence something that will be I think the major 0:07:54.280 --> 0:07:58.960 risks throughout this winter how much cold spell will on 0:07:59.000 --> 0:08:02.240 the one hand increased gas demand in the heating sector 0:08:02.600 --> 0:08:05.680 and on the other hand city demanded France which they 0:08:05.720 --> 0:08:08.280 cannot meet themselves. I think we would agree with you 0:08:08.320 --> 0:08:10.520 here that at least the biggest priority has to be 0:08:10.560 --> 0:08:13.680 focusing on gas demand and mechanisms to support the gas 0:08:13.680 --> 0:08:16.720 price side of things. The question and risks around the 0:08:16.920 --> 0:08:19.560 crazy power market dynamics we've seen over this year, especially 0:08:19.600 --> 0:08:22.080 as you point out with French nuclear output being at 0:08:22.160 --> 0:08:25.560 almost record loads, that they're all definitely things on our radar. 0:08:25.960 --> 0:08:28.280 I guess maybe to dig in a little bit more 0:08:28.360 --> 0:08:30.480 on the gas price side. You know, we've seen a 0:08:30.560 --> 0:08:33.520 number of interventions being proposed and in some cases even 0:08:33.559 --> 0:08:37.439 implemented across the region, but also not a lot of progress. 0:08:37.480 --> 0:08:38.960 If I dare to say on on some of the 0:08:39.000 --> 0:08:42.120 mechanisms that have been floated to support gas price to 0:08:42.240 --> 0:08:45.440 actually mitigate some of the high gas price environment that 0:08:45.480 --> 0:08:47.880 we're seeing, I kind of want to know your view 0:08:48.080 --> 0:08:51.360 on what kind of interventions on the gas side are 0:08:51.400 --> 0:08:55.920 likely to be most successful. And I'm particularly thinking post 0:08:56.040 --> 0:08:58.920 this winter. So if we're thinking one to three years 0:08:58.920 --> 0:09:05.360 out now, I think joint purchasing by Europe on the 0:09:05.480 --> 0:09:09.920 global energy market would of course drive down producers rent 0:09:10.160 --> 0:09:14.320 here and increase our buyer power here. So that's something 0:09:14.360 --> 0:09:17.240 we should definitely do. And then, of course the second 0:09:17.320 --> 0:09:22.440 thing is will we see in increased export capacity over 0:09:22.480 --> 0:09:25.520 the coming months and years now? There are some projects 0:09:25.600 --> 0:09:29.280 that are envisaged a lot I think will come only 0:09:32.000 --> 0:09:35.880 and therefore we will I think I have to find 0:09:35.880 --> 0:09:40.800 a way to keep efficiency, renewables and others really as 0:09:40.920 --> 0:09:44.760 strong pillars over the next twenty four thirty six months 0:09:45.200 --> 0:09:48.800 in terror to have gas demand lower than we had 0:09:48.800 --> 0:09:52.320 it in with those measures we need to be able 0:09:52.360 --> 0:09:57.760 to get the gas market back to normal. Yeah, I 0:09:57.800 --> 0:10:00.560 guess it's definitely be inflated for a a while now. 0:10:00.640 --> 0:10:03.480 The question of joint gas purchasing, are you optimistic that 0:10:03.679 --> 0:10:08.240 will kind of progress? Well, used to be something where 0:10:08.280 --> 0:10:11.840 also Germany was very hesitant. We have switched our position. 0:10:12.160 --> 0:10:16.240 Given the high gas prices on the LNG market. I 0:10:16.280 --> 0:10:19.439 think there is a very good cause and case which 0:10:19.480 --> 0:10:22.320 is now different to other discussions that we had up 0:10:22.320 --> 0:10:27.680 to one. So therefore I would say yes, three will 0:10:27.720 --> 0:10:30.880 be the year where we see jo gas. And of 0:10:30.880 --> 0:10:32.880 course you know that there have already been a range 0:10:32.920 --> 0:10:35.640 of successful measures in some cases for the gas markets, 0:10:35.679 --> 0:10:39.200 including support for the midstream gas storage targets. We saw 0:10:39.280 --> 0:10:41.760 a kind of elect effectively rolled out across the region. 