Modo Selects - Shining a light on Solar with Ross Grier (Managing Director @ Next Energy Capital)

So when we say a gigawatt of solar, what does that gigawatt mean?

The renewables market--

again, going back to where we started, which is how much this market's matured and become an economic decision--

you now see a really hot secondary market for portfolios. So there are big strategics that are really hungry for taking a big chunk of long-term asset ownership.

So mid to northern Europe is the hot spot for solar?

ROSS GRIER: Yeah, that's right, yeah. Yeah--

here, Germany, places like that.

That's pretty cool.

It's, technically, not necessarily that challenging to get that metering set up right. But from a regulatory perspective, super challenging.

QUENTIN SCRIMSHIRE: Nightmare.

Hey, everybody. [? Yssi, ?]

podcast producer for Modo here. For today's Modo Selects, we are revisiting an episode from last year where Q sits down with Ross Grier from NextEnergy Capital.

During the course of the conversation, they cover things like solar technology, solar markets, and, of course, where NextEnergy Capital fits into all of this. If you're enjoying the podcast, please hit Like, Subscribe, and all of those good buttons. It really means the world to us. Let's jump in.

[MUSIC PLAYING]

Hey, Ross.

Thanks for coming on the podcast.

Thanks a lot.

Firstly, anyone who's watching, please, we are in a very slouchy, soft room.

Yeah, very couchy.

And yeah, by the end of it, we're going to be pretty much horizontal.

I feel a bit like Jacob Rees-Mogg in that meme who got told to sit up straight or whatever.

Ross, you're here from NextEnergy Capital, and we'd like to have you on.

Who are you, Ross? What is NextEnergy Capital, and why are we talking? And what on earth are you guys doing in the battery world?

Yeah, great. Nice to be here. Thank you. So I'm Ross Grier. I'm managing director of NextEnergy Capital in the UK. So I look after all of the investment activities and the operations of our portfolio that we've built over the last decade in the space.

A little bit about me to start, I guess. So I started off my career in ExxonMobil as an analyst. I met a guy called Rex Tillerson, who then went on to be Trump's energy advisor. So you can imagine the character. And he inspired me, strangely, into the renewable energy space. And from that point on, I was always looking to get my career into that space.

You said, I don't want to be like him. I want to do renewables.

Or he was talking about renewables and--

So he did this kind of--

he did this presentation to a select few of us that said, this is energy production at the moment, and this is how oil, coal, gas currently are being refined. And this is what energy demand looks like over the next 20, 30 years. And this is how we think that same production is going to change. And then there was this little sliver of renewables.

And I thought, there's an opportunity there, an economic opportunity, in the future but also a better way than doing what we currently do right now. So it inspired me on a couple of different fronts, really.

It's pretty nuts, right? Because Exxon--

we're already digressing, here, right--

but Exxon have gone pretty hard at the oil and gas thing when BP and Shell are diverting, and Total are deciding, well, we want to be a renewables company in the future. Exxon said, no.

Yeah, yeah. We do what we do. We're old school.

QUENTIN SCRIMSHIRE: We do what we do--

old school. I guess you've got to respect a bit of grit there. But I mean, it's not the side I want to be on.

Yeah, I agree. That's exactly the decision I made, as well, was just like, this is not the ship I want to continue to sail on. I want to go the other way. And there's a lot to be really impressed about that organization.

The way it refines and transports and delivers with minimal spillage and all the rest of it is impressive. But it also isn't the right side of the legacy that I want to leave behind me. So it's [? an instant ?]

migration.

What are you? You're an economics person, a mechanical engineer?

No.

I'm a problem solver by trade. So I've done transformation and change consulting and various other managerial consulting-type roles in the past. And really, I got into renewables to help it scale. So it was to find what the barriers were, help mitigate them, and then commercialize it.

So I got back in 20--

what was it--

2009, 2008, into the solar space.

And really, back then, it was a tree-hugging decision. So it was really early doors in the things like the feed-in tariff in solar. So we were fighting for a conversation around PV in every avenue, so with the financiers, with the politicians, and so on.

And I've seen that mature over the last decade to being a real core part of the energy mix. And that's been super exciting. It's been really challenging, as well. Solar, as an industry, has a habit of making it look relatively easy. It definitely isn't.

I'm going to ask you about this later, yeah. Let's just bank that question.

Yeah, yeah. Happy to come back to that. So it's been really nice to see the latest conversation around energy security, where that conversation has really shifted now to say, well, actually, we get that solar is an important part of the mix.

And a mix is definitely important. I'm not just backing one technology class.

And it can be an increasing part of that energy mix. And we see the deliverability of it and all those good things that we've been saying for the last decade. And it's been really satisfying to realize that.

So over that 10 years since I joined NextEnergy--

it was 10 years next year--

we listed, I [? think-- ?]

we're the next NextEnergy Solar Fund, which is our big listed long-term holder of solar assets in the UK and beyond.

And we've built around a gigawatt of assets over the period of time. So we're quite a significant generator.

QUENTIN SCRIMSHIRE: A gigawatt of solar in 10 years?

Yeah.

That's a lot. That's a lot to manage.

ROSS GRIER: Given the baseline is 15 gigawatts being delivered in the UK today, it's not a bad sum.

And so is that one 1-gigawatt project, or is that 100 10-megawatt proj--

It's a hundred of various different shapes and sizes. So we have everything in there, actually, from domestic rooftops right the way up to 50-megawatt utility scale and absolutely everything in between. But the majority is kind of 5, 10 megawatts. The sizes step down in line with the feed-in tariff regime.

And let's come back to how you fit in. So what do you do at Next--

so you call it NextEnergy--

NextEnergy Capital or NextEnergy--

which one should I go with? So NextEnergy Group is the overall vehicle. We have three pillars to the group.

So NextEnergy Capital is an investment manager. So we look after the money on behalf of our institutional investors.

And then we really optimize those returns over time. So we're really sourcing all of the M&A activity. We're looking after the operations of the fund. And we're maintaining the compliance and all of that good stuff.

The second pillar of the vehicle is WiseEnergy. That's our asset management sister company. It's a key component of what you get with NextEnergy. So we've got a bunch of people spread across the world who look after solar assets only.

