Ask Modo: Mailbag episode #1 with Ed Porter and Shaniyaa Holness-McKenzie

Effectively trading five markets consecutive half hours working ever say ten or twenty battery systems, submitting multiple bids and offers constantly, it's very, very difficult to do that with a human sat at the other side of it.

How would a change of government affect storage?

Whichever government is in place, like, make sure that we have more capability to deliver that transition. So I would say that's probably the thing to be to be focusing on.

Since interconnectors flow both ways, what about the impact of renewables in other countries as well?

Those interconnectors, the the kind of service that they're providing, it works well if one area is generating well and one area is not generating well. You can kind of balance that way. But if if you've kind of got flat generation across all of Europe, then it can be quite limited. So you can have this kind of systemic risk with with interconnection.

Hello, and welcome back to transmission for a different type of episode today where we are answering your questions.

In this mailbag episode, Modo Energy's Ed Porter and Shania Hornace McKenzie explore a variety of questions sent in by you. If you've got a question you'd like answered on the show, you can submit it via the link in the description or leave a comment wherever you listen. Let's jump in.

Hi. It's Shania, and you're listening to the Transmission Podcast by Moto Energy. And today's podcast is a different one. We're gonna be doing a mailbag episode. So we've got mailbag questions where you can ask us some questions. And on today's show, we actually have Ed joined with us to answer your questions.

Thanks, Shania. Thanks for the thanks for the welcome.

Yeah. Here as a as a guest guest. Yes. And, yeah, looking forward to looking forward to getting stuck in.

If you have any questions that you'd like answering, then you can check the link in the show notes whether you're on LinkedIn, YouTube, or Spotify. So let us know, and we'll get them on the show.

Alrighty. Well, let's let's get stuck into the questions. So question one.

So the first question that we have in our deck is, what recent advancements in technology are we seeing being implemented with batteries globally, but then also within the UK?

Yeah. Really interesting because the breadth of the answer to this is is is really wide. So the first answer is probably to talk about the cost of batteries. So for a number of years, maybe the last five, six years, the cost of batteries kind of moved down a small amount from from year to year. And in some cases, we've actually had lithium costs have gone up, and so the cost of batteries has kind of moved up slightly and then gone back down in the following year. And that's kind of been the situation for maybe five, six years, and it's kind of followed a a curve that you'd expect it to to do. In the last year, what we've actually seen is that trend has essentially broken.

And what we've seen is that the battery cell costs from people like CATL or BYD, the the the cost of those cells has kinda dropped down to, like, fifty to sixty dollars per kilowatt hour Yeah.

Which which as a as a cost of additional battery capacity Now caveat, those systems are for just the cells. So this so we're not talking about a fully deliver a a fully delivered battery system in the UK, and those numbers that are quoted are often quoted for delivery in China. And so in in terms of what has to happen to those cells before they get into a a final battery project that is delivered, say, in the UK or in the US, There is a lot of work that that kind of goes into that, and so not all of those cost reductions get passed through. So we're not saying that batteries tomorrow are gonna be half the cost of what they were previously, but certainly, we will see cost reductions.

Maybe something like a thirty percent cost reduction might come through for battery storage. And that is really, really important because if you're looking at battery storage projects and you're thinking, okay. This revenue the the my my revenue line is making me this much money and my cost is kind of, okay, it's costing me this much. Have I got enough profit in that project to actually go ahead and build it?

Well, if you take your CapEx and you take ten, twenty, thirty percent off, all of a sudden, of the projects that everyone's looking at, so many more are now buildable. Yeah. And so that's that's probably that's probably one really big change in terms of what's happened.

And just off of that, actually, in terms of the materials that we are seeing used for sales, has there been much change there, and has that contributed to the reduction in cost?

Yeah. Definitely.