0:10:41.840 --> 0:10:45.040 And also to the point you raised earlier about downstream 0:10:45.040 --> 0:10:48.160 support to consumers, we already talked a little bit about 0:10:48.240 --> 0:10:51.120 how the high gas price environment is also having spill 0:10:51.160 --> 0:10:55.079 over consequences for our power markets because electricity prices are 0:10:55.200 --> 0:10:57.839 very often set by gas as the marginal supply source 0:10:57.880 --> 0:11:00.440 in the region. So maybe want to dig a little 0:11:00.440 --> 0:11:03.000 bit into some of the measures on the electricity side 0:11:03.000 --> 0:11:06.480 of things. Now. Back in October for those listening, the 0:11:06.520 --> 0:11:09.480 European Commission did set the stage for the EU to 0:11:09.679 --> 0:11:13.320 implement measures, including things like the levies on fossil fuel 0:11:13.320 --> 0:11:17.640 production as well as clawbacks on electricity generators profits, namely 0:11:17.720 --> 0:11:22.960 those inframarginal technologies like nuclear and renewables and nignite. But 0:11:23.080 --> 0:11:26.920 in practice been a analysts have been tracking kind of 0:11:26.920 --> 0:11:28.760 some of the measures that have actually started to be 0:11:28.840 --> 0:11:33.440 rolled out, and we've noticed a real mixture of measures 0:11:33.480 --> 0:11:36.800 starting to take effect across the regions. So Germany announced 0:11:37.080 --> 0:11:40.800 it's when for clawbacks on electricity generation, which go actually 0:11:40.840 --> 0:11:43.080 deeper than the EU threshold of a hundred and eighty 0:11:43.240 --> 0:11:46.160 euros Permegawa tower. Germany's, i believe is a hundred and 0:11:46.200 --> 0:11:49.760 thirty threshold with a ninety cent tax rate. And France 0:11:50.080 --> 0:11:53.320 has a perhaps even more aggressive and different clawback as well, 0:11:53.400 --> 0:11:56.440 starting from a hundred years permegawa tower, and they're planning 0:11:56.440 --> 0:11:58.640 to implement that for an even longer period of time 0:11:58.679 --> 0:12:01.640 than recommended by the Commission. And I think for start 0:12:01.760 --> 0:12:05.720 is these clawbacks are creating some discussions among the utilities 0:12:05.720 --> 0:12:08.360 around you know, use of these proceeds, And I want 0:12:08.400 --> 0:12:11.000 to ask you in particular, do you see any risks 0:12:11.040 --> 0:12:14.880 to so many differentiated response is now taking place among 0:12:15.080 --> 0:12:20.520 EU member states? Not really. I mean we see huge 0:12:20.720 --> 0:12:25.400 extra profits out there, and no one was planning with them. Honest, 0:12:25.480 --> 0:12:28.079 no one would have predicted the power cries of some 0:12:28.559 --> 0:12:31.240 have heard the euros promegoad hours or who or even 0:12:31.360 --> 0:12:34.000 higher that we have seen this summer. And if you 0:12:34.520 --> 0:12:39.600 take basically the three expectations were also well above three 0:12:39.640 --> 0:12:42.880 hundred euros permego at our I've seen a lot of models, 0:12:42.920 --> 0:12:46.000 but none of them have really kind of had those numbers. 0:12:46.040 --> 0:12:47.840 People out there are making a lot of money and 0:12:47.880 --> 0:12:50.680 if governments say a part of that should be given 0:12:50.720 --> 0:12:53.800 back to customers, then that's fair enough. The question is 0:12:53.920 --> 0:12:58.280 rather how long will those measures last and what happens afterwards. 