Navigating Europe's patchwork battery markets with Kilian Leykam (Director @ Aquila Clean Energy)

Hello and welcome to another episode of Transmission. Today, we're joined by Cillian from Aquina Clean Energy. And Cillian is the director of investment management in battery storage and has deep experience in bringing forward battery storage in Europe. This conversation covers the history of investing in European battery storage from four hour systems in Belgium to Germany, Italy, Iberia, Greece, and the Baltics. We cover the biggest challenges and opportunities in each market in Europe, as well as covering some of the critical changes that are happening, things like harmonization, but also co location across those markets. For anyone interested in European best, they're going to find Cillian's expertise and insights super useful. And with that, let's jump in.

Hello, Cillian. Welcome to Transmission. Thanks for the invitation, Ed. Great to be here.

Okay. So let's get straight into this. I would love to know a little bit more about you and your context within the energy space.

So I'm a director for batteries at Archidai Clean Energy. We are an, IPP and developer for renewables and batteries, working across, Europe, but also in in APEC. I joined the company five years ago to to build up the battery portfolio.

We have now, seven gigawatt of, portfolio across nine European countries, continental Europe. And, before that, in my, earlier career year, I was, working in trading. So for for many years, I've been working, at the trading desk, trading coal, electricity, gas, UAs. And, later, I was heading the business development and strategy of a a large European utility.

And just to kind of pick up on that seven gig, so to help people understand by region where that seven gigs is located, how how how is that kind of how is that spread across markets?

So we we started out our first, battery project, was in Benelux.

We acquired that in twenty twenty one, and, that has been operational since, two years now. It's been one of the first four hour assets in, continental Europe, twenty five megawatts. So for today's standards, not huge, but, at that time, it was one of the larger, assets certainly for for the continent. And, then we have a very, mature, German pipeline where we are currently constructing, two projects. We're also constructing, a a a project in, Finland currently.

And then we have, yeah, large pipelines in Italy, in Iberia, in Greece.

So so these are the main markets. And then we are also active in in certain niche niches. So we we have a Swiss project, but also something in, in the vortex.

Okay. So pretty broad a a pretty broad mix.

And if I kind of was to go over those markets, so is am I am I right to say that Germany is probably one of the largest markets?

Yes. Certainly. So in in in Germany, we have, one point two gigawatt of, project portfolio split across, DSO, where most of our late stage projects are. But then also now, we we we started doing the larger TSO connected projects.

Okay. And maybe just to go back to Benelux, actually. So that twenty five megawatts at four hours, that's pretty unusual, actually, to be looking at four hours back in twenty twenty one. What was the kind of what was the reasoning that kinda got you to that that point?

So, Belgium has a capacity market and and that capacity market at that time had a slight tendency, for the four hour duration. Also, it's a very energy heavy market, so the the battery is really used for cycling across aFRR, but also, imbalance. So, with the bedroom market, it's very particular because it has a very volatile, imbalance market that is, well, in real time used for for for the optimisation of the battery. And that is, something, that that the battery can do very well. Nowadays, we are also developing two hour batteries in in Belgium, but at that time, the tendency was slightly in favor of the four hour.

Okay. Really interesting to to kinda hear that. And I suppose a lot of our listeners might be in the US or UK or potentially in Australia. AFRR, what does that stand for? What is that as a service?

That's, the secondary reserve. So that's basically, the ancillary services from the TSOs that is used for the slightly slower response time after the primary reserve.

And, it stands for automated, frequency restoration reserve. So it's basically automatically activated by the, TSOs.

And now I think let's move into the first kind of topic we want to really cover, which is, how how does Aquila think about these markets?

So you're active in a lot of markets.

How do you assess the attractiveness of different different markets? So when we started in, twenty twenty, looking at batteries and Aquila, we were coming we have been doing renewables for over fifteen years. We started twenty twenty with batteries. It was very early stage.

Right? UK was, starting to to to pick up. The activity increased quite a bit there. But on the continent, it was still, very early, and most people said that you will not have the same development as in the UK because you have a large interconnected European grid.

And, hence, you do not need such a flexibility like an island market in the UK. Right? I mean, in retrospect, obviously, we can now say that this is has probably not been proven true, and and and we expected that, that early on that there will be a similar need for short term flexibility, also on the continent.