So just to kind of tell a little bit of a story about about this. So going back a few years, many batteries were NMC, so nickel, manganese, and cobalt. The the probably just to pause on that for a second, the the interesting part about that is is the amount of cobalt that is used in those batteries. Cobalt obviously comes from areas that are that have difficult records around exactly how that cobalt is extracted.

Mhmm. And so what you saw from the battery industry for a number of years was essentially different levels of n, m, and c were being used in those batteries to essentially reduce the amount of of c that was going into cobalt that was going into those those projects. And kind of continuing that along, along comes LFP, so lithium ion phosphate, a new type of battery, and one that is is used across many of the the the new systems that are coming into the market, but at at lower cost, but, crucially, without the cobalt. Yeah.

And so I think what we're seeing happening in the market is essentially the the constant adaption of battery technologies to find the lowest cost or for other other very important reasons, the the the best mix of chemistries that we should be using. And and maybe kind of just going from NMC to LFP, if we look forward into the future, we we have sort of sodium ion that people keep on talking about. Yeah. And it's very difficult to say right now, okay, sodium ion's gonna dominate the market.

It's gonna be it's gonna be everywhere. It's gonna be every single battery that we look at. But what you can say is that sodium ion appears to be going through all of the tests in a reasonably solid way. So it seems to kind of be scaling.

It seems to be going into good scale projects. It seems to be delivering on those projects. And when you've got tech that's doing that, the the the chances are that actually the the technology that's within it is reasonably robust. Mhmm.

And if we do get to the point of of, say, having big sodium ion projects, well, then a lot of the conversations around lithium mining that people talk about, all of a sudden, well, lithium then isn't the kind of the the most important feedstock for those projects.

Yeah. And actually, we're moving on to sodium and sodium, well, we have a lot of it.

Yeah. That's interesting as well to think about the wider implications of, like, the materials that are used in batteries as well. So it's good that this is part of the the thing the thought process that people are having when thinking about, a storage project. So yeah. Good to know.

I know. I could that that's also another thing. So I'm gonna I'm gonna run with it. In terms of in terms of the changes we've seen in the battery space recently, so I think if you go back a couple of years, if you ask people to put a number on, like, how what percentage of a battery could you recycle Mhmm.

That percentage really could have been anything. Yeah. Someone could have said five percent. Someone could have said fifteen percent, fifty.

We didn't really have a solid number. Mhmm. We have seen in the last year many people come out and sort of and really clearly state that they believe that they can recycle ninety five percent of of batteries, And that is that is really important. Now whenever someone tells us a tells us a number, you should also quiz them about the kind of economics of actually doing that.

So where you've got things like NMC, each of those those materials is is is valuable in their own right, and so there's more there's more reason to recover them. LFP, those materials are slightly less valuable, and so there's slightly less of an incentive to recover them. Sodium ion, again, sodium is quite cheap, and so that is not something that we'd expect to see a huge amount of recovery of just just for the the the cost of the feedstock. So, yeah, another thing that's definitely changing in this space is the recycling of those of those storage assets, which we always expected to come, but we're now seeing good data coming through for it, and people are definitely staking, or or putting numbers out there in terms of what they can get from those battery projects, which is really good to see.

Because what is the the lifespan of a battery? Well, fifteen years?

Yeah. Yeah. So typically people would talk about it in cycles. And so go back a few years, maybe that number might have been sort of eight thousand cycles.

Okay. These days, you're probably more talking about twelve, thirteen thousand cycles. Mhmm. And, actually, that's a really that's a really nice kind of lead into, like, the tech the technological changes as well.

Yeah. So not only are we seeing kind of CapEx coming down and we're seeing the more more recycling of those systems, the actual systems themselves, the technical capabilities of them are improving. And so, like, one of those characteristics could be the number of cycles Yeah. That a battery can run.

Another characteristic would be something like the energy density of that battery. So CATL came out and said, that they could put, I think, six point two five megawatt hours in a in a in a in a standard in a standard kind of shipping container. And that's really talking to this this trend, which is as we mature as a technology, we'll be able to put more cells, more energy into our standards our standard sort of footprints. Yeah.

