What Happens When Every Battery Market Gets Crowded? - Centrica

I'm your host, Ed Porter. Welcome back to Transmission. Originally. Ancillary services were the key to battery trading. They saturated. Then it was re trading that saturating too. This conversation is all about how trading teams stay on top of the opportunity. Brecht is the director of physical asset trading and optimisation at Centrica Energy, one of Europe's largest trading houses across a 20 gigawatt portfolio. This episode talks through the mechanics. Why fixing issues fast matters more than chasing the perfect trade, where AI actually earns its place in the loop, and how regulation can take value off the table. If you want to know more about how things like grid restrictions are changing your batteries revenue forecast today, ask Ko, Modo Energy's AI analyst. Sign up is free. Link in the bio. Let's jump in. Brecht, welcome to Transmission. Well, it's great to be here. Thanks for the invitation. Oh, pleasure. And as always, let's get straight into it. So what is the one thing that people get wrong about optimising batteries? I think, uh, the market as a whole has learned a lot. There's a lot more and a lot more research, research out there, a lot more depth to research. So I think we have a lot of, uh, very educated conversations with our with our customers about what it takes to optimise a battery. The one thing that people do tend to underestimate in the beginning is the the importance of operational excellence, you know, detecting when something goes wrong with the battery. Analysing what the root causes and fixing it in uh, and doing that as quickly, as efficiently as possible. Okay. That that costs quite a bit of money for people if they don't have that under the belt right away. So I think that's something people should. That's pretty funny, right? Because people would naturally assume that the way to get the most money out of a battery is like the most sort of complicated multivariate optimisation of the of the sort of minutia of sort of intraday power and all the various power options out there. But you're saying actually one of the things that probably goes wrong more than anything else is can you get the thing fixed on site quickly and back up and running. That's going to cost you the most money? Yeah. It's not just just about playing offence, it's also about playing defence. Yeah, I love that I love that okay. And so you've argued before that and you can tell we've done our homework on Transmission, uh, that what you're seeing is that there is, uh, converging, um, converging performance around modelling returns. And the conversation that we're seeing in European trading markets is going from can batteries make money? We're starting to see the answer is yes, but it's can you as an optimiser, can you make it repeatedly? Absolutely. I think, you know, if you go back a couple of years ago when you got started, it was 2017, 2018, people didn't really know what to make of a battery. It was hard to convince people that it was worthwhile to invest in a battery. And, um, you know, we've seen some spectacular returns for these initial investors. That money is no longer there, right? You see a lot more, you know, these early these early spreads that you could capture. They're going down because there's more batteries in the market. Yeah. So our platform quite proud of what we, what we built, uh, still think is possible if you have like a small group of people, smart ones with a bit of seed capital, you can you can you can get similar performance as we do. But the the trick now is being able to do that repeatedly. So doing it again and again and again across different markets, across your entire portfolio, all at the same time. Yeah, I think that that you can't do that just by keep throwing capital at it to, to to find new things. That has to come from your returns. And even so, if those stellar returns are gone, you need to be able to still in a market that has smaller margins still to make money and then reinvest those into into doing better. So what's the what's the secret sauce? Right. Because as you say, people come along. They look at the market. There's some very good returns initially. And then the market starts to saturate. More batteries get added and returns drop. So yeah. What's the secret sauce to kind of staying at the, the, the cutting edge of that. You know the market it has evolved a lot already. But it's still it's still very much a moving, moving target that we're chasing, you know, serious services maybe not so important as before. Now people are talking about, you know, retraining and wholesale markets and continue to intraday market. Um, but, you know, it's always something new that you have to have that you have to pursue. I think if if I look at our own story, um, we've sort of had three, 4 or 5 big ideas there. We thought, ah, this is going to be for batteries. The time and again markets called up and we had to chase the next idea. What I've learned is, you know, it don't necessarily try to go for the super duper crazy ideas. Maybe 80% is good enough. Stay nimble. Make sure that you can pivot to the next idea once everybody catches up. Don't look at investment horizons of five years. Look in terms of what you can do next year and just keep going at it again and again and maybe in there. So there's are people who are kind of new to batch optimisation a little bit. I'll just say. So there's ancillary services. That's when a battery supports a grid in terms of some of the additional grid characteristics like frequency to help keep keep grid frequency at say, 50Hz. Or when there's a loss of load on the system, it helps to