0:12:58.480 --> 0:13:03.200 We have said they should end the end of April four. 0:13:03.640 --> 0:13:07.360 I think others in Europe also saying the crisis is 0:13:07.400 --> 0:13:11.080 not over in somewhere twenty three, but I'm in twenty 0:13:11.120 --> 0:13:14.120 four it will be over. And therefore the question is 0:13:14.160 --> 0:13:17.120 really what is the investment environment and when do we 0:13:17.200 --> 0:13:20.040 go back to normal? And there I would say everyone 0:13:20.080 --> 0:13:24.800 can be expecting that in four we will be returning 0:13:24.840 --> 0:13:27.880 back to normal markets. Yeah, I think we agree in 0:13:27.960 --> 0:13:31.880 terms of the investment signal, particularly for new technologies like 0:13:32.480 --> 0:13:35.360 on shore windom PV, which are now very much cheaper 0:13:35.480 --> 0:13:38.240 to run even to build new than even running the 0:13:38.240 --> 0:13:42.120 existing colon gas fire fleet, especially in this commodity price environment. 0:13:42.160 --> 0:13:45.360 So I think the investment signal question, like the fundamentals 0:13:45.360 --> 0:13:48.840 are there um everything in our models agrees build renobles 0:13:48.880 --> 0:13:52.160 to displace that existing generation, and definitely agreed with you 0:13:52.240 --> 0:13:55.679 as well on the question around duration at these mechanisms. 0:13:55.720 --> 0:13:58.520 I know, at least here in the UK, the clawback 0:13:58.600 --> 0:14:01.679 that's now been proposed by our government is planned to 0:14:01.760 --> 0:14:04.679 run through CHILL, at least in the press release that 0:14:04.720 --> 0:14:07.560 they announced last month, So that's definitely a question mark 0:14:07.600 --> 0:14:10.840 around around duration. And I think in some cases, if 0:14:10.840 --> 0:14:14.360 we're talking about measures that may extend over the kind 0:14:14.400 --> 0:14:17.240 of six to eight month time horizon and into the year, 0:14:17.360 --> 0:14:19.120 maybe even five years in the case of the UK, 0:14:19.560 --> 0:14:22.360 we do kind of reflect on the question around will 0:14:22.400 --> 0:14:26.240 there be perhaps slightly stronger signals for investment in new 0:14:26.240 --> 0:14:30.720 build renewables in certain markets over others, especially given things 0:14:30.760 --> 0:14:34.560 like supply chain constraints that many renewable energy developers are facing. 0:14:34.920 --> 0:14:37.640 I think the question mark around whether there will be 0:14:37.680 --> 0:14:42.160 slightly different decisions made is an interesting one still. I agree, 0:14:42.160 --> 0:14:46.520 of course, and the European Commission will now propose some 0:14:46.640 --> 0:14:50.600 market design reforms, and I guess a lot will be 0:14:50.680 --> 0:14:54.360 injuring towards for difference all over Europe, which the UK 0:14:54.600 --> 0:14:58.640 has as a standard model for renew renewables because that 0:14:58.840 --> 0:15:02.160 then gives to teacher investors. But at the same time 0:15:02.320 --> 0:15:07.040 it also has some sort of automatic cap on extra 0:15:07.200 --> 0:15:10.680 profits there in build So that is something I would 0:15:10.680 --> 0:15:14.080 expect to be coming out of Russells and to be 0:15:14.280 --> 0:15:19.080 also debated and discussed aboung members states throughout twenty twenty three. 0:15:19.480 --> 0:15:24.840 And we've just increased the auction price on wind and 0:15:24.880 --> 0:15:30.720 solar by twenty because of higher prices of raw materials 0:15:30.800 --> 0:15:34.080 and steel and everything that we see out there. So yes, 0:15:34.160 --> 0:15:39.720 inflation is there. We will see for probably some years 0:15:39.920 --> 0:15:43.000 higher prices, but that will also trigger new investment and 0:15:43.040 --> 0:15:45.840 then prices will come back down again. So these are 0:15:45.960 --> 0:15:49.160 special times we need to adapt and react, but I 0:15:49.520 --> 0:15:53.040 would see that Europe does that. Yeah. I think we 0:15:53.120 --> 0:15:55.840 agree on on this point a lot about the need 0:15:56.120 --> 0:15:59.000 to reflect on how the market design is laid