And that means that from our battery sites that we have, let's say you have planning for a certain size of space, all of a sudden you can get more you can get more battery onto that same site, but also you have to pour fewer foundations. Yep. Maybe the planning is slightly easier to get through. And so there's a bit of a snowball effect that that happens with with that improving tech.

Oh, thank you.

Also, special shout out for CATL for for for for for putting their for putting their release data on on a on a battery that was that seemingly on the moon and then had, like, some extremely bright light coming from it. It was it was it was really special.

I I feel like I need to see this.

Oh, you you need to see it. You need to see it. We will put a link in the show notes for sure for this.

And was there anything else you wanted to mention with regards to advancements in technology?

Yeah.

We've already opened the door with this part.

I realized I took you took you a tangent about it.

So so yes. For sure. And I think this one is less about the batteries themselves, but it's perhaps more about how they're being used.

Mhmm.

So batteries in a market such as GB, one of the key markets for those batteries is the balancing mechanism.

Now the balancing mechanism is effectively things that the control room actions that the control room takes close to delivery, so in the last hour before delivery typically, to make sure that essentially we have supply meeting demand and and the lights don't go out. And if you go back a few years, batteries weren't used so much in the bouncing mechanism. Mhmm. And that was largely because the bouncing mechanism was set up to run-in a certain way and was doing its job in terms of calling certain assets, and and that was all that was all very much working.

But with the with the sort of growth of battery storage in the market and battery storage going through the size of the frequency response market, so as as the GB fleet went through the frequency response markets, and now we have three point nine gigs of batteries and we need about one to one and a half gigs of frequency response. So essentially, imagine we have two gigs of batteries that are always available to be doing something. So National Grid now has these two gigs of batteries always available to do something, and they haven't really been making the most out of those batteries, and I think that's they they would say that, and I think I think the industry would also say that.

And what has happened is they've got a program of works that runs from twenty twenty three to twenty twenty seven called the open balancing platform, which you compile lots of stats for and put onto the modem black box. So this interview is the wrong way.

Familiar.

Yeah. This this yeah. This interview is the wrong way around. But I I hope you like hearing your own research coming coming back to you.

Yeah. And and I I think the the point that I really wanted to make on this is actually that there is the the on one on one side we're seeing the technological improvement of those batteries, batteries, but also we are starting to see, like, processes and algorithmic and automated dispatch within the control room starting to get much more value out of the batteries. So that doesn't necessarily mean that those those batteries are doing something that they're they're not capable of. It's more that the the processes and the systems that are in place are now starting to get more value for both ESO, for battery owners, and for consumers.

Yeah. We're starting to get more value out of the battery fleet we've got.

Yes. Yeah. And and touching on what you just said as well, I think from some of the forums, I guess, I've been to where ESO have been there, I think they do really want to start using more, yeah, algorithmic based technology to dispatch batteries. And yeah.

And OBP is the start of that. And I think there's a few other areas. But well, I guess OBP encompasses a lot of things is the target. So, yeah, there's definitely more that they'll do in that arena as well from what they say.

Yeah. And it's it's something that we've we were just talking about this before actually, which is, you know, what what next for some of the analysis around OBP and and, essentially, how how much battery is used in the space. And I think we're really interested to to essentially go to the next level of comparing, say, storage with other technologies to get a really good idea of actually, are we are we seeing storage being used to the kind of the maximum of its potential or are we potentially leaving value on the table that would be great for consumers and would be great for ESO to get costs down and be great for storage portfolios to be used more? So, yeah, I I I am a hundred percent sure that we will be talking much more about this over the next twelve to twenty four months because it's a really important revenue stream.

Yes. Yeah. For sure. So my next question for you, Ed, is how are AI advancements being utilized to optimize battery energy storage systems in GB?