kind of keep the system balanced. Those services have been quite saturated now in quite a few markets, now in lots of markets. They still haven't been saturated, but they are saturating. So, um, the very high returns that were earned in the first few years that starting to fall away. Then the second thing you mentioned was retraining. So that's the concept of you put a trade on, let's say, the day before. And then when the market shifts, you can move that trade to a different point in the day and you can perhaps make more money from that trade. Now, we talked on this podcast, but also as an industry, we've talked a lot about ancillary services saturating and that's, I think quite well understood. But this retraining saturating I think that's a really interesting idea. Do you see that as saturating or is that have I kind of drawn a parallel there that I shouldn't have done? No. I think it's very much also something the value. Still, I think the value out of ancillary service market is not gone. I mentioned these big ideas. I think the next big idea that we had was was multi market trading. So indeed buying in one market and then selling it in a different market, capturing the spread between how those products are valued. And that's still something that's very much alive in the market. So it's the optimal strategy today is a bit of a mix of wholesale and ancillary service markets with this re trading coming on. But you know, not all of the batteries that are out there are currently just focusing on re trading. Once they do that you know that volume will will clip the tails of those those returns. There will always be money there, but you're not going to be making 50% more over over what spot earns, you know, that will go down as more batteries saturate this market. Yeah. So if you imagine kind of looking at a trading screen, you've got sort of people looking to buy and people looking to sell. If you've just got one party there, then there could be quite a wide spread between those two. And the price could be quite volatile. But as soon as you've got ten people looking to sell and ten people looking to buy, then you've got much more competition at that point. And that's kind of like what's clipping some of the returns in the, in the re trading. Yes, there's that. But there's also I think in the end what batteries do they bring a little bit relief. They bring a little bit of elasticity to this supply. Demand matching physically on the system. And the markets are an expression of that. Right. How tight is our system. How far away are we from having an outage anywhere. Yeah. And that returns in results in extreme prices in this market or in that market. And that's what batteries help us all. But if there's ten batteries, who are there ready to resolve that, that significant event? Yeah. Then it's a race to the bottom in terms of price. I love, um, market prices as an expression of what's physically happening underneath. I think that's a nice, uh, that's a nice turn of phrase. I might borrow it for a future episode. We shall see. Um, okay. So let's say, uh, obviously you're very active in these markets. I really want to talk about what's the difference between a really good optimiser and an average one. So in terms of sort of what you've seen in the market and what you've learned from doing this over many years, like what does make a good optimiser and what is the thing that is giving them the sort of improved performance? Is it sort of around their ability to forecast? Is it the ability to dispatch? Is it their market access? Maybe they've got better market access and everyone else um, or is it sort of is it scale? Is it sort of. They just have this never ending ability to keep on investing in sort of the cutting edge of optimisation, and eventually the sort of competition will drop out. What's so going back to the original question, what separates a good optimiser from an average one? I think you ignore any of the things that you mentioned at your own barrel. Uh, if you want to be a good optimiser, you have to be on top of all of that. Right. Being able to dispatch properly. Being able to position your assets properly. Having good forecast. What is the secrets? I think that that changes over time. Um, 5 or 6 years ago, it was for us. It was aggregation. We could generate 25%, 50% more, uh, from the market than our competitors by aggregating our assets in a smart way. That sort of is goal now. There are other things that come up. And so being a good optimiser is you have to have sort of you have to know about all of these things. You have to have something. And then when a value bucket appears, that's when you have to, you know, push through on that one. Um, and then just make sure you chase the market where things are going and trying to maybe anticipate also what is going to be the next big thing. Never going for the for the crazy stuff, but, you know, just being there in time to capture that value before everybody else. And I like the I like the point around. Um, you mentioned about sort of aggregation historically because there is this like mindset that exists in power markets that there's almost like a a different playbook for a large trading house like Centrica versus a more like niche optimiser that was founded last year and just coming into the market. Do you still see that? Do you still see that there's like a very big difference between those two, or it's like the advent of AI and market access, kind of like level the playing field. I'm not sure. No. As I said, I think, you know, if you're smart and if you work hard and you get a bit of seed capital, you can still match the big players in terms of performance