Inside the Deals That Decide Power Prices - Renewable Exchange

I'm your host, Ed Porter. Welcome back to Transmission. If your ND tariff says it's 100% green, here's an uncomfortable truth. Right now, the electricity actually reaching your home might be coming from gas. That's just one quirk buried inside the deals that really decide how Britain's electricity gets built, priced and sold. Deals called Power Purchase Agreements or PPAs. My guest today is Rob Ogden, founder and CEO of Renewable Exchange. He breaks down how power purchase agreements impact what we pay and how green our power actually is. And we take a look at their expansion to Germany where a growing market of wind assets are going merchant after finishing their subsidy schemes. Before we start, if you want to see what future power prices look like right now, head to motorenji.com and ask co, Motorenji's AI analyst. Sign up free and take seconds. Let's jump in. Hi Rob, welcome to Transmission. Hi Ed, thanks very much for inviting me on. Oh pleasure. And as ever, we're going to get straight into the detail. So what is one thing that people get wrong about power purchase agreements or PPAs as they're known? PPAs. So I think there's lots of misconceptions with PPAs in the market. But when you think about a PPA, I'm wondering what's coming to your mind. Is it a, is it the short term utility PPA market where you've got thousands of generation asset striking contracts over one, two, three year durations with all the energy suppliers? Or I don't know, is it maybe more like an AWS blue chip 15 year offtake agreement? Where would you go? Yeah, interesting. I think about in the very general sense, right? So anyone signing any agreement to purchase power, I think that sounds like it's very much what's the worst thing. Let's break it down. Absolutely. Yeah, but I think about the broad bucket of that. I know that you can get those shorter term contracts, there's rolling contracts for people who are looking to, let's say they've got off a feed entire from there looking for sort of additional secured revenue. I also know there's a very corporate angle to this as well. So there are some some big energy users who are looking to get certainty from the market. And so they're going out and they're trying to buy in PPAs to lock away portion of their energy. Absolutely. How do you see it? What's the, what's the, what's the divide? Well, that's it. I think that that is the, if we listen to the big corporate marketing hype of the world, I think that's where most people would go. It's the big long term contract with the blue chips of the world. But that really is the thin end of the wedge in PPAs. A PPA is, is a generic phrase at the end of the day, power purchasing agreement. So it's a power is electricity purchasing is to buy an agreement as a contract. So it is a contract to buy electricity fundamentally. That's what it is. You could therefore argue so many things are a PPA or power purchase agreement. Everything from your generic electricity supply agreement. So I think where you draw the line is subjective and there's not any kind of one rule. The big corporates of the world have definitely tried the land grab on PPA to kind of make it that blue chip contract. But I think for me that really misses the point. Certainly in the UK, every rock project has its subsidy. So rock renewable obligation. One of the subsidies, the, lots of the renewable generation projects have been built on in the UK. They get their subsidy and then they can sell their electricity however they like. So for a lot of those projects, they're optimizing them on one, two year contracts and they're trading in and out of the market different times. Feed-in tariff exactly the same. You get your feed-in tariff subsidy and then you get your electricity which you can sell yourself. So there's different structures in the market and in the UK specifically, PPAs generally are short term contracts signed between a generator of electricity and an energy supplier. And there's thousands that get signed every year. And so in terms of what you see through renewable exchange, what does the split look like between those sort of two to three year contracts for renewables under RO or Fit tariffs? And what does the split look like for the corporate? Is it sort of an 80/20 split? What does that look like? Yeah, it's a really great question. And there's not a lot of data out there on the market in this. If you look at the UK context which is where renewable exchange is the market leader in the biggest presence, 99% of PPAs are short term utility contracts between an operational generation asset and the energy suppliers. There's a handful of longer term corporate PPAs. And then you go even further and corporate PPAs generally when people think about corporate offtake, they're thinking about a new-to-market asset. So something that wouldn't have existed had it not been for that PPA which enabled that project to come to market. And in the UK, I can probably count on my fingers in front of you how many contracts, how many corporate PPAs actually built new projects. The UK's been absolutely plush with subsidies all the way from Noffo, the original subsidy, the non-fossil fuel obligation. That's a long time ago. That was the turn of the century. And then we had the renewable obligation came in in 2002, VDN TowerF came in then, CFDs now, which you could argue is more of a price support mechanism than a subsidy, but I'd probably argue it's a subsidy given the price levels that it gets tends to get struck out. And a CFD is what? A CFD is a contract for difference. So you agree 15 or now a 20-year contract, essentially underpinned by the UK government. You then sell your electricity on the wholesale market and if the price is lower than the agreed price you had from the government, they top you up. And if the price is higher than the agreed price you had