Is the flexibility gap holding back Europe’s energy transition?

Welcome to transmission, the podcast that uncovers the business of clean energy. I'm Ed Porter, VP of insights at Moto Energy.

My job is to make sense of how renewables and energy storage actually work on a balance sheet. And right now, one thing is clear.

Solar power by itself can't power the energy transition. Globally, we've installed around two terawatts of solar, enough to power hundreds of millions of homes. And that's huge. But the sun sets. Demand for electricity remains.

So we need energy storage to keep the lights on. Today's guest understands this acutely.

Dario Hernandez leads storage investment at NextEnergy Capital, a global renewables firm.

He advises their solar funds evolution into storage. This way, they can unlock more value from their assets, and they can provide consistent power to the grid even when the sun isn't shining. To be clear, the build out of solar is a huge success story. Fields of panels, rooftops covered in glass, and when the sun is shining, this means power is often cheap or even free.

But simply producing clean electricity isn't enough. The trick is turning that solar power from something that happens passively when the sun shines into something we can actually schedule and use when we need it. Batteries are the obvious answer to this, but they come with their own issues. For example, where should you even put them?

Should you build them on their own as standalone assets at key grid locations? Or should you bolt them onto existing solar sites? A process known as colocation so that they can share land, share cables, and share a good connection. Colocation sounds obvious.

You already have the permits. You already have the substation. You simply put the battery where the power is. But the rules don't always make it easy. In some markets, a colocated battery is treated like a new customer. It pays high fees just to connect to the grid, and suddenly, the smartest technical solution looks terrible on a spreadsheet.

So how can our rules, our regulations, and our market design help encourage the build out of this technology rather than hindering it? Welcome back to transmission.

Hello, Dario, and welcome to Transmission.

Thank you very much for having me, Ed.

Our pleasure. And as ever, let's give our listeners some context. So who are you? What's your role? And who do you work for?

Right. So I'm Dario Hernandez. I work as head of energy storage for NextEra Capital, NEC in short. We're a group of about four hundred people, which coverts all the way from development, investment management and asset management, solar and storage.

And in terms of numbers, we do have four point five billion dollars of assets under management.

We have about four gigawatts of assets and we represent in about ten, twelve countries, Europe, India, North America and Chile. I joined the team about two and a half years ago or so to grow the business in the storage side. But I've been in the industry for about fifteen years, everything from generation to trading and now on the investment side.

Okay. That's superb because I think that'll give people a really good appreciation of how big NEC are in the space, but also your experience as well in the storage side. You mentioned four gigs, is that mostly solar?

It is, majority solar. I mean, the company was created in two thousand and seven. So majority has been solar so far and the funds are ultimately solar. But we've been growing the allocation to storage, to batteries particularly.

We do have our first utility scale in operation since last year. We're hoping to start construction of new assets next year. So, it's growing. It's the part of the business that is also growing quite fast.

I think that's one of the really interesting trends in this. Right? So so why does a why does a solar fund and I think I can kind of put you in that position, right, as a solar fund historically. Why does a solar fund like want to step towards storage?

What's driving Well, I think it was the natural thing when I mean, it started already very early.

In twenty sixteen or 'eighteen, there was a couple of acquisitions of small batteries. I think the I guess the management at that time already saw the opportunity on storage and the learning curve. I think over time, with solar only, I guess, you can reach to the maximum of, I don't know, ten percent, twenty percent penetration depending on the market. So, guess the future, if you want to shift big volumes of capacity all the way from those solar hours into big times, provide your customers and the market with a more attractive product, then it's just natural to go into storage.

But then I think what I was surprised as well is the amount of synergies that are with the existing setup within the business. Right? It goes all the way from development on the business case. Right?

Solar and storage goes very well together. The predictability of solar, the the production profile. But then also even on the procurement side, for example, pretty much everything within a power plant, a solar power plant, it is the same in terms of sourcing the components, etcetera, than than batteries. Even some of the panel manufacturers, some of those large companies in China have gone into batteries as well.

So, those synergies were always there. And I think the future is going into dispatchable renewable energy. And if you're going to do that, solar and storage combination or solar and batteries combination is probably the lowest cost of electricity that you can find.

It's really interesting dynamic you point out that actually you can get a lot of the sort of same kit from some of those providers. So when you're looking at solar projects and storage projects, do you do you tend to kind of get that all from one provider all under one wrap, or do you tend to have, like, two different companies working side by side on sites?

You mean with solar and and Yeah.

