Unlocking investment for flexible assets with Roberto Castiglioni and Helena Anderson (Ikigai Capital)

Historically, power grids were built with one job in mind, to push electricity from a few big generation plants to everyone else so that we can use it in our homes and businesses.

Today, across much of Europe, those grids have to contend with cleaner but more decentralized and intermittent generation, which makes that job much, much harder. Grids today must absorb huge bursts of wind and solar, then keep everything steady when the weather changes. To combat this, countries can pour money into thicker wires or they can add flexibility in the form of fast controllable capacity that smooths the bumps so the whole system runs cleaner and cheaper. Battery energy storage systems are one instrument for that job. And in Italy, the grid operator just tried a bold way to buy this flexibility at scale.

Turner, the organization responsible for running Italy's power grid, just ran its first Maxe auction. Spelled m a c s e, it provides fifteen year contracts for energy storage systems and essentially tells batteries we'll pay you to keep the system stable and the energy trading can come later.

The goal is to cut risk, cut costs and make sure that the winning projects actually get built and around ten gigawatt hours of projects cleared in the auction. On today's episode, I sit down with Helena Anderson and Roberto Castiglione, cofounders of Ikigai. Ikigai's mission is simple to say and hard to do. They want to decarbonize core infrastructure, not only power, but airports, water, and data centers.

They're technology neutral and act as both an adviser and funded developer when projects need real skin in the game. They cut their teeth with batteries in Britain then shifted their focus to Southern Europe. In Italy, they've helped put together a multi gigawatt battery pipeline, around two point six gigawatts in fact, across something like sixteen sites. And they've partnered with Copenhagen Infrastructure Partners to take projects through construction.

That combination of developer pragmatism and capital discipline is exactly what the Max A scheme is trying to unlock. In theory, Max A changes the game in Italy by paying batteries for stability and flexibility through long term contracts while leaving energy trading upside on the table for those willing to chase it. The result is a split market. Low risk infrastructure capital anchors the guaranteed returns and trading led funds try to profit from the volatility outside it.

Italy's no ghost project rules requiring real permits, real connections, and real deposits mean that anything that wins a contract should get built. And a national auction of this scale resets pricing expectations for everyone from equipment suppliers to developers. So welcome back to transmission. Today, Helena and Roberto helped decode what Italy's Maxe moment really means, the battery lessons that European countries are learning from their neighbors in Britain, and how to build storage around value to the grid, not just megawatts.

If you work in the sector, this is a fascinating case study in large scale flexibility deployment. And if you don't work in the sector, it offers a clear roadmap for how a more efficient power grid might actually get built. Now let's jump in.

Helena, Roberto, welcome to transmission.

Thank you.

Thank you.

And if you'd like to start by introducing yourselves and your background in the energy space, Helena, we can start with you.

Well, it's a great honor to be here at the most exciting energy podcast, in Europe. Thank you for inviting us. I'm Helena Anderson. I am the cofounder of ikigai. I've been doing this a very long time, but I'll try and keep it short. I used to be a project finance lawyer. Don't hold that against me for a really long time, initially in Australia and then in the UK.

And, then I went into government. Nobody could understand that, but it was probably the best career change I made because it allowed me to eventually meet Roberto. And I was head of capital investment for the energy sector in the UK government in the Department for International Trade.

And, we founded Ikigai in twenty eighteen, twenty nineteen.

Roberto?

Well, first of all, thank you for, inviting us to, your podcast. Big fan of Modo since the very beginning. You guys are doing something amazing.

My background is energy just like Elena, project finance since the very beginning.

I worked in banking then moved into development and then after development, principal investment fund manager. So I like to say that I've seen the whole value chain of renewable energy from the lending side all the way to the equity side.

And then eventually, when when Erin and I met, it seemed like the right time to set up something together and basically use all the knowledge and experience that we got throughout, our our our parallel but different paths and do something big with with Ikigai.

Great. So a lot of experience in the room, right, on financing assets, getting capital in the right places in the energy transition and bringing projects to life, right. And I think we can try and tap into some of that today, right? I think it would be good to get an introduction. I know that you were early movers in the battery space here in GB, right? So one of the earliest moving markets in terms of grid scale best build out here in Britain, and you've kind of run that process, earn some battle scars in that market maybe, and now we're kind of looking across the rest of Europe as we look to build things out, right? It'd be good to get a bit of the context around your experience in the GB market and maybe any lessons learned and kind of what we can look to apply to newer markets, like Italy, for example, which I think we'll talk about today as well.

