Speaker 1: Hi, Mrs Dana Perkins, and you're listening to Switch It
Speaker 1: on the b n OF podcast. So this winter there
Speaker 1: have been some unusually warm and unusually cold weeks, and
Speaker 1: certainly people are talking not just about the weather, but
Speaker 1: the energy crisis. The conversation around natural gas and how
Speaker 1: it fits into the future of the energy system and
Speaker 1: really what that energy system overall looks like as the
Speaker 1: energy transition gets underway, has something that has been front
Speaker 1: of mine for many people, certainly the companies in the
Speaker 1: energy transition and of course policymakers. So today we have
Speaker 1: the opportunity to investigate the policy aspect more deeply. M
Speaker 1: A Champion here at BNF is head of Regional Energy
Speaker 1: Transitions Research, and she was able to sit down in
Speaker 1: conversation with Dr Patrick Greign, State Secretary at the Federal
Speaker 1: Ministry for Economic Affairs and Climate Action for Germany, and
Speaker 1: they discuss the ongoing energy crisis. Even as the days
Speaker 1: are longer and we can almost see spring approaching on
Speaker 1: our calendars, this conversation is not going to stop when
Speaker 1: we get to the summer. So what steps can and
Speaker 1: should be taken? Well, I'm going to leave that conversation
Speaker 1: with Emma and Dr Gregan. As a reminder, being a
Speaker 1: F does not provide investment of strategy advice, and we
Speaker 1: have a complete disclaimer at the very end of the show.
Speaker 1: Hi everyone, my name is Emma Champion. I sit on
Speaker 1: the analyst side at BENF working on our energy transitions
Speaker 1: coverage of the European region, and today I am actually
Speaker 1: so excited and in fact honored to be playing MC
Speaker 1: for today's episode because we get to have a really
Speaker 1: important conversation with an exceptional guest. So joining us on
Speaker 1: the show today to discuss some of the policy responses
Speaker 1: to the ongoing energy crisis here in Europe and transition
Speaker 1: opportunities that might help us get out of this situation
Speaker 1: is Germany's State Secretary of the Ministry for Economic Affairs
Speaker 1: and Climate Action, Dr Patrick Gregn. Thank you so much
Speaker 1: for joining us today, Patrick, and welcome to Switched On. Yeah,
Speaker 1: thanks for having me, Emma. I'm really delighted to discuss
Speaker 1: because there's so much going on. Absolutely, I think to
Speaker 1: start with needless to say, at least from my perspective,
Speaker 1: it's been a particularly eventful eighteen months to be an
Speaker 1: analyst covering European energy markets. We've seen gas prices hit
Speaker 1: those unprecedented highs energy costs adding to a lot of
Speaker 1: the inflationary pressures that are facing European economies and governments
Speaker 1: as a result, staging quite deep and unprecedented interventions into
Speaker 1: our energy markets to help contain those costs, support the
Speaker 1: struggling industries and households as well as utilities in some cases,
Speaker 1: and markets have been almost haywire. Over two following Russia's
Speaker 1: invasion of Ukraine, we've seen extreme volatility in energy prices.
Speaker 1: So I kind of want to start off with a
Speaker 1: really quite broad question, but one I think a lot
Speaker 1: of people have been asking themselves at various moments over
Speaker 1: this crisis. Patrick, do you think our energy markets are broken?
Speaker 1: And I guess what we're really getting out here is
Speaker 1: what do you think is the cause of the crisis.
Speaker 1: The real cause of the crisis is very simple. We're
Speaker 1: lacking one hundred third gbcm of gas from Russia, and
Speaker 1: that of course has a substantial reaction from Europe to
Speaker 1: somehow hope with that, and of course that means high
Speaker 1: gas prices, it means public activity to increase the availability
Speaker 1: of energy to Europe, and it will take a while
Speaker 1: until global markets have rearranged, and of course, because the
Speaker 1: power market is linked to the gas market in the
Speaker 1: sense that gas power plants are setting the price in
Speaker 1: the power market, we're seeing those high electricity prices. But
Speaker 1: at the end of the day, I'd say markets are functioning. Yeah, absolutely.
