The AWS for Power: How Philipp Man of terralayr Wants to Shape the BESS Offtake Market

[Music] Welcome to the PECS part podcast. Every two weeks we'll be bringing you fresh updates and insights on the Renewable Energy Market. Along with a guest, we'll share unique perspectives on the critical trends shaping our industry. Welcome to a new episode of the PECS apart podcast. Today I'm speaking with Philip Mann, CEO of TerraLayer, about his vision for building what he calls the AWS of Power to address the critical need for flexibility in our energy systems. We dive into the mechanics of their platform, the current demand and pricing for tools and his outlook on the German best off-take market. In the second part of the show, we look at short and long-term implications of the Iran War on European power and best valuations. We'll also discuss how flexible connection agreements are impacting risk profile and pricing of best tools across Germany. Today I'm very happy to have with me, Philip Mann, CEO and founder of TerraLayer, and we're going to discuss his company, the battery market, what he's offering, very happy to have you on the show, Philip. Thank you very much for inviting me and excited for our chat today. Philip, what made you found TerraLayer? What is TerraLayer up to? So first of all, thanks again for inviting me. So before I start on TerraLayer, kind of what made us want to build in the space. And we've been entrepreneurs for 13 years. Prior to this, we built a business in the B2C luxury watch space, a very different. I did start my career at Gelenkholdo in the middle of this legit fuel team. So it feels like going full circle, but I spend a lot more time in B2C online business than anything else. And then essentially, you know, if you spend near a decade selling stuff online that is very expensive, but has no impact whatsoever on society, neither positive, but also not negative, I guess. You start to wonder as an entrepreneur in the difficult moments and you know, you're building a business, it's never just going upwards. It's always a roller coaster. Am I really spending my time on something that has meaning? And so my co-founder, Ludwig Volitzer and my old company and my new business partner, again now, have essentially asked ourselves, you know, what can we do that has real impact for profit, for society, which is good for the planet, but at the same time can be a foundational generational business. And so we looked at different things very quickly came to the conclusion that on the generation side, you know, the inflection point of kind of exponential growth has already happened. So the, you know, the thing that is kind of the next frontier we thought in 22 is, has to be flexibility and storage. And so we felt that, okay, this is where we want to dedicate our time. And so as we looked at the at the time, really non-existing flex market, other than gas, arguably, and some coal, we felt that, okay, you know, you could have many pumped hydro or cranes lifting weights, but we quickly came to the conclusion that, you know, that sounds cool, but ultimately it's going to be batteries. And we developed a very simple hypothesis, which was it, there will be a massive need for flexibility. And it probably will be best served mostly by best. And it will not be practical for everyone who needs that flex to own and operate their own assets. So we said, somebody needs to build the AWS for power. That's essentially what we thought. And we now started Terrelayer in in 22 while selling our old company. We sold our old business April 16th, 23 April 17th, 23 and we're working full time on Terrelayer. And so to answer your question finally, what is Terrelayer? We are a integrated energy flexibility platform. Specifically, this means we have two parts of the business. On the one side, we developed finance and operate assets, a kind of IPP for best, if you will. And on the other side, we have a software route to market platform that commercializes our own assets and other infrastructure, best investor assets. Very importantly, we don't trade. We're not an optimizer. Think of us like an operating system for best, where you can configure your offtake across a fleet of assets or an individual asset. And you can slice the assets virtually rather than doing it physically. And then you can have a part of contract that a part of merchant. You can have multiple optimizers and so on. But happy to go into more detail, but conscious this was a very long answer. So I'll stop myself now. Yeah. Sorry for the length. With very different business logic. So how do you you have this best IPP and you have the best platform? So how do you go about this? Well, look, I think I think about it very simply because our best business like every best operator has a lot of challenges that we saw for. How do we drive contracted revenues? How do we benchmark merchant trading performance? How do we manage asset uptime? And how do we track things like state of charge drift? And so we built these tools for ourselves to become a better best operator. But what we realized is, well, actually, everyone else has the same challenges and they keep asking us how to do it. So why don't we just sell them the software we already have of the shelf. So in my mind, yes, it's different personas building this in the best business. You have EPC people, project engineers, etc. You know, project finance people. And in the software business, you know, you're mostly have software engineers. But ultimately as cheesy as it sounds, it kind of cross pollinates like our software business exists to serve best assets. And our best assets are better as a function of the software business. So while they had different companies arguably, it's all under one company. But although the different teams of different