I I think so far, it's still separate because they're, you know, different expertise. But more and more, we see that potentially it could go together at some point. And and that creates those leverage when it comes to contracting and procurement and construction, etcetera.

And you mentioned that NEC, so NEC's NG Capital, who I'll refer to as NEC all the way through. Hopefully, that doesn't confuse people, but let's just call you NEC.

When you talk about developing those sites, just to give people the context, so you develop those sites, construct them, you bring them online, and you also operate them for the intention of the the the lifetime of the projects?

Well, I should have specified. So we have within NEC, we have three main units. One is called Starlight Energy, and that's where our own capital that we put at work on development. So in there, have about twelve gigawatts on development platform. So I mean, we understand that there's some attrition rate always from development. And they don't necessarily need to sell it into our existing funds. They can go external as well into the market.

And then so we acquired within our existing funds in NextEra Energy Capital. We acquired some of the projects when we fund them in time or attractive, etcetera, within from Starlight.

But we also acquired many of our projects from the market. So projects that are ready to build from other developers, and then we bring them into NextEra Energy Capital. In terms of construction, yes, we have a pretty strong construction team where we'll bring those RTV projects into ready to build into NTP, notice to proceed, and then into commercial operation date. And then we'll manage that through the third leg, which is Wise Energy, which is our asset manager. So then they manage all those projects through their entire life.

Okay. And you are doing my job for me. Right? RTB, ready to build Yeah.

NTTP I've seen the podcast. Notice to proceed.

You are you you know, we can swap seats if you like. Yeah. But thank you for and and our listeners will thank you for being really clear on what those acronyms mean.

And one thing we've seen when sort of big solar businesses look to then try and add storage is a kind of a few ways of doing it. Right? So you could kind of add a portfolio level, you could have one solar site over here and in kind of the same country, could have another sort of storage site over there. So they could be totally different.

Or you could have two sites on one piece of land that kind of share a grid connection but have their own inverters. Or you can kind of have them sharing an inverter. So there's kind of lots of different flavors of this colocation. What is working for Neck?

Well, both things. So we do standalone projects and colocated projects. I think there is values on both with standalone, you know, you are less restricted on location. You can have a strategic point of connection.

Obviously, you're not limited by the times of the solar development. But we do see a huge value on collocation and we think it's undervalued at the moment.

For example, if we take the case of the UK on the connections reform, there is not really a strong mention on collocation. And we think that collocation, especially at this time where grid connections are very scarce, not just on capacity, but also on the connection point, our proposition is, look, you can within the existing portfolio of solar, you can come in, reduce existing land that is dedicated to to the solar farm, reduce the existing switchgear, the transformer, the connection point, even the way at which you connect at the actual substation. That is not only a massive cost saving that then eventually will pass on the consumer.

It's also having the stability services at the point where it's needed the most, right, and the balancing and the speed, right, of doing that. Because one of the things that we're liking the most as well is we as energy industry, I guess, is those electrical engineers, the expansive stations to create those new bays, planning, etcetera. So the improvement with collocation and and the benefits are really compounded and really huge, and and we would like to see more of that. In other countries, actually that's favored.

Spain, for example, recently just passed a law in which it facilitates, for example, environmental permitting and everything related to permitting for batteries collocated within solar farms. We would like to see more of that in the UK. So I mean, if we could, we will probably seek to add storage to every single site in solar that we have, but not always is possible, obviously.

I I I was about to ask that as my next question, which is like, does every single solar site, do you kinda see it being colocated? And it's really interesting to hear your answer to it, right, which is that yes, like, it makes total sense to have solar and storage colocated and we'd want to see it everywhere. I think for for listeners just to help them, you both have like this pipeline of projects coming through where you could plan to have solar and storage together. And then you've also got all of these existing sites that are say solar only and you'd like to kind of retrofit them with with storage.

Which do you think is most likely to kind of get the most colocation out of those two?

Well, I think it's always a bit easier when it's new projects because you can plan from the beginning. You know, you you can leverage and benefit from every single opportunity of cost saving. Also from the beginning of the contracts, there are some complexities also when adding storage to an existing site. Again, there are some countries where this is facilitated.

There are a number of complexities which prevents you from doing that in the first place. I think the new projects, I think we're gonna see a big wave, especially on those solar dominated regions like, you know, Chile or south of Europe. Pretty much everything is coming with the storage attached to it. So it's got it's gonna be very interesting because it it has implications all the way we've talked about the development and the procurement but also the financing, the route to market, hybrid PPAs, all that sort stuff.