in one market or for one asset class. Um, but, uh, you know, I came from a small company that was bought by a big company. I think there's also many advantages of being part of a big place like Centrica. It starts with the type of products we can offer to our customers, so we can offer financial guarantees, right? So if you give us your battery, we'll pay you a fixed amount, not just whatever the market is paying tomorrow, but every 5 or 7, ten year period. We'll we'll give you a fixed amount. And that works really well for, for asset developers. It helps them embrace capital very effectively. And that means they can build more assets with less equity. Also what we've learned is, you know, the platform, the capabilities that we built for batteries, they don't only work for batteries, they work for renewables, they work for CHP, they work for CCGT. So there's big thermal plants. They work for gas peakers. They work for residential flexibility. And being part of Centrica means we can we can leverage that technology for all of those technologies. Finally, I think when it comes to managing risk, right. Um, you know, if you if you go all in on batteries in the UK, for instance, and then returns come down and your business goes with it, right? So having a more diversified portfolio of assets that that that really helps, um, means you can take on more risk in the battery space because, you know, if battery earnings go down, that's probably because they're eating the the balancing costs that you incur on your renewable portfolio. So if you have, say, like a retail book and a wind book and a battery book together, some of their risks offset. That can be quite a nice thing from a risk management perspective. Absolutely. Because those risks, you can't trade them in the market. Right. There's no product that you can buy from from from anyone that protects you against that. The only way to really manage that at the moment is by having those exposures physically in your portfolio. I really like that you've done this. You've kind of been in the small, the smaller business side in a company called Restore, but then it also now on a much bigger business in Centrica, gut feel. Let's say we have 30 optimisers that exist in Europe today. Um, rough number. I haven't counted them. So, like, please don't, uh, nobody, nobody fact check me on that, because I'm not sure it's true. Uh, but let's say we have 30 today. Do you think that if we go forward ten years, we'll sort of narrow it down and we'll be down to five in the future, and they'll just be sort of five dominant optimisers who have all sort of got these advantages of scale coming through. Or do you think there's this like never ending pipeline of entrepreneurial, uh, seed capital backs, uh, niche players who will keep on coming in and keep on making up, you know, trading House X and that picks up battery storage or, um, the next the next tech that needs some investment. Well, I mean, I work for Centrica and I, we're about already 8 or 9 years ago. So by doing it, I do believe that we have an advantage. Um, you do see coming in waves, right. So you had you had a wave of aggregators which were being funded by, by seed capital. Uh, people were trying to put, you know, industrial assets in the market or residential assets and, you know, Yeah. Data and gold balled up. And then you had, you know, the battery optimisers. And probably there's going to be a next wave. But if I see what we need to do to stay relevant in the market, that consumes a lot of capital. And if you need to get that from your own returns, that means you need scale, a scale that you can reach. You know, that means you need a big a big player. And when we talk about these big trading houses like Centrica, there is a part of me that always thinks that large trading houses means more traditional approach to markets, which means you'll be slower to adopt things like AI. I must be wrong. Uh, how do you think about sort of, um, the progress of things like AI in a in a trading house, because it feels like a perfect match in terms of something that can handle lots of data points, all in a very quick period of time. I think AI is is a hot topic everywhere, right. Uh, also within Centrica. Um, I think my teams are probably some of the heaviest users of of AI in in the whole Centrica. Um, because in part is because it is really a good fit. Right? Anytime you have a problem that, you know, finding the solution is time consuming of difficult, but checking whether the solution works or it's better than the previous thing that you found. That's where these, you know, software coding agents, they really shine, right? Because they can just turn away. And then they come up with five results and you pick the one that you like is best. So that's that's great. I think it's using those those tools in our R&D workflows has really sped up. We can we can we can test so many more ideas we can. The speed to market of these ideas is going down. Um, so that's awesome. There's areas where it's maybe less interesting. There's also a lot of hype about AI. You know, any any anytime that you can't verify whether your solution is great, maybe it has not such a good idea to use it. Right. You wouldn't want I don't think you would want to use AI to set a strategy for your company, because how are you going to verify that whatever AI comes up with is actually going to work? Yeah. Where's the accountability in that process? Well, I mean, it's just going to be very expensive to figure out whether AI is right or not. So just put a put a person on it. They're still smarter than AI right? We haven't reached the the level yet. Where where AI is smarter than