denays, we all strive for the same thing, which is to drive more best onto the market, currently 100% focused on Germany. And to do it in a way that unlocks more value for assets. We happen to own most of the assets today ourselves. But we have incredible traction with more third party assets coming on the platform. And we just believe, you know, more best is good for everyone. But wouldn't wouldn't you see challenges arising when you scale the business that, for example, on the platform, you have different needs. How the platform shall be developed versus your own needs as an IPP, which might be conflicting. I'm not really to be honest. I mean, ultimately, anything that the platform needs should be something that serves best owners operators. And if it doesn't serve us, it will probably also not serve others. And now some people will have different focus areas. So if we are very active in the medium voltage space, kind of 10 to 30 megawatts. So what we use our software for is to bundle fleets, right, to have eight assets put them together, create a virtual portfolio, and then 12 to 50% of it. So rather than going as a per asset, you kind of slice it, into one or you merge into one and then you slice it to different off takers. And that's what we did with Wattenfall last year for 55 megawatts. That's what we did with RWE last year for 50 megawatts. And, you know, other asset owners may have the situation that they have very large assets, 400 megawatts assets, five megawatts assets. And they can maybe not find one off-taker who's happy to take all that contracted revenue risk. So they can then split the asset with us rather than creating a physical split. But the software is the same. And I think maybe if your question was a more around, well, this platform will scale. And how do you know you don't have a conflict of interest of your customers? Look, at the end of the day, our answer to that is very similar. It is very simple. Like, we're not a trader. We don't trade trading decisions. We do dispatch, right? If you are with one optimizer that has a large fleet of assets with customer X, and has one single asset with you, they actually bid into the Encelerary Services, right? So they can treat the portfolio better than your individual asset. We don't make these commercial decisions. It is up to you as the asset owner, how you configure the asset. Do you want 50 percent contracted, 10 percent contracted, 70 percent contracted, three years, five years, seven years. The opportunities are endless. It's entirely up to you. We only do the dispatch. And it's very easy to audit that we did the dispatch in your best interest because you can see how many times was your asset cycle versus our asset. And that's the only thing that you couldn't theory hold against us. And that's very easy to audit. And we have very clear Chinese worlds there. So I think there's no conflict or interest on the contrary, actually, our assets drive more megawatts to the platform, which means that if you are a small asset, you will actually benefit from more scale on the platform, better tolling terms, better data insights, better uptime, a lot more track record in terms of bankability for contracted long term tolling structures. So I think on the contrary, our own assets actually make the value proposition better for everyone else. And other people's assets make it better for ourselves as well. So I think it's it's mutually beneficial for sure. Well, we're deep into the platform. So the way I understood the platform allows best assets to be aggregated so they can basically contract, contract tolls, contract services. So how would you describe this? I would start maybe to take a step back. So when you when you have a best asset trade in Germany, in the majority of markets, but certainly in Germany, you're kind of confronted with the situation fully merchant, fully contracted, fully merchant, super risky, not so easy to finance, in theory super attractive in a short term, or what doesn't mean in a long term, most capital providers which are in fraught, don't want just merchant, or you can go fully contracted, and you know, you leave a lot of upside on the table. And recently in the last 12 months, we've seen an emergence of something in between, like somebody will tell the whole thing, like 80% of it, but then they want to do the merchant slice. But you don't actually know that they're the best merchant provider. And what we said is, you know, you shouldn't have to force to choose between these very limited options on the menu. You should find the best contracted offer, however much you want, whatever tenure you want, so you can configure your revenue stack, and you should have the best merchant option. And the best merchant option by definition is not one individual merchant option. Because if you actually look at trading performance also of optimizers in the UK, you will see that there are a number that are better, but there's no one who consistently out performs. So if you actually want to take a concentration better on one optimizer, it doesn't really make sense. What you want is you want to have as much exposure across multiple optimizers. And so what our platform enables you to do is to say, I want to do 50% contracted, for instance, across my fleet of assets or across one individual large asset, and I want to have 50% merchant, or 20% merchant, however much it is. And rather than the merchant slice going for one trader, we have a basket of optimizers, we call it the Terrelay ETF, enhanced trading of flexibility. It's a bit misleading, it's more fund of funds arguably, but basically you have multiple optimizers. And then according to performance, the good ones add any given moment in time, get more capacity, and the other ones less. And then once you see that