The way we like to describe, Ikigai, is that we focus on decarbonizing core infrastructure.

So core infrastructure, it does mean the grid, the electricity grid and the gas grid, but it also means airports, ports, water companies, waste, motorway service stations, data centers, everybody's favorite topic.

And we are technology neutral in terms of the way in which we look at decarbonization. So, not just power, also heat, molecules. No one particular form of storage in that role.

We also look at carbon capture in hard to abate industries. We are very broad in terms of the different technologies that we work with.

And as a company, we started out focusing on advisory.

We've now built a balance sheet that we can also do funded development and step into the space where others fear to trade, I suppose. We we set up the company because we wanted to crowd in institutional money into decarbonization of infrastructure. And that means putting your money where your mouth is sometimes, being willing to go in at the feasibility study stage, at the DevEx stage when other people will only come in at RTB. And I love the phrase or the acronym RTB because it means so many different things to so many different people, which is a good place to talk about our experience in the UK market for batteries. We started behind the meter in twenty seventeen when Roberto and I first met. I was still in government. He was at an infrastructure fund.

And Roberto had the brilliant idea that maybe there was a a structural need for batteries behind the meter for hard to abate industries that had critical power loads where they could do demand side response more easily. They could have, UPS available through a battery. And I remember when we started talking to investors about that and the looks on their faces, they just could not understand why anyone would want to do that even though, you know, the revenue stream was arguably there, probably because of scale. You know, we were looking at at smaller projects at that stage.

Funny how things come back into fashion because now we talk to institutional investors, and all they want is behind the media contracted revenues wherever they can possibly get it. So that was where it all started, us focusing on decarbonization of infrastructure and and industry.

But more recently, what brought us into the whole world of front of the meter batteries is that we started working with institutional investors who had acquired, quote, RTB projects.

And when we actually had a look at them for them sort of as the, I guess, commercial slash developer brain where we could take decisions like a developer would even though we were advisers, it became abundantly clear that those projects were not ready to build. There were issues with planning. There were issues with fire. There were issues with drainage. There were challenges around satisfying various other conditions on the planning. You know, there were lot lots of challenges.

And so we spent almost a year fixing a few different batteries in the UK.

Fast forward a few years, we're now still doing co development work with real estate owners who've got planning permission for really large batteries, you know, gigawatt scale batteries, but still doing the same thing, looking at how we make those projects bankable and ready for institutional money. But I guess the kind of jumping off point for the focus of today is what we've done in Italy. So we work across, UK, Italy, Spain, and Portugal now, but with a big focus on Italy. And we've now developed two point six gigawatts of front of the meter batteries in Italy, with our Italian partners, off our own balance sheets.

And we closed a a partnership with, Copenhagen Infrastructure Partners to take those projects into construction across an I think we we have sixteen sites, some of which we we continue to own, some of which is with CAP, and we've learned a lot from that. So I guess it's a very topical moment to talk about what we've seen happening last few weeks and where we think the market is going and why we think what we've done is is competitive.

Yeah. And I think one of the things that we wanted to dig into, right, in terms of the Italian market, one of the big pieces of news we've seen come out of the market is around the Maxey scheme, a different way to procure batteries. Right? So in GB, the story very much on the merchant side today, and I'm sure there is a kind of big merchant picture in Italy as well, which we can come on to kind of contrast the merchant and contracted elements of this, right? But one thing we've seen in the market is the Max A scheme where I think they've procured centrally the kind of Italian government, right, procured about ten gigawatt hours of storage in the Italian market.

Roberto, maybe I think we can come to you just to talk us through what that scheme looks like, how it works, the type of investors that might be involved and yeah, if there's kind of a case for merchant base on top of that as well.

Yeah. I mean, great question for a great moment in time in Italy with the first large Maxi auction. Maxi is basically think about it as a platform for grid services that Turner has, commissioned, you know, went out to market for ten gigawatt hour. The way I look at it is like Maxi is basically an orchestra director and the different instruments are the different services. And the orchestra director calls in different instruments at different point in time.