Mean, it's a massive kind of worms there to open but Yeah.

Well, it's really interesting and maybe I'll just talk very quickly about Michael from a revenue perspective, like if you have a battery and you're bringing your battery onto a solar site with the right combination of sizes, the actual losses that you get from the storage site can only be sort of one to two percent of of what that storage site would have otherwise made. And so essentially you're using losing a very small portion but you're able to get accelerated access to the grid which honestly all of this is all about sort of reducing cost to consumers being able to bring more soda onto our system more quickly. It always surprises me that grid operators haven't said, yeah, please do this. We really want to see it. Like, what what do you think holds them back?

Well, no, I agree. I think it's just that because in energy transition, we always think on terms of megawatts, you're selling more megawatts. And I think the change needs to happen in regulators that need to facilitate that and needs to see that.

But it also happens on the system operators. The way they analyze still these projects in most cases is to see, okay, this is a new project altogether, new generation, right? Full export, full import. And it has implications in the way it operates. So we need to start system operators needs to start looking at the benefits that brings.

That also has implications, for example, on the grid charges. Still, it gets if it's a transmission connector, it's different, but distribution connector, you still get charged, say, for the individual elements. So I think it needs a cultural mentality change fundamentally when it comes to to those because they're coming. Right? And and as I say, some countries, that's favored. I think in the UK, we're lagging a bit behind on that.

Yeah. I was gonna add to that. We see, for example, in SPP, which is a region in the US. There's almost like one interconnection queue that they have and then they have a a queue that almost runs alongside it, is almost for like accelerating and retrofit projects.

And I think that kind of it seems like to your point of how do we use these bays more, how can we use existing connections better. That just feels like a nicer structure. And maybe we'll get there in the UK in time, but equally, the u the like, the globe is not or global markets are not gonna wait for the UK. Right?

And so investors will look for the best possible places to to deploy this.

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Enjoy the conversation.

I was gonna ask you, would would would NET kind of consider not only just doing colocation, would you consider just sort of standalone storage sites or is that sort of outside of your remit?

No, absolutely. And the projects that we've done so far are standalone. Again, for those reasons, right?

Where we find value, we'll deploy the capital and there are benefits for both. So we've done it already and we operate them and we optimize them through a third party in this case. But the I think where we see huge opportunity is on that base on that portfolio of solar at the moment. So you I've talked about the cost element, but it's also about it's it's more binary to it.

Right? In some countries where there's simply no access to the grid Having that solar plant in there, it gives you access. So so it's just it's just an option creation there for creating value that, you know, others will not have. Yeah.

So so I guess priority will will deploy the capital where we see the value, and and standalone is very important element because of that. You know, you you can directly point to those strategic locations in the right place and and having no delays, I guess, from the solar element. But then we see that entire fleet of solar could bring us a lot of value by integrating integrating batteries there.

Okay. So you've got sort of this, like, mixed strategies. You're looking for solar in the right place, right time. You're also looking for colocation, whether that's retrofit or new, and you're also looking at sort of standalone storage as well. That to me feels like a very balanced approach. So it's all going well. Which of the specific markets that you're you're looking at?

Well, so we're looking at pretty much every market where we operate already. UK, of course, is our main market. Then we have Iberia, so Portugal, Spain, Italy, Greece, Poland as main markets in Europe. And then we have Chile is part of the US. I think they're the priority. It's quite a wider spectrum of countries, regulatory regimes, business cases, it's what keeps me entertained.

Okay. Well, let's let's pick up a couple of those. I'd love to talk about Iberia I'd love to talk about Chile. Okay. So what is special about those markets?

Well, they're very different. So both in both cases, what we have is they're very they're lagging behind storage. So for example, if you take the UK, right, I always go back to what I know best, which is the UK, and you have twenty gigs of solar, give or take, and what, seven gigawatts of batteries. So, you know, a ratio of two to one, you know, more or less.

In Spain, we have thirty plus gigawatts of solar and zero batteries. So that tells you and Chile is similar. Right? So that tells you that, you know, the market, there is a very strong incentive for flexibility, and we see that on the prices as well.

The business cases are very different. So Spain is more like the business case that we see in the UK or Germany, heavy loaded on the wholesale market on rebalancing, a component on capacity market that we expect next year. There is also a first mover advantage on AFRR prices. Right?

Secondary reserve for for frequency management. In Chile, it's different. In Chile, at the moment, it's mostly about moving big amounts of energy, right, shifting them from hours that have zero prices or nearly zero prices all the way to the peak time. So it's bulk amount of energy shifting, so longer duration, potentially four, six, eight hours, and capacity payments as well.