from the government, you pay them back. So it's like a price stability mechanism that gives renewable generation projects guarantee over the price they'll receive for their electricity, over a sufficiently long period that enables them to bring in debt and other financing to build that project in the first place. And it's quite interesting because when you do see these headlines out there, it's very rare you see a headline around a rock or a fit getting a three-year contract. You never see it. You always see, you know, I'm going to use Amazon or like a hyperscaler, let's say, the hyperscaler signs contract for 15 years. They love it. They always always makes it into the press. I don't know why that is. I think maybe it's the additionality point you mentioned, which is that it helps to bring those assets to market and that's what sort of seems to make it newsworthy. Absolutely. It's a marketing play at the end of the day. You know, they are out there. A lot of corporates now are signing PPAs for economic purposes because it secures them a long-term price at which they can procure power. But it was also very much a sustainability drive ESG, you know, and this is corporates, you know, really trying to demonstrate their commitment to decarbonisation alongside price. Yeah. And this comes back to like a Google white paper, I can't remember when it was again, because it's probably going back into the history books a little bit around the concept that if you sign to buy energy from a renewable generator, it creates additionalities so they can sort of finance their asset better and therefore they can build out more solar and wind. And it's pretty exciting. The kind of area where I wanted to go on that is to start to ask question, do you think people start to regret a little bit some of the PPAs? So what I mean by that is that back in the world where gas prices were set, well, gas was set in the price, you know, 9 times out of 10 or 95% of the time. You had quite a high price in the middle of summer. And so generally speaking, wherever you set your PPA, you kind of got good value for money on it. Now when we see more often, not more often than not, but quite often you'll see enough renewables on the system. And I think for the first half of this year, it was something like 80% of the time, gas was still sending the price. Yeah. But for that 20% of the price, 20% of the first half of this year, you were seeing some very low prices coming through and sometimes negative pricing. And I wonder if that's having quite an interesting impact on PPAs because if you're just buying the PPA just to kind of tick the box of saying, oh, I've got sort of a green supply, then I don't think it was too worried about it. But if you're signing it from an economics perspective, you might sign your PPA at say, let's call it 15p per kilowatt hour, which would be 150 pounds per megawatt hour. And you're buying energy under that PPA at the same time. The wholesale market's gone to sort of minus 10. And you're thinking, God, why am I having to buy from this PPA when the market is kind of coming through to this negative price? You started to see the dynamics of that hit on how people structure those PPAs? Yeah, absolutely. And this is, it's getting more, more prominent now, but it's been around forever. So the ability to actually price a PPA, a power purchase agreement is complex. So you are essentially forecasting its production over a long period of time into changing macro economic market factors. So an increased penetration of renewables, like you've said, starts to decouple the electricity price from the gas price and the marginal cost of running a wind farm is what's how much how much we pay for the wind. Yeah. You know, it's next to nothing. So they will bid into the shorter markets incredibly low. As long as the price is positive, they want to run. So it definitely has a pull down effect on prices. This is all priced in a negotiated upfront. And alongside a number of terms that accompany that from the PPA. So things like can the off-taker turn that asset off if the power price has gone negative? Because they don't want to receive electricity when they would essentially have to pay for receiving that power. Be better for everyone if they turn off that wind farm, bought it from the market for free and compensated the wind farm owner in some way. So there's different mechanisms that you can price into a PPA from the start. You're talking really now about those 15 year PPAs. And it depends when you struck them. So if you If you use chocolate conch, that's fine. that kind of pre-2020, you know, market prices were quite stable, you know, you were trading range bound, I don't know, 50 to 70 pound a megawatt hour typically. Almost always driven by where the gas price was, okay? So if you then committed to a long-term PPA at those kinds of price levels 15 years, you probably went through the wave of COVID, we hit kind of 30 pound a megawatt hour base load summer, and the big COVID as the man was just destroyed over that kind of summer 2020, that there was a lot of regret then, there was a lot of hindsight traders going, "Uh oh, why did we sign that PPA?" But then you roll for, you know, only 18 months and you hit the kind of peak of the Ukraine crisis at the start of that conflict, and you have wholesale prices over 400 pound a megawatt hour. So it's this volatility that a long-term PPA will avoid for a corporate off-taker or for any off-taker. I think you've seen more and more appetite from the energy suppliers have now taken kind of seven-year, 10-year PPAs with generation assets. They just might not have that requirement for it to be a new-to-market project or new-to-earth project. That additional element where actually me signing this contract with you brings new renewable generation which displaces gas. But yeah, coming back to that pricing concept, it's tricky. You're