the ones that have less actually improve their performance, then it gets changed. And I think it's the same way that a hedge fund like Millennium Capital runs their book. You have 10 p.m.s or 20 p.m.s or whatever it is, portfolio managers. They run a good book, they get more parts of the book. They lock in a loss, you take a way size of the book. And that's how we run the optimizer ETF basket. And how does it work in practice? So if a third party best comes to you and says, "Sami up." Yeah, I mean, it's pretty easy. First of all, I have to tell us what kind of revenue profile you want. You want 50% for seven years, 20% for three years, 30% merchant, or 80% for seven years, that's up to you. We will then either already use the toll encounter party that you already identified because you already did your own tender, or we will actually help you find partners like I was like Wattenfile, like RWE, who are they already on board on the platform and can very easily with existing contractual structures to tell you how to do it. And then the merchant part, we have a basket of optimizers, as soon as you switch on to our merchant platform, you instantly access them. And then additionally, we have virtual battery auctions, VBAs we call them. They are arguably kind of like mini-tools. And we actually run this almost every day where we auction off your merchant capacity and our merchant capacity. And we basically set a hurdle price. So we have a price expectation every day what we think the market is worth tomorrow. And if it clears above that hurdle, we auction it off to these other parties, which drives Alpha versus what a conventional optimizer arguably could make in the market at that day or at that week or at that month, however long this slices. And these are customers like Engelhard, like Onji, like some of the large commodity shops, hedge funds, etc. And the reason they buy this, because I anticipate that maybe your next question, happy to go into detail, is you know, they don't have physical batteries and they want to trade a physical flexible asset. And they basically do this mini-tool for a day, a week, a month. And if their willingness to pay as higher, because they have exposure to balancing costs or they want to do profile shaping for PPAs, or just because they have a different view on the market, then you can lock that in as an SNS and owner via our SNR platform. Great. And I assume this is all done financially. Well, it is arguably both. So it's a virtual tolling deal, whether it's a long-term toll or a day. And it's virtual in the sense that it's not tied to any specific asset, but it is nominated from our balancing group to theirs the next day. So it is a virtual product from a, how do you handle it perspective? They are on our API, they don't know which asset it is, super easy operationally, scales in theory, infinitely, and infinite being, you know, the quantum of megawatts we have on the platform. It's balance sheet light if they operate on the IFRS, on the IFRS 16, depending on how you treat your accounting, you don't need to consolidate the lease, especially for long-term tolls. But you still get the physical settlement the next day. So it's the best of both worlds, arguably. It's a virtual product, super easy to handle, almost like a financial product, but you still get the physical settlement the next day. I understand the pricing mechanism for the daily options. How would it work choosing your optimizer from a better third-party perspective? I mean, it's pretty easy. You basically look at the 30-day moving average and the 7-day moving average, and different optimizers tend to be particularly good on different things. And the market may be very strong in FCR right now, or maybe it's right now very strong in AFR. Typically, different algos tend to have different propensity to capture value for different market situations. And you can then see usually historically, in that being the last seven days, last 30 days, etc. What's the moving average? And then you shift that across there. We also let this hurdle price. How is the shift possible as a third-party best-seller? I mean, you can do it every day. You can do it every day. I mean, we do it actively for you, but if you, let's say, bring a best to us and you say, "You know what guys, it's all cool what you're saying, but I want to do it myself." You are more than welcome to do that. You get the anonymized data, so you don't actually know which optimizes who, but you get the anonymized data. And then you can dial it up and down just like buying different baskets of ETFs in the stock market. I wouldn't recommend you doing that because we have a very good quantum that runs this. But, you know, if your desire is to do it yourselves, you're welcome by all means. And how about the longer data products? How is the prices, Corrie? Look out there. Again, assuming a third-party asset coming to you and say, "Hey, for the bankability case I need to do, I want to do 50% five years." Yeah. I mean, the reality is that is still a very manual process. Like the, you know, there's called it 20 to 30 people that have real tolling demand for Germany, of those, let's say 10 to 15, you know, attractive from a bankability perspective, depending on, you know, you want to have BBB+ for instance, whatever it is. And then, you know, you approach them and you say, "Look, this is the asset. These are the parameters. This is what it is. How do you price that?" And then the way to think about it is, when you come to us and you do a virtual talk via us, we are not your counterparty, right? The counterparty is Wattenfall, or RWE, so you have their balance sheet. We are just quote unquote the software provider. So you have the best of both worlds. You have the easy management dispatch, all the trading