Yeah. This is this is a really interesting one and actually kind of links back to a little bit of what we were talking about in in the balancing mechanism. Mhmm. I think one of the things and and there's kind of lots of ways we could talk about this, but one specific example that I want to call out is where people are with batteries at the moment is that they are having to optimize across lots of different markets.

Mhmm.

So if you think about the optimizers, they have to look at reserve products, so things like balancing reserve. Yeah. They then have to look at frequency response markets. They have to look in day ahead market and trade there, and then they have to go into the intraday market and trade there.

And then they have to go into the balancing mechanism, like, last last but not least. And so effectively trading five markets, lots of individual and and kind of consecutive half hours. And so you have to have these kind of really joined up strategies. And if you're imagining that they are working over, say, ten or twenty battery systems and they're submitting multiple bids and offers constantly, you you kind of it's very, very difficult to do that with a human sat at the other side of it.

And so one of the really interesting things that we're seeing is sort of algorithmic approaches to battery dispatch that's that's assigned to come through. Mhmm. And we're starting to see some quite some some some really kind of some not not unusual, but we're starting interesting behavior where batteries are doing one thing through a day ahead market or an interstate market. Mhmm.

And then that's the right thing for them to be doing there, and they're they're providing flexibility to those markets. And then as they get into the balancing mechanism, their position, so whether they were discharging or charging, is then being flipped to provide effectively another service and that might be like providing a locational service, that kind of thing. And so what we're what we are now starting to see is kind of the the automated dispatch from the balancing mechanism start to meet things like the automated dispatch from the optimizers. And so how those things are meeting and how they're finding an optimal path is something yeah.

It's it's it's fascinating to see, and we are really at the start of how to get the most out of storage in the BM.

Thank you. And my next question for you is how do interconnectors impact Great Britain? And also, how does the penetration of renewables impact this as well?

Okay. So interconnectors, they essentially will flow power to the areas that have the highest price. Mhmm. So pretty pretty simple stuff. And, effectively, for the last winter in GB, we've had reasonably high power prices in GB in comparison to the the rest of Europe.

Mhmm.

And so over the course of peak prices, we've we've seen good power flow from Europe to Europe two GB. And so that's effectively given us around about four gigs on average across peak periods. As time goes on, this will change a little bit. So one of the things I think we flagged recently was as we get towards twenty thirty with many, many more sort of offshore wind farms installed Yeah. We might see the UK going from being a net importer of of power to being a net exporter of power.

And so, a, that's that's an opportunity, but also there there's kind of another side to all of this, which is that if a lot of that power is is very subsidized Mhmm.

Then, there can also be some some consequences of that in terms of where where our sort of subsidized generation is going.

Okay.

So, yeah, it's it's Internet is a really interesting interesting part of the power market, but but definitely just think about them as essentially flowing power to the areas where the price is is highest.

And I guess as a since interconnectors flow both ways, what about the impact from of renewables in other countries as well? How would that affect Great Britain?

Yeah. A classic example of this is is just how much Germany has invested in in solar generation. Germany was then exporting solar to lots of other regions as a result of kind of its early adoption of of solar policy. Mhmm.

We would expect to see that continue. Yeah. So any any area where there's very good solar generation or very good wind generation, you will see low prices and therefore those regions will be exporting. And that will be a benefit to those other regions around that will then receive this kind of lower cost power, which is really nice.

I think the the kind of the the catch with some of the interconnection work is that, yes, it's very good to keep power prices down for the total region. And, yes, they do by essentially removing some of the very regional, like, high wind high high wind or or or low wind or high solar, low low solar. Yeah. Essentially, interconnectors can can try and balance a little bit of that across the continent.

But there are some occasions where effectively, if you get very low wind across all of Europe Yep.