Speaker 1: I kind of want to reflect on some of the
Speaker 1: lasts that we can and maybe should already be taking
Speaker 1: away from crisis management, particularly from your perspective and time
Speaker 1: now as a policymaker during this time, and so let's
Speaker 1: dig into some of the measures that are already being
Speaker 1: implemented for this winter. I'm in London. We've already seen
Speaker 1: over some of this month, indeed across much of the
Speaker 1: rest of Europe snow and sustain subzero temperatures. This is
Speaker 1: generating more and more concern around energy costs and looking forward,
Speaker 1: I guess I want to know what, in your mind
Speaker 1: should governments be prioritizing to minimize the negative effects of
Speaker 1: this crisis. It's very clear that we would need to
Speaker 1: reduce our guest demand by some twent over the next
Speaker 1: eighteen months in Europe, and essentially the price will do
Speaker 1: part of this. We see already how a price have
Speaker 1: driven down guest demanding industry. But then there are other
Speaker 1: effects where we would also need to government intervention, lower
Speaker 1: heat demand, to boost energy efficiency, to boost renewables, to
Speaker 1: basically we did the call back online in order to
Speaker 1: get basically gas our plants less full of ours. So
Speaker 1: those are essentially all the things that we need to
Speaker 1: do when it comes to basically gas flows. Then of
Speaker 1: course we have the gas price issue, and there we have,
Speaker 1: of course for customers huge price increases. We somehow need
Speaker 1: to find a way that they can cope with it.
Speaker 1: That's why a lot of governments have handed out subsidies.
Speaker 1: But on the other hand, there are also people who
Speaker 1: make a lot of money now and we should also
Speaker 1: take some of those extra profits and give them back
Speaker 1: to customers. I want to dig into some of those
Speaker 1: ideas a little further, so maybe let's talk about the
Speaker 1: demand and price dynamics. We've already seen to your point
Speaker 1: that many consumers across the segments from residential to industry
Speaker 1: are already responding to this higher price environment and reducing
Speaker 1: that consumption. My colleagues on the BENF Gas team are
Speaker 1: trying king gas demand destruction in Germany at over fift
Speaker 1: even since it got colder over the recent weeks um
Speaker 1: and that's according to our provision or kind of implied
Speaker 1: demand data. But we've also seen to your point about
Speaker 1: many governments, including in Germany, you're rightly putting in place
Speaker 1: measures to help contain costs for consumers and support their
Speaker 1: energy bills. I guess the question here is, is there
Speaker 1: a dilemma where there are risks of going too far
Speaker 1: in shielding consumers from price increases and thereby actually muting
Speaker 1: the effect of some of those price signals to reduce demand.
Speaker 1: I guess, like, what's the sweet spot? Well, what we
Speaker 1: are doing is the shielding of customers has to still
Speaker 1: have a full incentive to reduce demand, which is why
Speaker 1: at the end of the day, it is a lump
Speaker 1: some money calculated on previous demand, but it's a lumpsome
Speaker 1: transfer that we're doing. That means you still have the
Speaker 1: full incentive to reduce your gas demand because you still
Speaker 1: see the gas high prices on your marginal demand. And
Speaker 1: therefore I think that's what is needed, shield customers through
Speaker 1: a mechanism which still gives the full incentive to reduce Yeah,
Speaker 1: I understand it's certainly a tricky one though to get
Speaker 1: the balance right, and I mean to be fair to
Speaker 1: my point, we are still tracking demand destruction happening in
Speaker 1: real time, so I think we're not quite at that
Speaker 1: point where it's completely in elastic. If you look at
Speaker 1: now the cold times, then essentially what is happening and
Speaker 1: that is our problem. Because French nukes are down demand
Speaker 1: from France and electricity is so high to the imports,
Speaker 1: especially when it gets cold, that then gas power plants
Speaker 1: in all neighboring countries are producing for France. That is,
Speaker 1: in essence something that will be I think the major
Speaker 1: risks throughout this winter how much cold spell will on
Speaker 1: the one hand increased gas demand in the heating sector
Speaker 1: and on the other hand city demanded France which they
Speaker 1: cannot meet themselves. I think we would agree with you
Speaker 1: here that at least the biggest priority has to be
Speaker 1: focusing on gas demand and mechanisms to support the gas
Speaker 1: price side of things. The question and risks around the
Speaker 1: crazy power market dynamics we've seen over this year, especially
Speaker 1: as you point out with French nuclear output being at
Speaker 1: almost record loads, that they're all definitely things on our radar.