The beauty of it is that it's a long term contract, fifteen year contract, where you basically hand over your battery to Turner, and Turner decides what to do and what kind of services in terms of frequency, reserve, voltage support, different services that they need to balance the grid.

It offers visibility to TERNA for that amount, for ten gigawatt hour, a bit less because we know that one project just dropped out, but nevertheless.

And it offers to a kind of investor visibility for the next fifteen years in terms of revenues.

Now there is a lot of space for other services within MaxE or beyond MaxE. MaxE is, as I said, is a great fifteen year contract with visible return.

What TERNA has done has basically fast forward the pure essence of a battery on the grid, which is basically offer flexibility and balance the grid. So they fast forward the investment as integral part of the grid. And when you invest in core plus, the kind of return is the kind of return that MaxE is offering. So bond like government risk, which is great for a lot of investor. Investors that invested in core plus, in grid, in network, that's a great piece of piece of asset. With the added bonus that at the end of Maxi, you can do what you want and enter into new contracts that we will see in fifteen years or use the battery as merchant. Maxi leaves very little room for merchant merchant revenues because they need your battery for one thing and one thing only.

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Enjoy the conversation.

I think it'd be interesting to hear, yeah, what you think the future of the Italian grid is. If Turner are using these batteries to provide those frequency response services, that leaves this whole other market open right for the merchant picture in Italy. And I think it'd be good to get your thoughts on what that looks like for the Italian market and if we will see similar level of build out, of batteries in that market as well.

Yeah. I mean, it's a question that I think you will take probably a day or ten years to respond because, of course, we don't know where the market will be in fifteen years, in ten years, fifteen years. We don't know when new technology will come in. We don't know what the regulation will be. We don't know what the regulate which technology the regulation will be supporting. But we can say where it is and have educated guess on the future also based on what we have seen in the UK.

Because GB has been a great pioneer

For batteries. The EFR was a pioneering tool to derisk the first wave of of batteries. That is what kick started the market.

Because before the EFR, we didn't have large scale batteries. That kick started the market. And I think Italy, Terna, did an amazing job in learning from the GB experience, and Maxi is not a pioneering tool anymore while I think Maxi is more like a scaling tool. In fact, right away from the get go, the size is bigger. The individual size of battery is bigger.

The duration goes from six hours to eight and a half hours. Yeah.

Duration in EFR was one hour or less, if you remember.

So they did something totally different, but going back to your question about what's beyond Maxi. There is a whole war beyond Maxi, and the good thing is about the nature of BESS, the nature of lithium storage, the flexibility that it has as an asset, as a tool that lets you do a whole lot of services. Whether you wanna focus on the frequency, whether you wanna focus on the capacity market, whether you wanna focus on, we have seen time shift. Italy duration is people are developing four hours in the north, six, eight hours in the south. We've seen that. So that gives you different options or where you as an investor want to position yourself within the risk reward matrix. Maxi offers.

If you put it Maxi in the risk reward, man, it's at bottom left with a low risk and low reward. And then you can go all the way up. Pure merchant, the reward is big, but, of course, the risk is big. And so now stakeholders are developing all the services needed to accommodate the different revenue stacking that you as an investor wants to bring in depending on your risk attitude. Hybrid concept between capacity plus merchant, tolling agreement, floor. We have seen what large batteries are doing in the UK with different BMUs mixing, tolling floor merchant.

So if we believe in the fundamentals of the market, I e, penetration of renewable, I e, increase of volatility, the numbers are clear. The government is clear on what they want to do. They want to double in Italy, they want to double renewable production from fifty gigawatt to a hundred and seven In four years. And Italy is installing a tune of eight gigawatt a year. So by doing that, you need to go along with flexibility. You have to.

I think we've always tried to take a view across whatever asset class we're looking at that you you have to look at the long term fundamentals of the market. You have to look at the structural factors, and you have to look at, the role of technology in terms of change and obsolescence. And when you do that I mean, lessons you learn from having been in renewables for more than twenty years each.

Twenty five years. Yeah.

You know, the example that we often give is is Spain in two thousand seven when the tariff changes happened retrospectively. And the whole market complained, oh, I didn't see it coming. How could they do this? You know, there was no evidence whatsoever that this was gonna occur.

And what is it?

Roberta's correcting me. Twenty That is twenty eleven.

