223. Solar + Storage: The Economic Core of the Future Grid - Apr26

With Laurent Segalan from London and Gerard Reed from Berlin, this is redefining energy. Today on really fun energy, Jard, we're going to talk about solar and especially an extraordinary conversation you had with Anaconda of PVK. So can you give us a bit of context? Yeah, well, PVK is one of the world's leading software platforms for anyone who's designing large-scale PV systems. And they have a podcast, they invite him to come on. And really the whole thesis for me is that going forward, the economic core of the future power system is solar and storage. And the reason for this is just because of cost, it's a simple stuff. It's just solar we've never seen about electricity, production, technology as cheap as it. And also it can be put anywhere and add a bit of storage into that and you can do a huge amount. And actually I'd make a point as well, pre-really, you just can't block it because we're moving into a world of plug and play solar. And plug and play solar really means I put up my back garden, I plug it into a socket and put a battery beside it. And I've got a small power plant. And guess what? Why utility has no clue what's going on? My grid operator has no clue what's going on. It's an European perspective, but if I go to the global south, how are you going to revolutionize the world by being able to put these systems in? It's incredibly exciting. So let's listen to your conversation with Anaconda. But first the word from our partner. Ablokoe energy is Europe's premier leaser of ten-foot container mobile batteries. Built in Europe with CATL, best LFP cells, ablokoe energy serves 14 European countries, including France, Germany and the UK. Ablokoe batteries can be leased for any duration between six weeks and six years, and they are monitored by the Dutch award-winning platform school. Ablokoe energy, make your life easier, make your business more flexible. Back to the show. Gerard, welcome to our show. My pleasure. Looking forward to it. You really do bring a very perspective and I'm very excited to dive into what energy transition looks like when you zoom out and connect the dots. Have you been quite open about the fact that you were initially skeptical of solar? What were you skeptical about and what ultimately changed your mind? What I was skeptical about really was the ability to get costs down quickly. And where I was coming from this, this was 20 years ago. We've actually had solar panels for over 50 years. But sort of nothing happened in the space and I just didn't really see a path. When I went to see a solar factory in Berlin 20 years ago, I really just didn't see the ability to be able to get the cost down. I didn't understand what was going on if I'd be really honest. What I saw was a group of people who were making modules and they were doing this by hand and I just thought this is a joke. So that's what I was coming from now. I was thankfully able to listen to people who knew more than I did and convinced me otherwise. And here we are 20 years later and it really is the lowest cost form. I'm not even just saying the electricity of energy out there. We just not going to get anything lower cost. Yeah, that's interesting. And honestly, I think it sounds like that evolution sort of mirrors what we've seen across finance more broadly. There's early doubt that is followed by a rapid reassessment. Once the data becomes a little bit more impossible to ignore. Yeah, and it's like, go back and if you look at the history of solar, we talk about a solar coaster as in a roller coaster. It's up down, up down. I've seen, I don't know, many up down cycles have seen at this point down, but maybe it's every three or four years you have another up cycle or another down cycle. Now the good news today is, solar is in a much more sustainable position than it's ever being because it's costs are so low and also what's increasingly happening is you do have facilitating technologies alongside it. For me, the facilitating technologies would be batteries, power electronics, stuff like this that just make it much easier to integrate solar or into a wider system. So that's sort of why it's in a much better position than it's ever been really. And at some point you also shifted from seeing solar as a niche solution to calling it the bedrock of the future energy system. What was the moment or realization that led you to that shift? Well, the bedrock really is what's your foundation of an energy system. If we really look globally today, the foundation of our energy system is really oil. And what actually happens is every time you have an industrial revolution, you do have a new form of energy that takes over. So you had the first industrial revolution, we really moved from wood to coal, okay, but then around alongside coal you had the steam engine. And then we had an internal combustion engine, obviously needed oil. And now what we've got is electrification and an AI, I would say at this point in time, digitalization, all our technologies need electricity. They don't need oil. So that's the big shift, but the other shift is it's the lowest cost form of producing a usable form of energy. And that's the key difference because you can't stop that because the other thing that's really interesting for me about solar is the fact as you can use it anywhere. And of course you can say, oh my God, but we don't have a lot of sun in northern Europe. Yeah, so why talk to the plants in the back garden or your front