And they do that in every stage of an asset's life for a whole variety of different sponsors. So we know how these things age over time, which is really important in terms of how, as an investment manager, we then extract maximum value, maximum availability from the assets.

And we're now diverting that into other technologies, as well. So we've built this core skill set across those two platforms as solar. And then we're divesting that into battery and various other interesting spaces, as well.

QUENTIN SCRIMSHIRE: Could I ask you a quick question there? Sorry.

I'm going to ask you a question like I'm a five-year-old because I want to understand it properly. And this is the first time we've had someone on the podcast--

we're going to talk about batteries, of course, but we're also going to talk a lot about solar today--

so when we say a gigawatt of solar, what does that gigawatt mean?

So from my perspective, I view us as an asset owner. So really, it's a physical gigawatt DC of generating capacity. And all of that is either subsidized or under long-term agreements for the sale of power.

Is that, like, peak demand across the day? So the sunniest bit of the day, you're going to generate a gigawatt?

ROSS GRIER: Correct.

Or is it that you've got a gigawatt of connections with--

So it's a gigawatt of peak. So it's basically sunniest day of the year, maximum generation, what, theoretically, can you generate. It's not quite as straightforward as that because you experience some capping in the summer. But think of it as in if you add all of the capacity of all of the solar modules that are in the ground together, you get to that DC output.

So the reason--

I'm not trying to cut you out, by the way.

ROSS GRIER: No, no, it's fine. I'm just kind of trying to work out the best way to build a story. But you basically overpower solar. So you have a bigger amount of DC than you do an AC grid connection.

DC being Direct Current before the inverter--

ROSS GRIER: Correct, yeah.

And AC being Alternating Current, which is what the grid is at.

And the reason for doing that is, obviously, solar super efficient in the summer. It's, obviously, less efficient when irradiance is lower in the winter. So you're trying to take that traditional bell curve that you get with solar and lift the tails.

Because, obviously, pricing in the winter periods is significantly better than pricing in summer periods and so on. So economically, it makes a whole bunch of sense to work the system a little bit harder and to overpower.

What it does mean is your traditional bell curve is probably a bit flatter at the top, so you end up capping performance of the asset. So you're not putting out that full DC capacity in summer. You're actually having to limit your inverters a little bit to your grid connection size. But it makes it a more efficient system, overall.

Right. That's an interesting thing you said there. So the tail, so the bell curve--

obviously, at night, there's no solar.

Hold on. At night--

this is going to be a stupid question--

at night, is there nothing generated from a solar panel?

ROSS GRIER: Nothing generated.

There's 0 volts.

ROSS GRIER: Right now, 0.

I just wondered whether you get some--

ROSS GRIER: There is some tech that talks about harvesting moonlight.

Moonlight, yeah. That's what I was thinking of.

We're a bit early for that. It's up there alongside space solar, as well, which is a new concept on the horizon.

QUENTIN SCRIMSHIRE: Space solar--

yes. Those are two words that should go together more often. So you have to--

you angle the solar panels.

This is how little I understand this. I'm going to come out with lots of--

ROSS GRIER: That's cool.

--basic words that are wrong here. But solar panels, right? Is that still the word you use to describe them?

ROSS GRIER: Yeah, yeah--

good.

You angle them so you get the optimum irradiance, if you like. Is there an argument to say you angle them more towards the evening peak because your price is more attractive later on, and you actually, you're better off angling them towards--

I'm going to take a guess here--

the west or the east. I can't remember which one it is.

So the methodology is evolving. So technology is changing over time, as you would imagine. Actually, latest technology is tracker-led. So actually, it's self-optimizing relative to what's going on in the environment.

QUENTIN SCRIMSHIRE: So it moves?

Yeah.

So you could get single- and dual-axis tracker. So single-axis is obviously just doing the one. Dual is doing whatever it can to point directly at the sun. The traditional fixed methodologies is about utilizing the land parcel as efficiently as possible, as well.

So you've obviously got topography of the land to deal with. You've got shading issues to deal with. What you want is to minimize inter-row shading. So between one set of modules and the rows behind it, you want to minimize that at your lowest period of generation.

Because then, actually, you get to higher periods of generation, sun is obviously higher, you get less impact on that inter-row. So you're balancing a whole load of stuff in there to come up with the maximum yield output that you can get from the area you're taking.

Sometimes when I drive past a solar farm, solar panel--

solar park? people use the word park a lot now.

QUENTIN SCRIMSHIRE: Park and farm, yeah.

[INAUDIBLE]

power parks?

QUENTIN SCRIMSHIRE: Yeah, they do, yeah.

Why is park now in vogue? Anyway, when I drive past one, sometimes I do think that the distance between the banks, if you like, or the solar panels, is wider than makes sense for shadowing. But there must be more going on there, [? whether ?]

it's access and all that.

Yeah, there's a whole load of stuff that feeds into that, different dynamics. They've become more power-dense as people have changed designs, as well. So if you have--

again, going into a layer of detail that might be too much--

Let's do it.

--the modules are wired in a way that means that if you shade the bottom of a module, you effectively take off a section of the module. So if you think about the squares that run down a PV module that you've seen in your mind, they are wired like this.

So if you shade the bottom, you get all of those wires covered. If you then mount it in a portrait fashion and you just take the bottom, you're actually just taking that bottom component of the module off. The rest is still able to generate at higher output.

So you're able to then bring the row spacing together. Because then, if you're shading the bottom end of that next row, it doesn't matter so much.

So there is a right way up for solar panels.

QUENTIN SCRIMSHIRE: Well, there is, yes. And so theoretically, that has evolved into the industry over the last few years. So early doors, there were a lot of really widely spaced portrait. Then that changed to multiple landscape.

And now what we're seeing, again, is tracker. And you see a whole bunch of different solutions on tracker.

Right. Every day's a school day.

It's all good stuff.

Sorry. Back to NextEnergy. So you guys are, like, 200, 300 people-ish all around the world. What countries are you in?

How old is the company? How much money does it make or look after--

all of that stuff? Give us the Top Trumps card.

And actually, I'll give you the third pillar that I started talking about earlier.

We digressed. No, that's fine. So there's about 250 people in the group at the moment. They're spread across all jurisdictions. So we're basically everywhere over OECD these days. I look after just the UK business at the moment.

OECD being?