Twenty eleven. Was twenty eleven. Slightly before my time, I think.

But, yeah, twenty eleven is My my family for making me feel old.

Thank you.

I can make you feel young. I the first solar deal I I did in Spain was two thousand and seven. And at the time, we were already structuring around all the loopholes in the tariff.

And everyone was like, oh, I hope they don't work it out. Of course, they're gonna work it out. Right? And then they you know, obviously, in twenty eleven, the change happened.

And why is that important? Because if you actually read the objectives of the legislation, if you actually looked at how the Spanish market was evolving, the writing was on the wall. You knew what was gonna happen. The same thing is true when you look at the storage market as a whole.

We think of storage not just as a lithium ion battery, but as the alternative to lithium with the structural factors that come with critical minerals as alternatives to storage that provides fast response. So we're looking at long duration storage and where the market might go, whether it's through Maxi or something else. And also in the UK on pumped hydro, alternatives to water based pumped hydro, compressed air energy storage. All of these are things that are targeting the twelve hours plus market where we don't think lithium will ever be as competitive.

So you look at technology in the long run, and then you look at not only renewables penetration, which increases the need for storage of some kind, I should have said hydrogen as well. We do that as a molecule storage.

But, also, what is gonna happen to gas? You know, that's the thing I think that everybody who works in both UK and Italy sees really clearly. Those markets are similar, not only because one is an actual island and the other one's mostly an island, but but also because they have the same gas network penetration and the reliance on gas. And if we seek to either penalize gas for its carbon effect or gas comes off the system because it's noneconomic, that has impacts on the market. Right? Capacity market is underpinned by gas and coal right now in both markets. So these are all things that you have to sort of take a long term structural strategic view on in the way in which you invest.

I I I think the the point on gas is very important because, I think the what happened in two thousand and twenty two, with Ukraine and Russia really taught us a lesson that being dependent from someone else outside your boundaries, outside your borders is dangerous. Look at Germany, UK, Italy, heavily dependent on gas coming from Russia, prices, electricity price through the roof. When we have, as as Italy, as UK, internal resources, renewable resources that can make us almost independent. That's crazy. So the government I think all the governments have learned a lesson from then. And if we don't want to look at it as a sustainability point of view, just look at it as an independence point of view. How can we be independent from an energy energy point of view and deliver real value to our consumers?

Yeah. No. I think there's a there's a good there's a broader point in there right around energy security and the the kind of general role that increase in renewables, flexibility technologies, right, can have on energy security. I think a lot of that underpinned by policy, right?

And some interesting points on there. I think we're also very much in the business of forecasting how these things look in the future and what the merchant value of storage might look like, right? So you can do you kind of run all of your math, you can look at the economics of projects, you can run things forward into the future. You can't tell that there's going to be an energy crisis that, you know, there'll be the kind of Russian invasion of Ukraine that pumps up gas prices, reward spectrum looks like.

I think the way that you framed it right around having the Max A scheme as you're gonna get low risk, low reward versus the kind of merchant element where you potentially get much higher returns, right, if some of these spreads exist. It'd be interesting to get your thoughts on the the kinds of investors who are interested in each of those scenarios and where the capital is coming from in each scenario there as well.

Well, as I said, core plus investors. So investors that like to invest in the physical grid, you know, cables.

Their return expectation is is low. Hence, something like Maxi looks really good because they're getting what they need.

And on top of that, there is an opportunity for an upside. At the end of the fifteen year, there's opportunity for an upside.

On the other end of the spectrum, you have Unless they thrash the battery.

Yeah. That's Let's let's talk back in fifteen years, and let's see how Terna has used those batteries.

Yep.

Obviously, they need to use their batteries within the warranty package, and we still need to see if a battery really last twenty, twenty five years depending on the usage, depending on the warranty package that you're offered.

But, anyway, the other the other end of the spectrum, you have the pure traders that they used to trade contract, but they are starting to trade electrons and not just contract. Or you have investor that have large generation portfolio that they need to balance somehow.

And having storage in your portfolio as your investment mix, solar, you know, remember at the beginning, it was like, oh, let's all invest in wind. Great. Then it's like, we need to balance that. Oh, let's invest in solar.

You know, it's a classical MBA case study of umbrellas and ice creams. You know, I invest in umbrellas and in ice cream. So when the weather is bad, take out the umbrella, make money. When it's good, take out the gelato van and make money there.