garden about that. They go, well, we're quite happy. We survived with this, you know, sun only being here. Whatever it is eight hours a day in winter. So I don't take that argument because I just think what happens is you adapt. That's all about low cost and flexibility. That's what solar has. I agree. It's funny how quickly that perception changed. And almost before many people even realize it was happening because it fell faster than almost anyone had forecasted deployment, scale globally. And then suddenly solar wasn't just a technology story. It was a system story. Yeah. And I want to say, I only think we're at the beginnings of that system story because if I take, let's call the Western world, North America, Europe, what we've got there is you're replacing an old system. That's more difficult. But okay, if I go to Pakistan, I'm not replacing an old system. What I'm doing is I'm bringing power to my people. And you can't stop it in that environment because people want to have a better life. And a better life for your kids means you need to have electricity and you need to have internet. They're the basic things you want if you want your kids to have a little. So guess what you do? You're going to put solar on your rooftop. And even if you've only have electricity for eight hours a day, it's better than zero. Right. And if you add batteries in there, it goes there. So I think really the big story of solar is only starting, but it's a different story. It is creating an energy system where solar is the better off. I agree. And how has your background in investment banking and capital markets shaped how you look at the energy transition compared to say from a purely technical or policy lens? Okay. So if you're a scientist or an engineer, what you're interested in is physics and you're interested in efficiencies and you're looking at it from a first principle point of view. As a finance person, but for me, it's economics doesn't make economic sense because if the physics is great, and the economics makes no sense, it ain't going to scare. So I really look at the economics of stuff. That's where I really, really focus on in every single technology I always think, does this make economic sense or could this in the future make economic sense? And I think that's the key thing that you focus on. Just keep focused on the economics, economics, economics. So I give you a very practical example. If I take the case of hydrogen, green hydrogen is really difficult for that to compete in a market with brown hydrogen, right? It's very difficult. Maybe it's not even extra impossible. And you sort of argue, okay, do we really need to do that? People really willing to pay for that. They have questions that I ask. And that means that I constantly focus on what's the best economic decision. That's what I'm trying to do and everything that I'm looking at. Don't necessarily get it right all the time because again, you're looking at the future all the time. But I think a lot of people don't do that. What they do is they get carried away with a story and stories maybe how you get some capital in the door, but stories are not how you create the future. You create the future by really bringing something at low cost to market. That's how you create the future. I really like that for a minute because capital in the end has a way of revealing the truth. Money moves towards what scales and away from what doesn't. And you've mentioned solar and batteries before. So when you talk about this energy revolution, now I'm going to talk about the energy revolution. Now we really talk about solar alone. It's really solar-class batteries. Why is this pair in the critical these days? So pressing upon most, storage has always been a critical part of our energy system. And we just let star with the basics of how we live our life every day. The most important storage device I have is probably my fridge. OK, that's what I'm doing and keeping my food there which I use every day. But if you go beyond that in the fossil fuel world, we've got massive amounts of storage that we've built up over the last 100 years, right? We've got oil tanks, we've got gas tanks. We've got oil tankers to transport that. So we've got massive capabilities to do. So storage is to all of us, it's clear. Storage is a key part of the energy system. Electricity is slightly different. There's not a huge amount of electricity storage out there because what you have to do is you have to take that electricity and convert it into a form of energy. So you know, you push it up a water and bring it back down as pumped hydro or something. And we realize in the past, probably easier just to rely on the fossil fuel storage. In other words, what you do is when you need more electricity, you take that coal in the bunker and you burn more of it. That's sort of what we've been doing. But in a world of renewables, where renewables is so low cost, and where the reality is because it makes so much economic sense for people to put more and more for solar and the system, whether it be in the home or whatever it is, You then have periods of access, then you go, "Well, what's the most efficient?" and cost effect a way to do it, let's do use a battery. And that's the reality of it. You could put it up the wall, you could put it up a mountain, or you could do something like that, but it's more expensive, and you've got inefficiencies in terms of efficiency, the losses that you have a higher. And in particular, in the case of lithium ion, lithium ion