So every Western civilized marketplace, from a financing perspective, is OECD. So we have assets now across Portugal, Spain, Chile, North America, and beyond. And the team that run that international fund are continuously pushing the boundaries of how much we've got there.

We've got just a little bit under $3 billion under management at the moment.

We were set up back in 2007 by Mike, who's our CEO and founder.

And then we started with just partner capital. And then we've raised significant multiple funds over that time period, as well.

And we're a combination of listed funds in NextEnergy Solar Fund and then private funds, as well. So the private funds are same sorts of investors so, generally speaking, institutional- or pension fund-type investors. But they have different mandates.

So the private ones tend to be a bit shorter, so they're looking at, kind of, a 10-year horizon. So NextEnergy Solar Fund is particularly interesting because it's an evergreen vehicle. So it's never going to divest these assets. It's going to own and operate them for 20, 30, 40, 50 years.

Can I jump into some basics here? Because I'm sure it's not clear to me, I'm sure it's not clear to a lot of listeners. So we're talking about funds here.

So this is NextEnergy Capital looking after other people's money and managing it and doing it and making a good return from it, right? And there's two types of funds, a private and a public. A public one, anyone can go and buy those shares on the stock exchange, right? And private ones, not everyone can.

It's [INAUDIBLE].

Your pension fund's investing.

QUENTIN SCRIMSHIRE: Your pension funds.

But you talked a little bit about duration there. So in a 10-year private fund, you raise some money. You get the private money. You buy the assets. And what, in 10 years, do you just sell them all? You sell the whole fund?

You see them as a portfolio, or bring the next wave of capital in--

depends on the strategy. There's a whole host of different ways of doing it. But there's, obviously, what they call in the industry a yield compression in the middle.

So you're basically building a portfolio of assets, optimizing them as well as you can, building optionality around it, potentially bringing debt into that equation, as well, to increase your returns and so on. And then you're looking to sell that portfolio to the next owner.

And what's interesting in the renewables market--

again, going back to where we started, which is how much this market's matured and become an economic decision--

you now see a really hot secondary market for portfolios. So there are big strategics that are really hungry for taking a big chunk of long-term asset ownership.

Such as like BP and Shell have set these massive targets. They want to own so much renewables. And there's probably a shortage of it out there. So to buy it all in one--

in these packages is probably a sensible--

Exactly, yeah. And if you think about, for those guys, doing a 5 million pound transaction is really painful.

It's our bread and butter to do something 5 to 50 million. We can then aggregate that up to a significant portfolio--

500 million worth. That's a much easier ticket for them to digest.

But then a public fund, a public fund's a bit like a public company, right?

You have to do the reporting. You have to be careful what you say publicly if it's not--

you can't have non-public information that's not yet--

can't remember the CFA stuff now. it's a long time ago.

And the public side of the business, how much that? Is it half? Is it a quarter?

So it's about half in terms of assets under management. It's a bit less than--

a bit less than that, but call it 50/50 for the sake of arguments.

And interestingly, for us, it's a real mix of those big institutional and, also, retail investors. So we do have you and I and various other people individually invested through their share [? ICES ?]

into that next NextEnergy Solar Fund.

So it makes it particularly interesting because I have conversations with super sophisticated institutional investors right down to someone who happens to live near to one of our solar farms and bought shares off the back of van and everything in between. It makes it really interesting.

And so bit, the public bit, is a bit like--

and forgive me here for comparing you because you don't like to be compared--

but a bit like Gresham House or Gore Street--

ROSS GRIER: Yeah, very similar.

--or Harmony because it's a public fund, and anyone can go and buy shares. All right.

And so NextEnergy Capital is growing very quickly, so 250 people. Isn't that like you said?

ROSS GRIER: Yeah.

And you're in lots of different countries in the world. What's the vision for the company? Where are you guys headed? What do you believe?

So it's grown--

it's grown massively. So I started when there were five of us in a cafe in London dreaming about this thing called NextEnergy Solar Fund. And it's grown ridiculously over that period. It's been lovely to be part of that journey.

Do you know everyone's name?

Until COVID, definitely. Now it's a bit shaky. We've had a whole bunch of new starters recently. And it's weird being back in the office because I now see people walking past I don't know. But we'll change that over the next six months. We're a good, sort of, family business like that.

So where are we going? So NextEnergy has a mission at the core of it. It's why it's a cool place to work. So the founders of the business really truly believe in creating a more sustainable future through the nexus of renewable energy.

So our whole mission was to get together and commercialize this cool idea of solar PV. Because we could see the potential, but we could see that the market couldn't. And we've been trying to build those bridges since. And that's really what we do as a business.

So we've been one of the first in the UK to migrate from subsidies, so those feed-in tariffs and the ROCs that we spoke about earlier, to what's called post-subsidy solar, so building solar without any form of support, so no contracts for difference, no government subsidies, nothing in the background there.

You're building these right now? You've built them?

ROSS GRIER: We have already built a bunch of these.

We're building more. We've got a massive pipeline of stuff in development at the moment, which we will bring to the market over the next few years.

Can I just clarify there? So you're saying that NextEnergy Capital, and others I mentioned, are now building solar that has got no government subsidy, no guaranteed revenues? You can raise the money, and people are willing to spend the money on a solar asset, just assuming that the sun shines every day, and you're going to take the prices, and the prices are good enough?

Yeah, correct. So the reliability of solar has proven itself, as we said already. So the reason solar has established itself as part of the energy mix is because it's super predictable.

There's very few moving parts in it. It's pretty solid-state technology. It's not fire and forget. You have to look after it. You have to love it. And you have to really know what you're doing to optimize it over time.

But it's really predictable. And therefore, investors can get really comfortable with that. You obviously need to fight the argument of, is there enough sunlight in the UK? But actually, you do that via a spreadsheet that says, well, you know, here's what it costs to build it. This is what it outputs. Economics tells you the answer to that.

And the UK is a great place to generate sun because it's not too hot--

apart from the last couple of days--

it's not generally too hot. And that doesn't give you any performance issues.

I'm going to bank that one, too. I thought really hot, sunny days would be good.

Yeah, no. It's ironic. So solar actually gets less efficient the hotter it gets. So what you want--

QUENTIN SCRIMSHIRE: What?