out, 0:15:59.040 --> 0:16:02.520 particularly as we moved to technologies in the energy system 0:16:02.560 --> 0:16:04.920 that you know very much increasingly become based on their 0:16:04.920 --> 0:16:08.880 fixed costs, unless on their variable costs. I guess maybe 0:16:08.920 --> 0:16:11.800 just to dig one level deeper on on that, maybe 0:16:11.800 --> 0:16:14.200 just thinking about the renewable side of things. You mentioned 0:16:14.480 --> 0:16:18.600 CFD auction designs which have been very important in bringing 0:16:18.960 --> 0:16:21.040 lots of new renewables to the markets, and we have 0:16:21.240 --> 0:16:24.640 various designs across Europe. I guess we're we're actually facing 0:16:24.800 --> 0:16:28.120 similar reforms or at least proposals for reforms to how 0:16:28.160 --> 0:16:31.480 this happens in the UK here, and we have governments 0:16:31.520 --> 0:16:33.800 starting to think about how do we balance the need 0:16:33.920 --> 0:16:38.720 for keeping the incentive for new investment in renewables to 0:16:38.800 --> 0:16:41.800 also balance the needs of the power system itself to operate. 0:16:41.840 --> 0:16:45.320 You know, have operational signals that enable things like flexibility 0:16:45.400 --> 0:16:48.120 and other things. What do you think is most important 0:16:48.160 --> 0:16:50.480 to get right in the immediate term for kind of 0:16:50.520 --> 0:16:55.920 market design changes. You've been highlighting that this is about 0:16:56.520 --> 0:17:00.040 first of all, getting investments done. At second, the what 0:17:00.360 --> 0:17:04.480 market to be I think the key price signal that 0:17:04.520 --> 0:17:08.399 we need in order to have flexibility and everything to 0:17:08.520 --> 0:17:12.400 have a real time dispatch to the supply and demand work, 0:17:12.840 --> 0:17:16.280 and that's essentially what we need to solve those See 0:17:16.280 --> 0:17:19.480 if these whether or not they are towards killer what 0:17:19.720 --> 0:17:23.080 hours or maybe rather killer what's what is it that 0:17:23.359 --> 0:17:28.760 basically insures investment certainty at the same time gives the 0:17:28.840 --> 0:17:34.679 incentive to optimize yourself towards a very variable spot market. 0:17:35.240 --> 0:17:38.320 And there are answers to that if you ask economists, 0:17:38.320 --> 0:17:41.200 and we should listen to them. But I'm quite confident 0:17:41.280 --> 0:17:44.120 that we will get that also done within Europe as 0:17:44.160 --> 0:17:47.520 part of the negotiations in three Yeah, and I know 0:17:47.600 --> 0:17:49.720 that this has been on the agenda for the Commission 0:17:49.720 --> 0:17:52.240 in the wider member states for a while now, at 0:17:52.320 --> 0:17:55.160 least since I've been covering the onset of the European 0:17:55.160 --> 0:17:57.560 Green Dale, the market design reforms have been on the agenda. 0:17:57.600 --> 0:18:01.360 So hopefully one of the shall I benefits that are 0:18:01.400 --> 0:18:03.919 there in this whole crazy environment that we find ourselves 0:18:03.920 --> 0:18:06.960 and is that it's accelerating that discussion. One more thing 0:18:07.600 --> 0:18:10.920 we've been pushing very hard the last year, and that 0:18:11.080 --> 0:18:14.240 looks like now we will really be able to implement 0:18:14.320 --> 0:18:21.280 it to eason permitting processes to have everything really fast 0:18:21.320 --> 0:18:25.120 and speedy when it comes to wind and solar installation 0:18:25.359 --> 0:18:29.479 and permitting really is basically get to those six months 0:18:29.520 --> 0:18:33.480 of permitting process which the European Commission has been announcing 0:18:33.600 --> 0:18:37.760 the repower you and therefore I would say this is 0:18:37.800 --> 0:18:41.200 the moment to really kick start the renewable revolution in Europe, 