people. We're not yet at AGI. Um, but but it could be. It could be on the way. Um, so then maybe to take a step back then in terms of how you approach this problem, it seems really clear to me that you're putting AI into things like bringing software or trading tools to market and making sure that those tools come through quicker than ever before. What do you think about just a full sort of AI strategy? So take the human out of the loop. Let the human go. Let the AI agent go for it. Do you think that we should allow that to happen, or is that something that you kind of think? Well, the more you think about that, the more you think about, um, trading rules. Trading regulations. I've just been very concerned about the AI picking certain strategies that it probably shouldn't. I wouldn't do that. I mean, I think it's not able to. Right. I mean, if you hook up Claude Code or ChatGPT or whatever, Sonnet, or one of these models you can't type in optimise my portfolio, it's not going to do anything. I think there's indeed there's there's a question of rules and regulations. You need to be able to explain why you made a certain trade. Yeah. Especially if markets are stressed and there's a blackout. And you were trading. Yeah. Of course you have to start keep trading during those events. You have to be able to explain to the regulator why you made a certain trade. You know, that that it improved, that it didn't cause any harm for the system. It's not just about maximising returns. It's about creating a system that works and brings value to to society. Then operationally, um, you know, there are things that you wouldn't want ChatGPT to drive your Tesla, right? Starts to hallucinate. You don't want it to hallucinate when it's when it's driving a mission critical infrastructure thing. Right. We have a portfolio of 20GW. If AI starts hallucinating and wants to shut it down, that takes the grid with it. That cannot happen, right? So you need more assurances that it works. So you feel like that that is that there's that accountability element that has to come through as to why you took those actions. And that's why you always see sort of human in the loop. Yes. But I mean, in terms of capability, there's also the capability doesn't exist yet, right? It will fail at some point. And we can't allow these portfolios to fail for even a second. Yeah. I suppose there's also a really interesting thing around if it's just business as usual trading. You know, we've seen this kind of trading pattern before for the last 10,000 times. And so we're asking an LLM to think about this set of parameters that we've all seen before. And you kind of think, okay, well, I could see how it might be able to turn its hand to that. But imagine the situation we're in right now, which is, The longest, driest, hottest spell in GB. On on um in in records. Um, and the same thing is happening in Europe. You've got riverbeds getting into sort of record low water levels, which means that you've got difficulty bringing in water to cool down certain generation, and you've also got difficulty in terms of getting coal to places and industry to allow itself to continue to run as well. So there's also like demand side things that are starting to happen. Those feel like events that we haven't seen so many occurrences of. And so you're kind of asking AI to be creative in terms of how it manages these one off event. Is that somewhere where you see, um, another case of where you'd want a bit of human creativity alongside AI's thought process? Yeah, absolutely. And you know, AI, you can break that down into a number of different technologies. And then there's a number of different use cases. And I think if you want to successfully use AI, whether that's a large language model or deep learning or reinforcement learning, or just random forest or trees or any of those different technologies, it's about recognising, um, where they work, but also where they don't work and making sure you have, uh, fail safes in place that have human supervision, um, to step in when they don't. I think, um, when it comes to batteries, that's probably the area of our portfolio where we've advanced the most with automation just because. Yeah, the problem is, is so complex, right. You see, refer to it as three dimensional chess. But I think one of your colleagues coined 96 dimensional chess. Yes. So I started using that one. Yeah. Um, and so I think, you know, close to 100% of the trades that we make run through algorithms. But those algorithms are monitored and they are configured and tweaked by, by traders, sometimes on a daily basis, sometimes on a monthly basis. It depends a bit on market circumstances. Um, and, you know, they they do have issues. They do have problems extrapolating beyond what they've seen in the past, and humans are better at it, reasoning about the a certain situation and figuring out, okay, what could happen if what could happen tomorrow. Um, and and that's when when the traders step in. Um, that's not that. We start using rulers in a pen to do that. Yeah. Um, but it's about, you know, keeping a tight leash on the algos and in really, really rare cases. Um, trader might even put a put a trade in to make sure that the algos trade in the right direction. Yeah. Um, that's another aspect of using AI. You need to be able to you need a system where where that those, uh, those drivers can coexist. Right. You need to be able to have enough levers and boxes and parameters in your setup so that the trader can, in an efficient way, step in and and make sure that the system takes the right decisions. It's fascinating. We're not. We're not I don't think, um, as a sector, we're done with