So that's what you learned at your MBA.

A lot of money to learn this.

A lot of money. Cost me cost me a lot. The energy mix in a in a balanced portfolio, you have wind, winter, night, solar, day, summer, and you try to balance that. But then we find out that that wasn't enough because the grid is throwing other challenges. It's throwing curtailment challenges on your asset, on your generation asset.

It's throwing pricing

Challenges to your to your asset. And so now investors are like, hold on a second. We need to put some flexible asset.

Because intermittent generation expose you to certain risk. By introducing flexible asset, you balance your portfolio revenue, basically, cash flow. So that gives you a totally different approach from an investor that is doing core plus.

Yeah.

But if if I don't mean to be controversial in saying this, but to try No.

Please be controversial. You know, like it.

To try and, like, hone in on within that institutional investor, Core Plus gang who are gonna be the winners. I mean, it's not a coincidence that we really wanted to work with Copenhagen Infrastructure Partners on this because the winners will be the ones that can secure the lowest supply prices. Right?

Yeah. That's a good point.

What what does that even what does that mean? In practice, what does that mean? It means you've got the resources internally to start preparing a sophisticated procurement strategy six months out from an auction.

It means you can get on a plane to China, and you can apply global leverage to secure the best pricing, with personal relationships at the cell level.

And you have the experience of how to, squeeze the contracting structure so that you're not leaving any fat in that overall plan.

If you're an inexperienced investor, if you've only ever done EPC wraps with turnkey scenarios Yep.

And you don't have that go global portfolio to play with, it's harder. It's a game for partnerships, for people who, like us, have experience of how to really cut the DevEx and to design projects around the lowest possible development costs Which, you know, there there are certain key factors in that.

And then partnering with organizations that have the firepower to really drive down CapEx.

The delivery costs.

Yeah. Yeah.

And and, also, you know, the interesting thing about the optimizer market is in a nascent market, you have a limited number of optimizers you can engage with.

So that traditional procurement approach of, alright. We'll go out to twenty five different optimizers, and we'll we'll get the best price.

Maybe that doesn't work in a less mature market. Maybe you're building relationships there or the optimizers have more market power or whatever. You know? These are all factors that you have to take into account. Unless you are really deep pockets with with global awareness of all the lessons learned, that's difficult.

So I think within the institutional investor environment, there are weaker and stronger players.

Is that a controversial thing to say?

No. It's true.

You you you need to be extremely experienced to do batteries, and and I think that is one of the problems not the problems, but the failures that you see is because I think people have gone in developing, managing, investing in batteries with the solar mindset, with a with a green generation mindset. It's totally different. Totally different. If you think that, oh, I've developed a lot of solar. Now I'm gonna develop batteries. And you're keeping the same mindset, you're dead.

Yeah. No. It's definitely something that we saw in the GB market. Right? And I think, yeah, so when people talk about battle scars from the market, right, there's a lot of people building out solar, probably a lot of that solar is contracted, steady revenue stream.

You build it at scale, you get cheaper prices and that's kind of your six percent return that a pension fund wants, right? If people then apply that mindset into merchant battery revenues and we're tracking battery revenues every month, right? And then looking something like this, then it's it's kind of not where you want your risk rewards spectrum to be or your kind of appetite for that overall in the market, right? I think there's an interesting point there on the CapEx particularly.

And I think one of the standout things the industry is how developers manage to get the scheme to work at such low prices, right? So I think some of the contract values as low as kind of EUR twelve thousand or EUR thirteen thousand half going able that.

Pulled is to utilize some of those supplier relationships, utilize scale, balance sheet to pull down their CapEx to make the return work. Right?

Winning an auction is not the same as delivering a battery.

That's that's true.

So It remains to be seen whether or not they can actually deliver having been those aggressive steps. Return.

Yeah. We have to see, but but having said that, there are first of all, is a great result for consumers. Let's not forget that.

Ten gigawatt hour at those prices is great for consumers. And ultimately, that's what we have to do as an industry, deliver value to the consumers. We need to be able to deliver the value though because if people bid so low and then they don't deliver, it's a double whammy damage To the industry. So let's let's hope that these people now can deliver.