taking a long-term view over where the market's going to go in the next 15 years. In the UK, it's especially tricky because you couple that with CFD procurement, so the contracts for difference that we just touched on. And you have a huge volume of new, predominantly wind and some solar coming online, which is going to just shift gas and display gas even further. So you know, this is where you guys come in, build your long-term power forecast models that, you know, try and look at these fundamentals and work out, okay, well, what is the captured price of a wind farm likely to be over that long period of time? And that's something we see more and more as we look out to the future. We see sort of less periods where gas is setting the price, particularly in the summers. And so I think it's a harder and harder thing to sort of get that PPA pricing right, particularly for like a 15-year corporate PPA. And you also see some parties starting to deal with it contractually. So obviously you have the sort of standard price setting process, but you also see some parties saying, as you said, "Oh, could we turn that off?" I suppose there are other variants of other forms of contracting that give people more comfort to sign these contracts. There's all sorts. And you know, the lawyers of this world absolutely love this stuff. You know, if there's a problem, they can invent a solution to it. You can't ignore the other side of the equation here, though. Like you think about this from a corporate perspective and they don't want to overpay for power that they're receiving over a long period of time. But from a developer's perspective, it's, you know, they're not necessarily looking to profit maximize all the time, but for them, they're making, you know, usually hundreds of millions of pounds investment up front to put this project on the ground. They need to borrow money and generate returns for their investors to be able to raise the capital to build that project. And for them, they're looking for a stability of return then into the future over the period of that project. So it's not always like a complete price maximization play on the developer side. They kind of have a hurdle of which they need to overcome to pay back the capital expenditure of building that project in the first place and then generating return for their investors. It doesn't need to be, it doesn't need to be massive. Obviously, if the returns are there great, you could get pay back on a new build win farm in Ukraine crisis in three years. You just couldn't get it built. Yeah. Yeah. There was some crazy stat on Onshore Wind, I seem to remember during the Ukraine crisis around the Ukraine had built more onshore wind in a year than we had in GB. Oh, you're kidding me. Which was sweet. That was a sort of a legacy of the planning around GB onshore wind, which is changing. If you just happen to have a project that was consented ready to build, but you'd just come off the back of COVID and you couldn't get it financed off of 30 pound a megawatt hour base load. And maybe you had some supply chain challenges coming off the back of COVID as well with actually getting parts here to physically connect. But there was one client of ours who was ready to go just hadn't pulled the trigger. And then in the Ukraine hit, he signed a two year PPA over 500 pound a megawatt hour for a new solar farm and got payback over that two year period for the entire investment. So it's kind of a crazy, it's crazy that that's possible. It's crazy that that's possible. But we're not expecting Ukraine level power prices on a regular basis. Maybe one thing I think is really interesting, right? So if I'm a corporate and I'm signing up to a PPA, which we know is a small portion, but let's say I'm a corporate that's signing up to a PPA. Maybe that covers 50% of my energy needs over the course of the year. That's then a bit of a sliding scale all the way to 100%. Are you starting to see some PPAs come through that are sort of a PPA plus some form of flexibility so that with their PPA, they can not only buy like the solar portion, but they can also get some flexibility. So maybe not covering 50% of the supply, but maybe more like 60 or 70%. In theory, all the way up to 100, we haven't seen too many of those come live. But people are starting to talk about this concept of getting more covered by your PPA. Yeah, well, I think this is for me, this is where energy suppliers and utilities play an absolutely critical role. And they get such little recognition for what they do in the market because on the one side of the market, you've got generation, you've got developers building generation assets. Okay, so they're connecting new power to the grid and they want to sell that power. They want, they want as high a price as possible for that power that makes that project viable to build. On the other side of the market, you've got corporate to, you know, they're running their business. It's just a cost item for them on the PNL. They want to minimize that as much as possible. So you've got this natural kind of conflict between the two. Income the energy suppliers, the utilities, the EDFs of the world, the good energies of the world, you know, that they can, they sit in between and they provide the perfect conduit to these two parties who maybe don't have a line, perfectly aligned interests. They don't care fundamentally what the underlying price level is between the two of them. They're negotiating an offtake structure from the, from the wind farm and then negotiating an energy supply contract for the corporate. So they are in the perfect place to be able to offer this kind of flexibility. If you're putting corporate directly with generator, I'm not saying it's impossible, but you have these market players that can manage balancing exposure. They can hedge different profiles. They can actually create inherent flexibility in the