this. We have so far to go in terms of working out what the right balance is, where we should allow AI to play, where we shouldn't. Um, maybe, maybe let's change lane then a little bit from the AI side to just in general. And we've just talked about how crazy the European power markets have been this summer. And actually this whole year has been pretty odd. We've had incredible cannibalisation in in solar at the start of the year, followed by heatwave after heatwave after heatwave, which has pushed sort of us to the limits of kind of where we thought we would be in summer. And if I sort of wear a sort of slightly forward looking hat, we've got gas, uh, um, storage almost at record lows going into winter. And so it feels like we know we're not out of this yet in terms of being an exceptional year in that context. Like which which markets in Europe are the ones that excite you the most? Well, it's it's a lot very rewarding to actually operate assets in markets in our core territories, a sort of Benelux, Nordics, UK and Germany. In terms of looking ahead of where we are, where I think it's most exciting to start increasing our portfolio. I think Spain, Italy, Germany, those are really, really cool, uh, really cool places where flexibility is really needed. Um, uh, and, you know, we just signed our first autonomy agreement in Germany, so congratulations. Thank you. Yeah. So we put our money where our mouths and and Germany's like a great example of somewhere where we're kind of moving away from. We know that ancillary service saturation is coming. That's kind of, I think widely understood in the German market. But the but the, the second part I think is the really interesting one, which is on the, on the comment around 96 dimensional chess, uh, the additional value that you can get from the intraday market. So trading uh, the available intraday markets and sort of retraining that position lots, that feels like one of the hardest things to To understand and to forecast correctly. So as you add five gigawatts, ten gigawatts of batteries, how quickly is that going to contract? I think it's something that is repeatedly, uh, quite poorly understood. Yeah. Um, absolutely, absolutely. I think, um, directionally, I think it's it's easy to see things. Um, if you want to put a timing on it. When will this happen? You know, uh, what will it stabilise to? I think that those are very, very hard questions. Um, I wouldn't want to, I, I wouldn't want to put a number, but you did have to put a number on it because the toll, a toll had to be signed at a number. So, uh, so someone, someone in central could put a number on it? Uh, yeah, that's true, but I think, you know, toll pricing, it's it's tricky. Right? Um, I think, you know, it requires a very different expertise from how you would price a financial instrument because battery, battery markets or energy markets are very, very far from complete. So it's not that you can sort of look at, you know, the forward value and you know that market and that market and then sort of build up what the value of a battery would be that just doesn't exist. Right. You know, like with a big gas unit, you could look at the power price three years out, the gas price three years out. And you could say, well, okay, there's a nice there's a nice spread in between these things. There's a nice clean spark spread. So I can I can value this option slightly more easily. Whereas with a battery you just don't have that visibility. Yeah. And it's because, you know, if you did a bit of financial math in school. So one of the founding principles is, you know, you should be able to store whatever you're trying to to, to make money off. Right. Whether that's stock or whether that's money or whether that's gas. But for electricity that just that's not the case. Right. That that doesn't exist. I mean, batteries, yes. But that's sort of the principle that you need to start pricing it. So if you want to do a good job of this, Uh, you need to think more in scenarios. What if. And you need to determine what you know, what is a possible scenario, and then ask yourself the question in this, this possible market, do I still want to be able to make money? Or do I believe this is so implausible that I'm okay losing money? And you know, if you do enough of those scenarios, that's then, you know, that gives you your, your boundary. A question of how you set your risk appetite, relation to those scenarios and how you price. This is not wanting. Right. It also plays in but this is not a risk neutral ensemble of scenarios that you use. That was definitely the question I wanted to ask as a follow up. Right. Which is which is, is this is this kind of two schools of thought in scenarios? Right. There's there's a there's a sort of Monte Carlo type approach where you have variables, you have profiles of what those risks look like, and you can run those through complicated models. And that will give you distributions of what outcomes might look like. And it's sort of very mathematical. Uh, Monte Carlo is not the only way of doing it. There's lots of ways of doing it. Um, and then you've got the perhaps slightly more old school, and I'm not sure whether old school is the right term for it, but somebody who's done the market for ten years might be able to say a more not mathematical distribution or mathematical scenarios, but they might be able to say something like, okay, what about, um, Russian gas returning to Europe? What about, uh, a heatwave lasting for five months? Uh, that up until this year, probably seemed like it was quite far off. So. So which, when you're talking about scenarios, are you more thinking about sort of the pure