0:18:41.400 --> 0:18:44.639 because it's very clear that is the only real sustainable 0:18:44.680 --> 0:18:48.040 answer to this higher gas prices at crisis. It's not 0:18:48.080 --> 0:18:51.199 going to be elergy from elsewhere. It's going to be 0:18:51.520 --> 0:18:54.360 wind and solar produced in Europe. Yeah, you've actually very 0:18:54.400 --> 0:18:56.639 well preempted the next question that I had for you, 0:18:56.680 --> 0:18:59.760 which is very much about the transition opportunities that are 0:18:59.800 --> 0:19:02.360 in urging in response to this crisis. We've long had 0:19:02.359 --> 0:19:05.680 this discussion around solving the energy trilemma. You know that 0:19:05.800 --> 0:19:11.040 our optimal energy system should balance one lowest cost for consumers. Too, 0:19:11.080 --> 0:19:14.080 it should be clean, it should be sustainable. Three, it 0:19:14.080 --> 0:19:17.480 should be reliable and secure. And actually, for me personally, 0:19:17.480 --> 0:19:19.240 I would add a fourth dimension there, which is we 0:19:19.240 --> 0:19:21.840 need to be talking about pace of delivery. Now. From 0:19:21.840 --> 0:19:24.679 my perspective, energy security has never been so high on 0:19:24.680 --> 0:19:28.040 the agenda, and it is increasingly clear that transition is 0:19:28.359 --> 0:19:32.440 part of energy security, especially with the need to cultivate 0:19:32.480 --> 0:19:38.560 accelerated deployments of local renewables. However, unfortunately, our analysis continues 0:19:38.600 --> 0:19:41.879 to find that there is actually just a really sizeable, 0:19:42.160 --> 0:19:45.359 huge disconnect between what's needed in terms of scale up 0:19:45.400 --> 0:19:48.560 of clean energy capacity and the reality of what's happening 0:19:48.600 --> 0:19:52.280 on the ground. You've mentioned permitting. We know that there 0:19:52.280 --> 0:19:55.440 are a number of challenges facing the scale up of renewables, 0:19:55.440 --> 0:19:59.160 and I know Germany has quite recently updated its own 0:19:59.320 --> 0:20:00.960 clean energy to how it gets as part of that 0:20:01.040 --> 0:20:05.520 Easter package earlier in two What beyond just getting the 0:20:05.520 --> 0:20:08.560 permitting right do you think is key to addressing those 0:20:08.640 --> 0:20:12.240 challenges in accelerating deployments at the pace that we actually need. 0:20:14.040 --> 0:20:17.600 So permenting is one thing alluded to that. The second 0:20:17.680 --> 0:20:21.440 thing is also to increase the capacity along the whole 0:20:21.720 --> 0:20:26.960 value chain. I've talked to winds producers and asked them, 0:20:27.000 --> 0:20:30.640 so are you prepared for that huge demand that will 0:20:30.720 --> 0:20:35.480 come all over Europe for additional wind mills, for additional pillars, 0:20:35.560 --> 0:20:39.760 for additional technologies that are associated to that, like grid 0:20:39.960 --> 0:20:44.040 connection and stuff, and there I was astonished that they were. 0:20:44.440 --> 0:20:48.359 So it's it is also about industrial policy here, because 0:20:48.400 --> 0:20:50.679 if I add up the wind off floor targets for 0:20:50.720 --> 0:20:56.040 example of the UK, Germany, Denmark, Netherlands and now also 0:20:56.480 --> 0:21:01.680 Poland and Poltics, then we're talking about quadrupling the factory 0:21:02.080 --> 0:21:05.439 sizes that we need to produce all that. So I 0:21:05.480 --> 0:21:09.320 think that will be the next real challenge, basically the 0:21:09.400 --> 0:21:13.200 capacity to build that stuff, and not just the market design. 