analytics, etc., all the billing, etc., you know, our platform. But then you still have the credit that, you know, you want, or the counterparty credit that you want to kind of get a, get the dead in place. And two data points that that works is we just did a very significant portfolio financing with ABNMRO and Commerz Bank on the back of the tolls that we did. So it's as good, arguably better than a conventional physical toll. But that means you drive to price discovery and negotiation on behalf of the client also for the. We can. We can, but we don't have to. We also often have clients saying, "Look, you know, I already have X. They made it offer. I think it's great. I just want to run it via you guys." And we also often get a call that, "Hey, we've done a toll and we now realize they get issues with their credit and risk team on their IFS issue. Can you help us? We've already signed it and we're running into penalties." So we see both things. I would say that every customer's different. Some teams which have large origination capabilities, they might already have an off-taker. They just want to have a software to run it. Or they may want to have partially told and partially trade themselves. We are the best platform to enable you to do that. There are many reasons for choosing us. But if you are like, "Look, I want to do nothing. Drive the price, discovery, do the contract. We can also do that. It's entirely up to you." And this is offered in Germany. We always talk about Germany. Yeah. At the moment, 100% focus on Germany. I would say we are thinking about other markets, but we are not ready to articulate a timeline when to go into other markets yet. But this issue or these challenges for asset owners and off-takers as well, by the way, the pen European, arguably they're global, but they're certainly pen European. So there's a lot of demand there and we get a lot of calls. Can you help me in Finland? Can you help me in Italy? Can you help me in Poland? But I think we want to make sure that we serve our customers as good as possible in one market and then use their blueprint rather than scaling prematurely, which is probably a bit of a fear that we have developed because in our old company we expanded it to 22 miles. markets at the same time. And I can tell you that was not the cleanest of expansions. And so now we said, okay, we want to be as close to picture perfect as possible in one market. We want to win for our value proposition sets. And once we feel we're there or we're comfortably on the trajectory to get there, then it's time to open your tent in another place. Well, and let's talk a bit about the market. Let's talk a bit about Germany. So what are you seeing? We call it FPA, the flexibility purchase to agreement market is developing. You have deep insights, you tender every day. You see longer data products. Yeah. I mean, first of all, I would say there's massive demand for flexibility. And I think it's not a hype. It's structural. There is a, you know, depending on which numbers you look at, if you look at the Fraunhover Institute numbers, in the next four and a half years, you have a 78 gigawatt hour flexibility gap in Germany. And we are nowhere near being able to serve that with the current build out of best velocity. And I mean, if you just take a look in the news, right, like all the issues that you have in Hormuz right now, I don't see that the capacity market will be that guess heavy as Katarina Raishow wants it right now. I certainly think it would be not very smart to do it, but I think even if they want to do it, I think it's going to be a tough push. And even if they do do it, even though it's not that smart and they get it done, I don't think actually all the assets will be in place by 2030, given the supply chain issues we see right now to actually serve that flexibility with gas. Well, that's a different topic before kind of going on a rant here. What do we see with the talks? Look, demand is massive. There are many different players that bid. These are financial players. These are commodity shop traders. These are utilities. I would say the most sophisticated ones tend to be the utilities. We start seeing some large scale CNI demand as well, like data centers or automotive, but I would say the best guys to do a deal with other utilities because there's a lot of people that will send you a term sheet, but they will not be able to close and transact. And even if they do close and transact, will they be there when their toll is out of the money? I don't necessarily know, but the utilities do these deals they have done the deals. And I mean, if you look at the quantum of real tolls done in Germany so far, I don't know the exact last number, but I would say it's sub 10, maybe eight, maybe seven. So I think three of them are us and the first three out of four were us. So I would be very careful what is promised to you. But overall, in terms of pricing, we see prices are still at a high level. There's still a lot of demand. But it seems that people start to understand it's not as easy to close a deal as everyone thought at the beginning. You see convergence on price expectation right now. Let's take a three or five year toll start day, 20, 20, 27. I mean, look, there's a pretty large spread still. I mean, you have people bidding and you're thinking like, guys, like why would anyone ever do this? Like, what are you bidding here? And then by the way, they take like four weeks to submit the bidding. How did you get there? And then you see very, very high numbers too. But once you look under the hood, you know, their credit may not be bad, but it's not going to help you with a bank. I think what we certainly see is we're seeing the emergence of a lot of kind of swap structures, at least being talked about. You know, we