Modo Selects: Investing in a green future with Ben Guest (Managing Director at Gresham House New Energy)

I've been the big learnings along the way. I mean, when you say that the market is mature now, is it's mature technologies, it's a maturing investment class. Are we there And along the way, what do we have to do for get there?

Is it mature? In some ways, it's mature in that I think it's fully investable. You've got technologies that are available that are reliable that means you can put them in the ground that the business model is visible, clear, likely to keep developing favorably. So I think that makes it very, very investable and and therefore sufficiently mature as as a sector to to grow. In terms of maturity from a where will we end up versus where we are now, I think we'll look at our earlier plants and, you know, in five or ten years time go, well, it's still work.

It's still generating good returns, but it's, isn't it funny how we used to do things that way or that way?

You know?

Hello, everybody. Welcome back another installment of transmission. Today, we are revisiting an episode from April twenty twenty two with Ben Guest, Managing Director and Lead Fund Manager at Gresham House new energy. Over the course of the conversation, Ben shares his insights into the outlooks for investments in storage space. As always, if you are enjoying the podcast, please hit subscribe and give us a rating. It really helps us to reach wider audience. And with that, let's jump in.

So here we are. I'm here with, Ben. We're in well, Ben guessed. We're in Question House's headquarters.

Your new headquarters, actually. Mhmm. You've been here for a year or so.

Not even, about six months.

And we are here.

Thanks for coming on because I know your time is very lots of people want it.

And we are so pleased to have it have you on a podcast to talk about everything through batteries and gushing houses journey and what next really. How is how how is Ben here as the energy storage fund guy. What happened before this? And, yeah, who are you?

Okay. It's just giving you a full background so that people know I've been in the fund management industry since nineteen ninety four, graduated as an engineer, and then joined Lazar Asset Management. Time it's called Lazad Investors and it's a well known, fund manager in the city. Actually, overall merchant bank, as as it was called in those days, unless you well use term these days, and I became a junior fund manager or a junior analyst, focusing on all sorts of different areas. But levered early on, my knowledge of technology being, you know, recently graduated engineer and someone who studied electronics at a level and various other things.

Yeah. Like, they had a analog days.

Back the early days of digital.

Yeah. I mean, I'm not a holder. I just I was just throwing one out there and see if we did catch it.

Yeah. Early days of digital, early days of fiber, all the days of semiconduct well, relatively early days of semiconductors and sort of microprocessors and sounds. And and Daris and mobile phones and other things as emails were a new thing when I was working. So I I I started there and I let my trade and fund management and in in what was in in in in those days and even today, I think known as a value investing outfit, and learned an awful lot about that. I focused on areas like TMT Tech Media Telecom as they became relevant areas towards the end of the nineties and Delhi Northeast, then tried my hand at Petchel management.

And did that within Lazarus and then within another company that emerged from people, who who came from Lazarus in two thousand and three and did that for three or four years.

So you ran your own fund.

Absolutely. Absolutely.

Oh, wow. Cool.

Yep. So I ran Europe's largest long short tech fund.

Wow.

It was billion dollars at at its peak. And then decided to wind all that up and pack it all in and set up my own business called Hazel Capital.

For a low stress life instead.

For a straight for a low stress life.

Yeah. Just before the financial crisis hit as well in two thousand and eight, which was very low stress. And found my way and decided to make it an entirely green if I can be using expression gli green or clean tech popular expression in the day. Focused company.

Okay. So sort of left all the knowledge I had behind other than obviously being able to use it in other ways within the new area. And then quickly realized that the most interesting area from an investability perspective and scalability perspective was was infrastructure. It wasn't about the manufacturers.

It wasn't about all the parts of the value chain. I was most interested in the in the infrastructure side, and then eventually backfilled, if you want to call it that, in the development side. So initially thought, well, you know, fund fund managers, equity fund managers, whether long, short or otherwise, I think it's a good year if they've made anywhere depending on their risk profile, five to twenty percent. And I was thinking you can buy a solo farm, especially in this environment in Southern Europe because the UK hadn't didn't have any yet.

Oh, sunshine.

But in two thousand no sunshine yet.

In two thousand eight or nine, you could actually sort of buy solar funds with twenty percent IRRs. And I was thinking, why you buy it? Look after it, but you don't have to sort of go and pick stocks every year. Many, many times over and make sure you get that right and manage your risk.