Speaker 1: I guess maybe to dig in a little bit more
Speaker 1: on the gas price side. You know, we've seen a
Speaker 1: number of interventions being proposed and in some cases even
Speaker 1: implemented across the region, but also not a lot of progress.
Speaker 1: If I dare to say on on some of the
Speaker 1: mechanisms that have been floated to support gas price to
Speaker 1: actually mitigate some of the high gas price environment that
Speaker 1: we're seeing, I kind of want to know your view
Speaker 1: on what kind of interventions on the gas side are
Speaker 1: likely to be most successful. And I'm particularly thinking post
Speaker 1: this winter. So if we're thinking one to three years
Speaker 1: out now, I think joint purchasing by Europe on the
Speaker 1: global energy market would of course drive down producers rent
Speaker 1: here and increase our buyer power here. So that's something
Speaker 1: we should definitely do. And then, of course the second
Speaker 1: thing is will we see in increased export capacity over
Speaker 1: the coming months and years now? There are some projects
Speaker 1: that are envisaged a lot I think will come only
Speaker 1: and therefore we will I think I have to find
Speaker 1: a way to keep efficiency, renewables and others really as
Speaker 1: strong pillars over the next twenty four thirty six months
Speaker 1: in terror to have gas demand lower than we had
Speaker 1: it in with those measures we need to be able
Speaker 1: to get the gas market back to normal. Yeah, I
Speaker 1: guess it's definitely be inflated for a a while now.
Speaker 1: The question of joint gas purchasing, are you optimistic that
Speaker 1: will kind of progress? Well, used to be something where
Speaker 1: also Germany was very hesitant. We have switched our position.
Speaker 1: Given the high gas prices on the LNG market. I
Speaker 1: think there is a very good cause and case which
Speaker 1: is now different to other discussions that we had up
Speaker 1: to one. So therefore I would say yes, three will
Speaker 1: be the year where we see jo gas. And of
Speaker 1: course you know that there have already been a range
Speaker 1: of successful measures in some cases for the gas markets,
Speaker 1: including support for the midstream gas storage targets. We saw
Speaker 1: a kind of elect effectively rolled out across the region.
Speaker 1: And also to the point you raised earlier about downstream
Speaker 1: support to consumers, we already talked a little bit about
Speaker 1: how the high gas price environment is also having spill
Speaker 1: over consequences for our power markets because electricity prices are
Speaker 1: very often set by gas as the marginal supply source
Speaker 1: in the region. So maybe want to dig a little
Speaker 1: bit into some of the measures on the electricity side
Speaker 1: of things. Now. Back in October for those listening, the
Speaker 1: European Commission did set the stage for the EU to
Speaker 1: implement measures, including things like the levies on fossil fuel
Speaker 1: production as well as clawbacks on electricity generators profits, namely
Speaker 1: those inframarginal technologies like nuclear and renewables and nignite. But
Speaker 1: in practice been a analysts have been tracking kind of
Speaker 1: some of the measures that have actually started to be
Speaker 1: rolled out, and we've noticed a real mixture of measures
Speaker 1: starting to take effect across the regions. So Germany announced
Speaker 1: it's when for clawbacks on electricity generation, which go actually
Speaker 1: deeper than the EU threshold of a hundred and eighty
Speaker 1: euros Permegawa tower. Germany's, i believe is a hundred and
Speaker 1: thirty threshold with a ninety cent tax rate. And France
Speaker 1: has a perhaps even more aggressive and different clawback as well,
Speaker 1: starting from a hundred years permegawa tower, and they're planning
Speaker 1: to implement that for an even longer period of time
Speaker 1: than recommended by the Commission. And I think for start
Speaker 1: is these clawbacks are creating some discussions among the utilities
Speaker 1: around you know, use of these proceeds, And I want
Speaker 1: to ask you in particular, do you see any risks
Speaker 1: to so many differentiated response is now taking place among
Speaker 1: EU member states? Not really. I mean we see huge
Speaker 1: extra profits out there, and no one was planning with them. Honest,
Speaker 1: no one would have predicted the power cries of some
Speaker 1: have heard the euros promegoad hours or who or even
Speaker 1: higher that we have seen this summer. And if you
Speaker 1: take basically the three expectations were also well above three
Speaker 1: hundred euros permego at our I've seen a lot of models,
Speaker 1: but none of them have really kind of had those numbers.