mathematical modelling or do you put more weight into the, um, sort of market expertise scenarios? Uh, you call it old school, but, you know, if you, if you did a stint in finance and, uh, I was I was there in the aftermath of the credit crisis, you know, where and models, these risk neutral models were part of what caused that that Blow-Up. And in the aftermath of that, people started thinking, okay, maybe, you know, maybe what's wrong here? Because the math works. I didn't make a mistake. I didn't, you know, I made sure I carried it, too and everything. Yeah. Um, and so it's some of these fundamental assumptions that underlie this that are just plain wrong. And so you had this offshoot of people that said, well, you know, the market is not complete, right? Um, they're there. What if I drop that assumption? What is my theory look like then? And then you get the there's a few different schools that develop. One is like utility theory. So, you know, people are risk averse. They're not risk neutral. There's many different prices another way. And that's actually mathematically equivalent to it is is scenarios right. So when it comes to pricing and weather risk that's something we need. We would use Monte Carlo type simulation. We develop a number of simulations we run it through. But then there are other factors where you know where you would have much more jumpy behaviour like the gas price. Yeah. I try and calibrate a model to historical gas prices and trying to predict what 2020 16 or 20 20 or 2023, you would be completely wrong. So there we work with with scenarios what if right and and what do we how do we value those scenarios? Is that something? Do we think our companies should make money in that scenario? Also looking. And the thing is, you know, if you do that and then instead of taking averages over over scenarios, you look at, you know, your this appetite, we all want to make money and you combine it with other assets. You actually get nonlinear, um, equations. So the value of, of, of a deal depends on what you have in your portfolio. Okay. And, and that's, that's really cool stuff because then, you know, um, people talk about, you know, um, having a diversified portfolio. So you're not so exposed, you know, this way of looking at it actually translates that into value. And prices suggest, you know, if if you value this, because if you value this battery, because you have these renewables, well, this is a price that you should offer them. Well, actually this is the price range that you should offer them. And then you you give that to your originators to to try and find the best deals. I think it's a really fascinating thing that's been happening in power markets, in that what we start to see is some insurance, um, businesses coming in and offering, uh, deals around certain types of risks. And there's always a bit of a head scratcher for me because I feel like, um, the entities that are best or most able to handle those risks are people who already have sort of the offsetting risk within their book, and so they should be able to price that at a, at a best possible level. Um, needless to say, we are also seeing insurance businesses come in who say, well, look, I'm actually very good at handling this type of risk. I'm very good at being able to price it, um, maybe to be picked up on a, on a future podcast with a, with an insurance head as to why they're coming in and picking up those, those, those, those particular risks. But for me, I, I think in the long term I see utilities winning out in that, that battle. Yeah, I would agree. Um. Oh well I think you would agree, wouldn't you? Yeah, I phrased that question wrong, didn't I? Yeah. No, I mean, it makes sense for us. For us. Um, having the right portfolio is risk reducing versus just, you know, betting going all in on batteries. Right. Diversifying is a good a good way to do it. Um, do I think the the the, the the thing where these insurance maybe are able to step in is that, um, the range of error on your mathematical interpretation of this or you're trying to quantify the benefit of this diversification effect is so large that, uh, you know, pick any utilities and that will give you a vastly different price. There's no risk neutral. There's no true price. Right. That doesn't exist yet. Um, and so, yeah, there is, you know, maybe you can you can squeeze in, you can squeeze yourself in there and offer a price. Uh, maybe it's because they think that's, you know, it's a good head for their weather exposure, I don't know. Yeah. And maybe a good point, actually, uh, because they're also They also have sort of offsetting exposures within their book. So, um, yeah. Uh, and to move a little bit away from that side, we're also seeing some technical limitations starting to come through. So when when a listener thinks about how a battery might be able to trade in the future, they think, okay, here's a battery and it's got a grid connection, and the grid connection allows it to charge and discharge however it sees fit. But what we're seeing in regions like Germany, we've got flexible connection agreements coming through that will limit how batteries are allowed to trade in regions like the Netherlands. We have some very, very high grid fees that can be reduced quite far by signing up to a non like non firmness in their connection. So, so, so they have a firm connection for say 85% of the year, but then 15% of the year it's non firm. So they might get turned off as a as a as a as an asset optimiser. How are you thinking about these sort of technical restrictions that are starting to come in on these assets. Um, yeah. I mean they're definitely taking part of the value