And if you get very low solar across all of Europe Mhmm. Then those interconnectors, the the kind of service that they're providing, it works well if one generation one area is generating well and one area is not generating well. You can kind of balance that way. But if if you've kind of got flat generation across all of Europe, then in terms of the kind of security of supply angle, it can be quite limited. So you can have this kind of systemic risk with with interconnection.

And so that's definitely one thing to watch out for.

Has that ever happened? Have you seen that before?

Yeah. It it it does it does happen. And and the the reality of this, right, is that that Europe is very connected in terms of the weather patterns that it receives. This is why people are looking at building interconnectors to to areas that are further afield. So maybe going to Morocco, potentially going to Iceland, connecting to Norway. The more that kind of we can build that that sort of network of interconnection, the more secure we will be as a result. But, absolutely, you see you see periods of time where, say, the, like, the vast majority of Europe is is is getting pretty low wind generation.

Yeah. Okay. Thank you. That's interesting. So, Ed, I know that you were recently in parliament to talk about things related to, kinda, clean energy and energy in general. So if you could give a little explanation about what you would do in there, and then that would lead nicely onto our next question, which is how would a change of government affect storage?

Oh, man. You've really you've really you've really dropped that in the conversation. Okay. So, yeah, I mean, very privileged to be invited to go along and talk about battery storage.

It was we was part of environmental audit committee, and, yeah, it was it was a really good session, a nice chance to kind of represent some of our customers and kind of talk about what's happening in the space. So, yeah, that was that was a real privilege, and it's really nice to see the wider kind of government taking a look at what's happening in battery storage. So that's Mhmm. That's really positive.

This question. So so then talking about change of government, and we shall see where we end up with that Yeah. By by kind of all measures, looks like we'll have some form of labor government coming in. And in terms of energy markets, I think at a really at a at a really high level, there is an a a more aggressive target.

So instead of trying to do net zero by twenty thirty five, we've got net zero by twenty thirty. And then we've very recently seen a few more pieces of policy starting to come out from Labour around, like, what they want this to look like. Mhmm. Just just to talk about the politics of a little bit of it, and this is not a politics podcast.

There is a very competitive that's a very competitive space and when we would be flat last. But I think the thing that I'd maybe say about it is that the the way that it's set up at the moment is that Labour seem to have such a commanding lead. I don't think they necessarily need to go and put out, anything drastic about that energy policy, to be honest. Kind of they're in a position where if they don't rock the boat, it feels like they'll they'll it'll be okay.

If it was kind of, neck and neck kind of two horse race, then I think you'd see people kind of coming out with more policies and maybe being a bit more, like, risky in terms of what they're putting forward. Yeah. So I actually I I don't really expect to see much before the the election that will kind of really be a bit of a, like, hostage to fortune where they're gonna have to write something and then they'll get into power and then Christ, I'm like, why did we say that? I really just do not want to have to deliver that.

So I don't think we're gonna see anything too too drastic, but that's personal opinion. So, I mean, could be totally wrong and almost certainly am totally wrong. So, yeah, you're you're welcome for that opinion. And and what we have seen from Labour so far, there's a few things.

So a bit more ambitious on the the the net zero goal by twenty thirty. Yeah. I'm not sure there's many people in the energy space who believe that that is that is really achievable, but it's but it's not bad to have the intention to be set. Having the intention to be set will allow people to try and think about how we might be able to deliver that by twenty thirty.

I guess that that would be my question is what what makes people kinda apprehensive about that as the target?

Yeah. So certainly certainly grid connections is kind of a big part of it. Then there's there's planning and there's policy that allows us to kind of move quickly enough to essentially move to a net zero system. We we we we have some really challenging goals around the amount of solar to be deployed, the amount of wind to be deployed.

And I think there is a question of, do we have enough qualified people all the way through from sort of early stage planning through to commissioning and and the kind of final engineering checks of connecting to certain networks. Do we do we have enough people to be able to kind of implement the scale of what we're trying to do here? Yeah. And whether someone comes along and says, oh, that's gonna be in twenty thirty or whether that's gonna be in twenty thirty five, that's not changing the number of qualified electricians we have.

