Europe’s Power Trading Outlook with Xavier Veillard

[Music] Welcome to the HC Comortis Podcast, a podcast dedicated to the Comortis sector and the people within it. I'm your host Paul Chapman. This podcast is produced by HC Group, a global search firm dedicated to the Comortis sector. [Music] Today we return to the European energy markets in particular power. How is European power demand fed since Russia's invasion of Ukraine? What has that done to power markets themselves and the energy mix? And just as European power demand was starting to pick back up, has Israel and the US's attack on Iran upended it. And what has all this volatility meant for European energy traders? Our guest is Avi Veyard. Partner at McKinsey in part of that global energy practice and their lead for power trading. As always you can support the show by leaving us a positive review on the platform while listening on. And as always I hope you enjoy the episode. Zavi welcome back to the show. Thank you Paul. Thank you for hosting me. I think this is our third podcast together. So it's almost becoming an annual and we're excited to have you on. And I guess today we're trying to do a couple of objectives. One is tell a story that you and I plan to tell back in February, prior to Israel and the US's conflict in Iran. And then tell the story subsequent to that. And that story is really centered on European but also abroad a global energy prices, particularly power and some of the fuels go into creating that power. But a power supply story, a power demand story. And then what is what what the ruckians caused by the war in Iran that are causing and what might be some of the long term impacts. So let's spend the first half really kind of catching us up where we were in the latter stages of 2025 and where we are in 2026 or started the year off with with respect to and let's start with Europe. Power prices now where were they where they've been and kind of what the outlet was because it seemed like a pretty sanguine picture for the Europe power markets it looked like since the investment in renewables was paying off. And yes, let's I don't want to pre-empt the stories but let's start there. Thank you Paul. So maybe let me step back a bit to give a broad picture around power and electrification. So if you look at the past 10 years or so, global power consumption has grown around 3.5% globally. So there has been a significant level of electrification across the globe. Now if you look a bit more granular at certain regions and if you look particularly at Europe, what you see is actually over the last 10 years in Europe, we have had rather flat or even in some countries declining power consumption. So it's a bit at odds with the overall electrification trends where you would have expected to have a growing power consumption. Now however we believe we're at a bit at an inflection point and everything that has led to that contraction of consumption related to energy efficiency, demand destruction. Overall is reaching a bottom and now when you look at electrification of industry, data centers, electrification of transport and broader fuel to electricity switch related to heating for buildings. For example, we are now entering a period where in Europe we see close to 2% annual growth over the next 15 years. And that's important because that electrification trend drives a lot of incremental demand and so the need to invest in the overall system and the need to have a well-functioning market to trade power. You asked about prices. So indeed what happened is obviously in 2022, with the conflict in Ukraine, we had a search in gas price. Gas is setting the marginal price of power in Europe and so with gas tripling, quadripling, you had the same effect on power which at the time was also coupled with a number of other factors, a cold winter, a lot of nuclear outage in France and so all of this led to power surging above the 200, 300 euro per megawatt hour for winter 22 deliveries. If you look at what happened after and I fast forward in 2025, we have had essentially a market with ample supply, a lot of renewables producing well and as a result actually price is going in the opposite direction where you had average wholesale prices a month ahead quarter ahead more in the area of 40, 50 euro per megawatt hour. And with power it's always a bit difficult because contrary to oil where you have a month ahead price and you have a forward curve which is with a resolution of a month by month in power. If you look at it on a day basis it's obviously very different so just before this call I was looking at the day ahead prices for power for Germany tomorrow. If you look at it's quite interesting so at 8 a.m. tomorrow it will be 160 euro, at 3 pm it will be 0 and at 6 pm it will be 80 euro per megawatt hour. So you know it's difficult also to talk about price and absolute because it's very different for each hour of the day and that's a bit the new normal so there is an absolute volatility which is again what we saw in 22 in 25 and what we're seeing now with the average price is going back up north of the 100 euro per megawatt hour but there is also that inherent hourly volatility which is the new norm in the in the power sector it's the case in Europe so also the case in a number of places in the US and where there is more liberalization and a number of renewables online where we have this hourly volatility and the implications are strong and we'll come back to it a bit after I assume but so you have to think of a