contracts because they can let you trade in and out of it. If you're a wind farm owner, you just want to know that someone's going to buy your offtake for the full period of time, ideally at a fixed price. If you're an end user, you just want to know that you can get delivered power to meet your demand profile at a low price forever. The energy suppliers bring these two very different profiles together and can enable each party to kind of achieve what they're looking for and contract kind of tripartite between the three of them to create that link that gives the flexibility to the corporate to do what they need to do even to walk away from the contract if necessary without just stirbing what the developers got from a financing agreement and from the ability to kind of raise revenue from there. I feel like that's getting to be a harder and harder job. You go back 10 years and there was majority sort of gas generation supplied to consumers. It was slightly easier to work out where there's cost going to be now. You've got a big chunk of it sitting under PPAs and then you've got the stuff that's at the margins, so the bits where you need flexibility, possibly harder to price. So some of these utilities have got a bit of a tough job like working out how to make sure consumers get supplied and with that form of flexibility. But what I wanted to do was to go all the way back on renewable exchange back to when you first got started to say, how did you get started? Because there's kind of an interesting story of kind of creating that company then because obviously you have to have both sides of each trade and if you've got nothing to start with then like where does this come from. So how did you kind of get that zero to one motion in play? Yeah, it's a great question. And it was tough. I think I was probably just young and stupid enough to think that it could work. I was in the, I was trading energy in the energy markets and I kind of saw this transition that you've explained. We're moving away from maybe a hundred large thermal assets that are centrally dispatched to a world where you've got thousands of small intermittent renewable projects that need to connect with the market. And my observation was that the market was just not functioning well for those developers, those asset owners to understand a what they could sell their power for, be who they could sell their power for, sorry, be who they could sell their power to and then be able to actually act on that, execute it quickly. So that was the concept for renewable exchange. It was to build a marketplace that brought together all of the different renewable energy generators on one side with all the different energy suppliers on the other, make it super easy to analyze contracts and execute PPAs. Getting started was tough and I think every business needs a bit of luck early on. So for us our luck came from Aberdeen share wind farmers. Absolutely. Love the concept. They wanted to connect with all the energy companies. They wanted to get a great price and they wanted to do it quickly. And for us we grew with zero marketing spend from day one. We got on the phones and we were trying to reach out to people who had renewable generation assets, stumbled across some farmers in Aberdeen share. You do a great job for one over the weekend, five referrals come in on Monday. We're doing six PPAs by then the week doing another 20 and we're just snowballed from that. I hope that you still go back to Aberdeen share and I go ahead and hold that behind you. Yeah, exactly. This is where the team from. Absolutely. That's what got it going really and it's tough getting the business going and we ended up. We're ended up tearing up the platform three times now. So we built it once to get it going. We had no idea the level of demand for the product. Our pricing engine is like the nuts and bolts of everything we do. It forecasts all of our PPAs and it analyzes all the bids for tenders going through. And we got to a point pretty quickly where it was taking more than 24 hours to refresh all our models and we were getting a new input. And I think what you very quickly end up with there is just absolute system collapse. So we had to tear it up, in house everything, rebuild the whole platform again. We rebuilt it and within about 18 months we found ourselves back in the same situation. We'd cut too many corners, we'd build it again. So here we go, third time lucky. So we tore it all up again, rebuilt it. And I have our amazing software engineers and product team to thank for now having a fantastic platform which came just in time for the orange man in the White House to cause absolute chaos at the start of this year, where we had almost our entire year of business done in two weeks of March. We wouldn't have been able to do that and operate at that scale and sign hundreds of PPAs within a 10 day period. If we hadn't got that kind of scalability in that system and that process, I think these are the kind of tools that the market really needs. It needs to move more to a world where we can actually act more like a renewable generator, more like a power trader, access to market, create value, take value from the market where it's there. We're in this like really weird period of like short-term volatility windows, like even yesterday, power prices spiked 8% for three hours and then back down. So if you're responsive, if you've set your strategy and you're able to then act quickly on that and secure a PPA within an hour, you can take that value from the market. If you can't do that, then it takes you two weeks, three weeks, to tender in-house slow-tendering processes or brokers or things like that. It's just too slow and you just cannot capture that value from the market. - We're recording at the 30th of June here. So where we've seen those spikes coming through it, it's because we've had the first heat wave coming into GB