There's been a lot of procurement optimization being done behind these numbers, but there's been optimizations on different levels in order to achieve these numbers. And I think I see two different two different levels of of optimization. One that applies to the common mortals like everyone but anal. Anal, can optimize beyond anyone else in Italy Because they have some structural advantages that commercial investors don't have.

They already had land waiting for this.

They already had connection that they've already amortized in their strategic fifteen year plan.

So they already starting from a very low development cost.

And then they could apply procurement optimization like everyone else, but with even more power.

It's like optimization, I like to say on crack. It's like, yeah. I can optimize, but I can do it at a different level than you. Yeah.

Because imagine how many gigawatt they're developing across different markets internationally. Then strong financial optimization. And then Enel comes in and they go like, oh, yeah. Cost of capital, I can beat you.

Oh, banks, oh, let me talk to my relationship banks. Let me squeeze them a bit more because they can do it. Leverage, same thing. They can get a bit more than than the than the normal mortals.

And then business model optimization, they know the market extremely well. They are, you know, the operator in Italy. They've always been there.

They understand Are they the generator and the operator?

Don't go there. Don't go there. The good thing is that they're offering extremely good value for consumers. And they've gone through, and, potentially, they've also helped the whole market on the investor side because of the pressure that everyone has put on CapEx.

Now potentially, the bar on CapEx has gone down. And if you run some numbers now I don't know where people CapEx for this investor, the commercial investor is. But if you run the numbers, you're looking at numbers that is, like, half of what you mentioned Yeah. Around seventy five down to sixty thousand euros per megawatt hour.

We don't know the details of where everyone is procuring and if at that level they can really deliver because the next issue will be the supply chain. Can you deliver everything at that price? What happens if you can't honor that price?

I mean, you only have to look at the CFD in the UK for offshore wind.

Yeah.

To a point, you reeducate the supply chain. And beyond a certain point, you kill a market.

Or you you make it unattractive for investors to come in because you can't achieve that pricing. UK government got that level wrong in the last Yeah. CFD round. But for the first few auctions, clearly, it really helped everyone in the market because suppliers were incentivized to to innovate faster and and eliminate fat. So, you know, that's where we are in Italy.

Then we know that the big the big guys, b a BYD, Trina, CATL, they're all part of the the the winning consortia.

So it'd be interesting to see how that reflects for procurement for other investors because, you know, now that that the bar is set

And if you look at the forecast on the spreads, the spreads are healthy.

And if you reduce the CapEx and you take advantage of that, that means that the investment becomes very interesting

When you take some merchant risk. So it goes back to the point of the different instruction where do you position yourself on the risk reward curve.

Yes. No. I think it's it's interesting, right? And I think if we look at the GB market when that was just starting out, right, the the procurement was a completely different system, right? It was individual developers striking contracts for ten containerized best units from CATL, right, small, you're not going to get a great price on that. If you look at this auction, if you think, yes, NL kind of clearing up two thirds of capacity, right, there's the half with half then of been to do year.

We'll of you go into that discussion, you point at those results and say, I know that you're not gonna be able to give me exactly that price right, but surely we can Yeah. We can get somewhere close.

And you have a lot of gigawatts in development ready to go in construction RTB, then you can clearly show the supplier that you mean business.

The other thing I think is worth saying that as a as a non Italian, I think we've been really impressed with how positive towards international investment, all the different facets of the Italian market, you know, in terms of engagement with Turner, engagement with the the planning Central Planning Authority, how they understand what international investors require. They understand the level of certainty, transparency, communication that they require.

And I think it compares very favorably to the UK. I mean, we we've always built our our reputation in the UK on clarity and transparency of regulation. And, you know, you know you're gonna get a consultation. You're not gonna have an opportunity to contribute, all that stuff.

And Italy's done that too, but where they've gone further is they've really looked at what were the factors that made a market attractive to institutional money.

And then they've delivered in terms of the grid. You know, they've done what they said they were gonna do.

They've been open to discussions, clarifications.

We've been really impressed. Yeah.

I personally, I And I and I mean The reputation that Italy have is not actually how we've experienced it.

No. It was it it is a good experience for someone that left Italy twenty five years ago because I was sick and tired of of the government and how Italy was working. This is actually a a welcome experience that show us how they've learned from, you know, the international previous experience.

And to a certain extent, they have streamlined the process. Obviously, it's not perfect.