system where external conflicts related to commodities that we use for power production creates a lot of inflation or deflation going the opposite way for power prices and to the effect of renewables on the hourly prices that is very strong and hence what we observe for tomorrow in Germany for example. That was fascinating and a lot to unpack and we are going to spend some time on what it means for the trading community just on that that power demand growth and that contrast between Europe and the rest of the world the rest of the world at 3.5% or whatever it might basically GDP and Europe not. Is that a reflection of the fact that European GDP hasn't grown in the last whatever it is 10 years and also if so is that cause or effect in other words is it a function of higher TTF prices higher gas prices have them to higher power prices which have led to a demand a demand destruction economic destruction can you just help us understand that a little bit and then I will come on to that interday volatility no absolutely so it's a combination of both factors so indeed the GDP growth in emerging countries has sustained a lot of incremental investment in power production capacity gas power plant coal power plants nuclear significant nuclear development in China and as a result globally you have had an increase in power supply which has been coupled with increase of GDP and hence our consumption for industry and for residential and so that's why you have this coupling of GDP growth and power demand growth now what happened in Europe is that we have had two things one there has been a strong driver around efficiency efficiency in industry efficiency in buildings efficiency in homes and that has driven a lot more reduction of energy consumption per capita and there has been a lot of measures to stimulate efficiency so for example if you look at the white certificate scheme it's a scheme where you incentivize residential homeowners to reduce consumption in return to have certificates for what they deploy to reduce that consumption you have had that scheme in France and Italy and Poland and other countries and so it stimulates a lot of efficiency and so that was one thing the second thing is obviously when the prices increase your sensitivity to consumption increases and so in the last few years even starting before 2022 increases in power prices associated with the underlying increasing gas prices but not only led to increasing exposure to higher prices for industrials and residential sectors and as a result reduction in overall demand and that's on top of the efficiency measures and the lot of it has been driven by industry. If you look at demand, roughly two-third of the demand is actually industry. And so-- - So that is essentially economic. - It's a large demand pool. And when this industry is facing high pressure from other industries that are competing on an important parity basis, then that industry is struggling. And so what we've had is a reduction in industry consumption associated with these high prices. So you take these two effects together, that led to the stagnation of demand in the past years in Europe. Now, again, when we look forward, we see now the growth coming back. And so we think we're a bit at an inflection point. And so now the story will be a bit different going forward with again drivers related to data centers, transport, and also additional industry identification. A bit of one bit of the other, if I'm hearing you right then. So now we're kind of at an inflection point where all of the prospective efficiency has been captured. That industry that is sensitive to price has essentially been destroyed or shut down whatever it might be gone elsewhere. And now you're forecasting the new growth on that kind of new low baseline, and with AI data centers and continued electrification. Presumably as well, there's some part of Europe reaping the dividend of all the investment in renewables. We've seen that a little bit in the wind, this winter where it's really boosted or really load power prices. Can you just sharpen that argument a little bit about why now you see a renewed growth in power demand? Yes, yes. So it's coming from a broad range of drivers. I think if you look at the industry, there's a lot of a driver related to electrification of heat production. So if you hear about e-boilers, medium to high temperature heat pumps, coupled with on-site batteries to provide buffer for industrial processes, there is a lot of now affordable price competitive solution to electrify the man. And that's one thing addressing industry. The second thing is if you look at buildings, when you look at heat production in buildings, more and more, you have either regulatory bands. And this is not new related to producing heat from gas. And so for a new build, there's a case in the evidence, for example, for a number of years, or any removal of subsidies for improving heat production efficiency in buildings if you still use gas. And so as a result, you can have an accelerated shift towards heat pumps or pure electric systems. And that's in buildings. If you go after in data center, essentially there's a surge of global data center. And if you look at it in Europe, it's about three-ish gigawatt per year that could be added as a potential, which is significant, right? So the total gigawatt that it represents is significant. If you then add on top of this transport, which in total volume is not too big, so it's about in 2030, it could be still less than 10% of total