and there'll be another one coming soon. So we are seeing some pretty odd dynamics in the power market. On the Trump point, I think it's really interesting like someone who's very anti-renewables, like a lot of the actions that have been taken and we've talked about on this podcast before, but have created a world where actually for renewables, it's been stronger globally to get these projects deployed. - Yeah. - And it's a sort of funny consequence of the actions that he's taken. I don't think there's some 3D chess going on. (laughing) - I don't know. - I highly doubt it. - But it's just a funny consequence that's happened. And maybe to go from the very macro down to the sort of nuts and bolts of it or the person on the street. So if I am outside the energy sector and I hear this episode, what, how do you think about how renewable exchange, your business, like reduces costs for consumers? Is that something you think about on a daily basis or do you just kind of think, oh, that's just the function of efficient markets and my job is to make renewable exchange work as kind of easily as possible? - Yeah, no, it's a great question. And renewable exchange exists to maximize revenue for renewable generators, okay? So for owners and operators of renewable generation projects, we want them to collect maximum value from the market. She might turn around to me and say, hey Rob, you're pushing up cost to consumers. But I would challenge you and say actually, what renewable exchange is doing is increasing investment into the cheapest form of generating electricity, renewables. The more we can improve the business case for renewables and improve their economics, the stronger the signal for new investment into these projects becomes. The more capital flows into renewable energy projects and the more we displace gas and other thermal kind of generation from the stack. So I reckon co could probably have a good go at quantifying what that is for the average consumer. I've not got the figures on the front of me. - Yeah, in front of the hands, to have a good business on the show now. - Sure. Okay, for me it will come to that market efficiency piece, right, which is that if you have these bilateral deals where people negotiate the wrong price and then people get stuck in the wrong price and that means that people leave the market, that's no good for anyone. Okay, it's the sort of the value of markets if you can give people the ability to get the best price for their asset and you can give the sort of buyers the ability to look over thousands of projects and buy, then that efficiency feels like a really key thing. - Yeah, absolutely. I think it's efficiency and transparency. - So in terms of the projects you're seeing, obviously you're seeing lots of wind, lots of solar, a lot of batteries are now starting to come through. So how many projects you've started to see the co-located? Is that sort of a growing trend or is that something that sort of hasn't really hit the PPA market yet? - Yeah, no, I think it absolutely is a growing trend. I think we're finding a lot more operators with solar assets looking at either building in batteries in the planning phase. That's kind of the, I think the best time to look at it or looking at how we can kind of bolt them on later on when there's maybe some grid connection capacity spare or flexible grid connections throughout the day if they're just exporting in the middle of the day for a solar farm, a battery can kind of work outside of those parameters and come in as well. The big thing we're seeing with co-location is that there's PPA off-takers in the market that are great at off-taking renewable profiles. And then there's optimizers in the market who are absolutely fantastic at accessing all the different battery revenue streams and there's a tiny crossover in the middle. And this really surprised me. When we ran some tenders for the battery optimization agreements for flexibility contracts to the market, there were very few companies in our PPA off-taker pool that were really like hot on the optimization. So it's like three or four. And when it's those three or four, it's different teams within those companies as well. So it's almost like looking at two completely different things. And what you really want to avoid is given the keys to your battery asset over to that company that's doing the best possible job on the renewable project because they're probably not going to be the best optimizer for the battery. So although physically, you're looking at co-locating these projects and it's probably more of a cap-ex saving when you're actually optimizing them and running the operations of the project, you really want to look at these two things very differently. You don't want to couple the two together. Although I did come across this novel concept of green bears where the battery was constrained to only work with the output from the solar farm. That's the German system. OK, fantastic. How does that work? Yeah, I don't think as well. I think it's a bad in-between point. Are they physically constrained to just operate in that way? Indeed. They're currently their own cycling overnight. So it's essentially you take an asset that's a really good flexible asset and you are hiding it in this way. It's a pretty bad example of regulation. Yeah, it's a killer. It's like a fully free market asset and you're just like clipping its wings completely and saying, "Nope, all you can do is low-chiff "that renewable output to the evening." Great. Well, that's kind of like what, 30% of the picture, but you're missing a bit of the pie. Well, here we're laying on complexity rights. So we've started from solar, we've added on batteries. Now we're going to go into the world of regos. Oh, yeah. So what's a rego? So rego is a renewable energy guarantee of origin certificate. So it essentially says you produced one megawatt hour of renewable