Speaker 1: People out there are making a lot of money and
Speaker 1: if governments say a part of that should be given
Speaker 1: back to customers, then that's fair enough. The question is
Speaker 1: rather how long will those measures last and what happens afterwards.
Speaker 1: We have said they should end the end of April four.
Speaker 1: I think others in Europe also saying the crisis is
Speaker 1: not over in somewhere twenty three, but I'm in twenty
Speaker 1: four it will be over. And therefore the question is
Speaker 1: really what is the investment environment and when do we
Speaker 1: go back to normal? And there I would say everyone
Speaker 1: can be expecting that in four we will be returning
Speaker 1: back to normal markets. Yeah, I think we agree in
Speaker 1: terms of the investment signal, particularly for new technologies like
Speaker 1: on shore windom PV, which are now very much cheaper
Speaker 1: to run even to build new than even running the
Speaker 1: existing colon gas fire fleet, especially in this commodity price environment.
Speaker 1: So I think the investment signal question, like the fundamentals
Speaker 1: are there um everything in our models agrees build renobles
Speaker 1: to displace that existing generation, and definitely agreed with you
Speaker 1: as well on the question around duration at these mechanisms.
Speaker 1: I know, at least here in the UK, the clawback
Speaker 1: that's now been proposed by our government is planned to
Speaker 1: run through CHILL, at least in the press release that
Speaker 1: they announced last month, So that's definitely a question mark
Speaker 1: around around duration. And I think in some cases, if
Speaker 1: we're talking about measures that may extend over the kind
Speaker 1: of six to eight month time horizon and into the year,
Speaker 1: maybe even five years in the case of the UK,
Speaker 1: we do kind of reflect on the question around will
Speaker 1: there be perhaps slightly stronger signals for investment in new
Speaker 1: build renewables in certain markets over others, especially given things
Speaker 1: like supply chain constraints that many renewable energy developers are facing.
Speaker 1: I think the question mark around whether there will be
Speaker 1: slightly different decisions made is an interesting one still. I agree,
Speaker 1: of course, and the European Commission will now propose some
Speaker 1: market design reforms, and I guess a lot will be
Speaker 1: injuring towards for difference all over Europe, which the UK
Speaker 1: has as a standard model for renew renewables because that
Speaker 1: then gives to teacher investors. But at the same time
Speaker 1: it also has some sort of automatic cap on extra
Speaker 1: profits there in build So that is something I would
Speaker 1: expect to be coming out of Russells and to be
Speaker 1: also debated and discussed aboung members states throughout twenty twenty three.
Speaker 1: And we've just increased the auction price on wind and
Speaker 1: solar by twenty because of higher prices of raw materials
Speaker 1: and steel and everything that we see out there. So yes,
Speaker 1: inflation is there. We will see for probably some years
Speaker 1: higher prices, but that will also trigger new investment and
Speaker 1: then prices will come back down again. So these are
Speaker 1: special times we need to adapt and react, but I
Speaker 1: would see that Europe does that. Yeah. I think we
Speaker 1: agree on on this point a lot about the need
Speaker 1: to reflect on how the market design is laid out,
Speaker 1: particularly as we moved to technologies in the energy system
Speaker 1: that you know very much increasingly become based on their
Speaker 1: fixed costs, unless on their variable costs. I guess maybe
Speaker 1: just to dig one level deeper on on that, maybe
Speaker 1: just thinking about the renewable side of things. You mentioned
Speaker 1: CFD auction designs which have been very important in bringing
Speaker 1: lots of new renewables to the markets, and we have
Speaker 1: various designs across Europe. I guess we're we're actually facing
Speaker 1: similar reforms or at least proposals for reforms to how
Speaker 1: this happens in the UK here, and we have governments
Speaker 1: starting to think about how do we balance the need
Speaker 1: for keeping the incentive for new investment in renewables to
Speaker 1: also balance the needs of the power system itself to operate.