It's it's there and it's there forever. And I was very interested in that, and it was actually new to me as as an investment area and learnt the trade by trying and by doing and learnt all about the the underlying technologies and the O and M and the challenges from a legal perspective and due diligence and everything else. And basically, you know, cut my teeth buying initially a distressed solar farm in in in Spain, and then went from there. And then when the market emerged, in in two thousand and ten for Feeding tariff subsidized solar projects.

We got heavily involved.

We we went for it and raised a couple of VCTs.

This is all Hazel Capital.

This is all Hazel Capital and, you know, built four of the first circa sort of five megawatt solar projects under the initial Feed and tariff regime, which came to an abrupt end because of the realization that the UK might be making a similar mistake to what the Spanish made in terms of allowing too many megawatts getting built under a very generous subsidy scheme. So that was cut short, but So there was a hiatus immediately after that. I don't know if you remember that. And then but we went from there and developed and all managed about three hundred megawatts in the first few years of Hazel Capital and And then when the subsidies came to an end and at the similar time, the ability to invest through tax efficient schemes into renewables also came to an end We we started to pivot into new areas and looked at very many areas in but but one of the areas that really took hold in around twenty fifteen was was battery.

So as long ago as twenty fifteen, built initial projects with contracts in FFR. So commercial FFR as opposed to EFR where we just saw everyone heading at that market and being overly basically competitive in the auction. So, if you win at an auction, you my rule of thumb is you've actually lost not one. So it's probably not a fair comparison every time, but it's it's it's an indicator that you've obviously paid the most.

Well, yeah. We saw projects. Well, I think the EDF went down to seven pounds for that project, and we had it at fire prices at, like, fifteen, twenty quid.

Uh-uh. Well, no. In those days, and FFR prices were in the twenties. Wow. Yeah. And and and our lowest price was, I think, about eighteen. I think so.

It's like everybody do the f r thing and really the the the play was, don't go there. Look over here. Look over here.

Yeah. Of course, the f r was four years.

Of course.

F f r was was for two. It's still generous in those days for new projects, and we built our first seventy megawatts, and that became the seed portfolio for the Grushing Mass Energy Storage Fund. And, of course, while we're building those, I was having lots of conversations with Grusham House and coming inside to to really sort of continue this, the story in energy storage and and go from there.

Okay. So if I got this right, originally an engineer. Were you a chemical engineer. No.

Mechanical but also did lots of electronic stuff as well. Yeah. Then moving to investing hedge fund manager for for a while. That would have been crazy.

Yeah. And then let all that behind and started a brand new thing getting into solar. Solar at Hazel Capital moved really, really fast and then got into batteries pretty much twenty fifteen, which is early back then. Yeah.

Area. Yeah.

Okay. And so you've been doing this for a long time, and you've been you've been doing batteries for a long time. We'll talk about batteries specifically.

And this is a bit of a it's almost a silly question because it's so big, but what have been the big learnings along the way? I mean, with would you say that the market is mature now? Is this a mature technology? Is this a maturing investment class? Are we there yet?

And along the way, how what do we have to do to get is it mature?

In some ways it's mature in that I think it's fully investable. You've got technologies that are available that are reliable that mean that you can put them in the ground. The the business model is visible, clear, likely to keep developing favorably. So I think that makes it very, very investable and and therefore sufficiently mature as as a sector to to grow. In terms of maturity from a where we will where will we end up versus where we are now, I think we'll look at our earlier plants and, you know, in five or ten years time and go, well, they're still work. They're still generating good returns.

But it's isn't it funny how we used to do things that way or that way? You know, the easy examples are the fact that our first batteries weren't containerized by the manufacturer of those battery cells. It was done by the EPC contractor. So they did a very good job, but, you know, they are very much shipping containers that have been container that that in in which the batteries have been containerized.

Right now, everything is, you know, made for purpose. Yeah. And and that's extracting cost. And and I think there'll be a a cost curve, especially on the system side that that will be pretty significant.

And so there'll be standardization, more standardization. But other areas where there's maturity. You know, when we first got involved, the the company we were one of the partners we were working with actually wrote the control system develop the APIs for the interfaces with the batteries for the first time. All of these are now, you know, readily provided by the optimizers and or other companies that specifically provide what we could call the glue in in in it when whenever whenever you haven't whenever you got a missing piece, and examples of that would be the fund that we funds that we've subsequently raised, were used to acquire some EFR projects, those EFR projects were also designed early projects commissioned in twenty eighteen.