generation. It's administered by Offgem, who are the UK energy regulator, and they you submit monthly how many megawatt hours of green electricity you exported to the grid, or you've generated actually, don't have to export it, you could just have to generate it to get regos. Yeah. And they issue you with that requisite volume of regos. And so as a generator, you can then feel free to sell that rego to whoever you see fits, and then they can then someone else can buy it and say, I've in effect, I've bought that rego, which means that my supply is now green for once for a while. Absolutely. It's trying to avoid double counting of greenness. So it's saying the person that owns that one certificate for that megawatt hour has the right to claim that their supply was green. OK. And over the last few years, what's happened in rego pricing? So rego pricing has been on an absolute rollercoaster ride. So if you roll back to, I mean, roll back to the inception of regos, the market wasn't born of a natural demand for green energy. The market in the UK was born of subsidy schemes, creating renewable supply. So there wasn't really a market to buy regos and have green energy. And then we had the birth of some of the kind of green energy retailers. And for those that were the mainstream retailers, we then had the birth of green tariffs, where they were saying, hey, if you buy this tariff, it's a bit more expensive. It's a premium product. We'll procure regos on your behalf. That created the start of the demand for regos and regos were so cheap. All you had to do was cover the costs of doing the legal work on the contract. 10, 20 P for a rego, 2, 3 P, 3 P, 10 P. Nothing, absolutely nothing. And an energy retailer could sell them at a premium, maybe selling them at 50 P, maybe selling them for a pound in an energy contract. And that just created an absolute influx. It was a bit of a slow burn surprisingly, but it created a slow burn influx of energy suppliers selling green tariffs. And that then bore the demand. We got to a tipping point, kind of early 2020s, where we had certain energy suppliers that hadn't really been taking rego hedging seriously. So they ended up, their strategy for regos was regos are really cheap. There's loads of supply. We'll come at the end of the year and buy all the regos. We need for the electricity that we've sold throughout the year. They came to market at the end of the year. It hadn't been the best renewable production year. And they ran out of luck. Came to market. And there just wasn't many regos around. It ended up pushing up prices absolutely enormously. We coupled this with leaving the EU, which removed some ability to import European companies. the in guarantees of origin certificate, which are like the European equivalent of a rego, but you could match them. You could translate them or you used to be able to import them and use them to use them for a number of reasons, but one of which was to evidence your green supply. That got removed. So all of a sudden you had all these any supplies that have been procuring guarantee of origin certificates and importing them cheap more cheaply than regos. They had to come to the rego market. So you kind of had this like complete clash of demand explosion in the market in this one period. And prices went up and we saw regos trading above 20 pound of rego. So a very short period of time. Yeah. Like that's like a quarter of the price of the power. So what we found was that this artificial oversupply that was created with a lack of demand, finally we hit that inflection point. Demand caught up with supply, prices exploded. And then we found out who was actually willing to pay to be green. Yeah. Because the prices started becoming material. So when you got to your contract renewal as a business or as a domestic, you had to pay an actual premium to have a green tariff. Yeah. And a lot of businesses said, no, thank you. No, thank you. Walked away and we got the demand destruction. High prices, kill high prices, low prices, kill low prices. You know, we've found the point. Since then we've had a lot more supply again in the market. The FD has been rolling through. We've got a lot more capacity of new renewables coming to market. And I kind of think we're going to be back in this world of infinitely growing supply without the demand that's really there. So where are prices today if I was to buy rego? Well, if you look at prices for regos that were produced in the last compliance period, so 2025 to 2026 compliance period, I could buy regos today for like three pants of rego. Okay. So we're almost like banged down and and to be in my spec down, I think and this is the really interesting part about regos, right, which is that as you enter a more renewable dominated system, you get more wind, you get more solar. And so the availability of regos are quite high. And so you may get this period where you actually have more regos than your demand needs. And so the price gets very low. And there's kind of two options here, right? So one option is the rego market stays as is and you still have this kind of this concept of within yearly matching, which is the compliance period you talked about. I'm more excited about and I'd like to see happen is a more like 24/7 matching, which is not to say you can use a rego from the middle of summer to offset your consumption and winter, but you could use everything has to be matched within the particular hour. And so if the market is genuinely flush with regos, like the lots of wind, lots of solar, then it costs nothing. But if the market is genuinely short, so there's not much wind, there's not much solar, then it is quite expensive. And then you kind of are starting to give price signals to get some sort of flexibility from low carbon sources. I'm quite excited about that 24/7 rego. I think the market should go that way. But what do you see and what do people