Speaker 1: You know, have operational signals that enable things like flexibility
Speaker 1: and other things. What do you think is most important
Speaker 1: to get right in the immediate term for kind of
Speaker 1: market design changes. You've been highlighting that this is about
Speaker 1: first of all, getting investments done. At second, the what
Speaker 1: market to be I think the key price signal that
Speaker 1: we need in order to have flexibility and everything to
Speaker 1: have a real time dispatch to the supply and demand work,
Speaker 1: and that's essentially what we need to solve those See
Speaker 1: if these whether or not they are towards killer what
Speaker 1: hours or maybe rather killer what's what is it that
Speaker 1: basically insures investment certainty at the same time gives the
Speaker 1: incentive to optimize yourself towards a very variable spot market.
Speaker 1: And there are answers to that if you ask economists,
Speaker 1: and we should listen to them. But I'm quite confident
Speaker 1: that we will get that also done within Europe as
Speaker 1: part of the negotiations in three Yeah, and I know
Speaker 1: that this has been on the agenda for the Commission
Speaker 1: in the wider member states for a while now, at
Speaker 1: least since I've been covering the onset of the European
Speaker 1: Green Dale, the market design reforms have been on the agenda.
Speaker 1: So hopefully one of the shall I benefits that are
Speaker 1: there in this whole crazy environment that we find ourselves
Speaker 1: and is that it's accelerating that discussion. One more thing
Speaker 1: we've been pushing very hard the last year, and that
Speaker 1: looks like now we will really be able to implement
Speaker 1: it to eason permitting processes to have everything really fast
Speaker 1: and speedy when it comes to wind and solar installation
Speaker 1: and permitting really is basically get to those six months
Speaker 1: of permitting process which the European Commission has been announcing
Speaker 1: the repower you and therefore I would say this is
Speaker 1: the moment to really kick start the renewable revolution in Europe,
Speaker 1: because it's very clear that is the only real sustainable
Speaker 1: answer to this higher gas prices at crisis. It's not
Speaker 1: going to be elergy from elsewhere. It's going to be
Speaker 1: wind and solar produced in Europe. Yeah, you've actually very
Speaker 1: well preempted the next question that I had for you,
Speaker 1: which is very much about the transition opportunities that are
Speaker 1: in urging in response to this crisis. We've long had
Speaker 1: this discussion around solving the energy trilemma. You know that
Speaker 1: our optimal energy system should balance one lowest cost for consumers. Too,
Speaker 1: it should be clean, it should be sustainable. Three, it
Speaker 1: should be reliable and secure. And actually, for me personally,
Speaker 1: I would add a fourth dimension there, which is we
Speaker 1: need to be talking about pace of delivery. Now. From
Speaker 1: my perspective, energy security has never been so high on
Speaker 1: the agenda, and it is increasingly clear that transition is
Speaker 1: part of energy security, especially with the need to cultivate
Speaker 1: accelerated deployments of local renewables. However, unfortunately, our analysis continues
Speaker 1: to find that there is actually just a really sizeable,
Speaker 1: huge disconnect between what's needed in terms of scale up
Speaker 1: of clean energy capacity and the reality of what's happening
Speaker 1: on the ground. You've mentioned permitting. We know that there
Speaker 1: are a number of challenges facing the scale up of renewables,
Speaker 1: and I know Germany has quite recently updated its own
Speaker 1: clean energy to how it gets as part of that
Speaker 1: Easter package earlier in two What beyond just getting the
Speaker 1: permitting right do you think is key to addressing those
Speaker 1: challenges in accelerating deployments at the pace that we actually need.
Speaker 1: So permenting is one thing alluded to that. The second
Speaker 1: thing is also to increase the capacity along the whole
Speaker 1: value chain. I've talked to winds producers and asked them,
Speaker 1: so are you prepared for that huge demand that will
Speaker 1: come all over Europe for additional wind mills, for additional pillars,
Speaker 1: for additional technologies that are associated to that, like grid
Speaker 1: connection and stuff, and there I was astonished that they were.
Speaker 1: So it's it is also about industrial policy here, because
Speaker 1: if I add up the wind off floor targets for
Speaker 1: example of the UK, Germany, Denmark, Netherlands and now also
Speaker 1: Poland and Poltics, then we're talking about quadrupling the factory
Speaker 1: sizes that we need to produce all that. So I
Speaker 1: think that will be the next real challenge, basically the
Speaker 1: capacity to build that stuff, and not just the market design.