is, I do use a story that nothing happened in batteries between probably 1900 and about 2010, and then we had lithium ion. And obviously, lithium ion is in every device that we have as a lithium ion battery in it, and they're getting better and better. And also then we've also got new forms of batteries, which are lower-cost, higher performance, coming our way as well. So that battery revolution continues, but the thing that really lends itself to batteries with solar is the fact that every day the sun goes up and the sun goes down. And when it's down, that means you always have potential to actually use any excess that you've saved to the time when the sun is not there. So you can do this one, you can bank on this every day. Let me contrast that with, say, wind or hydro. Wind, you have no idea what's gonna happen because what often happens is wind comes in front, and these fronts could be which for two or three days. So that means is I go and go, "Hey, I'm gonna take this storage, "I'm gonna save it for night, it don't work, wind, "because you might have to save it for three days." Now that's okay, you save it for three days, but with solar, it's much easier. You save it until it's dark. The exact same thing you would also save a hydro as well. You use hydro as well as the same thing. You say, "Oh, again, I save it." You could do that, but there are better ways of doing it as well, that would say. So let's say it really does lend itself to solar as opposed to other technologies, that's what I would say. - Yeah, and I think this distinction matters a lot, especially when people still talk about these technologies as if they're optional atoms. Really, with solar without storage, you have generation, but solar with batteries, you do have like a real infrastructure. - Exactly, exactly. - Now you often emphasize the need for a systemic fuel of energy transition. Can you unpack what that really means and why focusing on one technology in isolation can be misleading? - Yes, what you have is don't forget, again, I'm gonna go back to the Western world because the Western world, what we've got is a whole pile of technologies that are used out there in a system, so you've got fossil fuels. We already have electricity, and I'm sort of saying, well, the future is based on solar. And then the question is, how do you get there and should you get there and doesn't make economic sense? And what we end up doing is we make changes all across this system. And we just make it more and more complex. And what this means is we end up with unforeseen consequences. And even when we do see the consequences, we don't act. So I'd give you a very simple example. The Spanish blackout that took place last year. Every grid operator in Europe has been talking about really behind the scenes that we would have this type of event. Some have been preparing for it, and some haven't. The Spanish have not been. Let's be really clear on that. Now, that is a criticism of the Spanish grid operator and the regulator, but the point is we know what's going on. And I can go on and on and give a really simple example. I'm in Ireland today, and if I go back 12 months ago, Ireland had a storm that came in, and a large part of West Ireland lost power for whatever it was a day and a half. Some people lost it from much more than that. And it's like, "Shokara, Ireland had a storm." I go, "We've always had storms." Number one, and number two, all the climate models have been saying for 15 years that the storms in Ireland would get more severe. So it didn't prepare. That's what I'm talking about when I'm talking about. Even where there were consequences that we could foresee, the powers that be having made the changes that need to be made. Then we talk about unforeseen consequences. For scene is something you just could predict. So I give you a very practical example of that. We had a whole series of nuclear power plants in France last summer that had to close because of jellyfish. Now, you go, "What the hell are jellyfish doing?" What jellyfish were doing was they were congregating in and around the water inlets for cooling the plants. Okay? Now, why am I saying that? Well, the reason jellyfish is there is because the waters are getting warmer. And again, unforeseen, something we haven't said. There's so many unforeseen consequences. So the only way you can really think about this is I think is to really think of this at a very, very systematic level. And a systematic level is, "Where do we want to go?" Is the first question. Where do we want to go? And then the question is, "What's the best way to get there from both an economic and a society of point of view?" And I don't see this anywhere in the world. What you've got is regulators saying one thing, governments saying another and this, you know, and it's been pulled in every different direction. And as I said, it just gets more and more complex. And this is not helpful to producing a low cost energy system that is suitable for our future. That's where I come from. Yeah, so that's really a helpful way of thinking about it. Because we're often debating about pieces of the puzzle without really stepping back to look at the whole picture. And we could really say that we don't have a technology problem, but we have a coordination problem. Exactly. That's a good way of putting a coordination problem. I know it's different to coordinate all the different parties, but I'd also call like, "Lictatic in the case of Europe." If you really want to go and move forward with