from, from, from the battery. Right. Um, if you cannot trade the last hour or if your your asset is curtailed without any compensation. That takes part of the value. And also so it's tricky to, you know, reflect we don't know how TSOs would would use those flexible connection agreements. Right. At 1% at a time. Is that 10% of the time. And then bringing it back to your previous question, how do you translate that into at all? So I think those are definitely leading to higher investment premiums because yeah, that uncertainty is just not good. On the other hand, um, some of the other restrictions that you mentioned, they are very much, you know, uh, taking value away from what a battery can deliver, like in Germany, you call proposal to not trade in the final hour. Uh, in UK re trading, maybe put a put a stop to that. Those are taking part of the value that batteries can generate. And so part of the value that the batteries bring to the end consumers, they're taking that away. Yeah. Um, it's not really a good thing. It's a pretty, uh. It's a pretty fundamental mistake, right? From regulators. If you're doing things that are going to result in a net increase in cost to consumers by poorly designed markets. Uh, that's something that is such a weird thing to have happen because it's it's really frustrating for the asset owners. It's frustrating for the optimisers, it's bad for consumers. And you kind of scratch your head and think, well, why is this happening? Well, yeah, I mean, if I, if I tried to put myself in the shoes of a TSO, right. Uh, was it, uh, a transmission system operator. Yeah. So they look after transmission system as the name sounds? Yeah, indeed. So, uh, there was a couple of months ago, start of the year. There was a 100 megawatt battery in, uh, Lithuania or Estonia, that pulled down the grid there because it started, uh, charging, uh, very quickly. So I understand the concerns, uh, that that these grid operators have, it's very difficult to to model how a battery is going to behave. Um, there's also the risk of herding behaviour if you just led batteries all over your grid, respond to a national signal, right? They all start doing the same thing because the price is high, so we should sell. Price is low, we should buy. And sometimes if you have a local constraint that that's bad right. Because then your your grid goes down. It's also it's also sometimes very expensive to make sure all these assets are connected. So I understand it from that point of view. And flexible connection agreements as a backstop are not the worst thing in the world. If that allows more batteries to connect to the system. Yeah, what would be bad if that's the only way in which batteries can participate in in keeping the grid alive? Yeah, I think there's a lot of value that batteries can bring to the grid to help the transmission, to prevent, uh, you know, to, to, to to avoid that, we have to build excess amount of cables. Mhm. I think that example of a sort of a national signal and yet local constraints is one of the ones that I find the most frustrating, which is we sort of got this legacy design of our system. Um, and because of that legacy design of the system, you can't get the best out of the flexible assets that are coming through like a battery storage, which, um, I find very frustrating, but that is a totally different can of worms, and we could spend a long time on it, maybe just to bring it back around to kind of close the circle of this conversation. I'd be really interested to get your view on what developers are asking you. So developers are coming in and saying, I want X for my projects. What what are you seeing coming through? Are you seeing people? Is it sort of um, and this can be commercial. So it could be about profit shares, tolls, floors, or it could be around technical parameters on, on sort of optimising the assets as well. I think the number one question that we tend to get from, from our customers is, uh, is around the products. You know, the people are looking for guarantees. They've seen, um, the volatility of earnings on a battery. If you're if you're on time, it can be really great if you're a little bit slow and maybe not so great. And it goes up and down. So, you know, they're looking for more assurances so that they can get, uh, you know, cheaper, cheaper capital and allow them to do their business without, you know, constantly monitoring every day whether it was a good day or a bad day. Then, uh, there's in Germany in particular, but also in other areas, there's there's a lot of concerns around these interventions coming from from regulators and from, uh, from grid operators and changing, uh, putting uncertainty on how, uh, batteries operate in the future. Yeah. And then I think, you know, you mentioned profit shares, I think there if so, if it is companies that do, for one reason or another want to take an exposure to battery earnings. Um, they're still very much looking for guaranteed performance. How can you be sure that you're going to be the best optimiser in the next ten years? Um, I think that's that's really, really hard to put something like that in a contract. We can tell them that we're going to be the best, obviously, but to put that as a guarantee in a contract, we don't believe that's very workable. I think that just means that if you do that over five, ten years, you're going to be around the table every six months. So, you know, if people want that, I think we we prefer to move towards more frictionless contracts that are less onerous for us to onboard, to optimise. And then we can give a, you know, we can let customers come and go much quicker. Yeah. And then they can find