Speaker 1: How important do you think the energy security dimension to
Speaker 1: the supply chain is in that equation? As a policymaker,
Speaker 1: how do you think about that? We didn't pay enough
Speaker 1: attention to that in the past. I would say I
Speaker 1: would feel a lot safer if we knew that let's
Speaker 1: say some or so of European demands on wind, solar
Speaker 1: and batteries and grids technologies and everything it can also
Speaker 1: be produced within Europe, and the European Commission I think
Speaker 1: is now waking up to that we will need additional
Speaker 1: instruments that FUNDA Lion has said we will for a
Speaker 1: few years need to relax our strict state it rules,
Speaker 1: and A totally agree because we need in this context,
Speaker 1: also as a response to the Inflation Reduction Act in
Speaker 1: the US, have a strong industrial policy. In Europe that
Speaker 1: delivers on all of those targets. That's really interesting. I
Speaker 1: guess beyond clean power, we know that other parts of
Speaker 1: the economy also need to transition, especially when we talk
Speaker 1: about sectors like heating, and we need to strike the
Speaker 1: right balance between supporting industries and companies and even households
Speaker 1: with their energy costs while still encouraging them to decarbonize. Now,
Speaker 1: as you will well know, the European Commissions Repower EU plan,
Speaker 1: which was kind of set up in response to the
Speaker 1: invasion of Ukraine earlier in the year, set some pretty
Speaker 1: lofty targets to structurally cut gas demand by over half
Speaker 1: across our entire economy. By that would require us to
Speaker 1: drive down gas use, not just in power where you know,
Speaker 1: relying on renewables, but also in heating an industry too.
Speaker 1: What are your source on Repower EU now and what
Speaker 1: kind of measures do you think will be required to
Speaker 1: actually deliver on it. I'm very grateful for the European
Speaker 1: Commission to have put forward Repower you because it was
Speaker 1: clear we needed an response in this crisis, and not
Speaker 1: just AFT package, which in itself was already very ambitious,
Speaker 1: and then the additional two ordinances that they proposed. Now
Speaker 1: what is key is heat pumps so quick, a lot
Speaker 1: of heat pumps all over Europe. That reduces gust demand
Speaker 1: in the heating sector. Second, what is needed is, as
Speaker 1: I've said, quick permitting procedures, and there we need to
Speaker 1: change European legislation in order to be quicker on national levels.
Speaker 1: So that is key and crucial in that regard. And
Speaker 1: the third is that industrial policy approach to those key
Speaker 1: technologies like wind, solar, battery and grips technologies. I think
Speaker 1: we need more of reducink gas demand in the hurry.
Speaker 1: There are some things that are just switching from gas
Speaker 1: to oil, which is the short term measure, but when
Speaker 1: it's really transformatory is switching from gas to electricity, not
Speaker 1: only private households but also within industry, and of course
Speaker 1: ramping up everything we can on the renewable electricity side.
Speaker 1: And I mean that that also does have to be
Speaker 1: somewhat of a discussion around the risks to our carbon
Speaker 1: footprint of things like the repowery package which do more
Speaker 1: heavily rely on cold generation, for example in Europe. And actually,
Speaker 1: while prepping for this interview with you, I spent a
Speaker 1: lot of time talking to many being analysts and people
Speaker 1: in our teams. And one of the questions that came up,
Speaker 1: and this is maybe a little bit broader step away
Speaker 1: from repower EU specifically, but more about the role of
Speaker 1: climate policy and our targets in light of this energy
Speaker 1: crisis and the example that Europe has to be setting
Speaker 1: to the rest of the world. And maybe to be
Speaker 1: quite simple on the question, but something that came out
Speaker 1: out of CORP recently in Egypt is the whole how
Speaker 1: do we keep one point five alive? I guess that's
Speaker 1: my question for you. How do we admite of this situation? Well,
Speaker 1: it is of course the challenge, and let's not show
Speaker 1: away from it. We're using more cold than we thought
Speaker 1: and we've prolonged the lifetime of a cold power plants
Speaker 1: which we all were shutting down up until in Mark
Speaker 1: twenty four. So these are teen months of additional cold
Speaker 1: power which we have to take. But the good news
Speaker 1: is we're not changing anything on the emissions trading system.