So some of those have got relatively rudimentary control systems, you know, layering on software onto that provided by third parties, you know, that just speaks to the maturity, the fact that that's even possible.

So, yeah, it's it's definitely moving on interfaces on interfaces there.

It is interfaces on interfaces. So it's not it's it works well.

It's it's just more counterparties you have to deal with What about the now?

Actually, let's put some numbers around it. Right? Because some of the folks are listening. I hope I'll imagine Gushing House doesn't really need much introduction, but let's do it anyway.

So how big support folio now?

How big are we talking?

Sure. So the the portfolio is four hundred and twenty five megawatts of operational assets. We've got four hundred and fifteen megawatts of of, assets in construction.

We've got a portfolio that we've announced, which if you include the operational portfolio, the infrastructure portfolio, and the remainder of the pipeline, It totals one point five five seven megawatts. Wow.

You kick what? Sorry. So you've got as much as you got built now, you've got under construction already. So straight things, you know, going in the round. Yeah.

Then on top of that, you've got another sort of sixty, seventy percent as well on top of my maths and grade, but you Yeah.

That that almost the same again. So it's like yeah.

What's the end game? How big how big discretion House go with this?

That's a really good question. I mean, it depends what time horizon you take.

Is there ever an end point for a company, but probably not, you know, the continuum But if you sort of Actually, if you ask me the question about Modo, I'd probably say I'd probably just Clear egg.

Freak out.

Yeah. Oh, I see.

I don't know.

There is no end. Right?

Yeah. You're right. Exactly.

What what what what's sort of really clear is, and if you sort of take a global perspective, or or a very macro perspective, you realize that the energy market is colossal, which is why I got into this.

You know, it's sort of just to give you another little bit of background, you know, when I when I was in TMT, and in tech, in particular, my expertise was in understanding cost curves and in the development of industries and just how quickly they develop you know, sort of take decades for TVs to penetrate the entire population.

It took a decade for mobile phones to penetrate the global population pretty much. So just how different it was, And then I thought, well, where is the next big escrow from from from a career perspective, that I can also add value in? And And, what do I also care about, which, to the green agenda? And I was just amazed by how big the energy market is compared to the tech sector, for example, And if you think that the entire energy market is historically subdivided into oil consumption, gas consumption, electricity consumption, and all of that is now gonna become electricity.

And all of that is generated by renewables.

And then it dawns on you that you need back sitting alongside all of those renewables, you realize that while the renewable sector is absolutely colossal or will be, it's very big already, but it will be absolutely colossal.

The the same the same goes for energy storage. And then you realize just how big a thing we have embarked on. And I was running some some numbers the other day, you know, in in the US. The penetration of renewables is really under twenty percent if you think of wind and solar. And that will obviously go to a hundred percent, but then you're talking about overall electricity consumption probably going up three times.

Yeah. Makes my brain hurt. I mean, the electrification of everything. And then I believe, I know this is some people don't agree with this, but Energy consumption is a key driver of general opportunity and bringing up, you know, the whole world to a standard of living that is that is necessary.

I don't think we can do it without increasing in consumption. So you've got those two things, electrification of everything plus that, and you've got a market which is most people would kill to be involved in.

Well, they're welcome to join.

Yeah.

But I guess there's the also part of the story is, so you guys have got a gigawatt, two gigawatts in a couple of years, you know, that's the kind of numbers we're talking about. Mhmm. But that might end up being a drop in the ocean at fifteen, twenty years time.

Yes.

So maybe maybe you have to go even faster and even bigger. I don't know. I don't know about faster.

Certainly we're growing fast enough. We're we're very busy, but bigger, for sure. I mean, it's my view that, being gigawatts scale will will not make you a large player.

In in the electricity market longer term.

It'll be multi gigawatt, maybe deck a gigawatt, you know, sort of that's that will be a player that is you know, significant because if we can be a gigawatt plus in the UK, which represents about one percent of the global electricity market, it gives you an idea of just how big the global electricity market is, you know, and so it just happens to be that the UK has been forward thinking for a bunch of reasons, you know, offgem Bay's national grid, the invest investor set. Everybody gets these events could come together to to to result in a an early emerging battery sector.