--is a UK, Northern German territory. Yeah, it's crazy, isn't it? And so the modules themselves get less efficient the hotter the surface temperature gets. But also, the inverters, obviously, are running harder, as they have to cool themselves.

And you get more availability issues from that perspective, as well--

and then transformers and the like.

So the whole Sahara--

ROSS GRIER: Heat is not great.

The whole Saharan desert thing maybe isn't as good as it sounds.

Like everything, if you engineer it for the purpose, it's workable, and there's no space limitations and all the rest of it, so you can cope with the inefficiency. But you have major dust issues--

dust getting into absolutely everything and so on and significant heat stress. So it's not without challenges.

I'm a massive fan of putting solar wherever we can have it. So my future is you see solar on everything, from your car to every single roof of a building. And every window is generating energy at the point of need, rather than distributing it across the country and so on. That's my dream vision, that if we could eventually achieve that within my lifetime, I'd be super proud.

So mid to northern Europe is the hot spot for solar?

ROSS GRIER: Yeah, it's great, yeah--

here, Germany, places like that are fantastic.

We're good for wind, Ireland, with a great continental shelf, [? apart ?]

from the floating wind people who we've had on the podcast. And they think we're good for that, too. I bet we are.

ROSS GRIER: [? Fair play ?]

[INAUDIBLE]..

Great for solar.

ROSS GRIER: Not so good at delivering nuclear, but we [? just don't seem ?]

to like it.

Not so good. There's a bit of gas in the ground. It's not so bad here.

It's great, yeah. It's a good place to be an asset owner, as well. So the underlying political environment, economic environment, in the UK makes it a good place to invest. It's very, very rare that the government does significant--

touch wood--

retrospective change that harms onward investment.

So things like the windfall taxes that have been talked about recently, government has done the right juggling act of saying, well, actually, if I do something here, it will impact the future attractiveness for investors coming into this significant new wave of growth that we're trying to motivate to achieve our net zero target. So there's always a complex beast there.

But the UK government's really good at not undermining the infrastructure investment. So it's a good place to deploy capital, as well as being a good place to generate energy, as well.

It's kind of funny, though. I'm gonna go off topic here now. But until recently, I think that was true. But now we've got a price cap.

So politicians are weighing in on what the appropriate price is for commodity, which--

someone will tell me I'm wrong here--

but I don't think we do that elsewhere. A political person deciding how much someone should pay for things and then the public purse picking up the rest, which is--

Fascinating.

QUENTIN SCRIMSHIRE: --fascinating. I don't know. You can build such a strong argument [INAUDIBLE]..

Yeah, you can.

It's just interesting that it's happened. And then the windfall tax, and there was talk about the windfall tax going on renewables, which was mad.

I'm glad that hasn't happened--

touch wood--

so yeah, until recently. But we're starting to move in that general direction. But I guess maybe that's a conversation for another day.

It's all a nod towards market reform, isn't it, which we all know is coming in some way, shape, or form? I think, contrary to the environment being good in terms of not undermining existing investment, I think we're pretty bad at making decent change along things like what's being talked about in the energy market reform space, where we're thinking about, how is the ecosystem going to evolve over the next 20, 30 years, and how do we get a pricing model that works for everybody and makes energy more efficient and inspires generators or investors to still invest in an asset in a particular location because we've got issues?

That's a very, very complex--

It's such a mess, isn't it?

ROSS GRIER: --complex beast to try and unpick. And we've obviously got the legacy of everything that's done to date. So I don't underestimate the challenges we've got to overcome. But then, again, going back to why I love working in this industry, I came in here to solve challenges.

That sort of challenge is as exciting as it gets, right?

I think we're in the if you want to make an omelet, you've got to break a few eggs, or whatever the phrase is. I think we're in the eggs everywhere phase at the moment.

ROSS GRIER: It feels that way.

We've got people running around, shouting nodal pricing.

ROSS GRIER: [LAUGHS]

yes.

And we're all paying the marginal price for gas--

all these random things all going into the frying pan have gone really hard at this, at whatever this is. And now we're going to get the omelet. That's my thoughts.

Well, I like to think of it, as well, that evolution of that ecosystem, I find super interesting. So just add EV, or Electric Vehicles, into the mix, so 30 million cars in the UK. There's 30 million batteries going to be deployed in various different locations that could do some really cool demand-side response in the future.

That is a version of how we currently do things that I can barely contemplate how that then feeds into the mix. But what it will definitely be is exciting. And there'll be loads of opportunity for creating exciting businesses and creating interesting returns out of it, as well.

So you guys looking at--

we're going well off topic, buy why not? You've got an EV, right?

ROSS GRIER: Yes.

Before this, you got a call from your wife about an EV charger.

ROSS GRIER: Yeah.

You've got an EV. Is the company looking at EV chargers? And is that an opportunity you guys are interested in?

So not so much a sector for us on the EV side.

Our model is more about scale. So really, our focus is deploying the next gigawatt of PV in the UK space. And then it's also to diversify that, as well.

So we are really interested in the battery space and how that works really well with an existing, complementary generating station and also how that works on a standalone basis and how we weave that into a wider portfolio and how we think about evolving that portfolio out into the future.

So I always talk in two mindsets about storage. I really like the current business case around short-duration storage. But I really welcome the opportunity that longer-duration storage feeds into the mix of how we think about generating power.

When you say short, do you mean one hour?

Yeah, one- to four-hour, I think, is, kind of, where my mind, where we are for short duration. And the longer stuff allows you to do significantly more power shifting to times when you actually need the power.

So I'm gonna ask you a couple more questions about NextEnergy Capital, and then we're going to talk solar and batteries. So NextEnergy Capital, you guys own these assets. I need, like, a tick box thing here.

What do you do?

Do you buy land? Do you get grid connections? Do you develop it? Do you get the planning?

Do you build it? Do you negotiate the contracts? Do you operate it? Do you decommission it?

Which bits do you do?

ROSS GRIER: All of it.

All of it.

All of that, basically, apart from the buy the land bit. So we generally lease land from farmers. So I like to think of PV as an important part of how farmers are diversifying their business, as well. So it's a reliable income stream in a very unreliable world, especially as we go through Brexit and the things we definitely shouldn't digress on to.