So, yeah, very interesting to see those dynamics, which are driven by the regulatory environment.

Okay. And when you say sort of AFRR in terms of Spain, what is that market?

What does it do?

Right. So that's the same pan European market, automatic frequency restoration reserve. That's I hope I got this right. And that is to contain the frequency deviations.

Right? So it's short duration injections of power or energy in this case to contain that. And that is contracted ahead on capacity or availability payments, and then it's paid on energy dispatch. And that is the same the same setup across all Central European markets.

And at the moment, because there are no batteries, those those prices are heavily linked and heavily correlated to gas price and CGT combined cycles, gas turbines.

Which which by the way is a totally crazy thing to do.

Right? To have like, you have super flexible options in terms of batteries and yet to be asking sort of gas units which are flexible but not as flexible to try and do sort of fast acting response.

Something in GB, I think as of late twenty twenty two, essentially, batteries were just providing all of that market and has been a benefit to sort of GB consumers. Feels crazy that some markets are still at the stage of having to try and get those services from non batteries.

Well, that's right. I mean, I think Spain I mean, if we go more, you know, deeper in Spain, Spain has all the ingredients to be a very, very strong market on batteries. It's it it has many similarities with the UK. So for example, it has a a base twenty percent or so of generation from nuclear fleet, but there's a decommissioning program.

There's no new capacity coming online. There's a phase out of coal. There is obviously the solar penetration that we discussed about. There's the size of the market is one of the largest.

There's liquidity on the intraday. And there are obviously all those elements that makes sense for those to be. There is no primary response yet liberalized. And the market from a regulation perspective traditionally has tried to incentivize batteries by CapEx subsidy, which the problem with that is that as the technology evolves very quickly, then it's sending the wrong incentives, right, not necessarily that competition and driving the cost down.

And capacity market also has been lagging, which is a bit of the cherry on top of the business case. Yeah. And so I think regulation has been lagging behind only realizing every single service, voltage control, frequency control, and and lowering the barrier of entry. Right?

Well, that's pretty much undescribing every step that the UK has done To be successful in there. And I think we're starting to see now the the right steps. I think the blackout has been a very strong incentive to move things a bit faster. And and I think the the the good thing in a way is that the market, I think, is gonna go from zero to a hundred because all the learning curve that we have in the UK, obviously, technology evolution.

Now the technology is at a point in terms of CapEx and OpEx and maturity of financing, etcetera, that we're gonna see we're gonna see big projects very fast.

There's there's this secondary mover advantage. Right? So you're if you're the second person to that market, you know so I mean, look, we are building multiple over gigawatt sized projects in GB. We're also doing that in California, very large projects all over the world.

In Germany, we've got one gigawatt, four gigawatt hour systems. Now that we have things like that, when you decommission a coal plant, it's now much more doable to bring in something which is like a one gig, four gigawatt hour system. I think back to sort of GB, again, we keep on referring this, it's it's quite a nice example for a a market that's kind of matured very slowly. The first systems were sort of one megawatt, four megawatt hours.

The systems that we can now build are a thousand times bigger than that. And so Spain, I think, has this a little bit of superpower that when it decides to move quickly, it has it can kind of go and buy the blueprints for some of these massive projects and move very quickly. So I'm equally as excited.

You you you mentioned though about voltage control.

Why is voltage control interesting in Spain?

Well, recent blackout, I think what we know and what's now clear is that there was a failure in terms of voltage control that provides on or that generated some oscillations that trigger tripping off a number of power plants. I think that's proven in all the reports that many power plants didn't both thermal and renewable didn't necessarily respond appropriately to say when there was absorption of reactive required, they were doing injection or vice versa. So the thing is that batteries can do that in a very effective way. And that's not theory's practice.

Right? Like in the UK, there has been a number of reactive tenders for voltage control. And in all cases, have clear. When when you make it technology neutral, like for like, they've clear at a much lower cost than any alternative because they can do that, you know, on the four quadrants, I guess, on the power factor diagram.

So we get the ability to take We've got a we've got a bit geeky here, but this is this is on the the sort of how in phase the energy is that your asset is producing, how aligned that is with grid frequency kind of turns up on on a sort of four by four quadrant as it were.

And it's a way of sort of visualizing the quality of your power. And so, Dario, you kind of yeah. You're you're essentially trying to describe that because inverters can can tweak that, you can essentially get different types of or different quality of power out of the system.