I've got to ask you. So you're you're the fund manager. Right? You're the so part of my excuse my ignorance, but part of your job as a fund rate, fund manager is fundraising.

Right. And so if you've been doing this for a for a long time, you would have seen how the narrative or the story has changed over time with, raising capital and getting investors comfortable with these kind of assets. So I wonder whether you just comment on that. You know, where where are we now and how far have we come?

And are investors now comfortable with this thing That's that seems so normal to us now because we're in it every day, but to folk there's lots of folks out there who still they hear about it for the first time and it sounds like space age stuff.

How how does that work and what are you seeing?

It's it's a really good question. First of all, our narrative in terms of what we tell investors has not changed. You know, we've we've consistently talk to the the thesis that this is all about the intermittency of renewables that batteries enable a cost effective transition by avoiding curtailments and the need to fill in troughs in supply with gas or something else and therefore it makes it cost effective from a CO2 budget perspective and a cost perspective, generally, you're saving electricity.

And and that has been the mainstay for what we say. That is the reason you build these batteries. Everything else is ancillary, literally, and and and a nice business to be in if if you can make money out of it and, you know, use your batteries more gently as we have over the last few years. But the the that is our core thesis.

We Of course, lots of investors who are still becoming familiar with this and still have elementary questions, which are completely fair around you know, is there a risk of obsolescence? It was the risk around competition? Are you gonna arbitrage your returns away? And the answer to that is yes, but it's gonna take about three decades and and and, you know, not to zero.

And, other other questions around just what is the business model? What what is trading how does it work? How power price is set? In in some cases, it's difficult to know what questions to ask if you don't know the electricity market because it's so familiar to us.

But it's not an industry which lends itself to outside in learning because we almost have to know where to look. It's very hard to find decent primates and so on. It's getting probably better. National Grids getting increasingly transparent with with useful web pages and the like, and you can learn from others as well.

But it it is it is a relatively challenging industry to know. And if you don't understand the principles of electricity on top of that, or the wholesale market mechanism or the how the networks are set up, It's it's probably a challenge if you if you come from a background of something tangential, whether it's infrastructure or something else that you you probably have a head start. But, yeah, it's it's it's it's definitely challenging in that sense for our investor or prospective investor base, but, you know, one of the key messages we share is that especially in one of the things that is really challenge investors is, the fact that it's a merchant business model.

So the fact that we don't fully contract our revenues in a space where fully contracted revenues are attractive. And you can contract them as as you know. You can you can certainly in terms of floor floor floor prices. But we don't see the value in that, and our investors haven't expected that of us at this stage.

And That's interesting. Yeah. And and equally interestingly is nor have our lenders So we've secured debt last year, and I had prior to that thought, well, maybe we have to start contracting some of our revenues in order to secure debt at attractive levels in terms of total quantum, but also cost of money. And and that hasn't been the case.

They've been comfortable with a sufficiently low, and the levels we want this, you know, twenty five, thirty percent leverage, which increases returns, but we're securing you know, three, three and a half percent money.

That is exciting because it means that the industry has moved on.

That is so contrary to, I think, conventional thinking around which is that the reason why you have a floor price is because institutional investors and debt need floor prices because otherwise they can't get comfortable because this thing's so new and blah blah. And so what you're saying is that's not the case. Maybe that's because it's maybe that's because it's question house. Right?

Let me I think I think there's a case for that.

Our our debt facility is is is what's called a CapEx facility. So we draw it down as new investments come through. Mhmm. It's not leveraging the existing portfolio, but the existing portfolio there has a strong cash flow, which can service the debt as it comes through.

So it provides an extra protection for the lender. If you look at at at the rates that we're talking about, there's certainly at a premium to what solar and wind projects get debt at, but given the higher returns, the servicing of that debt is covered by or largely covered by centimeters contracts, for example. And so there's there's really strong coverage and and security there. So it's it's worked out very well that that there is good coverage at sensible levels of debt.

That haven't spooked investors and the idea that we have a portfolio is obviously helps. Yeah.

Can I can I ask you on that?

Because so I would have thought that a floor price would be really attractive to you and, yes, to Gresham House. And, and it sounds like from you speaking is it's not, or the way that they they're currently offered isn't. Is that because you have to pay a premium for them or because the numbers are too low? And you are far more bullish on on energy storage as I am than many of the floor prices offer. What how are you thinking about it?