It creates a load of stability in their operating environment that will allow them to do, really, more creative stuff to save the planet. And they can then use the income from that to start thinking about how they might farm more efficiently, from a rewilding perspective, and loads of really cool, beneficial, nature-based solutions stuff that's going to be vital to our survival in the future, as well. So I like to think that's the starting point for me.

But yeah, our third pillar of a business that I never got on to talk about is called Starlight, which is a development vehicle. So we literally do everything from concept right the way through the construction process into ownership. Then we do long-term ownership. And then we think about repowering and decommissioning and all those things out into the future.

So I never really talk too much about decommissioning because my own view is we're acutely aware of what the constraints are in terms of achieving incremental growth in things like renewables out into the future. Grid connections is going to be a key component of that, as we know. So once something is a solar farm, I'm pretty sure it's always going to be a solar farm, at least for as long as I'm able to look at it.

It will look different. So it will definitely have a retrofitted storage and/or hydrogen solution on it. It will be more power-dense as technology improves. All this stuff will evolve.

But once that grid connection's there, it's hugely valuable from an optionality perspective. Because then, over the asset's life, you can really start to be creative about what you do with that particular parcel of land.

OK. And so I'm going to say something very triggering now, on purpose. And please don't leave the room.

ROSS GRIER: I love this [? one. ?]

[LAUGHS]

So solar, according to the cr��me de la cr��me of complexity in the power world, is probably coal power stations and then maybe gas CCGTs.

And then you get down to other stuff, so peaking plant.

It's quite complicated, gas connections to deal with. I'm going to get crucified for this.

And then the battery bit's quite complicated.

But people see it as solar but a bit more complicated. But you've got bidirectional inverters. You've got more complex grid connections, bigger NVA swings.

And then the bottom of the pile is solar, right? Because it's just trays in a field.

ROSS GRIER: Yeah, it's easy.

You get some sheep. And then you rake it in, and everyone's laughing. So isn't solar easy?

So I think the industry makes it look easier than it is. And there's a whole--

interestingly, this is one of the reasons why we're migrating into battery storage space, as well. Because actually, a whole host of learning in that decade includes everything from how you construct, realize, procure components and then how you long-term asset own these things.

People have the opinion that you stick it in the ground, you leave it alone, and job done. It categorically isn't like that. They need to be loved. They need to be looked after.

They need to be optimized. They live and breathe like everything--

full of computers.

We all know what happens every time you go back in the office and plug your laptop in. It's carnage for at least half an hour, isn't it, while you restart and do updates and so on?

So these things definitely need looked after. And as they degrade, you need to be on top of how performance is changing to allow you to think about how you're going to repower it in the future.

So we take a very different stance than a lot of our peers in the sector by being really active in the way that we manage our assets. So we're looking at every single string, so every single row of panels, in every single one of our assets all the time.

And we have auto-triggered alarms. And we're looking at how data is changing over time to predict what's going to happen in those assets in the future to allow us to proactively change things and achieve availability in the future.

So can you put a solar farm in and forget it? Yeah, you probably can, and it'll do well for a few years. But its performance will degrade really rapidly. And if you go and look at an asset that is unloved, you can tell, just by looking at the performance figures, that it is unloved.

So if you're trying to extract maximum return for your investors over time and de-risk it for investors over time, you really need to be super active with it, and you need to understand that tech. And it's complicated. So I think that does serve to counter that argument a little bit.

QUENTIN SCRIMSHIRE: I don't really believe that argument. Obviously, these things are bloody complicated. They're really difficult to build.

Because there's loads of stakeholders to keep happy, and you've got to get it right. And it's a bit more complicated than leaving it, obviously.

I just thought I'd start down that route.

Because I had a feeling it would be a bit more complicated You're contracting for this stuff. How do you even--

10 years ago, how do you contract to build a solar farm when no one's done it before?

Yeah. We all got in a room and wrote the contract.

That's why I say it's really interesting for us to migrate into the battery space. Because, actually, I see a lot of mistakes that were made in those early days of solar being repeated in the battery space, so all of those learnings about what happens when you find a grid connection and you're able to secure planning for something. And how do you then turn that into a physical asset?

And how do you do that in the middle of winter? Because you always end up constructing in the middle of winter, despite your best intentions. And you have a bunch of contractors on site who've actually, because of demand, oversold their capacity four times and are, therefore, unable to give you the resource in the timeline that you were expecting.

How have you made sure that what you're getting delivered to site is technically and from a quality perspective exactly what you wanted? How do you make sure your warranties are right? We've learned all of this the hard way in PV.

And I do see the battery storage space not having learned from those lessons. So actually, we are repeating a whole bunch of that stuff in delivery in the battery storage space at the moment.

So from our perspective, we think we've got a pretty unique opportunity to really bring those learnings forward. And we've got the development and the construction managers in our business that help us to take [? our way ?]

through that transitional period of, how do you actually realize it and it be the right asset for you to then own over the long term?

Because a lot of the components are the same, or similar, right?

So you've got a grid connection. You've got transformers. You've got copper. You've got cabling.

You've got [? civils. ?]

You've got controls and instrumentation, metering. That's all kind of the same.

ROSS GRIER: Yeah.

And then you've got inverters, which are a little bit different. And the controls are a little bit different, but still the same stuff, right? You're still cooling a big [INAUDIBLE]

circuit that needs a lot

of-- you get a lot of heat out of it.

And then the bit on the end is different. So you've either got battery cells or solar. But on the DC side, you've still got to run cables. So there's a lot that's similar.

You guys are building assets right now, aren't you? You're either building one or you're building a few?

ROSS GRIER: Yeah, we're building a few.

Where are you in the battery world right now?

So we're also building our first utility-scale standalone battery. So we've got 50 megawatts in construction up in Fife in Scotland. And we're doing that with our partner, [? EO ?]

Power. And we selected a JV partner to step into the battery space because we're super experienced in the solar space.

We get batteries. We've actually had a couple of utility-scale batteries in the portfolio since 2017. Predominantly be doing frequency response stuff. But we bought them in to learn the technology, learn a lot of those challenges around how the battery management systems work, how do we extract data, how does that integrate with the market, how do the contractual structure work, and so on. So they've been a very useful test bed for us.