stuff, I think what you have to sort of put together is, I call it a future energies commission that really has Keith and that connects to go and put in, that can make change happen across Europe. Now that's maybe a pipe dream for me, but I'm going back to what I briefly said earlier on with, we're in an industrial revolution. Now this is probably the biggest industrial revolution in history, my and kind. And that industrial revolution is AI and electricity. And so you could do two things. You can become a ludite and you can block all of this, but good luck to you on that, because what you're doing is you're putting all of us in the future into a very economically weak situation. So then the question is what to do. That's where I'm coming from when I'm thinking about this. And by the way, I spend an awful lot of my time really thinking about AI and what it does and what it doesn't do, because it's the speed of change in that area is just so quick. And it's not going to slow down. So that's where I'm coming from now. This industrial revolution is quicker than any industrial revolution we've ever seen. The first steam coal revolution took 150 years. The automobile revolution, maybe it took 50 years. This is not going to take 50 years. This is a 10 year revolution. But somehow for me, the irony is striking because we have cleaner, cheaper technologies available, but then crisis planning still sort of default to 20th century. Now you mentioned the power outage in Spain. I know Berlin had some outages a couple of weeks ago. Boulder, Colorado also had some. So what do these moments really tell us about grid resilience? I'm going to just say their warning signs to all of us. Okay. And we have to heed these warnings. So and I give a very practical example of this. There have been attacks, physical attacks on transformers in the United States. And what did the United States do? All the states get together, all the energy regulators, all the utilities, and they say, okay, we need to support each other if there's an attack on one of these pieces of critical infrastructure. That means they have strategies in place. In case there's an attack on one of these pieces of critical infrastructure. There's nothing like that in place in Europe. Okay. And I'm going to say totally unacceptable, totally unacceptable. Because the issue is the risks if something goes wrong are just so big because society will, as we know it, in a major city collapse if you don't have power for three days. That's the reality of the world we live in. So accept this. Don't run away from it. Accept it. And then you have to go and change your approach to how you run that system. Because then you go and say, okay, one of the risks in this system, one of the major ones, and how do I deal with those risks if a horrendous event takes place? What do I do? How do I react? And how do I get the system back running as quickly as possible? Okay. That's it. Have these open conversations. And by the way, that's also systemic thinking because that requires people to be really open and honest about this. And rather than hiding the threats and the weaknesses of the system as it is, you know, that's where I'm coming from. The last thing I'd say, if I said to you today, I was running my businesses with Faxus, you would break out laugh and you go, what are you talking about? And I go, okay, I can tell you in the names of many grid operators that are still used in Faxus. And they'll turn around and they'll say it's more secure. Yeah, it was a bit slow, isn't it, for the world that we're in a present where electricity is moving basically at the speed of light and you're telling me you're waiting for your Fax before you make a decision. I mean, come on. This is a joke. And if there's a grid operator here listening, they'll be cringing on, oh my God, how dare he say this. He's not even an engineer. I mean, I go, listen, if you're an engineer, show us that you're an engineer and actually improve the situation and really come out there and deal with the risks around what you're doing for a job every day. And there's a lot of talk about microgrids and distributed generation as a way forward. How important do you think this is for a decentralization to build real resilience? Anybody who's in the systems theory area will tell you that the best form of systems are decentralized. That's the reality of it. If you have a centralized system with just a small number of connections, well, that's a pretty weak system. So the more redundancy you can have in the system to better, but redundancy, also, it's about this whole thing. idea would say have been able to island the system. And island, me, is, is the power system in Norway goes out. That would be felt across Europe, okay, because we're all connected in together. So it goes out. But then the question is, can Sweden protect itself from that? Can Gemmark protect itself without? Let's go back to the Spanish situation. Portugal was not able to islandize its grid when they had problems in Spain, okay? So that's not very resilient either from the Portuguese. So the question is, what can you do in these extremes is to make sure that these systems stay stable. And I said this at a national level, but then what happens at the local level as well? So if you take the case of Berlin, obviously part of Berlin, one cable in West Berlin is taken out. And there's no power in that region for five days. That ain't very resilient because you have to ask, well, why did that region not have another