haven't done one of those. We just had our conference, Pat Conn and Munich. And one of the banks said, you know, in the room in front of 250 people, they would not bank a DA swap. They don't think it's a real contracted product. Now, that's their opinion. But I think it is an indication that if you want the benefit of contracted revenues to drive up leverage, then, you know, tolling is really, I would say, the blue chip product and mechanism for that. And then also, once you look at tolls, not all tolls are born equal. You know, if you go to Wattenfile, which is essentially owned by the Swedish state versus to a commodity shop that's going to have a very different impact on how that helps you to bank or not, and you know, you want to do the toll to actually get benefits on the leverage side, right? There's no point to lock in revenues and then actually not get those. So I would say, you really want to look under the hood off of how that impacts your credit and what is their credit like and what is their track record and delivering. Yeah. Do you think the market will stay on a private route? So basically not having capacity markets or subsidy schemes coming in to enable pass, but actually doing the tolling way. Yeah. I mean, look, there is discussion. Well, you know, pretty likely we will have a capacity market in Germany at the moment, the deraating factor makes it seem that, you know, there will not be a lot left for best, right? RWE wrote a lobby letter two weeks ago to the Minister of the Economy, Catherine Reyesha, which reads a little bit like a kid's letter from, you know, to send out everything they wish for. I mean, well, you know, maybe I should also start sending letters, but, you know, for having something that can deliver power for 10 hours. I mean, that's obviously just gas, right? So the long and short of it is, I think we will see a capacity market. I think there will be some benefit to best. I think that if you asked me two weeks ago, it was not something I thought about as much for best. I think now of everything that's going on in the hormones and, you know, depending on who you believe, I mean, if you listen to the last law, say, and Jared redefining energy podcast this week, you know, they're saying this is going to be a long term energy crisis. Worst and what we saw after Ukraine. And if that's the case, I don't think all this gas is going to come to Germany and then actually it's going to be great for best. So I think it's a difficult moment and time to call it. But more optimistic than I was a few weeks ago. You mentioned the wish list. So now I'm curious what would be your wish list for the best market in Germany? I mean, the title would be less bureaucracy, but I think that's a catch all very unspecific thing to say. And I think we all wish for that, you know, regardless which industry and where we are. But I would say specifically, we have 860, 60, 60 years old in Germany. They very often are scared of best and I understand that. And rightfully so they wonder how to manage this influx of a new asset class in their zones in their regions. And that's correct. I understand that I have sympathy for it. What I think is they go about the wrong way. How to fix that. I think flexible connection agreements. Not necessarily bad, but the way that they're, you know, stopping you with ramb rate restrictions and only 1000 hours that you can operate in an unrestricted way or, you know, you need to lock in your schedule, a day in advance or whatever it is or two days in advance. I mean, it's just going to kill the use of best. And I think it's arguably the worst possible outcome because you're going to have a lot of assets that will actually not be net-steamless, you know, system-friendly. You're actually still going to lock in the grid connection. And I think that's much harder to manage. And I think what I would wish for if I had one wish is that the regulator, the binats, when it stands second to her and that the, the virtue of the ministerium, the minister of the economy, C.I. to I, with one clear strategy on how to drive flexible capacity to Germany, with one regime, with the grid feast and that's in care to coming after 2029, hopefully, and not retrospectively. And thinking that with the grid connection process to create something which essentially will be an emulation of nodal pricing in the US, which totally makes sense, but to do it in one way and one goal with a clear regime that everybody understands. But not the, how we say in German, Zalami tactic, slicing Zalami every single time just a little bit, going back and forth, everyone making their own rules, making everyone nervous. It's bad for the industry, it's bad for off-takers, it's bad for the country. I mean, Germany needs flexibility, even if I was not in the best industry, the reality is there is no future, Germany, industrial, you know, place of meaning without flex. It's just, that's just the reality and it's not going to be gas, like you can say that on stages, but it won't be gas. It doesn't make sense. Sovereignty and abundance will only come with renewables and best is currently the only way to drive that. But the quick, the regulator and the ministers understand that the quicker we can get to something that is easy and then in all the industry will work with whatever they have and that's going to be clear and if these things are reasonable, that's great, that's my wish. Great, and that's it with this wish and in the meantime, I wish you all the best success still by deal. Great pieces of building, Philip, thanks. Thank you very much for inviting me, Luca and I wish you a great day too. First, we want to look at how the Iran war is impacting pricing of power and best in Europe. We noted now that the market has shifting from pricing a flow disruption to