say to you? I think it's got to go that way really, because fundamentally, to be green, we don't really care about matching year by year, how much supply we've had with such demand to go to have a fully green grid. We have to have that flexibility that enables us to kind of fit supply to demand in some way. I guess batteries have a really interesting role in like, could they load shift regos to like, you know, regos produced in a surplus period with demand that's got a shortage of regos? Could the battery actually physically take that? You almost end up with like power market 2.0 for regos, where you've got to match them, you know, the UK's market settled half out by half out, you can kind of pick your time frame that you want to match them by. But at least that's then, it's a Varma consumer, right? I'm a corporate or a domestic and I say, I've got a 100% green tariff and then I look at an action grid app and I say like, what's running on the system right now and it's just pure gas. You kind of think, I feel like I'm pretty good. You don't have 100%. No, I don't. I'm clearly not. I'm clearly getting some gas, right? So I think the 24/7 rego matching would give you, it just feels more transparent, it feels more honest. You'd be able to say, right now, your consumption, no, it's not green because when the soul is not running. Absolutely. But you'd be able to say with much more certainty, when is and when isn't. I feel like I agree with you on the 2.0. I don't know quite how you'd run a rock through a battery, kind of arbitrarily clip it by 15% for a round of efficiency or something. Someone with a big model come up with that out. Yeah, no, it's really tricky. I think the the rego market is fascinating and it's a bit of a journey, right? We started with this like oversupply, let's subsidise renewables. This feels like a good thing to do. Let's create a new industry, a whole green economy. And then we kind of moved into this oversupply, really low prices for regos, world, where everybody's green. I think we've got to take that next step now as an industry. We've got to move to looking at matching things more real time and doing that properly. The other concept that you have for regos, the other alternative is to look at maybe something like the French model, where if the rego came from a project that was subsidised, then it shouldn't necessarily have a rego certificate with it because it got built by the subsidy scheme. So why should businesses and consumers be able to claim the greenness of that project? They didn't actually contribute to that green energy being on the grid. That was the subsidy scheme which we're all paying for because we're all billpayers, you know, businesses and customers. There's a horrible untangling to that because I'm sure the French generators would say, well, we only built it in the first place because you were expecting to get the goo that was at this point. I'm not sure price level is made, there's that made sense for them to do that because French even taken it one step further and the state say, those regos are regos because you got the project was built off the back of the subsidy contract that we gave you. So those regos are owned by the state. We will auction them off every quarter so they're one regular auctions for all the guarantee of origin certificates that came from those projects and they used a revenue they generate from that to pay back on the subsidy to reduce the cost of the subsidies. So lovely circular system. So I think there's a lot of potential for looking at this properly and I really call an off gem to really get stuck into this because there's a lot of opportunity to kind of go with the times here and like really make a difference. A great, I think it's a great point off gem if you're listening. I know some of you do. So take a look at the rego space. Okay, then let's move on from DB. I also want to talk about Germany because you have been looking at DB but also looking at Germany. Why did you pick Germany as a next region to look at? Yeah, great question. So for renewable exchange, we're a marketplace. So we need a high density of projects on the one side of generation assets that are operational, they're looking to sell power and we need a high density of energy suppliers on the other side that are looking to buy power. Germany for us was a fantastic market. The main reason we looked at Germany was because they have a 20 year kind of feed entire subsidy. For that 20 years, you can't really do a lot in the market and you get paid by the German state, your feed entire for malm. But in year 20, you're thrown to the wolves. You have no idea how to connect with the different market players. You've got no guaranteed revenue and you've got a generation assets that still got some life in it. So for us, we kind of got started. We got started in Germany around the turn of 2020, which was when those first 20 year contracts were up. Okay, so there's a wind turbines from 2000. These are wind turbines from 2000. They're really old technology that are rolling off there and coming into that end of life phase. It's really interesting. I remember the wind turbines in those early 2000s wouldn't have been very big. You're one megawatt. That's probably half a meg. Half a meg is probably about right. And then around sort of the 2010s, you get into the 456 megawatt type sizes. So I imagine that you're seeing like opening like a time capsule a little bit and seeing those and the sites. Are you starting to see there's kind of like bigger volume coming through as you're getting the bigger turbines and the more upstate tech? Yeah, it's scaling through, but it's a slow burn, you know, it's year by year. So we're 2026 now. So you're looking at 2006 projects that are rolling off. These are old assets and it's very old technology as well. It's great to open that time capsule and look at how far the engineering's