cable coming in that's going to supply the power? Or if you knew about that one cable coming in and having the importance of it, then the question is, why would you not put a battery in there to deal with it? To make sure that if something happens, you still have backup power or whatever it is there in case. Or by the way, you protect that cable. You keep a camera on it because you know it's your weak point because the reality is there's all part of websites out there where I can go in and I can go and look at the distribution, transmission grid, the gas grids. I can look at critical infrastructure and I can see exactly where things are as the reality. So that's face reality. There are people out there, bad actors and they can win and do and see all this. So that's the world we're in. You have to deal with that. And again, it goes back to the reality is that can't do it electricity. And by the way, that's only a minor situation, I would say. It's a part of Berlin. 100,000 people without electricity. That's not 3 million people in Berlin with electricity for three days or five days. In the winter, then you'd see what would happen, right? Then you'd have the German government falling. That's what you would have. Exactly. Exactly. Yeah, it all comes down to just those islands and just making sure that everything is a little bit more intelligently connected. Good way of putting it. Absolutely. I guess from a financial market perspective, what are the biggest risks and opportunities in solar, storage and clean energy today from your point of view? Let's start with the risks. Good, get the bad news out of the way. The biggest risk is the fact that we've got in regions across the world. Again, I could take the case of Pakistan. I could take the case of Europe. I could take the case of Texas. You have periods of the day, too much electricity in the system. And the too much electricity in the system means the price is collapsed down to zero or they might even go minus. In that type of environment, if I got a solar system and I'm hoping to get 30 euros for 40 euros first, I'm getting zero. And I've got it in trouble. So I might eat a bit of lowest cost form of electricity generation, but nobody wants my electricity on a June day or 12 clock. That's the biggest risk is that what we're really seeing is this. And by the way, let's talk about the first phase of renewables was build, build, build to replace fossil fuels. Okay. That was fine. And we subsidized it and this, but the next phase is not about that. The next phase is about producing low cost electricity for people and don't keep your own solar wind. All these are a very big part of that. But the business model is going to change. So just take the case of say solar. You're definitely going to see more behind the meter. You know, in other words, at home, in our businesses, on our rooftops, in our gardens, and you connect them in a bathroom. Okay. In with storage, you can see this very, very, very clearly. That's where we're going. I can see if you take large scales for some the same thing is you could say we can have the German government or whichever government is financing us to build more and more solar. And you go, well, why would you finance someone to build more or something when the price is going to be zero? So that requires us to either you stop subsidizing or actually you change the way the market works. In other words, enable the customer to benefit from the fact that there's a load of solar on a sunny day every weekend and allow them benefit. And how do you do this? Listen to me radically about it. If you look what's going on in Australia, what are they going to do? They're going to give away electricity when there's too much solar in the system. So why would we not say to our industry across Europe? Guys, every weekend you've got free electricity during the day. Okay. Either that or you have too much of it and you pay someone to take it, you know, you're cutalers. I think we need to be creative in our solutions in around this. We have to rather than overregulate, you know, just be a little bit more creative. I go back to the risk is financing solar and renewables is now more difficult than what it was because you don't have this long term PPA, call it a feed-in tariff or whatever it is. You don't have that in place anymore. There's something else there. And this requires everybody in the industry to change because this is called growing up, growing up and maturing. So that's what's going on. That's the risk. If you ask me what's the opportunity, the real opportunity again is how do you integrate storage and other forms of generation in and around solar. That's really the thing that I really think about in a different way. And again, I'm going to start with solar because it's the lowest cost from and it's the one that you can block. I can block off shall win by just saying no to it. You're not going to be able to block solar because that customer who generates electricity at 10 cents using solar on his rooftop is going to keep doing it because guess what? Electricity in the grid is 30 because we really clear that's where you can block it. Then we've got balcony solar and a whole pile of stuff. So plug-and-sop, wave solar is there. So you can block this. That's the most exciting thing in and around this. And it also means that let me call it the optimization of these assets becomes really important. What I mean by that is trading the assets. These assets are solar assets going to be around for 40 