And so I think, really, the the devil will be in the detail of that, which is like, well, how quickly does whichever government is in place, like, make sure that we have more capability to deliver that transition. So I would say that's probably the thing to be to be focusing on. We also have this kind of GB energy. Right?

And I'd be really interested to see kind of, like, what that does, what they want to use it as a vehicle for. If you think about the UK, I mean, one thing we do very well at the moment is is financing. You know, London is a very good place for to finance and and there's kind of no shortage of that. So, like, what, like, what's holding back the the the transition from moving faster?

And I'm sure they have good ideas of in terms of what they're gonna do with with GB Energy, but it'd be, yeah, it'd be interesting to see them.

Yeah. And they've definitely said the focus will be on clean energy as well. So and that could include wind, onshore wind, offshore wind. So yeah. It'd be interesting to see exactly what they aim to do and how that would affect people who are already kind of players in that field. Yes. I agree with you there.

And it's a pretty similar story. Right? So in the same way that the net zero target comes forward, the the offshore wind, floating wind, onshore wind numbers, and solar numbers, they're all kind of a step up from what we've seen in things like future energy scenarios, which is great. It's it's more challenging.

But, again, it's kind of it's it's it's positive in that it's setting a precedent. It's setting where they want to go. I think people will be skeptical of it until they see really how it can get delivered. And that's probably that's probably the take home message, which is, like, we need to see those key details before this this becomes a reality.

Yeah. They did mention stuff to do with good connection issues as well. Yes. So I get and and the FSO.

So I guess it's in line with things that are already being talked about at the moment. So Yeah. The yeah. Because, obviously, every time you have a change in government, you never know which things are gonna continue or not.

So it'd be interesting as well to see see how those things progress too.

Yeah. Yeah. And I think open opportunity, if anyone wants to come on and maybe I think Ed Miliband needs to come on and and talk about how GB Energy is gonna work. This is an open invitation. We'd love to get his. We'd love to get it to you.

Love that. Yeah.

It would be a great episode. It wouldn't be as good as the yet one, but it would be it would be up there.

Nothing is as as great as that one, I have to admit.

For sure. One last thing on this. So the thing that surprised me on the manifesto is that no one battery storage in GBs have been a massive success story. We've been able to essentially decarbonize a huge amount of our frequency response, and batteries are constantly providing services that mean energy is delivered to consumers at lowest cost.

It's weird that it's weird that sort of both parties don't necessarily want to kind of put themselves closer to energy storage and some of the benefit that it's brought through. We definitely don't want it to be a big kind of political football and and involved in the space, but it it is a success story and will continue to be a success story in the next government Mhmm. Whichever way that goes. And it would be, I think it would be appropriate for for people on the the the energy policy side to be to be celebrating that.

Yeah. Yeah. For sure. Yeah. And just the the build out of batteries over the past few years has been especially the last year has been has been amazing.

So, yeah, a lot more to come. Okay, Ed. This this one might be a hard one for you because, I don't know, you you don't strike me as someone that would have this problem. But what is something that you got wrong or went in a different direction than you were expecting?

Okay.

Or where you've changed your mind as well?

I think I can hold my hands up and say, comprehensively, I've been wrong many, many times. And and in a few basic so in the like, I suppose in in no particular order, that's a that's a world. Right? Sounds like it's gonna be a a long list.

So I I definitely last year, I went into the winter last year thinking, oh, we're gonna have a it's gonna be an interesting winter, and we're gonna see high power we're gonna see high power prices. It's gonna be winter is gonna be a better time for battery storage. And I think that that's kind of the mindset of a lot of people in the space was peaking assets make more money in winter and less money in summer. Mhmm.