So and and now markets like like Germany, like Italy are obviously, extremely active. Right? I would potentially even say a bit more active than than the UK at this stage. And when when we started, we basically, looked at the different, European markets where we partly had already renewable, activities, but also markets that we entered just from the battery side, like, for example, Belgium.

And we looked at, okay, where do we have the renewable build out and where do we have the fossil decommissioning.

And, these two factors are driving to a large extent the the need for batteries. And we see that the individual setup of each market differs slightly across, the various, European markets, but there is a trend towards harmonization of the markets. And in the end, when when you have this drive for renewals, you end up with a certain level of, short term volatility, and this requires the existence of this flexibility asset. And then it doesn't depend so much whether this is, this flexibility is then covered by ancillary services or via wholesale, markets.

And we see different approaches here and, or or Italy, which takes a completely different approach in terms of how batteries are incentivized. But as long as you have this build out of renewables, you then also have this need for for for the connected flexibility. And and and that is, what is what is driving the opportunities across Europe because this drive for renewables is something you see from the Nordics over Central Europe and then obviously also in in the in the big PV markets in Southern Europe. Right?

Italy, Portugal, Spain.

Yes. Yeah. Agreed. I I I actually had forgotten about that. Definitely, I remember now twenty twenty, twenty twenty one conversations about how interconnected Europe was and how limited storage was gonna be, that was definitely a thing that definitely happened.

Exactly. Lost lost to time. It definitely did exist for a time. So building on from the interconnection side, so the two key parts of the res build out, which you kind of highlighted, brings through, like, certain sort of price dynamics, so over generation, let's say, for low price charging opportunities.

But also on the fossil decommissioning side, have have you looked at some of the old fossil sites that have been decommissioned? Have you ever looked at some of those and said, that site, we'd be interested to use some of the existing grid infrastructure to develop around those projects? Or have you yes.

Okay. So so, actually, the the project in in Belgium that I just mentioned, that is, the site of, of a former coal plant.

And, the coal plant has been teared down and, then basically the the batteries erected upon it. That's makes a lot of sense because you have the grid infrastructure already there. You you have the transformers often already there. You have already the injection capacity at that specific grid. Not not always the import capacity to to charge the batteries. That is something that, that can be tricky in this location sometimes.

But, yes, we have done it. However, it's difficult to scale because, obviously, that is something that is often, dominated by the incumbent players that that have these former sides and that that are reutilizing them for Yes. For for new projects.

So they hold the site. They hold the land. And if they want to, they could kind of step in and develop that. So you'd you'd have to kind of acquire it from them Exactly. And then develop it. Okay.

But as I think as a as a business case, I I I think it's kind of super interesting because it it really is kind of just making the most of the, like, the transmission capacity Absolutely.

That we have. And it's a similar logic in the end, like the collocation.

Mhmm.

And the colocation with renewables.

Yes. Yeah. And so maybe a a nice sort of foreshadowing to to where we're going later on in this conversation.

But let's let's first talk a little bit about regulation. So you obviously see a lot of markets, and you've brought forward projects in a lot of regions. How does the regulation differ from region to region? And I think perhaps that builds on a little bit of what you're saying at the end about that sort of the harmonization of markets as well. So so how different are these regions?

If if you look at the big picture, they look quite different.

So you have markets like, Italy, which are dominated by by long term contracts. On the one hand, the capacity market, but but then also the so called MAXA auction, which gives a fifteen year contract, basically fully contracted revenues, for for a battery. And then you have other markets like Germany, but also like the Benelux, which are very wholesale driven.

So, driven by either imbalance or, in the case of Germany, the continuous intraday market, which allows close to real time optimization of the battery. Mhmm. And then you have, markets which which, still have a large share of ancillary services.

One example of this is Nordics, but also, in Iberia, the AFRA that I already mentioned, is something that that that is still dominating these revenue mixes.

But what we are seeing as a trend is wholesale anyway is something that is already pretty harmonized, across Europe. So you have the big exchange, the epics, which is covering most of the regions, not all of yet. So for example, not Italy yet and also not Spain yet where you have local pools.

But wholesale is something which is fairly standard across continental Europe.

And then you have the ancillary services, which were until recently not very harmonized, but the EU has implemented, certain harmonization initiatives like, Picasso, which is, for example, it's it's a it's a name of the initiative from the EU and and which plans to, harmonise the secondary reserve markets, so the AFR markets, across Europe. So also these markets are then are getting more similar across the different countries.