Yeah. Ultimately, it's what do you put in your financial model if you have a floor price contract? And and and what do you put in your model if you've got a merchant contract?

And they're very different numbers. So I'll go with the merchant contract.

Thanks very much.

And it is it is the confidence in understanding the market, and that goes to one of the key messages we share with our shareholders, which is this is a fundamentally profitable business model. So when you use the word trading to people in the finance industry, they might think, you know, short term trading, derivatives, speculation, potential for loss on a daily basis. It's not that. It's not any of that. You are dealing with a positive spread that exists as a function of supply demand imbalance that nothing else can store Yeah. Or capture or capture. And so we capture those spreads.

Investors and and lenders have all understood that. And therefore, it's about a positive return and and where that positive return lands, that's the uncertainty. But that's not such a bad thing. At least investors are com got comfortable that it's not such a bad thing to have that variability given that the starting point is substantially positive.

And so if you if you're looking at a starting return where, you know, even the lower end of a likely outcome is probably better than you get on a renewables project. You know, it's it's not a bad investment.

Yeah.

Surely question mark.

It's like if you're an investor and you're gonna invest in Gresham House or a fund or, you know, you gotta buy battery assets or a bit of one, you kinda you gotta wrap your head around the whole macro picture anyway.

So you're gonna have to get comfortable with how merchant works and exactly as you say. Yeah. So if you're gonna go to all the trouble of figuring out how that works and you're you're in the asset class because you understand its need and the all the stuff that we've been talking about.

Then why give away a bit of that to a floor price just to another for counterparty who sort of agrees with you, but but not quite as much That's you just read my mind.

Absolutely exactly that. Yeah.

Okay. I wanna talk about optimize for a second because Gresham House Of course, you've got four twenty five megawatts now. You can have a lot more megawatts. And I think all of these assets are out at the moment, or most of them are with optimizers.

Mhmm.

And of course, you that will happen. You just signed a big deal with a renko. Congratulations on that.

How how do you think about optimizing this space? And you've used a lot of different ones. Right?

Some of which I've been on the end of in previous lives. How do you think about the how optimize have come on in the last few years? And what you're excited about to do with optimizers. And how do you choose one?

Well, that just just sort of going full circle.

That's another area where maturity, has sort of emerged you know, when we first got involved, we were sort of in interrogating if that's the right word or interviewing the the optimizes and and ensuring they would tap interviews, by the way, but on the other side of the table.

Oh, I see.

Slide, what does that chart mean exactly what that chart mean?

Well, we really want you to understand how our optimizers made money because, you know, that's one of the big challenges with batteries is is how does a battery get entered into the market? Was the BM balancing mechanism or or wholesale market and make money given that it's got a choose when it when it makes it when it charges, which on in in effect means when it makes itself available in due course, for export, and they've and that's so different to gas peakers and other dispatchable assets where it's just basically around the cost of the fuel. And if the power prices higher than the cost of fuel, you run it and you keep running it because there's no end of battery life.

You just keep doing it and you just keep it up. Those are the two big differences. It's sort of a variable short run marginal cost for a battery in its function of its import cost, and and the fact that you can only run it for a finite amount of time. Those are the two fundamental difference.

We make the equation for how you run these assets completely different. So we got our heads around that, but we just wanted see who else could do this. And fortunately, the handful of companies, quite extraordinarily, really, emerging to to do exactly that that they literally made their entire business about that. You know, Habitat Energy and ARrenco being two great examples, as well as in house, optimization teams at places like EDF and Flexristi.

You know, they really understood the need to move away from, you know, human based Excel sheet trading, you know. And, unfortunately, that was there and and therefore, we could, as our FFO contracts, initial FFO contracts on our seed assets rolled off, we could actually allocate capacity to these to these companies and and they've been extremely impressive in in in how they've developed.

What's mad is you guys have you've been around the whole market. You've worked with most of the optimizers once, I think.

And you've you've learned all this stuff, and you're still now saying, you know what?

We're not gonna do this in house. So that must mean, a, you're getting a pretty good service from these optimizers, or you're you're comfortable now with the with the work that they do and that they're worth it, which actually, my personal thought is, I think, the gate, the optimizer the job of an optimizer has become so much more difficult.