But But even even little things well, not little things, but it's a big thing.

The the way in which they run grid offers in Italy They don't have ghost projects like we have here. Yep. You know, largely, they've avoided that because you have to do an upfront, very significant deposit in order to secure your grid offer.

They realized that well before the UK did. So the market is more of a well, the pipeline is a truer representation of what actually will get built than pre grid reform, you would say, the UK.

Yeah. And I think that that leads on nicely to the the final question, right, which is the implementation of a lot of this and where build out might go in the Italian market. I think I've probably still got my cynical GB hat on right with our connections process that we have here. Sounds like it's probably more sensible, dare I say, in the Italian market, a bit more transparent, I think.

First get we're to be are they gonna get grid connections? I think you mentioned that they probably have a lot of these grid connections sat waiting to go in many cases anyway. Right?

Yeah. But the good thing about Max is that you can only participate if your battery is out of planning. And being out of planning means having firm connection. Yeah. And we know how laborious it is to go to the process for that connection. First thing you need to be you need to pay a deposit when you apply for for the connection. You awarded that, connection, and then you go through the whole process during planning on firming that connection.

So by the end of it, you know for sure that you have allocated a certain amount In that connection, that substation.

It's like having the statement of works before you go in with your planning application.

Yeah.

Sort of. Yeah.

So you gotta have a bit of bit of skin in the game, right, to to even be able to go into the maxi in the first place.

Yeah. But yeah. But then when you when, know, when you have that, you know for sure that you can connect.

You know, then there are other elements, other challenges that get into construction and supply chain and so on and so forth. But at least on the Italian side, we see that there is a lot more clarity on the connection from from the beginning.

And you know whether you should abandon a project because it's congested, you're not gonna get it Or if you can push through because you know you're gonna get it. And, Terna also, the interaction that you have with Terna is very collaborative. They really want to make this thing happen.

So they will try to help you to a certain extent, of course, to what they can do to create the right environment for you to get your your connection.

And I think, yeah, probably some lessons in that to go both ways across markets. Right? That we can apply from Italy to GB and then GB to the Italian market. But, yeah, I think, overall, I think, yeah, the the kind of Maxxis scheme is an interesting new way that we've seen in Europe to procure these batteries.

Right? I think from the discussion, it's clear that there's a role across the spectrum. Right? And while that kind of is is covering off a lot of that lower risk stuff, we still think there's a kind of big chunk of merchant best that can be built in in Italy.

And I think it's the the fundamentals that we see across the board, across markets in Europe, right, in terms of renewable penetration, traditional source of flexibility going offline, and we will probably see some more at cheaper levels of CapEx as well.

Definitely. And and, you know, let's not forget that it's a beginning in in Italy. The market The storage market is still at the beginning. Yep.

And we've seen how it has changed already on the off taker side. When we started development in twenty two, twenty one, twenty two, and I start going out, talking to off takers, zero. Yeah. It's like, oh, do you do storage?

Like, ninety percent were like, not what?

Yeah.

And now we're seeing a lot more international offtakers coming in. Being very competitive, bringing in the experience that they had in other markets, Germany, UK, coming in with some interesting products. And you can really see every every few months, you see someone new coming in. Every few months, you see a new product coming in with with interesting solution on the hybrid tolling floor on top of capacity market.

Definitely a kind of exciting time for the Italian And then we'll the question.

Future merchant case for batteries, a lot of renewables coming online, particularly in the south of Italy, right? It's looking like an interesting time. Yes, I think to kind of wrap things up, I will give you the chance to kind of make any plugs that you have at Ikigai? Anything that you wanna tell the listeners beyond the next two Maxi schemes?

Oh, there's a lot whole world beyond Maxi.

I think that my message on on storage is look at the fundamentals of the market, and it will give you a very good understanding on the opportunities in the market. And in Italy, there are all the right signs for a very interesting storage market and not just lithium, but also long duration storage with pump hydro, with c o two storage.

And also, I want to say behind the meter storage, because that was my first love, and my first love is back, I think.

There is gonna be a lot of behind the meter storage, especially when we talk about data centers, like large energy users. Because the at the end of the day, everyone is gonna face curtailment.

Everyone is gonna face lack of connections or large connections for what you need. And so storage can help you manage cost, manage access to the grid, revenues.