And I think one thing that we've learned over the last six to nine months is that you might have a mild winter, but then also as you come into summer periods, you start to get negative pricing coming through. And as you get negative pricing plus solar generation, you kind of that gives a that gives a spread to battery assets, but it also gives a potential for battery assets to cycle twice, and they might not have that in winter. And so I was very much I I was kind of thinking, oh, winter's gonna be this key time where we're gonna see the best revenues for storage. And I think that still is true long term.

But one thing I've kind of learned over the course of the last few months is is just just how effective kind of some of our summer periods might be for battery storage. They've been dreadful for sort of gas peakers, but it'd be very good for storage. So that's definitely one thing that I've learned. Another area so I think one thing that surprised me is that I was expecting batteries to be to be traded on on forward markets.

So I was expecting people to to try and get rid of some of the risk with their battery assets.

So imagine, a battery has exposure to power prices and, if you trade all of that battery at essentially the day ahead stage, any movement in power prices before then is going to is is is gonna create exposure for you.

Yeah.

In the same way that for for retail customers, your your your retail your retail company will go out into the market and will start buying energy for you three years ahead of time, even though your exact shape of your, retail consumption will really vary half hour to half hour. Yeah. So I think there is an expectation that batteries will at some point start to hedge, which is essentially buying power or essentially getting rid of their risk in forward markets. Yeah.

We expect to see or I expect to see a bit more of that in the market. We've seen some people do little bits of it. So there are a few companies that announced it. There are a few companies that didn't announce it were doing it.

And, yeah, I I think we'd I think we'd expect to see more of that, but there hasn't been as much as I maybe thought there would be up until now.

Yeah. I think I remember an an article coming out about a company announcing that they were gonna be doing that as well.

Yeah. There was that was a StackCraft and Staterra, like, quarter ahead hedge. And I think at the same time that was happening, there were others in the space also looking at it. I just think it it's not it's not yet got to if if I compare it to retail Mhmm. Every single retail business hedges for for anywhere between one and three years ahead of time.

Okay.

If you look at the battery storage space, I think some players are looking at that. Some players are are are kind of hedging their position, but but but not everyone. And some players would actually say, oh, I actually don't want to be hedged. Mhmm. And I think that given the revenue changes we've seen in the last couple of or in the last year, I think people might have changed their position on that and might decide to be a bit more hedged.

How how do you as a battery, how do you kinda plan for your energy so far ahead?

Yeah. I think that's that's that's the hard part. Right? So effectively, you're you as a battery, you wanna buy in the you wanna buy the lowest possible half hour and you wanna sell the highest possible half hour.

And you can do that in the in the day ahead or you can do it in the intraday market. So really close to delivery, you can do that. If you go three years out Yeah. The thing that people trade is, like, base load power, so twenty four seven power across an entire season.

Yeah. And that doesn't really match at all to the thing that you actually want to you actually want to trade. Okay. And so what people do is is they can either find someone who's willing to kinda take the other other side of it and then people will price it and they'll find a trade.

Mhmm. Or you can do something which is gonna sound super super technical, but isn't really oh, god. Technical term alert. We're going delta hedging.

Right? Ask Treadful.

You should never say ask this question.

Yeah.

You should no one should ever say that in a in a in a real life situation. But effectively, it's like they they work out from all of their all their expected trading what what their exposure is. Yeah. And on the basis of kinda what that looks like, they will trade a small amount of those of those big contracts.

Okay.

And so what they're trying to do is they're trying to get their exposure to whichever way the price moves to be as low as possible.

Okay.

And that that's it.

Interesting. That's it.

Yeah. Yeah. Sorry. Yeah. That was that was a real blue Peter moment.

It was like, yeah, this this one I made earlier.

Like, just done.

Well, those those sound like some reasonable things to to maybe have been wrong on. I'm using quote quotes. Yeah. But yeah. Yeah.

Yeah. I mean, there's there's a long there's a long list of other things we've been wrong about. That's probably a separate episode, for sure.