This is our first really strategic step towards that goal of bringing significantly more volume of storage into the portfolio over the next few years. And that's one of two work streams we're doing in the business. The other one is we're actually progressing with retrofitting a storage solution to one of our existing solar farms.

So we've procured an import contract where we had export to the grid. And we've gone through the development cycle. And we're just going through that final technical specification phase to realize that. And that's first of a kind from our perspective, and industry-leading, because we're interfacing that with a subsidized ROC asset on a behind-the-meter basis.

So you've got to think about--

What does that mean?

So you've got to think about how you are getting your power out of your solar, putting it into your battery, and then getting paid a ROC on it, or getting paid a subsidy on it, as it's moving out into the grid. And you've got to make sure you're not importing into the battery and pushing it back through the meter in order to game--

to game the incentive, basically. So it's technically not necessarily that challenging to get that metering set up right. But from a regulatory perspective, super challenging.

Nightmare. So just to recap on this, what we're saying is you've got a solar farm that's got a renewable certificate, a ROC.

So that's a subsidy that gets paid pence per kilowatt hour, [? pounds ?]

per megawatt hour--

or so pence per kilowatt hour, pounds per megawatt hour, whatever it is. It gets paid for every bit of electricity, or power, that comes out of that solar panel to the grid. And do you get metered at the grid connection on that?

Yeah.

QUENTIN SCRIMSHIRE: And so this is a problem that loads of solar is going to have, where you've got a feed-in tariff or a ROC--

I don't know how it works, the feed-in tariff, but we'll come to that in a second--

a ROC where you get paid--

you get subsidized for that energy.

And it makes sense for everybody in the world, for the climate, for everything, if you to put a battery on that site. And so you want to do that. And this makes another headache, which is that you can't--

remind me how this works. We probably need a diagram.

So what you want to worry about is not importing into your battery, so you're not buying energy from the grid and then pushing it back out through your ROC meter. So you don't want to be getting incentivized for something that isn't green generation, which is entirely right. It's exactly the way it should be. So it does create some complexity on the metering side.

[INAUDIBLE]

off.

ROSS GRIER: But it's entirely--

it's entirely [? wrong. ?]

So you end up with a complicated metering setup in there, which allows you to get to the net right position.

But it's entirely right. Because going back to what we said earlier, once it's a solar farm, it should always be a solar farm. And what we should be looking to do is make it as power-dense as possible and as intelligent a generating station as it can be.

So we're seeing some interesting stuff in the Italian market at the moment where the government's actually promoting you repowering your assets. So they're taking those traditional fixed-tilt PV modules we've spoken about, so traditional build, and they are allowing you, under the subsidy regime, to swap that for tracker.

And the whole logic there--

you think, well, that's insane. Because you're going to generate a load more energy with newer technology for an old subsidy. But actually, what they're trying to do is maintain that delineation between what's a renewable power-generating facility and what's farmland to ensure that you're not inefficiently building additional stations when you can actually use it

We need to do a lot more of this, right? Because people think--

if you think about the site and you don't include all of the additional transmission and distribution infrastructure that you'd need if you weren't using that connection to its full capacity, you can take the view that this is double dipping or whatever and blah, blah, blah, but it's not. Because for every penny that you get out of that grid connection, you're not putting more of the headlines in or more--

ROSS GRIER: [? Pretty ?]

much, yeah.

We really need to think on it on a whole system level on that.

And it gets really interesting. Because the future is probably having a battery and some form of electrolyzer on there to produce green hydrogen. And that becomes a really complicated mind melter of how do you run all of that

[? contrasting ?]

structure?

QUENTIN SCRIMSHIRE: I haven't made my mind up on hydrogen yet.

And how do you stop curtailing everything? No, I think it's part of the mix.

I don't get it.

ROSS GRIER: Big fleet. Big fleet.

I keep on reading. Every month, I consume more and more stuff on this. And I just haven't figured it out yet.

But there's lots of smart people out there who have, and I trust them. But I have not figured it out it.

I think it's inevitable that it's an important part of the mix. So aviation, shipping, lorries, it doesn't make sense to do battery in that environment, does it, particularly, especially large-scale anyway. Small stuff, it does.

And I think green hydrogen has got an important role to play in there in future. I don't believe the let's feed it. Let's replace our gas boilers with hydrogen-fed boilers. I don't believe the infrastructure can cope with that. I think that's a bit of a myth.

But it's another reason why, actually, it's [? called ?]

[? being ?]

a generator. Because actually, that changes energy demand in the future, which is kind of cool.

So I do think it does eventually make its way into the system. But I'm in the same sort of boat, which is it's coming.

I trust it does. I couldn't explain--

I couldn't do the Richard Feynman, talk to me like I'm a five-year-old thing, and explain with maths how it all works. But I'm sure it will all figure itself out. I'm going to carry on doing the battery thing.

Be exciting to find out, right? [LAUGHS]

QUENTIN SCRIMSHIRE: So we've talked about solar a bit. We talked about batteries a bit. So when you put them together, how are you guys making the business case work? So a few questions are, do you DC couple them?

Do you AC couple them?

Is one de-risking the other or the other way around? What's the thinking behind putting them together?

So again, it's evolving thinking.

So eventually, on new build, especially, DC coupled is a really logical way to go. That market isn't quite there yet, in reality. So there's a lot of talk about it. There's been lots of talk about it for the last couple of years.

It's not really being realized effectively at the moment, effectively meaning there are not sufficient enough realized cases to confirm that it's really bankable and really sustainable from an infrastructure investor perspective. But it will definitely come because there's a whole bunch of logic in there.

So at the moment, it's all AC-connected technology. And in the main, what we're seeking to do is sweat the grid connection as hard as possible in the way that you're saying. [? While ?]

that expensive infrastructure is there at the moment, in simple terms, we're generating.

We're using that connection when the solar is generating. We're obviously not using it for the rest of the time. Why would we not use it as much as we can?

Now, what the co-locate does is potentially curtail your battery business case. So what we won't do--

so let me take another step back from there. So traditional thinking in a subsidized asset is the best thing you can do is generate a megawatt hour of energy that gets a subsidy and that you can sell the power.

That's the best thing you can do, whether you've got a battery or not. So include a battery in there, that principle is still true. There's some nuance in there, but let's say that's right.

So your battery won't ever curtail your solar.