power consumption. But again, it adds to the overall total. And you put all of this together, basically we're with the overall economic growth of the region. You're in an environment which has this positive growth that we foresee for power consumption. The energy and resources sector is experiencing unprecedented change. To help navigate this change and capture its opportunities, HC Group launched Enco Insights, a global advisory network dedicated to the sector, providing senior advisors and subject matter experts to investment and infrastructure funds, law firms and corporates. Enco Insights leverages HC Groups 20 years of connections in energy and commodities to give clients the expertise they need when the stakes are high and insight matters. Learn more at Enco Insights.com. Let's go back to that other comment. And if I heard you correctly, you said power prices could go from $160 a megawatt hour to zero and back up to 150 an hour later, which I think that's correct and B. That is eye watering volatility, if you're an oil trader or anyone really, is that I guess there's a qualitative difference between absolute volatility and kind of predictable volatility. Can you give us some sense of, this is the duck curve at work. How predictable is that volatility? Is this something that actually people can trade? Yeah, I mean, I'd like to buy power at zero and then sell it an hour later at 160 bucks. Yeah, I guess it's my point. Unless it's completely predictable and there's no money to be made in that. Yes, you're right. So we could call it predicted volatility. So I just know that tomorrow this is the hourly price curve. That's the one given on the day ahead market. Now tomorrow on an intraday basis, these prices will change a bit. So we'll have additional intraday volatility. Now you're right that if you have a battery in such a market, obviously it's a great business case because if you can store for four hours and you buy at the low point at 2 to 3 PM and you resell at the midpoint around 6, 7 PM, the business case is great. And so that's why you have this surge of investment in batteries, especially in Germany, because you have an incentive to benefit from this hourly curve. Now what will happen is the more and more battery you will add that the more and more this curve will reduce or flatten, if I should use the right word. But we're not there yet. We're not there yet. And so that's why you have these investments. And so you're right that this is predictable volatility now. Having said that, there's still a lot of unpredictable volatility. So the consequence of the current conflict has created a lot of volatility on the forward curve for power in Europe. And so that was not predictable, obviously. Weather changes, unplanned maintenance and selected assets. Again, what we had in '22 is not only the resultant of the conflict in Ukraine, but also the resultant of unavailable nuclear power assets in France, which created also additional volatility on our prices. So you are basically in a system which has multiple sources of volatility. One of them is wind speed, solar rare. Another one is solar radiation. Another one is just general flexible plant availability, whether it's nuclear gas or coal. And you could have also other sources related to operational outages, which add further volatility to the system. And obviously, coupled to all this is general weather conditions, which relates to how much consumption there will be in the system. I guess I'm sort of struggling with the idea that, let's assume all geopolitics is normal. And there are no outages. Everything's working as it should. What scope is there to be, I guess, wrong or right in terms of managing that volatility on a daily basis? Is it like the markets are efficient, the weather forecasts are so good, that you're not going to miscloud cover by such an extent that you're going to be completely off if you know what I mean. So I'm sort of trying to understand, kind of, for the traders today, that would seem to me that every, that level and scale of volatility. And I'm just trying to sort of sharpen the argument here is, how volatile is it in terms of predictability on any given day? Or is it actually quite, you know, 10% difference in cloud coverage, not going to make that much of a difference to germ markets, and generally speaking, for the most part, there aren't surprises every day. Yeah. You're touching really to the heart of the power market system. So if I look again at my example for Germany tomorrow, that day ahead curve is relatively predictable. Why we know with a lot of certainty the weather 24 hours in advance. It's another story when we take longer period, but 24 hours in advance, it's relatively well-forgasted. Unplanned outages usually on such a short notice should be relatively bound. Again, there can be tailored end to the market, but in general. And if we know the weather for tomorrow, we have a view on wind speed and we have a view on solar radiation and hence on renewable output. And if we have a view on weather tomorrow, we know how much to expect in terms of consumption from the overall sector. And there's always a sensitivity with respect to temperature, especially in the winter. And so given all that, we have a view of what we can expect from the curve tomorrow. And that's the curve we saw. So based on all these factors and based on the time of consumption peak and production peak, we have a curve that is above 100%. at 8pm, at 8pm, sorry, that goes to 0 at 3pm, and that