moved on since then. So some of these projects, you know, we have assets in Germany now where they're entering into PPAs and they have to specify as part of the tender that they don't allow the off-taker to economically curtail the asset. So they don't allow them to turn it off. Because if they turn it off, there's a high chance it won't start up again. I think anyone driving a car from the early 2000s probably has a similar feeling. And long journey. Just leave the cut, just leave the engine running. Just leave it running. Yeah, exactly. It's a real challenge for them. It's crazy. And so you're in Germany, you're looking at the wind in Germany. You also looking at solar assets as well. We'll look at some solar, but solar didn't kick in in Germany for quite a while after wind. So for us, a lot of the projects we do with wind farms where we do solar, it tends to be new projects to the looking for that kind of 15 year off take, looking at the corporate market, looking at what other routes to market they have. Can they take maybe a one or a two year short term PPA to get it going before their subsidy kicks in? They're looking at all kind of optimization options. But mainly for us, it's those those old wind farms. I'm able to close off the old wind farms. What's next for them? Do they kind of, do they run for another few years and when it eventually wraps up, it eventually wraps up? Or are they looking to refurb and to come back? Not as a 500 kilowatt wind unit, but they want to recycle the site and come back as a shiny new five megawatt or seven megawatt on your winter. That's the dream isn't there. I mean, you look at the UK renewables fleet and it's 2026. Probably almost every generation asset right now. by 2050 will need to be torn down and built again. So in Germany, absolutely, I think the idea is to get that oil can out and get that wind farm limping along as long as it can while you go through the kind of repowering or in some cases the decommissioning process. So you might not be able to get new planning permission for that project. When these projects were built, they tended to have like a 25 year planning permission that said you have to put it back to the green field it was at the start. And you finish with the project. So we're now kind of encountering that end of life phase and looking at these and really you know, testing ourselves and saying, right, hey, is this the right thing for the grid? Or should we be looking at repowering that site, taking down the 10, 500 kilowatt turbines that were there and maybe putting up to four meg turbines now or whatever kind of makes sense in a kind of modern age. But yeah, for Assa Ono, it's really kind of eke out as long as they can. Yeah, it's a fascinating part. I think in the same way that we probably saw people start up businesses for new PPAs coming through or new technologies like batteries. I'm sure there are going to be some people who are going to fire up businesses or start up businesses around decommissioning of assets. And it's just a fast, fascinating space like there's a wave of projects coming through. I'm sure there are like entrepreneurs out there who are already deep into this, but it's kind of interesting to get the feeling of it. Maybe just to wrap up one final question. So what is one contrarian view you hold about the energy market or indeed the PPA space? Yeah, I mean, a full of contrarian views. But I think probably the main play to throw out there is that we really have to kill off subsidies. It was amazing to have subsidised the renewable energy industry from the early 2000s all the way through and Europe did a fantastic job of this. I think when you get to a point where renewable energy is the cheapest form of generation, it really grates on the average Joe in the street to say, "But we have to subsidise the price that they receive for their electricity to make sense of them to build." So for me, the energy transition and moving to the full green economy is far too important to be in the hands of politicians and subject to the change of political winds around the world. I really think we have to take the fight on the economics here. We've got to look at different structures. We've got to look at different financing arrangements. We've got to look at different power purchase agreement options. We've got to kind of move to a world where you don't need a long term, you know, 15-year, 20-year contract to underpin the build out of a new renewable generation asset. This isn't easy, but I think as an industry, it's kind of our responsibility to just not sit on our hands and say, "Hey, keep rolling out those CFDs and UK PLCs just sat on a book of gigawatts of CFD exposure." That is the accepted norm now. What would you see that the PPAs would start to offer the same level of certainty that the CFDs do? I think it's maybe PPAs, it's maybe the way investors are looking at these projects. Then the really interesting one is the government sat on gigawatts of CFD exposure that they've procured. Why aren't they looking to back that out? They're just sat on that exposure. If prices rise, then their exposure reduces. If prices fall, their exposure increases. At the same time, there's a whole Ford's market out there of businesses, domestic customers, all sorts that would love to access that volume. Why can't they start de-risking this position and offering out these kind of reverse PPAs? Call it a PPA if you want to go with the corporate PPA hype still. Why don't we take that to market? Package of that. Yeah, that's something else. Fascinating. Rob, thank you very much for coming on Transmission. You've been wonderful guests. We've covered all things PPAs, regos, goose, all the acronyms. I hope people have followed along and got a really good understanding of how the renewable market functions today. Rob, thank you for coming on. Nice one Ed. Thanks very much. Pleasure to be here.