So you're not going to be switching your solar off in order to export with your battery. You're always going to take this as a better optionality for you.

So it does reduce your flexibility slightly within your battery relative to a standalone solution. But you don't have the same infrastructure setup costs as you do for creating a new standalone battery. So the two work in tandem relatively well.

Again, I get really excited by this concept of short and longer duration at the moment. So short makes a whole bunch of sense at the moment in terms of our business case. We see it as an optionality that we've created throughout the portfolio of existing assets we've got on value-add for our investor base.

Over time, I want to realize longer-duration storage. So securing those input contracts, for me, creates additional optionality again. Because once we've got that input and that export, there's nothing stopping us doing something more creative with that out into the future.

So really, yes, short duration for today. Will it be short duration for the next 30, 40, 50 years? Hey, I don't know. We'll find out how that ecosystem changes.

But I've got one eye on how we realize starting to what we call shapeshifter solar. So we're no longer generating in that bell curve as the sun reaches peak at midday and off in the evenings. And you're starting to create more base load.

How long do these solar site's last?

ROSS GRIER: A long time.

So the design life of batteries is now--

you say the inverters are going to last 25 years, 30 years, whatever. Is that legit?

So solar modules themselves will do 40 years all day long. They just get less efficient. So by the end of a 30-, 40-year operational life, they'll be 75%, 80% as efficient as they were when you put them in the ground. So they still got a whole bunch--

Even if you clean them and all that stuff?

Yeah, they just degrade. They degrade as they get exposed to weather and light and the rest of it.

So there's an argument to say, well, just leave it there as a less efficient asset, and run it until it just gives up. And there's a whole host of arguments as to why you would and wouldn't do that, including the repowering, power density thing we talked about.

Inverters are worked a lot harder and have a much shorter shelf life. So we usually assume about a 10-year life for an inverter in a solar asset.

In a battery? Oh, in a solar. But I guess a battery inverter is going to end up working harder.

ROSS GRIER: It shouldn't be massively dissimilar in the lifecycle. So you see a lot of--

Oh, I guess you could [INAUDIBLE]..

--variable business cases in this space. And a lot of super racy assumptions will assume significantly longer life cycles. But the other thing about inverters, as well, is they're, generally speaking, modular, as well. So what you're not doing is having complete failure of a unit, and you're stripping it out.

QUENTIN SCRIMSHIRE: You lose a bit, yeah.

Instead, you lose a bit, and you swap it out. So you're more propping it up over an expected longer-term asset life, as opposed to doing a complete swap-out at one point in time.

And if you DC couple--

so you connect your battery to your solar behind the inverter--

you don't have to buy as many inverters, right?

ROSS GRIER: Correct, yeah. You have to buy a slightly different inverter. But actually, quite a lot of the current solar inverters are shipped as DC-ready.

So you need some form of power converter [? to ?]

couple them. But that's it. You're literally just plug and play.

Now, however, there are, again, complexities in there. Because you're distributing your inverters throughout your field, which means you're going to have to do the same with your batteries, which means you're not particularly well configured. It's maybe harder. So there's [INAUDIBLE].

Also, if you've got a ROC on your main boundary meter, then my electrical engineering hat--

ROSS GRIER: Yeah, mine, too.

--is saying that you the control of that DC side is actually, essentially, a switch, right?

ROSS GRIER: Yeah.

And that's quite complicated.

ROSS GRIER:

This is quite a complicated technical problem to solve.

ROSS GRIER: It is definitely a very complicated technical problem to solve.

If you didn't have this subsidy, it would be a lot, lot simpler. But DC side, DC coupled subsidy-supported co-located solar and band--

battery--

yeah, I've lost myself--

is complicated.

Without a doubt. And one of the reasons why I talk to the fact that you'll see DC in the new builds is because you haven't necessarily got that subsidy issue. So there's a whole load of complexity to work through, again, going back to why it's called working in this space is there's never a day that doesn't go by where someone puts a challenge on your desk and you just go, pff, I have no idea--

--where I'm starting with that. But we always find a way. And I always laugh and joke about our own business and say, if you can find solar geekery anywhere that is more refined than in the NextEnergy and Wise, then you're doing really well.

These guys can tell you absolutely everything about an asset--

how it performs, how it works, and all the rest of it. So we feel like we're really well placed to run forward with this stuff and then share our learnings with industry, which is what we tend to do.

QUENTIN SCRIMSHIRE: The sun gods.

We've done a whole lot of this. Our CEO describes it as a snowplow. So he likes to see us run forward into this thing, create a path, and allow other capital to follow us into a space.

That's a nice idea. OK, one last question, and then I'm going to ask you the one about what do you think about the future.

So the thing you told me earlier, which I kind of thought I knew, but it's nice to hear it from you, is that people are building solar assets unsubsidized because they're going to take the merchant case, essentially. I'll take whatever price it is.

And of course, right now, this summer, it's my assumption--

well, my belief--

I expect and you can tell me, solar is in the money right now. Solar is, compared to the Excel sheets we had a few years ago--

It pays to be a generator at the moment, for sure.

QUENTIN SCRIMSHIRE: It pays to be a generator in solar, which is fantastic.

Just, I think this is a great thing.

But are you managing to get institutional investors and debt and banks and all of that stuff on merchant solar yet? Because that was a big challenge for batteries.

So go back to that snowplow.

So we're right at the start of that.

So there's been a recent CFD, so Contract For Difference, put out in the market, which solar has benefited for. So a whole bunch of the new stuff that's coming down the line will also get some form of subsidy support in the form of that CFD.

Though you wouldn't want that right now, would you? You want your subsidy in the summer.

Well, yes. Yeah and no, right? But a long-term contract is a revenue stream. And also, the recent clearing price was pretty decent in the context of what's going on around energy security. So there's a place for it, of course. Because it's bringing new capacity online.

What we've been doing is working with our investor base to help them understand that transition. So it's taken us an awful long time. We started work on merchant back in 2016, I think it was, and actually bought our first designed-as-merchant asset--

or, rather, post-subsidy we like to call it. Because merchant's a bad description of what you do with it. But call it post-subsidy asset.

Somebody tell me what the word "merchant" means. I've said this before. It's [? fliffy. ?]

Someone, in a sentence, tell me what merchant means.