But you still have, and I expect this to to continue for some time, local incentives in each in each region, in each country.

We just run through kind of the different types of market design. So we talked about Italy with the Maxa, Benelux, Germany, Iberia, which is kind of description of how each of those markets has its own form of regulation, but then how Picasso is kind of harmonizing parts of that, particularly on AFRR. But we haven't gone into the challenges. So within each of these types of regulation, as someone who wants to develop and and invest in these projects, Which of these kind of, regulatory regimes is particularly challenging to you, and and kind of what is particularly appealing?

Yeah. Let's start maybe with the ones that is really appealing. So so so so we see, big opportunities, in Germany.

We also like Italy, even though the two setups are are quite different. And and also, we we we see very big potential in Iberia, so both, Portugal and Spain.

What what we like is markets where where you have a large share of wholesale optimization revenues. So like the German market, which is really driven by the continuous intraday market where you can optimize in fifteen, minute granularity really up to five minutes before delivery the battery. And this, market is used a lot by, renewable players across, Germany to to optimise their imbalance position, and, hence, it sees a very high level of volatility, which is which is perfect for for battery optimisation.

That also that brings a benefit of of reduced cannibalisation risk. Right? So other markets which are more dominated by, ancillary services, Nordics is one example, but also Iberia, which is still, dominated at the moment by secondary reserves, so AFRR.

Also, there there are obviously cannibalization risk. And for a larger of deployment, you would need then, also an active wholesale market with the necessary revenues for the battery stack. And that is pretty much, the same situation that you faced, in the UK. Right? Yeah. It's it's it's the same story again, and therefore, I think you can also learn a lot from the UK and the experience here. Right?

It really is the same story. So, I mean, we had saturation in in GB in sort of the end of twenty twenty two. Texas, ERCOT was last year. Kaiso is also such Kaiso California is also saturated, and the NEM in Australia has kind of also also saturated its frequency response services. So you kind of see this consistent story coming through of kind of batteries coming into a market technically being the best at the frequency response side and then moving into wholesale. So I think where you're kind of highlighting with regions like Iberia that this kind of it it it is kind of frequency response driven. I think there is a there's a short terminus to that, which is I I think why I kind of really like your answer around Germany and this ability to be able to be in wholesale markets right up to delivery brings it feels like a a more secure revenue stream slightly longer term.

Is that how you think about it in terms of Yeah.

Absolutely. And and to be honest, I also think that's the future where all battery optimization, independent of the country will go, sooner or later. So markets, will be optimized. Renewal driven markets with short term volatility will be optimised on a close to a real time basis by automated optimisation, engines algorithms. Right? And that we are and we are seeing this already very active in countries like Germany or Belgium, and this will come sooner or later due to the other markets as well because it's the same fundamental need that you have in a renewable system.

Mhmm. Agreed. And just in terms of then focusing on some of the regulatory challenges, if you kinda had this ability to move the rollout of battery faster in Europe, what what what would you tweak?

What would you change?

If you know the challenges from the UK, I guess, the ones on the continent will sound very familiar to you. I would say it's, three main ones. So so one is grid, availability of grid connection. Second is the market setup, and the third one is, is permitting. And maybe maybe starting with a grid, so, the infamous connection queue in the UK, it's very similar, things happening for example in Germany. Germany has also had and still have, first come first serve basis of applying for grid connections.

And there are now various numbers flying around how big that queue now is. There's no full transparency, because there are over eight hundred DSOs in Germany. So so you don't know because nobody ever has taken stock of the, whole applications, but it's probably north of, five hundred gigawatt of grid connection applications.

Obviously, that number is is is pretty meaningless in itself, right, because we all know this will not lead to projects, but, it just shows how jammed the system is and how jammed the system is to to get to these grid, applications. And I think this is the number one, problem, that we are seeing across most of the countries and then also questions around availability the timing of the grid connection. So when is once you got an answer from the, grid operator, when is it available? When can you connect?

And then also, much around the firmness of the grid connection. So is it a flexibility connection? Is it a firm grid connection? These topics.

I think we're we're starting to have that conversation on firmness of grid connection.

So are you allowed to import and export in every in every single period for the sort of twenty four seven, or are there some periods where you're limited? We are starting to have those conversations in other regions as well. Maybe just to kind of give a little bit of context around the grid queue to ask about it in a different way. If I went to Germany today and said, right. I'd like to connect my battery to the grid on the first come, first served basis.