And it's been impressive how some in particular have really stepped up on and not not just performance, but also on reporting and all the all the other stuff that they have to do.

But what's cool is you guys have been around the whole market. You considered we can do this in house, we could build this in house, and you're still saying, you know what? We're gonna give this stuff to other people.

Yeah.

So how do you make that decision?

But if you think about what makes up an optimizer, it's not what we have in house. It's software engineers. It's people who understand the the market and trading you know, as as well as they breathe, you know, it's a really, really well. And people who can develop machine learning algorithms or other AI concepts to really make decisions.

And then they have to be able to create the IT infrastructure that can process incredible amounts of data and therefore understand the the need for a highly, highly reliable and redundant IT system as well. These are these are skills that we just don't have in house. We could absolutely bring them in house and do that. But as you get bigger, you get better terms on an optimization agreement, and you get that as a function of your scale.

You don't need to go through the the the the challenge of of doing that yourself and making mistakes and or getting it right, but there's that risk Yeah. And so why introduce that risk when there's a robust set of optimizers out there?

And a highly competitive market for them, pushing them against each, you know, there's so much innovation in that Yeah.

Yeah. Absolutely. You know, even though they're all, especially the leaders are extremely smart, that that there is there is more than one of them. So there's a degree of competition. So that's obviously benefit we benefit from that.

So, you know, if you think about what we want to achieve, it's achieving scale and returns for our shareholders. Well, so returns for our shareholders and is a function of scale and is a function of good fund management, which is a function of good capital discipline, good in in in equity market terms, stock selection, selecting the right projects, designing them well, contracting well, negotiating well, And and that's our school course skill set and doing that more than trying our hand at optimization when it's not necessary. It's just not necessary. And when you when you achieve scale through a simple focused strategy, that that is that is that's how you come out with the decisions where you don't do anything.

I'm just thinking as as an infrastructure play, like like like this, like this game that you guys are in. I guess there's the the the idea in the financial world that past performance doesn't indicate future performance or whatever that word is that that that phrase that comes over on the radio and on the new whenever the sharks. Right? But I guess if you're an asset business, it kind of does.

Right? It it has to because you've learned because every time you build an asset, every time you run an every moment that you're running an asset, you're learning. And it's about your learn rate in the startup parlance. It's a learn rate thing.

I'm sure you're it's just a funny one to think about, which is you know, although I guess all of that would be priced in. I'm just going around in my head. How does that sit? Anyway, I'm going going down a rabbit hole in my own mind here.

Well, it's interesting. I mean, you know, consistency of performance speaks to investment process.

And also, then, given that each of these projects is sort of operating business, the the the sustainability or the operating environment will will determine whether, you know, their own returns slip or commoditize or or whatever But I I I'm very much taking the view that we need to be, you know, in inverted commas paranoid, you know, assume that we might enter another COVID environment where electricity demand collapses and gas prices are, you know, sort of setting prices in the twenties. And we want to be this is this is my my own personal goal is to be able to hit on dividend even in that horrible environment. And and we're confident we're gonna get there. That is that is that means that because having been a student of markets and companies and industries for so long, you realize that all industries eventually commoditize. Yeah. And it doesn't mean that the leading company in that industry can't make good returns. We wanna be that company.

You just gotta win.

Well, let's that that really is under consolidation. What are you thinking about consolidation this market? Because at the moment, it's wild how many new end there are assets, you know, this this talk of various new funds. They've got three big funds now.

Let's talk of new ones this year. We've got utilities buying assets, oil companies getting involved in assets. There's so much, you know, real estate funds, property funds, supermarket funds, there's all sorts of folks in this place now. So what happens in the next?

Will there be consolidation or is there enough space for everybody?

I think we've been through one phase of consolidation, which is the sale by most of the EFR assets, and we bought a hundred and twenty of the two hundred meg that got awarded contracts in twenty sixteen and got built in twenty eighteen. So we that was one phase of consolidation where we bought assets from those exiting the sector and with with then then one other asset as well from from a player it's in the sector. So that that that is a first wave, I think, of people entering the market going, yeah, not for us or whatever they decided. There's bound to be a second wave and certainly a third wave and to accept their waves or whether it becomes continuous.