years. Okay, so I have a power purchase agreement for eight years. Well, what do I do after year eight? There's a whole pile of creativity that's needed in and around what you do with this going forward. And that is the area where I think it's very exciting. And ultimately, I do think the future of this is going to be a large part in developing countries. So I'm going to go and talk about the global south. If what's going there, or just take Australia, in terms of their whole system is being turned upside down because the customer wants solar because it is cheap. That's sort of where you have to look at if you want to get an understanding of what's happening or what's not happening at this space. That's really a great point. It's often not the technology that trips through Pollab, but it's all of the assumptions around it. Now, if you could change one major thing and let's say policy, market design regulation to accelerate the transition, what would it be? I would enable the system to be flexible. And what I mean by flexible is that we need to get the customers involved in this energy transition in a much more active way than they are present. Now, it doesn't mean that the customer has to decide, oh, go look, the power price is low. I'm going to switch off my refrigerator and I got to put on my air conditioner. That's not what I mean. It's enabling that so that what can happen is an energy service customer can come into you and do this for you. A manager and do it as a energy is a service type thing. All this, that's the really, really interesting thing is to enable that. What does that mean to enable flexibility? Well, that means to be able to allow storage into the system as quickly as possible right across it. Secondly, to remove all barriers in and around solar and generation generally in the home, make sure you have smart meters in place to enable this and then basically to allow aggregators to be able to take this demand and energy and use it in a different way. And I forgot, I forgot as well. It's very important to be using electric cars. I got these 100 kilowatt hour batteries just sitting there. So use them. How can we use them? We use them for backup power. So okay, you know, you have a blackout. Guess what? You've got your car. You can plug in. Brilliant. Okay. You can use it in the power system. Do smart charging. Enabling all of this smartness, particularly the demand side. And to do this almost without the customer knowing it. And I will give a vision of the future for me. Every device in our homes in the next years will have a battery in it. The reason they'll have a battery in it is because it makes economic sense. Now what's really interesting is if you look at the white, good manufacturers already, I'm talking Samsung. Panasonic. What do they do as well? Guess what? They do batteries. It's very obvious that they put these into device. I mean, you think of a smart TV today. Samsung's not TV today. I have control of that. I can do different things with it. You can see where I'm coming from. Devices. I'm selling them selling you a refrigerator. They sell you as cooling as a service. They say, okay, don't buy the refrigerator for me. What you do is you pay 10 euros a month. And by the way, you might laugh and go, oh, there's no way you're going to do that. Well, okay, I can go back and say it here. That's what we do with mobile phones. Sorry. And you could maybe say 20 years ago, we wouldn't have done it, but we do. This model is what people understand and it makes sense to them. And then what happens is I'm just making sure it's all working for me. I don't need to think about it. So that means you've got a whole pile of actors that are able with their devices and their services to make sure that the customer is involved in being part of the solution in and around making sure that we electrify in a low cost efficient way. That's where we're going from. And by the way, you have resilience in the system when you do that. I really couldn't agree more. I think sometimes progress isn't about inventing something new, it's more about removing the friction. So as you say, just making things a little easier. Agreed. This has really been a powerful conversation, not just about solar storage, but about how the entire energy system is being written in real time. The takeaway for me is clear, the transition is moving faster than most institutions are prepared for, and the winners will be those who understand the system and not just the technology. It's a good way to end it. I agree with you on that. How lovely. Thank you for sharing your perspective and challenging us to think bigger. I suppose the wrong, in conclusion, I'd like to hear your thoughts. You know, you listen to it. Do you think I'm being completely stark, raging, mad, or what's your thoughts? My thoughts are you are right below the 40th parallel. Above you have the season, when is going to be much more important. So below the 40th parallel, I'm with you, but it's not going to work for Northern Europe, Northern US. So yes and no. Yeah, you talk to me sometimes, you're blessed by history and sometimes you're cursed. So I think the global South is blessed and the global North is probably the cursed, right? But we'll finish with a song. Very good. Very good. Thank you very much. Thank you very much. Okay, John, until the next week. Welcome forward to us. Thank you for listening to redefining energy. Don't forget to rate the show and subscribe on Apple Podcasts, Spotify, or the platform of your choice.