Yes. And and then there is an element which is very important and many times not talked about. So for example, when you need to bring voltage control into into the grid, right, if you traditionally do it with gas plants Because they have to be in the money, which means recovering their cost of gas and carbon, etcetera. Yeah.

They also need to operate they also need to inject active powers. Right? Active megawatts. That means that you also need to curtail something that normally is renewable generation.

So you have that double element of expenses. Right? They pay to curtail Through the balancing mechanism in the UK. So it could be different mechanisms depending on the country, and pay a thermal generator to increase production.

And you see that in many overnight runs Yeah. In gas plants in the UK. Same thing in Spain. And I actually, after the blackout, we've seen more curtailment in solar To enable that thermal, you know, thermal activation.

And then there've been technical dispatches. Exactly. So like the words that affect, but essentially technical dispatches. So gas units have been told to run-in order to provide voltage services.

Correct. So then you have that double cost.

So batteries will save on those elements. First of all, it's proven that the generation or the voltage control, I guess, they can do it cheaper because they can stack any other revenues. They can do that at zero megawatts. That means that you don't need to curtail anything, and you don't need to activate anything else.

So look. I think I mean, the system operator has done, for example, just recently also approval or or the regulator in this case to prove to do a tighter control because there is an element on that. But then I think there's gonna be acceleration of those new products. Going back to the point about, you know, energy transition is also about changing procedures because on the system operator, they ultimately hold the keys to make the most out of those assets, which will enable more investment.

So so I I think the way to go is what's been proven to be right and proven to work like in the UK, which is liberalizing all those services and enabling just competition. I don't think the battery industry is asking for any subsidies. I mean, I think on a like for like comparison, they can win and they can displace all the peak times of the thermal generation.

I think it is such an important message that actually it is not batteries asking for more subsidy. In fact, it's often the opposite. What batteries are really asking for is open markets. So the ability to compete with gas to provide a voltage source or to compete with another tech to provide reactive power.

When these markets open up, actually you see that they can be incredibly competitive and it's kind of winning technologies tend to pick markets and batteries always push for open markets because they know they can win and they know they're the cheapest way of providing this. And so if you're working in a system operator, whether it's in Spain or or anywhere else, I think just just just hear that that you don't always have to go to the same place you've always been going to if you're reactive power for your voltage control. I know this sounds really sort of nerdy and really geeky, but but, like, we really generally, the ask is nearly always, let's have open markets and let's see what other people can provide.

If the best thing that you can get is a gas unit, great, very happy. But let's not have these these sort of markets hidden behind sort of closed doors because that is sort of limiting us for bringing in new technology.

I know I've sort of gone off on a bit of a rant there but No, that is exactly right.

I think it's very important because it's that in my opinion is that next big phase, right? If you wanna go on the energy transition, I mean, if you, you know, the first phase is CC in a way is you just grow solar and wind up to the certain level. The next phase and it's been you know, and you can see there are many reports, many simulations that have done it, go and displace all that volume into the right times, but also together with those ancillary services that sometimes make unnecessary long runs of thermal units. And that's the way you go from twenty percent, thirty percent penetration of renewables to say sixty percent or even seventy percent or eighty percent depending on the market. And that is I think what we as an industry, need to put the effort, right, that next big step.

Yeah. Yeah. And just to repackage this, because I know we've covered a lot of ground very quickly. But essentially the the the concept is that often a grid operator will call on a gas unit or a or a coal unit for something that's not the energy they produce but the additional things that they produce.

And actually one of the big things that's really exciting about batteries is that we can use batteries to provide those services without having to call on gas. And that's why you could go from saving at fifty percent penetration of renewables to maybe sixty percent. And we're not trying to solve a hundred percent renewables here. We're just trying to move the dial from fifty to sixty.

That's right. Yeah. Exactly. I mean, you just need to focus on on what's gonna make a difference, right, right now. And and and to me, that's the next phase of the energy transition.

I I I I wholeheartedly agree with all of this. We promised our listeners Chile. So let's let's go back to sort of ten minutes ago, and let's talk about what's exciting about Chile.

Well, Chile, you have a very predictable, very constant solar generation, you know, so many hours per year, every single day, that very long profile that you can store everything where you have pretty much zero prices every single day of the year.

And that's because they have a very strong solar performance essentially because they have like the Atacama Desert exists. Correct. Very low rain, very good sunshine. So perfect conditions for solar.

That's what drives a lot of the the low cost?