goes back in the 100 range at 6pm. And that's relatively predictable. So the fact that we have such a curve shape does not mean that the system is volatile. The system volatility comes on top of this. And you now try to predict what will happen in five days and beyond, because there is weather uncertainty, then you start to increase the probability of unplanned outages. Then you also have the volatility of the underlying commodities which feed into the system, all gas. And so put all that together, then you start to have quite volatile outlook that then starts to build. Another example that I find also striking, if you look at Kaiser, so now I'm going in the US as an example, so this is the California power market. And if you look at the distribution of their head prices over a year, if you compare 23, 24, 25, the standard deviation, which is a measure of volatility, has increased by 3x. So this is a market that I use because there's a lot of renewable penetration. There's also a lot of exposure to gas production assets and so forth. And again, you just see that you have that volatility that increases. So that's why it's important to differentiate the two aspects, what I expect to have tomorrow. And then how can I predict what happens after and their answers, which are dependent on these time horizons? Using Kaiser, using what we're seeing in Europe and then I guess weaving in here, the traders experience. Does that mean actually the ability to actually hedge out on the curve is now much more harder, right? The standard deviation is going up in terms of that volatility. Are there less products out there now today than there were 10 years ago to manage long-term volatility in power markets? And I guess I'm fascinated by that development, right? Penetration of renewables increases much greater power differentials. It increases volatility as well as you say. And does that then degrade the ability of the market to offer long-term hedging to power projects? Is that part of the design or not? I mean, I'm thinking about building a data center and I want to somehow hedge my power pricing exposure. I know long-term traders do that or it costs me a lot more to do that because it's much less predictable. Yep. So, I would argue the opposite in terms of what I'm seeing. So let me expand on this. Compared to 10 years ago, we have a market here in Europe that is, you know, I would say increased in liquidity for a broad range of standard hedging products which go from next week to next three years to hedge exposure to base and decal power. On top of this, we have seen the rise of the PPM market. So mid to long-term power purchase agreement, EPA definition always diverges from one to the other, but we say, then say, five to fifteen years roughly as a range. And these power purchase agreement offer you a fixed price conditions. And whilst the initial ones were as produced, so you would be exposed to the supply of selected renewable projects, more and more you have power purchase agreement which have fixed load supplies or even as consumed supplies. So they would follow your consumption within a certain profile. And so if you're an industrial or if you're mid or small size utility that needs to secure some supply, you can have access to these products. And there's now a big market for PPAs in Europe. And so that allows you to hedge on a longer term horizon power supplies. And that I think is something that has seen a radical evolution over the last ten years. Something which we didn't have ten years ago in Europe is now one of the instruments or anyone to secure and hedge power exposure on a long term. And the level of innovation on PPA remains strong. That is we see PPA with cap and floors. We see PPA which are fixed between prices and indexed between others. And so you have a lot of sophistication that grows in these contracts to reflect a bit the risk appetite of the buyer and the seller. And so as a result that market is not only growing in terms of offers but also in terms of sophistication. We had Luca Petretti on of Pexapart talking about the evolution of PPAs and people should go listen to that to that to you. A month old or so and still relevant. I guess secondly is kind of keen just to understand how power traders have fared in the last year and the early part of this year. And then secondly I guess it's a very small and silery question. But is there a qualitative difference on how effective European weather forecasting is now given the stakes involved? I mean has this spurred a phenomenal rise in investment in weather forecasting and Europe now has the best in the world because you could lose millions if you get it slightly wrong. Yes. Yes. Also, I think look around the traders so whether there are traders in utilities, in terms of traders or even at say the sophisticated buyers of large industrials or quasi traders. There has been a development that was in three areas. So the first one is what we call this long term origination market. So with the rise of PPAs, with the idea that you can source secure and hedge power supply on a longer term or also as a producer sell and hedge on a longer term. There is a whole market that has developed around these products and again more sophisticated, more structured, longer tenure. And so that required more originators, more structures and hence to develop that capability. The second area is the extreme opposite. So as we have an intraday market that is becoming more liquid with a lot of shape in that hourly curve as we