You know, you sort of have people who build assets, choose to run them for a bit, whether they think they're gonna get a better return as a result of doing something like that, and then sell them or just pivot into something else, whatever the reasons are, there's bound to be consolidation, but I at the moment, as you say, there's I'm not sure the right word is fragmentation, but it's certainly a lot of new entrants and a lot of, yeah, sort of new players, and and we'll see how how they all get on.

There's there's a lot of It's kind of comforting because it means there's loads of new players who are saying is the place to put my money.

But then it's kind of uncomfortable too because then you're you're in this you can turn it on its head and say, if there's so much interest, then I'm glad I'm first or I'm big or whatever, but that also makes me feel uncomfortable.

It makes you feel uncomfortable.

Well, I mean, I don't know.

And I said, I didn't own, own my house.

That does well for me, but I doubt it.

But, yeah, it just made me feel uncomfortable, but with so much if you if if you have growth of interest in the sector, forever to a point, there's too much growth of interest in the sector, I guess. I don't think we're there yet. It's just something that also thinking up No.

I think we're far from that.

And then I've just got a couple more questions.

A bit of a silly question, buddy, but have you guys looked internationally? Most of what you do is in Great Britain Mhmm. All of it is in Great Britain.

Great Britain. And we have an initial pipeline project, that we've disclosed in in in Ireland. Okay. One hundred and eighty meg project.

I don't need to say anything you haven't disclosed or I'm sure you guys are looking around around the world. So what what are you thinking about about international markets? Is that is that something that is important to question ourselves right now?

It it's something we're always exploring. One one of the great things about this sector is electricity is the same wherever you go.

If you put in a battery system, you're gonna put in a similar battery system wherever you go. The analysis is different in terms of what the market is. But ultimately, even the generation mix will be a version of of what you have in the UK, you know, it'll be renewables gas, maybe coal, maybe nuclear, maybe hydro, but it land in the different mixes, and with crucially different weather patterns. But all that does is is alter the equation and the output in terms of what you might build, but ultimately, you're still gonna build a battery system with probably the same technology.

That that does mean that the industry's sort of all our skills or our knowledge could be exported abroad, but we haven't made any commitments approach beyond Ireland.

What what strikes me is, and we we're looking internationally in very different markets, and we'll be in very different markets soon. That's all very exciting. But it's kind you you learn the the great British market and you learn about frequency response and, you know, fast response and the balance of mechanism. And you think, oh, I've gotta go and learn all these other markets again.

Mhmm.

But they're very similar.

It's a bit like learning French when you speak English or, you know, It's it's there's there's so much crossover. Actually, I don't speak great French. That's a very good example. It should be this in French. I thought you're gonna oh, no. I think we'll start talking to me in French.

I could do that.

No.

But, that's a really bad example. What my point is that you may have a different type of option structure or different rules or different settlement period thing. But, actually, the the general principles are the same. What you're looking at here, you know, you need frequency response.

You need a much a deep merchant market. You need a debalancing market eventually. You need access to these markets and everything's moving towards real time. Sometimes you kinda get your head around that, the new markets aren't that complicated That's what I've I've thought, but maybe that's my arrogance coming coming through here.

No.

I don't think it's arrogance. I think it's a good summary. Of course, it's double than detailed, you know. Yeah.

Not every market is a wholesale structure so that that disupplies that that sort of displace certain markets. And of course, there could be complexities at all levels, whether it's of the development stage into connection sort of before, you know, the pre commissioning stage, and and there are complexities in those areas. But but again, they are shades of gray. I I the way I observe it for the time being is is that every market has the same requirements.

So you still have to worry about, you know, whether it's the construction license or planning permission or something else or or interconnection or enduring connection or just a connection offer. It doesn't it's just parlance and jargon. But different regulations, laws, rules seem to be emphasized and applied differently depending on the country. More as a function of history, but ultimately that those rules will exist.

Yeah.

And exist for a good reason.

Oh, I wanna ask you one one last question, and I'm gonna come to this end game point. Right? What's the vision? So where does energy storage?

Your deep in energy storage now. Right? Where does energy storage fit in the future energy system? Yeah.

How important is it? How much stuff is it doing? And what and what's the impact that it has on humanity?

A bit of a big question, but Big question.

Rather than taking the global view this time, you'll take the UK view. Yeah. We have we have best estimate off top of my head is probably about thirty seven gigawatts of of of average demand for power through the year, huge variability intraday and seasonally. But, you know, if that's the level, but electricity represents twenty percent or so of total energy consumption. So that twenty percent is gonna go to a hundred percent.