Yeah, exactly. Solar. And that massive scale as well that you can go on those projects because of their location where they're in and the little constraints that you have around it. And so when you have all that those amounts of hours, you don't need necessarily to be very smart about optimizing a battery.

It is as simple. You don't even need to input from the grid. Right? Shifting all that amount of solar energy all the way to a different time.

So also regulation allows you to install to retrofit a battery in a very simplistic way with very low permitting, which makes sense. Right? I mean, we're talking about batteries occupy only a portion or an order of probably two orders of magnitude less than the equivalent solar capacity. Right?

So it it just makes so much sense to shift that to the tines. So I think it's a test bench for that hybrid PPA model that we're gonna see in the future in the rest of Europe. Right?

And and we also in Chile, you have the kind of very good solar in the north. You then kind of in the middle, you have this, Lakes District, which obviously has some some hydro capabilities. And then you have sort of Patagonia down in the south, which I'm not sure whether there is a large amount of pumped hydro in, but it certainly there is pumped hydro or hydro in the south of of Chile. Where do you look to put a battery given those options in terms of you could kinda put it in the south next to demand, but you could also put it up next to PV in the north, or you could kind of locate it in the middle to try and help the network because Chile is an incredibly long country. Where do you where do you put storage?

Well, at the moment, we're focusing on on really hybridizing the existing assets that we have because I think that's what is gonna bring us, you know, the highest value for or the highest return for for every euro or every dollar, I guess, that we spend. So we fully focus on that repowering or or hybrid hybridization, I guess, or collocation program and transforming, again, transforming those assets from pure generation, which are mostly around the center, solar generation into a a dispatchable twenty four seven renewable asset.

Okay. Well, I'm very happy to accept any invitation you want to extend to me to come out to Chile and see those sites when they go live.

That all sounds amazing. You also mentioned Europe, right? So beyond just GB and the reasons we've just been talking about, you mentioned Poland and Greece. How come those regions are on your radar?

Well, again, we're trying to leverage everything that we have on in terms of the company and the operation portfolio.

And so, but it just happens to be that normally the regions that are solar dominated, they're really good also for batteries. So in Greece, it's a sort of no brainer. One element in Greece is also some of the assets are facing in the future or potential curtailment or additional curtailment. So a batch will also capture that energy that otherwise would be lost and will shift it at different times. So there is like a double win, I guess. Right? So not only shifting the energy in terms of pricing, but shifting the energy that it will be otherwise curtailed.

And is that is that sorry. So to curtailment, is that a the country just has enough solar and you can't get any more into the grid? Or is that you've got lots of solar in one part of Greece and you just can't get it through the transmission lines?

Yeah. I think it's both. So but mostly, it's around it's on the network itself. So, you know, when we say, you know, that there is enough, I think the problem in many cases as we see also here in the UK is the lack of transmission reinforcement over the years. Right? So that transmission reinforcement has been lagging behind the development of power generation.

Then in Poland, it's a completely different story. So it is I think we see that in the next few years, one of the most interesting markets as well. It is probably it has less of a hype than Germany at the moment, but it's under the same fundamentals as well. And, you know, it's one of the largest markets as well. It has high liquidity. Again, those AFRR prices that we were saying is probably within Europe is probably the place with the highest volatility of AFRR on the after the introduction of the new platform.

So, yeah, very interesting market also for us.

Today is the eleventh of November.

Tomorrow, I think our interview sorry. Tomorrow. On Thursday, on the thirteenth of November, our interview with Alicia from Core Street Capital comes out and does a bit of a deep dive on Poland. So if you're listening to this and you think I'd love to hear more about Poland, please do check that out. It's a great explainer in terms of how that market works.

So moving on from individual regions, let's come back to actually delivering colocation or colocated projects. What are the sort of road bumps that you've come across in planning and executing these?

Well, I think, metering itself is still funny enough, right, because it's not rocket science, but it it is still quite a big hurdle. You wanna make sure if your PV contract, right, you know, whether it's a CFD or whether you have, rock or rigors, you know, certificates of of renewable power, you know, that they're protected. So, obviously, you don't wanna endanger that case. In some cases where you have also financing, project finance, you know, you need to be mindful, obviously, of those of the lenders and get approval and permission.