What might be a typical date that I would hear back in terms of when I might be able to connect?

Well, if you would ask today, the problem is that you wouldn't get an answer because, some, grid operators basically stopped, processing new applications.

So they said they will first work on, the queue they have. And then, it depends. We are seeing, timelines of, thirty six months. I mean, compared to to the UK, that's still relatively early.

Yes.

But but we are also only at the start of that journey. Right? So with more and more, application reaching in more mature status, it can be expected that this will also drag out. Sometimes Some some DSOs give you also late, twenty twenties, as answers. And and, yeah, these so so very very similar situation as in the UK. Yeah.

Okay. We we had the slightly infamous kinda twenty thirty six, twenty thirty seven date that was very much a a holding date. We'll we'll get back to you when we're, when when we're ready to. Let let's move on to your second one. So, market setup, what does what does that mean?

I mentioned Germany and, Belgium, which which which have a pretty good setup to to to do an non ancillary services optimization of the battery. But in other countries, even ancillary services are not fully opened yet. So for example, primary reserve, so that would be the equivalent of the FCR in in the UK. That isn't yet a market in Iberia.

It's not open in in Italy. There, it's basically a mandatory, provision by conventional power plants. So opening up all market segments where batteries can participate is key. And if you look, I mean, first would be obviously frequency, we discussed that, but then second also if you look beyond frequency services, there there there is a need to open these up, which is, reactive, which is inertia.

In Germany, you now see movements, towards that. So so there will be, tenders for, reactive power, and, there are also planned, tenders for for, synthetic inertia in in Germany.

But, opening up these markets is is something that that that that still, needs to be done in in in most of the, countries.

So, you mentioned reactive power and synthetic inertia. What do those sort of tender or market processes look like?

So at the moment, one German, TSO has has released a a tender for, reactive power in Germany.

But it's expected that, the, other TSO will follow through and will then also set up tenders. But at the moment, I would say it's still pretty much, experimenting how to set this up, and I expect then, that this will, also be harmonized, across, across Germany and hopefully also then, by by other European countries. In Belgium, for example, we we also participate already in reactive power services, with the batteries. So their area that TSO is already procuring, these services.

I think this is, like, one of the most exciting parts about about batteries because we we know that batteries come into a system. We know they can provide frequency response services at lower cost than thermal assets. And so that is really exciting, and we've kind of seen that across nearly all regions, more or less. Batteries have then gone into wholesale markets and again starting to compete with gas units for kind of the the kind of flexible megawatt hour at the peak.

And I think that's really exciting. But this is this kind of third bucket of things like synthetic inertia, reactive power, the degree to which batteries can do that and lower costs of running the system for the system operators but also for consumers feels like one of those things that's not not yet defined. If we have this conversation in three years' time, we'll be talking about it like, oh, it was so obvious that this was where it was going to go. That that feels like where it's going.

Is is that kind of what you see in in your advanced Absolutely.

And and and one thing is a cost. Yes. Obviously, batteries are able to, provide these services cheaper than conventional plant. But, the other topic is also the minimum, load requirement of fossil plants in order to, produce these services. Right? So we are seeing in Germany, but also in Iberia, that the grid operator is redispatching, so ramping up, outside of the wholesale market, these conventional plants in order to produce these services.

And this is obviously something that, when we want to move towards a fully decarbonized power system, this shouldn't happen and, batteries are perfectly suited to to to do this and to do this in a c o two neutral way. Yeah?

I I totally agree. And if you want to look at an example, like take a summer's day, plenty of solar, power price negative or near zero, and what you'll see is there'll be a couple of gas units that might be running often for things like voltage control in a particular area. So, yeah, expect to see more of that this summer, I think.

Yeah. Yeah. Absolutely. And we need to get rid of that.

Oh, oh, a hundred percent. And I think also good for consumers when we do because paying large gas units to run when the wholesale market says they shouldn't tends to be quite an expensive thing to do.

Yeah. And plus it leads to negative prices, which is also important to keep in mind.

Agreed. Agreed. Let's go on to your third. So permitting. What did you mean by permitting?

So permitting is is a process, how to get the, building permit.

This is something which, for a lot of authorities, in continental Europe is still new.

You have sometimes, like in the UK, a different system depending on the size of, the plant. So, above fifty megawatt, this is actually a number which which you don't only have in the UK, but also in in in some countries like like Spain or Italy. You have then different permitting routes on the national and and, local level. And, especially on the local level, we are seeing that it it is always a long process to start basically explaining local authorities from the very beginning.