So I I think behind the meter is gonna be strong in the future.

That's obviously because we're a little bit biased when it comes to behind the meter.

Because it was my first love, and I'm still convinced.

And it's our core business. So I I think if we come back to what we do as a business, we don't just do battery storage. We do so many different things. And the message that we are always trying to get out to the investors we work with, the customers that we work with, is that we shouldn't be looking in this very blinkered way at single asset classes or one element of a revenue stack. When we look at an opportunity, we're looking at it in its context.

And that means looking outside the boundaries of that site as to how you can optimize that site through lots of different ways of interacting with cash flow. And I think that's our big advantage in the market, which looked like massive disadvantage when we started talking about it to people eight years ago. But now when we can say, alright. Maybe on this site, the answer is adding a lithium battery behind the meter, doing an arbitrage play, time shifting, and you address a negative pricing or curtailment issue. But maybe it's not that.

Maybe it's looking over the fence and seeing you have an industrial zone or an airport or a motorway service station that's desperately in need of cheaper, greener power, and you can secure a contracted revenue stream. Or maybe you're next door to a port, and, actually, you should be storing this surplus energy that you have as hydrogen or any number of other solutions.

It's about recognizing that we live in a a more complex technological world and a more complex world as far as cash flow now, but it's not necessarily a problem. It's an opportunity if you understand those different ways of addressing an asset. So I think that's where we're looking for the next, you know, on the five year horizon, how do we take all of this experience we've had in different ways of intervening, and we optimize assets for the investors that we work with.

It's about optimizing value for for the asset.

It's it's not optimizing production, but optimizing revenues for that asset. And, yeah, sometimes it means creating, slightly complex structure, but we like that. We know how to do it, and we always try to find the best value for the stakeholders. And that's it's key to what we do.

Yeah. So trying to optimize each individual part of the equation, right, and look at kind of asset specific what the kind of yeah. Not just a broad brush approach if we think this is the best case. Right? You have to look at what the details are and kind of and tailor solutions to that.

Absolutely. Because every every every location, every asset has its own challenges, its own pros and cons, its own opportunities depending on where you are. As Elena said, a battery nearby data center that calls for a private wire. And the investor on the battery happy to have some contracted revenue on an availability base.

You know, that's gold. And most of the times, you take risk on large large data center operators with a with a with an amazing credit rating. So why not doing that? And the returns are better than max.

Nice. That's what yeah. Everybody wants to hear. Yeah.

And I think to to kind of wrap things up, I know that we might have already gone controversial with the behind the meter, point, but it'd be good to get, your controversial view in time honored transmission fashion. If you have a controversial view, something that you believe in energy markets that other people may not, your hot take.

I think Spain is worth looking at.

Nice. So do we.

Notwithstanding the the regulatory challenges or, you know, getting the various legislation that they need to get through for capacity market or front of the meter batteries, etcetera, through. And and but it's a really interesting market if you can see that a lot of actually potentially high performing assets are undervalued now. If only you can look at the ways of addressing their specific challenges, you know, as you guys have talked about so much, negative pricing and and curtailment, those problems are easily solved. We think they can be solved quickly if you take the right approach to filtering assets.

And so we've always said, you know, don't wait.

Start in a reasonable way. Just start. Because if we had taken the approach that, oh, the Italian market is not ready in No. You have be happy. Well, we wouldn't be ready for where it is now. You have to start.

Have to be ready ahead of time. Otherwise, you're too late.

My my controversial view I don't I don't know if it's controversial, but the way I see it is stop developing projects to maximize generation.

Because the value is not there.

You need to start developing projects, structuring project to maximize value.

Because in solar, in wind, the thing you do is, oh, how many megawatts can we put on this land?

It doesn't matter, to be honest.

It's not all about size.

It's not? Okay. Sometimes it is. Sometimes it's not. It's how you use it.

Yeah. Please, can we stop there?

It's how flexible it is. Right. Yeah.

I to go there. I had to go. It's how flexible you are.

Yeah.

It's only a matter of time.

And I and I think Hey, I've been good for an hour.

Yeah. Know.

Come on. On that. It's, yeah. We can we can wrap it up there. But, yeah. Helena, Roberto, it's been great to have you on the podcast. Thanks for coming on.

Thank you so much.

Thank you so much. Thank you so much, mother.