It doesn't mean that we go up five times because electric cars are more efficient than petrol cars. Much more gas heating is much less efficient than heat pumps which are at least twice as efficient. So we we might see electricity demand double or triple, though, especially with some economic growth. And maybe we're not sure something. Who knows? As opposed to having gone the other way for decades.

Within within that larger electricity pie, we will see renewables become h to a hundred percent of the total, if we wanna hit next era, and we need to do that. I think it's entirely possible based on the resource that we have, then especially offshore wind, you'll need the energy storage, and you'll need two forms of energy storage. You'll need energy storage as we know it, which will cover a huge percentage of situations, and you'll need what's called long long duration energy storage, which might not end up being long duration energy storage. It might end up being, you know, when when we have a five hundred hour under generation from wind fleet event, it might just be gas with sequestered CO2.

And when we got over generators, I'm I'm backing interconnectors, you know.

Yeah.

I I just I've always I've always scratched my head about interconnectors. Yeah. In many situations, they might help.

In in other situations that they might just prove that they don't help as in, you know, if it's super sunny and windy and blustery or something across all of Europe. Everyone's wanting to export to everyone else. It doesn't really solve the problem. But, you know, that's that's my slightly slightly tummy cheek example, but I've been using that one for a while. They're all versions of it, and and same goes the other way around, you know, if it's, you know, surprisingly still winter's evening. You know, you've got no solar. You've got, you know, no wind.

All of your will be stuck with it.

Is that something you could get capacity market? Contract in both ends of your interconnector.

Well, that's a that's a personal question.

Yeah. Yeah. Yeah. Yeah.

And that that speaks to So you're gonna do one out there.

You care about solving the problem, or do you care about making money?

And I think we need to focus on achieving both.

Yeah.

No. I think I think you end up with the the shortfalls in generation over long duration events with doesn't really apply to what we're doing except in certain circumstances being being achieved.

Well, the only technology I know of today would be a gas engine, which is dispatchable and can be flexible from a zero set point give or take while, when you're oversupplying, well, maybe we end up onshoring to manage intensive industries Yeah.

I've thought about this before, so instead of doing long duration energy storage, we have lots of short each duration energy storage. And then when we have the really sort of almost black one event that we're talking about. Mhmm.

We just run gas and make it really efficient gas.

Yeah. We're okay with that. That's a I've I've never considered that before.

Okay. Well, I mean, I'm just this is this just goes to the core of of how about that you think about think about these things. It's like, don't plug in a technology that doesn't exist yet because it might never come along. And I don't know of a single technology that does solve it, even an inter seasonal battery. You know, have a self has a self discharge rate that makes it wrote to be ineffective if if the the the oversupply event comes in the early part of the year, and then the undersupply event it comes later in the year when you need it. You've already self discharged because battery self discharge.

And of course, you can keep them topped up, but that's, like, in effect speaks to in Like evaporation.

Yeah. In in a pump pump program. Yeah.

Exactly. Right. Exactly. Very good example. And I haven't heard of all sort of that.

Well, that's what I'll use you.

Essentially, I think those are sort of three underpinnings in the future in whatever mix within the renewables and in whatever mix we end up seeing within the the the the the key quote unquote storage segments because actually one of them might just be more gas with with which is decarbonized.

It's big. Right?

The numbers you're talking about there are two or three times peak, two or three times average load now.

So that's like always triple almost a hundred gigs of energy of electricity and mass electrification. And we're gonna get there with mostly renewables. So let's say that's Let's say, I don't know, above fifty gigawatts, but it could be seventy five eighty. Right?

Of additional gig of of nameplate capacity. I would have thought it was another hundred.

Yeah. Because you and then yeah. And then, yeah, and then you need a load of batteries. So we're talking we've got a long way to go.

We could be doing one of these in ten years time and still talking and and we can figuring out what what on earth? What are we talking about ten years? Let's let's agree. I can do that.

And that's probably a good time to wrap up, Ben. I just wanna thank you so much for coming on and taking time out your day. I'm sure everybody listening absolutely love that conversation. If you got comments, please do let us know in the comments or remember to subscribe spotify or whatever you're listening.

And until next time, we'll see you soon. Thank you very much. Thank you.