Okay. And I have one last question for you, which comes from Luca Progetti from PEXA Park. So thank you very much for sending in this question. And it is very simply, what is the end game for batteries?

Luca, this is a real this is a real step up of a question, so thank you for thank you for sending it in. And I think there is so we so we when we when we look at our forecasting, we look out to kinda twenty fifty and we start to see we we start to see kind of how how the market is changing by that time. If we think about the the power market, the power market is trying to get to net zero by twenty thirty five. So the transition for the power market should be more or less done by twenty thirty five and kind of depends on how effectively you think we'll do that.

And then as we start to electrify other areas, we'll add more demand onto the to the power sector. And so, essentially, the power sector will transition and then grow. And in reality, it's actually growing and transitioning at the same time. So all this change in the power market.

And all of that time, effectively, more solar, more storage all the all the time.

Mhmm. So I'm not sure what the answer is in terms of, like, what is the end game for storage, but I think we're starting to get a much better appreciation of kind of what the end solution looks like, which is a heck of a lot of solar, a heck of a lot of wind, loads of storage to manage any kind of intraday balancing. So kind of any balancing that's, like, four, six, eight hours, we think, yeah. Okay.

Storage can kinda pick that up. That that's the kind of that's one part of the the end game, which is I think we've got a pretty good solution, and that will scale as we add more more demand. So we we kinda know what that looks like. I think the really big question is how do we deal with those really difficult periods where, let's say, going back to the earlier point around there not being much wind at all across Europe for, say, two weeks, How do we deal with that?

And battery storage might be six, eight, ten hours. That that feels like a really nice space for battery storage and very doable.

But can you use battery storage for interseasonal type trading? I think that's probably not gonna happen. And so, like, to what extent does storage start to kind of provide those kinds of services? Mhmm.

And I I I I don't really think we have a very clear answer at the moment. The way I expect it to come through will be through sort of the kind of commercial business cases. So people will continue to look at the money they can make from wholesale traded markets, what products are out there for reserve type services and capacity type services, and then they'll work out whether the whole thing makes money or not. And on the base of that, they'll decide to to to build the thing, yes or no.

That will still leave a gap. So there will still be big areas that I think are currently really undecided in terms of other types of storage tech that might come through that provides that provide kind of inter seasonal storage.

Are we gonna see to the CCUS podcast we had on recently, are we gonna see CCUS become really effective and really cost effective and and solve some of those problems? Are we gonna see hydrogen to power? I think we saw that in one of the government statements. Are we gonna see hydrogen to power? Mhmm. It seems like the market's saying a little bit no at the moment, but maybe maybe it'll come through. And so there are some really big chunky questions that are totally unanswered, and I think that's part of what makes it exciting to work in battery storage.

No. That's really those are some really interesting points because I hadn't really considered that, like, really long term, long duration storage that is used depending on, yeah, seasons, weather. So yes, that's that's really that's yeah. You got me thinking as well.

But yeah. No. Thank you, Luca, for that question. I think that's a nice a nice way to end the podcast as well, and get people thinking about that. And if you have any other questions of a similar nature that you would like us to answer, then please do send them in. Remember the link is in the show notes on whatever platform it is that you're listening or watching us on and thank you Ed for joining joining us today. Do you have any other things that you wanna leave with?

Oh, no. I I that was a real pleasure to be on. Thank you for hosting And, yeah, as as you're saying, like, please do send in any questions you've got. It would be great to run another one of these episodes. And, yeah, looking forward to doing it.

Thank you for listening to Transmission, a MODO Energy podcast.

Transmission delivers conversations from industry leaders and experts exploring energy markets and the operations and technologies related to grid scale battery energy storage. Check out our other episodes by searching transmission wherever you get your podcasts. Check out the Energy Academy, our video crash course on how markets in Great Britain and ERCOT work, or head to motoenergy dot com to see our written research. Thanks for listening.