There's the obvious ones about space and, you know, grid connection, etcetera. I mean, in many cases, it goes very technical because, you know, you you obviously have a certain capacity you can install in terms of power, but also other parameters like short circuit current and and other technicalities when you add in more inverters, you know, that can trigger obviously a red flag on the DNO and say, well, you know, you you cannot connect more more of this. And but yeah. And sometimes you reopen in the UK in the case of planning. Right? So that's why, you know, the case or the law that just passed in Spain last week is so important because it accelerates you know, it just makes easy and accelerates the deployment of storage on those sites and just removes one of those those big hurdles, I guess.

And let's let's pick up on some of those elements you mentioned. So you mentioned rocks, CFDs, and just to help people along with this, this essentially these are some of the some of the subsidy schemes for renewable generation. And so when you go into those schemes, you might sign an agreement for say fifteen years or CFDs are now going to twenty years. And so what you're really saying is that you don't want to do anything on-site that will sort of invalidate that subsidy scheme.

And also when you mentioned lenders and financiers, you're essentially saying some of those groups will have contracts that say, hey. You can't amend this. You can't change this. And so that's kind of where you're trying to be really careful in terms of making sure you don't amend any of those conditions.

So I think that's really important. You also mentioned short circuit level or short circuit current. Don't think we've talked really about short circuit current much on this podcast before. We should have done. Would you like to give the a very quick line on it?

Well, okay. You put me on the spot there. This is outside my but, you know, it's it's one of those, I guess, is that the DNOs trying to obviously protect the creature. And when there is a fault, there is the current that it gets injected on that on those events.

And so, obviously, the more amount or the bigger amount of generators that you have in this case, the bigger amount of or or the higher the current it is that it gets injected. So I think it's not a very real percept. Obviously, needs to be accounted on the design, on the protections, on the switchgear, etcetera. So quite techy, but it is one of those things that easily forgotten that can trip you over you're trying to collocate.

Yeah. And I think it's really important, right? Just I think people often think about energy markets as just megawatts, megawatt hours. Like, it's really like, we talked about we talked about the four quadrants on this on this podcast, which is already quite a lot.

But just just so people know, there's kind of there's all this reactive power, there's voltage control, there's short circuit current, which is often talked about as a short circuit level. Without kinda going into huge amounts of detail on this. There's just lots of additional qualities of of power, that go beyond just megawatts and megawatt hours. Now I think this is really fascinating to kinda help people understand why sometimes it's a little bit harder to retrofit or to just plunk a new project down when actually there's a lot of sort of detailed thinking that needs to happen on some of these sites.

No. That's absolutely right. And that's the I mean, that credit goes to the team, right, and the technical team that looks at all their details, but it it goes, you know, it requires a very careful planning when you do all those things and when you locate your battery within the distance of the switch gear and the cable runs and all that beautiful stuff. But, you know, there's a lot of work that goes behind collocating batteries within within solar farms.

Okay. I well, I've got two more questions for you, but I'd I'd like to ask a a different one just before we get on to that. And that is that you've you've done this for fifteen years now. Right? You've done a range of sort of technical through to commercial roles. Someone starting today, so coming out of school or university trying to get into the space, where would you recommend they get their first job in the MD transition?

Look, I I think development is a great place to be because it's at the interface between markets, technology, regulation. Right? And and I think having that bird's view of the market, especially in the time that is changing so much. I mean, it could be a bit overwhelming for a new startup, but I think that's the place where I probably enjoy the most, you know.

Yeah. Because you see the sort of technical requirements being satisfied, but also you have to have the commercial conversations around, hey, is this gonna make enough money to to sort of justify the the the decision? Okay. Fantastic.

And I'm sure that NEC are always looking for bright Bright minds and talents coming into the space.

Yeah. A great a great plug. Okay. So let's wrap up. So is there anything in particular you'd like to plug?

No. Well, I just mentioned that it's not just about solar and batteries. We are also, also, you know, anticipating all this change in the industry where you, you know, where you wanna make a dispatchable renewable generation and trade it on as a hybrid PPA or block trading, etcetera, etcetera, then we're making a lot of investment on automation of all processes, asset management, AI embedded into those processes. And I think that's gonna be very exciting part in the next year or two. So, yeah, watch the space. And maybe you can bring me again in a year or two years time to see how we're doing on that.

Yeah. Okay. So that's that's both kind of you've done the technical work, you're doing the commercial work, but you're thinking how could we package up some of the outputs from this so that they better match like what a corporate might want to buy or what a trader might be familiar with?

Is that is that sort of Yeah.

But it's automating the the but it's also within within the company. Right? So you're just changing fundamentally the way you operate with all the capabilities out there on the new tools for automation, for AI, etcetera. So I I think that is transformative in the industry, and and we'll see the results in Yeah. In the next, I I mean, relatively short time, in my opinion.