discussed earlier, there is also a need to be extremely reactive in intraday shorter market. Now given the volume of transaction and given the resolution of the prices, you know, 15 minutes, then essentially you need a lot of algorithmic approaches to manage the orders in that market. And so that has driven a lot of investment in algorithmic programs to manage intraday trading. And you can imagine the whole ecosystem around it with respect to quant, model and so forth. The third dimension of development and it touches after your second question, it's around market intelligence. So whether analytics is the core pillar of uncertainty in the system or analysis of uncertainty in the system that is how much radiation there will be, how much wind there will be, how much the thermal sensitivity will I have on the demand side. And as a result, there has been a lot of investment from broad range of actors around the weather models. There are third party models that exist on the market. There's intelligence that's built in on top of these third party models to create a bit individual secret sauce. And that's coupled with additional models on the fundamentals of the market. So everyone modeling every single production assets in the market. What could happen if one or the other go offline, a lot of simulation around where the market could go based on underlying commodity prices and all that market intelligence has been significantly strengthened. And so you take all these three dimensions, long term origination, short term algorithmic trading, market intelligence that led to significant investment in people in system and system also related to AI and digitization and the overall infrastructure that supports it. So that's a bit, let's say the three main trends that we saw for the traders. And I touched on it briefly, but indeed forecasting the outlook of the power system is critical. And a lot of it relates to weather forecasting. And so there has been a lot of investment around this around weather scientists as people and again, all the weather models building on third party models or building internal models. Those are three trends that we can relate to directly as a C group, right, in the placements what they were doing. And in fact, we had a Matt Lanzer on this is November 2024 on this podcast talking about weather forecasting. prediction and I think it's proving right and I think it will prove right across all these disciplines in the sector, right? This is that AI is going to unlock the capacity of humans and will increase the demand for humans with this expertise bureau to input and interpret and all the rest of it, right? And we're certainly seeing big demand for meteorologists across the space. Okay, I mean I find that fascinating and I think sort of, as I said, mirrors what we're finding. Then comes along, we're going to run out of time. That's the rundown. We could talk about Russia and so forth. But let's sort of skip to the to February and Israel and the US's attack on Iran. That comes along. We're trying to sort of, I guess we're leaving behind kind of a big slice of hydrocarbons in terms of chemicals and all the rest of it and fertiliser and so forth. But what does that do to this picture that you described to date, which was essentially quite an optimistic one. It was functioning markets. It was flat to lowering power prices in many cases and a slow growing demand in a new style of economy. And this is, you know, we're talking Europe but that mirrors some in Asia and so forth. What does that, what happens then? Yes, yes. So it's a bit, you know, the crystal ball question, but let me share. Yeah, sorry. I know we're a month in, but you know, I guess in the last four weeks, what, what do we see? Yes, yes. Now let me share a few thoughts. So I think, look, when we talk about the energy system, we always said there are three dimensions to shaping the energy policy, the energy strategy. It's sovereignty, it's affordability and it's sustainability. And so right now, the sovereignty dimension is the number one concern of states. Go, we, what's happening? And so what we can expect is the sovereignty agenda will proceed the agenda on the other two dimensions to the extent it can come back. Yeah, this is the trilema, absolutely sovereignty being security, right? Absolutely. And so if you look at this now, obviously today, the exposure to gas and Europe felt it in 22, but it's further acute now is a problem. When you have 20% of the world's energy supply, which are cut off from the market and the disruption this can bring on midterm and the risk that it could happen. And so the one thing we see, obviously, is states who have the option to diversify in their mix, the alternative backups that they need to manage peak load away from gas or do already. And so for example, when you look at India, China, you have the backup of their power system, which relies a lot on coal. So there's a bit of base tone coal, but there's a lot of backup coal for peak. And that will stay most likely because there are a lot of other supplies and less acute to volatility, even though coal prices have gone 30% up as a result of what happened on the gas market. So one of the most likely outcome will be that as sovereignty, the sovereignty dimension becomes more acute, you will have sovereign consideration taking over a bit more some of the sustainable consideration. And so some backup options back coal may stay longer or be more active in the mix for longer period of time. I think that's