Okay. What does, how how does a battery look like? What impact does it have in terms of noise that it does not have a significant risk of, fire and so forth. Right?

So that you basically you don't have an harmonized process and hence there is a need to go through explanation again and again. And taking the example of Germany where it's particularly, difficult to to manage the permitting. So in Germany, you currently have, three different, processes of getting the battery permitted, and there's no specific site, size, limitation which gives you the right direction for the for which process you go for, and each local authority then basically has a different, opinion on which is the right process and and which one should be used. And that makes it, in particular in Germany, very cumbersome to get, projects, permitted.

Okay.

So plenty for for improvement there. I think let's move from regulation to turning these sites into revenue. So how do you go about trading different assets in different locations?

I mean, as I said, in the beginning, you you have similar, problems, in in the countries. So due to the renewal transition, due to the fossil decommissioning, you face the similar, problems and, hence, also similar needs of the system that are then covered by either in series services or wholesale market. In in certain, countries, like for example, Germany, but also, Baltics, which is a pretty fresh country to our, battery portfolio, we have been early movers in in basically developing this, revenue stack with a large focus also on, energy revenues. So so moving away because, obviously, with the UK experience and also with the more international experience, you could see that, the capacity revenues from ancillary services will decline. So from the beginning, and that's why you also see, for example, the four hour asset in in Belgium, but also in Germany, we immediately went only for two hour assets. So we immediately, we we we skipped the one hour, developments.

And therefore always had a very, energy intensive, business model. So focusing in Germany on intraday, but also on, on AFRR energy. So basically on the activation of the, of the AFRR, reserve.

And, the optimisation itself, we are we are not doing, in house. We are doing that, with partners, with optimization partners. And there we see, large differences in terms of maturities of that of these optimization companies, across Europe. So you have markets like, Germany, but also, Benelux, where you have very sophisticated, battery optimizers, and you see them now also coming to the UK. And as far as I hear, they're also quite successful in your rankings.

So because how you optimize a battery in, in in in Benelux is something that where the UK market is now moving to, right, toward a very, imbalance, heavy optimisation of the battery. In other markets, these these companies, are not yet active. And and, for example, Iberia, Italy, are examples of markets where, there there there's not a big field of optimizers, yet, but I'm sure that this will also, develop over the next, year or so.

Okay. So very much within Germany, Benelux, UK, quite developed markets. There's sort of track record for a lot of these companies. For some of those less developed countries from, I'll say, a wholesale perspective, what do you look for in terms of doing the route to market in those regions? Do you look for optimizer or a route to market provider who has that kind of background in that particular that that particular region?

Not necessarily.

I I think, at the moment, we rather try to bring the experience from the other, countries, into these, so so the experience from, let's say, Germany into these countries, because I think that's the easier, step to do because getting, used to the local, market setup, which is mainly the ancillary services setup because the wholesale is already very similar. So, setting this up, from our perspective is the easier, step rather than, setting up an algorithmic trading setup without prior experience in in these countries.

And with these assets, you're also trying to you're trying to develop them, operate them, and also have them financed.

One of the ways that we're seeing people start to look at doing this is through the kind of flaws and tolls in the market. Are you seeing a trend towards flaws and tolls in European markets? Yeah. Absolutely.

And and the best example for this is, Germany.

So in Germany, we see a large appetite from, from off takers for for tolls. And we just recently, launched an RFP for one of our assets for toll, and we got, I think, more than a dozen of, answers from, potential offtakers all with, bankable, balance sheets because that is obviously a requirement here. So the offtake interest is there.

The interest from the project developers, I mean, so far few tolls, have been executed in Germany.

I think, just one actually has been done so far. But with project sizes increasing, we see, that more and more assets, will require tolls because once projects get bigger and we are now seeing the fifty, hundred, and and and hundred plus assets also being on a construction, in Germany. And therefore, also, the senior lenders will want to see some, secured revenues, and, hence, at least a partial toll is something that I would expect to see more frequently, going forward. Not, only I don't think we will move away completely from the merchant model. I think there's also a large appetite from owners, operators to have the merchant exposure because it, balances sales portfolios, because it it balances renewable portfolios, or because you just want to have the merchant exposure because you like volatility.