Yeah. I'm not sure how much everyone is talking about AI. Right?

So, you know I didn't wanna go too much onto the It gets it gets it gets everywhere.

But but actually, I don't think we definitely see AI on sort of the optimization and optimizers trying to get the best sort of out of their assets. And then we definitely see AI sort of physically on-site, maybe sort of working out which unit goes first. And and even if, like, you take this right down to a domestic level, you certainly see it there. I think AI in kind of the the sort of middle office element of of how some of these sites work is really interesting because I don't think many people have people know it's going there, but I don't think necessarily people have looked at it so directly.

Well, I've seen even, you know, test even. So not just on the energy management side, right? Like even when you start and analyze a new development and then you have hundreds of files for due diligence, right, when you want to analyze whether a project is good or not, that's literally hundreds of hours, hundreds of thousands of pounds spent on all that process. I mean, you can really think through and and it's not not gonna be that people disappear from one day to the next. You know, I'm not that naive. But the I I think we can already start to see companies investing on that space. And if you want to play on that in the next few years, probably need to adapt.

It could allow us all to move much faster. Yeah. Okay. I really like that. And then your final question, do you hold a contrarian view?

Well, we can do an an entire podcast on that. Okay.

So just to take one, I think not all the technologies need to be tested and tried in the energy transition. I think there is this common theme and this common idea that because we don't know the solution, then we need to try it all and fund it all, especially from public money point of view, to see what works. And I think there are many, in many cases, things that can be discarded with a back of the envelope calculation.

And I would like us to see funding and efforts focused on what we just discussed on that next step on the energy transition. What works? What drives the cost down? On changing parameters on the system operator, etcetera. And there are too many things that are diverting the attention, I think.

Yeah. I really like this.

I the the worrying thing is you don't know what you don't know. And so there's always this tendency to say, oh, look, we should discount this because it's it's not gonna it's never gonna reach sort of commercial maturity.

But you don't know how it might evolve in the future. And so we might be looking back on this moment in ten years time and saying, oh, like that was such a good decision to not look at it because we definitely didn't need it. Or we might be saying, god, you were such fools to discount this technology because actually it has totally revolutionized everything. And I I think I'm in I'm in your camp, which is that we have this tendency where we feel like we have to look at everything.

And actually it's quite straightforward that some things just really aren't working and we can move a lot faster without testing out some other things. But I also it would be great to kind of keep just like one toe in the pool as it were just in case some of these things do kind of reach maturity.

What do you think?

Well, I think there's look, there there's a mix of of things there. I think certain elements, right, without naming specific ones, I think we've forgotten about the fundamentals of physics and economics. And and even if the cost came down to the bare minimum, it just wouldn't work still.

Yeah.

So but, yeah, I agree. Look, there has to be a pot for innovation. A hundred percent. I'm I'm all for innovation and and but that doesn't mean that you divert a huge amount of government resources into, in some cases, even a commercial level in terms of the volume into things that should be met, you know, potentially on the innovation part.

We just saw one very large non lithium storage provider essentially sees operations recently last week and I think that is really interesting. So if you if you've kind of if you're thinking about what role your storage asset or your storage technology plays, have to be so aware around what lithium ion phosphate is doing because if you're trying to do the same thing that that is already doing, just be aware you're going up against sort of Chinese manufacturing and Chinese innovation and the scale of that is already so large and it's gonna be so hard to compete with it that you kind of have to be looking around the margins of it. I think sometimes people come through and say, I've got a new tech. It's a like a a three hour storage system and I I I kind of my heart sinks a little bit because I just know how hard that is. Yeah.

And I think people forget that we are where we are with lithium ion phosphate eight and those technologies because some companies that have the r and d budget of entire countries have dedicated their mission on the electric vehicle. So it's not because we were developing batteries at the beginning for, you know, storing solar energy. It's because of that. And I don't think any other industry that I could think of in the energy space enjoys that luxury.

And and look, appreciate this probably an unfair competition, but, you know, we just need to benefit from that and make the most of it.

Yeah. Competition is is unfair. Yeah. And and, yeah, competing against China is gonna be be very tough.

Okay. Dario, thank you very much for coming on. You've been a wonderful guest. We've had a real global tour and I hope people have got a really good understanding of some of the sort of the power, the the uniqueness of power, how some of these regions work, but also some of the commercial thinking that goes into it.

Thank you very much, Ed. It has been a pleasure for me.