Speaker 1: The Canadas up and negotiations in Brussels have really delivered
Speaker 1: on a strict reform of the t S, which is
Speaker 1: why we see high prices. High prices on you as
Speaker 1: you two allowances, and at the moment gas prices go
Speaker 1: back down, we will see the COD phase out just
Speaker 1: happening faster than you have ever thought. I would expect
Speaker 1: the second half of this decade six onwards that you'll
Speaker 1: see basically the whole call phase out happening in Europe,
Speaker 1: and therefore the signal to the rest of the world is,
Speaker 1: in essence, we're continuing on the energy transition. You'll see
Speaker 1: I think the fastest you roll out ever in this
Speaker 1: year and the last year, the COD phase out will
Speaker 1: happen the second part of this decade faster than you
Speaker 1: ever thought. Yeah, I think I think this alligans with
Speaker 1: a lot of the internal thinking that we're doing as well.
Speaker 1: I guess my very last question for you for today
Speaker 1: is again a slightly broader one, stepping back in light
Speaker 1: of the current geo political situation, and you've already mentioned
Speaker 1: several quite game changing perspectives that actually started to shift
Speaker 1: across Europe. Just as one example, the relaxing potentially of
Speaker 1: stating rules to be able to kind of support domestic
Speaker 1: manufacturing of clean energy components within the region. I guess,
Speaker 1: in light of our current geopolitics, are those principles that
Speaker 1: sat at the heart of European energy policy for the
Speaker 1: last few decades of the liberalized clean energy market now
Speaker 1: really at odds with delivering on our energy security goals.
Speaker 1: I do think that the European Commission, and it's basically
Speaker 1: safeguarding the competition rules they have put two little emphasis on,
Speaker 1: but we need that stuff with factories in Europe. And
Speaker 1: I think what we're now needing is this is not
Speaker 1: about an individual member state having that now advantages these
Speaker 1: are the other member states. That's not what we want.
Speaker 1: What we want is that within Europe we have the
Speaker 1: industrial capacity for all those technologies. So what this is
Speaker 1: really about is finding new state rules and also European
Speaker 1: instruments that allow for government funding for new factories in Europe.
Speaker 1: And that's then the European answer to the Inflation Reduction Act.
Speaker 1: While the focus has very much been on we don't
Speaker 1: want competition between member states and we need to basically
Speaker 1: ensure that, and that has been led to two little investments.
Speaker 1: Will now be how do we ensure that investment takes
Speaker 1: place in Europe? And of course also this shouldn't lead
Speaker 1: a one member states to be more about than others.
Speaker 1: But I see a convergence on these issues, I think
Speaker 1: I tend to agree, especially on the alignment between energy
Speaker 1: security and decombanizing the energy systems. Perhaps the question of
Speaker 1: how to do this well in terms of liberalizing markets
Speaker 1: is a slightly different question, and it definitely aligns with
Speaker 1: some of the This one question that honestly, I think
Speaker 1: every single client has asked a being affair at some
Speaker 1: point over this last year, is will this crisis accelerate
Speaker 1: or decelerate the transition? And I think there is no
Speaker 1: simple answer to that other than to say it's mixed
Speaker 1: and it depends what we're really we're really talking about. Well,
Speaker 1: I would say it does accelerate if you look at
Speaker 1: what the i A has just put out in their
Speaker 1: report of how they expect a renewable accelerating. Of course,
Speaker 1: we will have higher emissions in the power sector three
Speaker 1: because of short term measures on oil and coal, But
Speaker 1: at the same time, structurally this is driving renewables and
Speaker 1: just driving electrification, and that's what the energy transition is about.
Speaker 1: I would be very confident that if you look at
Speaker 1: short term indicators you might have a different due to this,
Speaker 1: But if you're looking at what happens structurally. Then this
Speaker 1: is speeding up the energy for sire, and that also
Speaker 1: aligns with many of the key findings of our new
Speaker 1: energy outlook as well. I could have asked so many
Speaker 1: more questions to you today, but unfortunately we are getting
Speaker 1: towards the end of our time. Patrick, I want to
Speaker 1: thank you for such an insightful conversation today. I think
Speaker 1: it's a really critical time for us to be reflecting
Speaker 1: on the responses that are taking place to the energy
Speaker 1: crisis while taking the time to think forward about the
Speaker 1: emerging energy transition opportunities. UM, thank you so much again
Speaker 1: for joining us today, Patrick, Yes, thank you, I'm up
Speaker 1: for having me and let's see what three you will bring.
Speaker 1: Today's episode of Switched On was edited by Rex Warner
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