So that's why I always refer to post-subsidy. Because what we don't do is spill power into the day-ahead market. We always, actually, sell it forward.

So we've got a sales desk who actually are wired into the power market, and they're constantly selling it forward. So actually, we always got these small hedges of power out into the future. So I try to avoid saying merchant. Because merchant makes you think [INAUDIBLE]..

QUENTIN SCRIMSHIRE: Let's ban that word. Let's burn all the books that say it.

I think let's take it out of the equation. Yeah, investors don't like it.

So we spend a lot of time creating the development case. So we've been quietly developing a whole host of assets. And then we've been taking investors on a journey.

The UK Infrastructure Bank, so the government's new spin-off from the Treasury that is designed to support new infrastructure projects, has actually backed our new fund that is designed to bring investors into post-subsidy solar. And it will be a whole host of long-, short-duration contracted solar, so everything from corporate BPAs to maybe some CFDs. But there's a whole host of merchant, as well.

And really, what we've done is educate that investor base over that period of time on what does it look like, what does it feel like, what are the downside risks, how has the business case evolved over time? And the benefit of solar, of course, in this environment is the OpEx is really low in solar and really predictable, as we've said already.

So actually, what you're really looking at is, how do you think power price is going to evolve over time? And so you then get into fascinating discussions about, well, what does the short term look like? Well, is the current energy crisis going away in the short term? I can't see anything on the horizon that gives me comfort it's going to disappear in the short term.

So then you start thinking, well, what happens mid-term? Well, we've talked about a few of those interesting things already. So you've got mass adoption of electric vehicle in a way we've never had before. I think society has now decided to step away from

[? ICE, ?]

step away from the traditional way of mobilizing itself.

You then get to, well, what do we do about heating?

And there's going to be a drive away from gas boilers--

mainly, where are we going to go with that? We've talked about the difficulty of feeding hydrogen into the gas grid and doing a simple change-out of the way the boiler works. So that probably means you end up with electric-based heating, as well, so some form of IR--

infrared--

based, [? as ?]

well [? as ?]

heat pump base, as well.

That has a massive impact on how demand works. And that's before you start thinking about the recent 40-degree temperatures that are going to be more likely and people wanting to put air conditioning in their houses and various other stuff.

So the demand profile is going to change fundamentally. It's set to double within the next 10, 15 years. So being a generator is a great place to be in the context of what's coming ahead of you in the short and mid-term.

The only thing that could really derail it is if we massively overachieve on our delivery ambitions for new technology. So if we're able to do 60 gigawatts of offshore wind and 50 gigawatts of solar in the next 10, 15 years, you're going to derail your business case, to a degree.

Realistically, there are monumental challenges in achieving all of that infrastructure in the time. And I always talk to the same thing, which is the grid, but it's only one component of the challenge.

But you know we're not realizing that based on current investment in the grid, our ability as a country to realize that type of a project and to energize it into the grid, as well. So you can get really comfortable over the mid-term that, again, you're not jeopardizing your business It's still a great place to be a generator.

As a downside, though, so you can see the capitalist seeping out of my body now, as I'm about to say this. But oh, no, we overbuilt renewables.

Oh, no. Oh, bugger.

That is a genuine fear, right?

Upside, you make loads of money. Downside--

[INAUDIBLE]

I try not to take it--

I'm not a financier, but I try not to take offense on behalf of the financiers in the room by--

so that assumption assumes that you have no foresight as an investment manager, and you're effectively looking at an investment you know is going to go wrong. And you are so motivated to get it in the ground that you make the investment decision anyway, and you hope for the best. And you do that at scale.

Now, I know for a fact that is not the way our industry behaves. And actually, what you'll see instead is an evolution of the business case. You're seeing it already with battery storage being incorporated.

We've talked to hydrogen. We've talked to things creating demand, building at the point of need and all that type of stuff. What I know is the sector will change its operating model to ensure that it doesn't effectively overbuild. It will always find a use for that overbuilt power and monetize it.

It's not going to be a situation where we have so much additional power at the wrong time of day that it's going to be worth nothing and you've cannibalized your revenues. And then that's before you get into that conversation we had earlier about how the ecosystem changes in the long term.

So you get into those distributed batteries all the way throughout the country, 30 million batteries, and then you get a whole host of, what, maybe 30, 40 gigawatts of batteries by 2050 at utility scale in the grid, as well--

look, the ecosystem is very, very different. And we're probably doing huge virtual power plant things.

So my gigawatt of operating portfolio is probably a gigawatt power station rather than a whole bunch of smaller, individual power stations. And we're using our batteries to compensate for the ebbs and flows and monetizing that way.

So yeah, I'm very confident that our current conservative assumption of how power pricing is going to give us interesting returns for our investors is super conservative. And there's only upside in there.

Either we're slower to build renewables, and demand doesn't change as we expect, and we stay in the same position and carry on burning fossil fuels--

either you get loads of volatility, power prices remain high, and you've done well with your assets, or we hit net zero and you get cannibalization.

And we survive as a society.

QUENTIN SCRIMSHIRE: And we survive as a society.

Win-win, right?

QUENTIN SCRIMSHIRE: But to be honest, it'll be somewhere in between. And everyone--

hopefully, it's all going to be all right. But I think the cannibalization thing--

I'm really bullish on peak demand, in general. I think our team always will say this about me. I believe that the electrification movement is going to be much, much bigger than people think.

ROSS GRIER: It is, definitely.

So we currently have 50 gigs of peak demand.

I can see us being a lot, lot higher than that if we get--

mobility it completely--

air-based mobility, right? We [INAUDIBLE]

more now. If we get airborne taxis in the way that people are saying we will be by 2040, guys, it's a lot more energy than just driving around on rubber, right? And all of this stuff will need to be electrified.

But we're going to go off topic. And we've definitely run out of time. Because [? Yssi, ?]

the producer, is--

I wish you could see this--

she's fanning the back of a camera.

[MUSIC PLAYING]

Did we talk too much?

Have we gone too long?

YSABELLE SWAN: No, no. [INAUDIBLE]

They're all back on. We're fanning cameras. It's that hot in here. We're going to leave that. Ross, thanks so much for coming on.

No, thanks so much for having me. I appreciate it.

All right. See you next time.

Thanks so much.

[MUSIC PLAYING]