a different optimiser. They believe they can they can do better. Yeah. It's a fascinating part of how how this works. So people do go down the profit share. So they kind of maintain that exposure. They really want to make sure that they're optimised is doing a good job. We spent a lot of time thinking about sort of creating these virtual assets that sort of track, um, the specific conditions like the ramp rate of the site or the flexible connection agreement, whatever it might be, so that we can kind of inform both sides and you hopefully you can have a more nuanced discussion around whether the assets are doing what it's supposed to be doing. Because in some regions, like Germany, that's really quite hard to do. So. Um. Fascinating. Okay, Brecht, I'm going to ask you one final question, which is is there a contrarian view you hold about the energy sector? Uh, I think there's there's a few people that people understand a lot about batteries. Right. But if I, if I had to say something, I would say, I don't think like the markets that we are operating in right now in service markets, the wholesale markets, those are not the markets that batteries are going to be making, where batteries are going to be of most use. I mean, those those markets, they match supply and demand. Assuming there's a there's a copper grid underneath, right, that you can you can take energy from the north of Germany and just send it without friction to the south of Germany. And that's really not the case. Right? That's why we talked about these flexible connection agreements. Um, this is starting to creep into the market and into, uh, it's leading to grid operators to try and slow down batteries, but it should really be about embracing batteries if you think about. I think storage and transmission, they should be best friends. Yeah. I thought to make sort of a a weird, maybe a weird analogy if you think about other distribution systems, like especially about perishable goods, like food. Think about how useful your fridge is, right? Instead of having to go to the supermarket for every meal because you know your meat is going to spoil if you leave it out. You can just go once a week or once every three days. Um, so that saves a lot on trips to the supermarket. And then if you're in the supermarket, think about how useful those fridges are or about the ability to canned food is. So in that sector, you know, a few thousand years ago that was not possible to store food. Right. Think about how much value is being created by the ability to store items, how much cheaper transportation becomes. And I think the analogy holds because if you look at our distribution system, that's incredibly expensive, right? If you look at our primary energy consumption, renewables are probably the cheapest way to generate primary energy. Electrification of heat transport is probably the most efficient form of doing that, but still, it's very expensive to run your car on electricity. And that's because distribution of electricity is very expensive. And the reason why distribution is very expensive is because it's dimensioned on peak usage. Right. There's a factor of 2 or 3 between what what what the grid transports on average, and what it needs to do on a peak level. So if you put batteries all over it, if you add storage to your system, if everybody has a residential battery, so when they turn on their induction stove, it doesn't cause a spike on the grid and they can soak up their excess solar. And when you know the every neighbourhood has a bunch of batteries to make sure they're plugged in, their EV doesn't overload, and every EV charging station has a has some batteries to to manage those peaks. Then you know that the cost of that grid infrastructure goes down and you know you can you can narrow mean and peak off the grid. This is this is to me, it's so exciting because you have if you're a grid owner, the thing you want to do is build more grid to be to be built very simply. I mean, some grid owners I'm sure would would like to add a comment there, but but generally speaking, they like to build more grid. Um, and so when you start adding batteries to a system, in theory you have to build less grid. And so you kind of get these good operators that go, oh, well, battery's coming along means I get to build less of what I want to build. So they they appear to be the enemy to me. But what you're saying is exactly right, which is that if you bring batteries into the system, you could run it more efficiently. You can get better utilisation. Um, and so how would we get these sort of grid operators to see batteries as being best friends as your term? Uh, how do we get that to happen? I don't know the answer to that, but I, um. I believe in things like locational markets to to to be part of the answer. Um, but there's, there's probably a lot of ways to to crack that nut. Yeah. Look, I think it starts with having having the conversation. Right. Um, and how people at grid operates. We've we've worked very well with grid operators in the past. There's a lot of people there who are have the same goals and aspirations as us to, to get through decarbonised grid. They're not all out there to, to make a maximum return. Um, it's part of it, of course. But, uh, I think, you know, if we, if we work together, it should be feasible. Um, so that's why I put it out here. Brilliant, Brecht, thank you very much for coming on Transmission. It's been a wonderful look into how you get the most out of these batteries. And I'm sure from asset owners to to other traders to just the interested parties will have, will have learned a lot. So thank you very much. My pleasure. It was great to be here.