that's the first one. The second one is in areas where in Europe is one where the sustainability agenda still remains strong. In addition to sovereignty, you will have an acceleration in the other alternatives. So what are they? It's nuclear in France, but not all countries. So for example, nuclear is going ahead with an 80 billion, 80 billion program for six new nuclear reactors. And it's renewables. And that's for example, Germany and the number of other countries who are just pushing ahead across all areas of renewables. So that's I think the second dimension that will happen again on the market. I think the third one will be that we will ask also the system to be more flexible and resilient to shocks. And so you could imagine that there could be additional storage constraints, additional strategic reserves of selected commodities that we want to have for the systems so that we can have a bit more buffer into the systems. And that's for any country globally to manage the risk. That maybe one final item, so it's less about the mix, but it's more about behaviors. We could also expect to have an increased appetite for PPAs. So what did we observe when there was the crisis end of 21 and then early 22? We had a lot of appetite, obviously, for industrial security PPAs. And then that went down because there was an expectation that prices would set up lower and there was no need to secure a mid to long term demand. Now again, the cycle is reversing. And so we can imagine it's also a renewal for PPA demand, which will in return stimulate renewable projects that can secure their off-takes. I see this shot in the arm for the renewable sector under that sovereignty, the security point in the triangle, right? Just on that nuclear side, we've had Michael Schneider on a couple of times talking about the death of the species. And you know, we see this sort of much-wanted, I never get it right, whether it's fourth or fifth generation, the sort of the liquid salts that means you don't have to have under such pressure to cool these reactors. Is that 80, so two questions? One, is that 80 billion going to be in just the same old reactors that are very expensive, that keep having outages or new technologies? And then the second question would be, is this finally going to give, you know, Germany has already, I think there's been some murmuring about regretting shutting down their nukes? Is this going to give a license to the rest of Europe to invest in nuclear as well? Where's that story? Well, look, I think on the new nuclear reactor, this is the EPR technology that is moving down, for example, the flammable wheel reactor, there will be incremental improvement to the technology, but that's the core technology which is proven. And so I think now that the question is, can you build enough reactors to lower the unitary cost? The big challenge with nuclear is if you build one plant versus if you build six plants. And the more? So that's my second question then. So same old technology, I guess, you know, is this going to be, has Europe more broadly Germany in particular? Is this give them license to jump in on this? So so I will get to that point. I think but the first element I wanted to mention is so latest technology needs to be built in series lower the unitary cost. Then the second point is it's an individual country choice. So you have countries in Eastern Europe, you have countries like France, you have countries in the Nordics, who in the UK, who are okay with nuclear. And they put nuclear in the future capital plans for increasing power production capacity. You have other countries who made opposite choice, Germany or Spain, for example. This is an individual country choice. I don't know if there will be reversal. I'm not sure. It's quite complex to reverse actually because there's an entire industry ecosystem and so forth that it sits behind. So it's complex. However, at the end, because of system coupling and because of the increasing interconnection capacity in Europe, which by the way is a resultant also of what's mandated to have a minimum level of interconnection, we will have a system which will be the resultant of all these individual country choices. Yeah, so it doesn't really matter, right? So, Germany is like you go ahead, France, I will obviously be buying your power and hopefully have a role that we get benefit everyone. Yeah, and I think that's where at the European level, we need to see the overall balance and indeed. So in France, there's a lot of, which is an opposition towards for example, onshore, onshore wind, but on the opposite, there's a lot of acceptance historically for nuclear. Germany's detour will opposite. So maybe one country like Germany will build more onshore wind and another country like France will be more nuclear. It's an interconnected system. So this will balance. Now, what's important is that at the European level, when you add all future capacity, you have a system which balances demand and supply. So that's the check that needs to be done and all the interconnection capacity that goes with it to rebalance the system at the European scale. It's hard to talk about long-term effects of this particular crisis this war. is fair to say though that we are in a world of huge volatility, de-globalization, one of our three D's as we talk about. Is there a, again, very early stages? Is this, this seems to me that this would be a force multiplier to European solidarity, European cooperation when it comes to energy markets in particular, a