So I think there will be a room for both, but we see, a larger proportion of tolls, going forward. And in particular, Germany is a good market for tolls because off takers are more comfortable tolling wholesale revenues than ancillary services revenues because wholesale revenues are, let's say, easier to forecast.

And, therefore, with markets moving more towards wholesale, dominated revenue stack, we also expect that then, there will be a larger amount of off takers feeling comfortable with that exposure for five to ten years.

Yes. Okay. And just to kind of just pick up a couple of bits on there.

So what is the typical tenor that you're seeing on on a toll?

So typical is five, there is also seven, and some companies are going up to ten. Okay.

And then you mentioned kind of going to a hundred megawatts and beyond.

I think one of the things that's really interesting on the tolling side is that some of the companies you mentioned that maybe have been kind of first movers in optimizing batteries might not necessarily have been the kind of the utility players of the past. And so doing tolls that are, say, five or seven years as a smaller optimizer can be quite challenging. How do you see the kind of the split between some of the sort of more legacy players who have kinda got big balance sheets and are kind of happier in the toll side to some of the innovators and the new entrants to the market who maybe have kind of less of the financial security, but perhaps more knowledge of how to do the toll.

Yeah. Absolutely. And and this is something, that that we are seeing as well. So so the good optimizers, in Germany are not necessarily, the companies, that have a balance sheet for a five to ten year contract.

Fully agree. What we are seeing is that these companies team up. So, basically, you have the optimizer doing the optimization, and you have, other companies offering the balance sheet for the tolling contract. And I think that is, that is a very good model because it serves both needs, and and we are seeing that from a few players, in Germany.

Yeah.

No. I think I think it's pretty smart, to be to to be clear. The other part you mentioned was around the portfolio risk. So people who have lots of, say, solar might be quite interested in having battery storage within their portfolio to help them with particular issues that are coming up in the market.

A question on how does Aquila think about the evolving role that storage plays within helping your portfolio in the longer term, so as we go five and ten years beyond today?

Yeah. So we have been doing renewables, and that is PV, wind, but also a bit of hydro in the past over, since since fifteen years. And now since five years, we we are doing, batteries, and, batteries has been have been the fastest growing asset class, in our portfolio over the last years, and it's now, the number two, in terms of size in our portfolio.

And we see that, evolving even more because we see that, renewables plus, batteries will become, the standard. So if you look at, our renewable pipelines in Iberia, it is standard to have PV plus base just in order to, be able to to sell a product that has more value, so dispatchable green power, and that you can then offer this to to customers. And this is becoming, from our perspective, the license to operate and the standard way of developing, PV, and to a certain extent also, wind farms going forward. What we're also doing is a triple hybridisation in in Iberia so that we are adding wind to the PV farms and then also add, batteries on top of it. So, this is for us, becoming the the absolute standard. Mhmm.

I think those kind of three words, dispatchable green power, that kind of of feels like where a lot of this is going on the PPA side, but also how do you get the most out of your good connection that you have been able to get hold of in in certain regions.

Okay. And and and maybe in that that tripling up, so wind, solar, and storage takes me kind of really nicely into the last question I wanted to ask, which is around the trend for colocation. So clearly, you believe in colocation. I've I've not seen too many people do a tripling up of text on one site. How big do you think colocation will be for Aquila's portfolio?

It really depends on the country because we we see certain countries that are going more into the, stand alone direction, like, for example, Germany. But then there are other countries, like Iberia, which are pushing very much the colocation setup.

We we have a, renewal portfolio, which is, over fifteen gigawatt across Europe. And and obviously, from our perspective, it makes a lot of sense to to utilize, one connection point because this is in the end the value of the project that is in the connection point to utilize that for for for various asset classes. And and therefore, we we really like it. We see that in, some countries that the regulation for collocation is not there yet. Like, for example, Germany, there we are then focusing more on the stand alone. And if you look at the German battery pipeline, you see that this is mostly the case that everything that is currently in construction, which is larger scale is, is stand alone.

But for countries where it's, possible, we really like, the the the collocation approach because, we are seeing that capture price risk is one point, but then also containment risk. So technical containment if the grid operator curtails the, the PV production, which is, for example, for Spain, a relevant topic, then you are, to a certain extent, protected, with your battery. And we are seeing that a four hour battery in in Iberia can reduce almost to zero the capture price risk of, of a PV plant. And that, is, from an investor point, obviously very helpful.