0:21:15.680 --> 0:21:20.359 How important do you think the energy security dimension to 0:21:20.440 --> 0:21:24.800 the supply chain is in that equation? As a policymaker, 0:21:24.840 --> 0:21:28.240 how do you think about that? We didn't pay enough 0:21:28.280 --> 0:21:30.720 attention to that in the past. I would say I 0:21:30.760 --> 0:21:34.880 would feel a lot safer if we knew that let's 0:21:34.880 --> 0:21:40.520 say some or so of European demands on wind, solar 0:21:40.800 --> 0:21:45.480 and batteries and grids technologies and everything it can also 0:21:45.520 --> 0:21:48.760 be produced within Europe, and the European Commission I think 0:21:49.280 --> 0:21:52.840 is now waking up to that we will need additional 0:21:52.880 --> 0:21:56.679 instruments that FUNDA Lion has said we will for a 0:21:56.720 --> 0:22:00.679 few years need to relax our strict state it rules, 0:22:00.840 --> 0:22:04.680 and A totally agree because we need in this context, 0:22:05.080 --> 0:22:08.399 also as a response to the Inflation Reduction Act in 0:22:08.560 --> 0:22:12.879 the US, have a strong industrial policy. In Europe that 0:22:13.480 --> 0:22:16.960 delivers on all of those targets. That's really interesting. I 0:22:17.000 --> 0:22:20.159 guess beyond clean power, we know that other parts of 0:22:20.160 --> 0:22:23.080 the economy also need to transition, especially when we talk 0:22:23.080 --> 0:22:25.720 about sectors like heating, and we need to strike the 0:22:25.800 --> 0:22:29.840 right balance between supporting industries and companies and even households 0:22:29.840 --> 0:22:33.800 with their energy costs while still encouraging them to decarbonize. Now, 0:22:33.840 --> 0:22:37.520 as you will well know, the European Commissions Repower EU plan, 0:22:37.600 --> 0:22:40.200 which was kind of set up in response to the 0:22:40.280 --> 0:22:44.240 invasion of Ukraine earlier in the year, set some pretty 0:22:44.359 --> 0:22:48.640 lofty targets to structurally cut gas demand by over half 0:22:48.720 --> 0:22:52.639 across our entire economy. By that would require us to 0:22:52.720 --> 0:22:55.679 drive down gas use, not just in power where you know, 0:22:55.760 --> 0:22:58.360 relying on renewables, but also in heating an industry too. 0:22:58.920 --> 0:23:03.679 What are your source on Repower EU now and what 0:23:03.800 --> 0:23:06.199 kind of measures do you think will be required to 0:23:06.480 --> 0:23:11.320 actually deliver on it. I'm very grateful for the European 0:23:11.320 --> 0:23:14.679 Commission to have put forward Repower you because it was 0:23:14.800 --> 0:23:18.119 clear we needed an response in this crisis, and not 0:23:18.200 --> 0:23:22.800 just AFT package, which in itself was already very ambitious, 0:23:22.880 --> 0:23:29.000 and then the additional two ordinances that they proposed. Now 0:23:29.440 --> 0:23:33.880 what is key is heat pumps so quick, a lot 0:23:33.920 --> 0:23:37.159 of heat pumps all over Europe. That reduces gust demand 0:23:37.200 --> 0:23:41.040 in the heating sector. Second, what is needed is, as 0:23:41.040 --> 0:23:44.879 I've said, quick permitting procedures, and there we need to 0:23:45.000 --> 0:23:49.600 change European legislation in order to be quicker on national levels. 0:23:49.680 --> 0:23:53.360 So that is key and crucial in that regard. And 0:23:53.520 --> 0:23:57.600 the third is that industrial policy approach to those key 0:23:57.600 --> 0:24:02.520 technologies like wind, solar, battery and grips technologies. I think 0:24:02.560 --> 0:24:05.600 we need more of reducink gas demand in the hurry. 0:24:06.119 --> 0:24:09.879 There are some things that are just switching from gas 0:24:09.920 --> 0:24:14.400 to oil, which is the short term measure, but when 0:24:14.520 --> 0:24:18.800 it's really transformatory is switching from gas to electricity, not 0:24:18.880 --> 0:24:23.040 only private households but also within industry, and of course 0:24:23.280 --> 0:24:27.080 ramping up everything we can on the renewable electricity side. 0:24:27.359 --> 0:24:29.280