pricing a structural supply risk. The reported strikes on Qatar's Ross Laughan, industrial complex, have moved the needle because we are no longer just talking about the simple transit delay through the straight of Hormuz. We are, at least if we were to believe the news, looking at the potential removal of 15 to 20% of global energy supply for the next three to five years. This effect is would erase the previous expectation of a late decade supply glut and titan's medium-term fundamentals across Europe. The shift is now visible as buying activity moves further down the power forward curve. While the initial phase of the conflict only lifted near-term contracts for 26 and 27, we are now seeing material upwards adjustment in KEL28 and KEL29 gas and power contracts. In terms of PPA valuations where we talk a long-dated contract like 10 years or more, we are seeing a sharp divergence based on market liquidity. In Germany, the impact on long-term PPA remains relatively contained because valuations are anchored to observable prices over a 10-year horizon. However, in other markets like the UK, where forward liquidity is much more limited to the first three years, the market approach is simply to extrapolate these medium-term price signals. So this has then accordingly led to much more aggressive reprising, where at least fair values of 10-year solar PPA contracts jumped in the UK by approximately almost 20 percent since the escalation began. Now despite these higher valuations, we first need to see how the transaction environment will react and whether those structurally higher price level will actually be realized given the highly uncertain environment. In such environments, when uncertain is so high, we are used to see buyers being more hesitant to lock in long-term prices, especially if it is just a geopolitical spike, if it is. And that's why we are currently seeing super-wide bid-ask spreads. Right now, it looks like that the only clear winner, if we are allowed to say so in this environment, is battery storage. Higher gas prices directly increase both absolute price levels and intraday volatility. In markets like Germany, where arbitrage revenues had recently been compressed, the return of wider spreads is significantly improving the outlook of merchant best strategies right now. Overall though, all wanting to see a bit how the situation is unfolding and waiting, noting though that the risk of structurally higher prices has been increasing with the length of the war. Overall, really, what a mess. Then I wanted to talk about a new acronym that is keeping many of us on our toes, FCA, which stands for flexible connection agreements. FCA is being promoted by grid operators in Germany as a new way of connecting best units to the grid. The grid operator's pitch is that such an FCA will allow a project to bypass long-reconnection cues by accepting non-firm access to the grid. In simple terms, the operator agrees to let the grid operator throttle or curtail the asset to manage local congestion in exchange, forgetting online years faster and at the lower upfront cost. Sounds cool, no? The nature of this agreement in Germany is still a bit challenging first because they're not standardized. They're all bilateral b-spoue contracts between developers and anyone of the many hundreds distribution system operators that exist. We are seeing constraints that range from dynamic curtailment linked to local renewable output to highly restrictive ramp rates. In some cases, a DSO might limit a battery's ramp rate to a lower 6% of its capacity per minute. This just doesn't just slow down the battery. It directly impairs its ability to capture fast moving intraday price bikes or participate fully in auxiliary service markets. And of course, if you have such operational uncertainty, this will directly feed into pricing of your off-take products. For a taller, so the entity that actually runs out the battery's capacity, such a FCA introduces volume risk. If you cannot discharge the battery exactly when the market is most lucrative because of such local grid constraints in your FCA contract, your capture value is significantly eroded. Because these risks are also difficult to quantify, especially if multiple projects with different constraints across different nodes, tollers are pricing much more conservatively. They're demanding higher risk premiums to compensate for this volume risk, which in turn pushes down the headline value of long-term tolling agreements. So to bridge this gap, we expect the German market evolving towards more flexible FPA structures, yet another acronym, FPA stands for Flexibility Purchase Agreement and covers all forms of price risk taking off-take structure from best units. We're expecting to see a move away from traditional physical tolls towards partial tolling where the asset only retains only a portion of the merchant risk. Even more, we would expect a rise of virtual tolls and financial products like top-bottom hour or also called day-ahead swaps. Virtual tolls are particularly effective in such an environment because they allow the flexibility value to be captured at a portfolio level, diversifying the risk that the single asset will be throttled. Meanwhile, financial structures like TBs allow parties to trade the spread between price peaks and throes without being tied in the same manner to the physical limitations of a specific grid node. So ultimately, if FCA becomes standard, we would expect the shift from in the small but rapidly growing German best-off-take landscape really away from physical tolls towards more financial transactions. Thank you for listening to the Pexa Park Podcast. If you're interested in more news, data, insights and analytics on the energy transition, head to our website pexapart.com to find out more.