force multiplier to customer choice. I mean the number of what's that message as I get for my friends back in the UK telling me how glad they are that they've got an electric car versus what I drive in the wake of diesel and gasoline prices. We're seeing it already a little bit on the military side, our call to arms, our response that is European-driven. Are we seeing that similarly on the energy side? IE is there array, you've seen political headwinds against renewables and all these pieces. Is this galvanizing Europe to the path that they've taken? Do you think this is an accelerant to the energy transition? Do you think this is an accelerant to, I guess, a more cohesive Europe? Yeah. So I think in periods of crisis like this or like in 22, you realize that scale matters to weigh in the global geopolitical debate and also to define your strategy. How to respond. How to respond from an energy supply security perspective. So I think the fact that scale matter in such situation most likely will go in the trend of reinforcing cooperation. Now, if you look at what this could mean in practice, I think a couple of things. So one, we discussed about it, the strength of the interconnected, integrated European power market and power system is key. That means coupling. That means interconnection capacity growth. And that means obviously harmonized market norms as we have. So that I think will just be more of it. The second thing is there is a concern about the supply chain of what we're building. And so how do we ensure that there is more local content in what we're building? What I think become more acute. And so we could expect also at a European level, lose or incentives that drive more local content to protect or stimulate the European industry. I think that's the second dimension. And then I think the third dimension will be to ensure that the exposures we have to individual countries or selected commodities are as limited or diversified as possible. And so we could imagine that there will be either more rules guidance or policies to ensure that supply diversification in the commodities we import will broaden. And when I mean commodities, I don't mean just, obviously, a call and gas, which for some of it, it's already well diversified. Also in the commodities that are linked to the energy transition. And so you could think through of refined metals, refined rare earth that we use in a lot of components related to the energy transition in batteries in wind farms and so forth. And so that could also be another consequence of what we're currently living in. Which I feel sets up. And you know, I always enjoy our discussions. Well, and it here is that does set up an inherent struggle and inherent contradiction in some ways, right? Because the response to all of this is that the free market approach, the laissez-faire approach, the invisible hand is no longer sufficient because we've got outside interruptors, state actors that are putting, you know, economies, countries at peril. And therefore we need to increase in government intervention to be able to build up those stockpiles to incentivize those local supply chains. Which itself then imperils the kind of economic decision making that has led to Europe's vibrant energy markets, right? The demand now swelling for PPAs, for example. And in that is an inherent contradiction that kind of I think is going to be the story of the next 10 years of the commodity markets is how do governments wrestle with the idea of essentially being sort of self-actors being selfish, you know, wanting to intervene with the recognition that the European power markets, for example, is the system that is succeeding and you can make all these individual choices as countries. But together as long as there's the free flow of electrons, you get the cumulative benefit. I mean, I think that's quite a, I don't know, you know, I don't know, get too deep. But that seems like a quite a challenge that the commodity markets are facing more broadly. Yes, to know you're right, Paul, it is a challenge. And I think at the end, we are going to balance the three dimensions we discussed earlier. And it's a pendulum. So sustainability, affordability and sovereignty. Right now, the sovereignty axis is driving a number of policy and regulatory choices. And again, most likely we're going to see more of them in the foreseeable future. But that pendulum may rebalance after in other conditions that we've seen in the past. And so depending on this, we'll see more of us contradictions. So maybe that will be the subject of your next podcast. Yeah, yeah. Well, we've covered the trial in a bit, but yeah, it's a fascinating world. Well, Xavier, you and I look forward to seeing each other at the FT. And I feel like there's about four different strands of four more episodes we should do together, you know, including kind of the the power mix, the volatility, where energy demand is going from here and the longer term impacts of the US and Israel's attack on Iran and and all the rest that's going on. And indeed as well, how to manage that trie lemma, but I look forward to seeing the FT's global commodity summit in Lausanne in a couple of weeks time. And as always, really appreciate you coming on. Thank you so much Paul with a real pleasure and looking forward to seeing you at the FT conference in Phoenix. Thank you for listening. To find out more about HC Group, our global offices and our expertise in search within the commodity sector, please visit www.hcgroup.global.