But if you want to sell the power output then to a to a corporate offtaker, then it's, obviously also very helpful because we are now seeing already that corporate offtakers, are asking for PV plus best, off takes. And that is then, if you look, for example, at, California, it's a very, similar trajectory, right, that the, battery build out is basically driven by the offtaker interest in having, dispatchable green power, and this is where the market, in our view is going to. Yeah?

I totally agree. And I think people will understand capture rates, so this concept that when you have lots of solar generating at the same time, you might get a smaller portion of the revenues versus, say, the average day ahead price. The the curtailment risk that you described in Spain, that's a little bit different to other markets. How does that work?

So, basically, when there is, too much, production in the Spanish, system, the grid operator is is allowed to, curtail the asset. And, that is a risk because it's non compensated in, in Spain.

And, in order to then still use that power, you can, basically inject it into the battery and then, dispatch it at a later, at a later time.

Yeah. It's it's different to other regions in the UK. For example, you would be allowed to keep on generating to a negative price if you wanted to. And in some cases, in older subsidies, you'd still be paid for generating a negative price.

Yeah. Yeah. That is that that is actually also something which is still not harmonized, across Europe.

It also creates some quite interesting things.

So you'd expect Spain to have quite negative pricing just because of the solar it receives. When you look at Spanish pricing, it always kind of caps out at zero, and this is the reason behind it.

Yes. However, we we we try to distinguish, economic containment and technical containment. So technical containment is really because there is an issue in the grid, and the grid cannot handle it, or the grid needs to ramp up, fossil production because of voltage issue. This also happens. Or with or the grid needs to ramp up, due to, local congestion, which is not reflected in the national, Iberian price.

And, the reason why you don't see very negative prices, you also see now more and more negative prices in Spain, actually. But why why it's not so negative is because you don't have so much, mass run, generation, in the grid, like, for example, in Germany or, in France or in, in in Benelux where where where the PV is less steered via pricing.

Yeah. No. This is a a fascinating tour across European markets. I think, listeners are getting a real, real insight into how some of these markets work and how you think about it. So it's that that is much appreciated. I'm gonna move on to our final two questions. So the first one is, is there anything you'd like to plug?

Yeah. I think, what what I would like to plug is not necessarily something around, around AQUILA Clean Energy as a company, but but more of the of the energy, transition, that we are in. Because, in particular in Germany, where I'm from, but, I I see a similar picture, in in other countries as well. And I think it's it's similar in the UK that the energy transition is always seen as, something negative, as something that takes away something, like for for the Germans, obviously, our, petrol cars and our diesel cars, our gas boilers, our lignite mines.

But, what what I would, pitch to the listeners that, that's actually not the case, that, that I think the system that we are moving to is is better. And it's better not only because it it has no c o two in it. I think this is, an a nice effect as well, but also because the experience, the reduced, local emissions, for the customers is something that that will make our societies in the end better. And I think that's that's the message I wanna I wanna transmit that, the the system we are moving to is actually it's good and it's better.

Oh, I totally agree. We have a wonderful snippet for the episode.

And, moving on to your contrarian views. So something that you believe that the majority of the market doesn't.

I I I think what what what I believe in for the UK, it might not be so contrarian anymore, because I I heard that soon actually in q two, there will be potentially also, changes on this year.

But in Germany, it's still, a pretty big red flag, and and I've been working in the energy industry, for for fifteen years. And in the past, it always has been something that in in in Germany you couldn't discuss, and this is, the zone of pricing. But I think, we will need zone of pricing also in Germany. And very slowly, the German energy industry is moving or is realizing that this is, really needed.

And therefore, I'm sure that this is also a topic where the UK is again, leading a bit the pack. But, I'm sure that in two years' time, we will have a similar discussion on sonar pricing, in Germany as well because we need it for the proper dispatching, of the assets. At the moment, assets don't receive the correct pricing as to dispatch because they do not include the network constraints and hence, I think not only for batteries but also for smart charging of EVs for demand response of big industry. It's it's essential to have the proper dispatching signals, and therefore, we will need to move towards zonal pricing, also in Germany.

And, the big benefit of it is that with, a northern zone in Germany, you would, have a zone that has more than ninety percent of renewable power and that under EU rules, actually allows you to produce, hydrogen, green hydrogen with, with grid power. And I think that's, that's a massive benefit that is often overlooked when, when when looking at, at zonal prices in in Germany.

I think it's a super interesting topic. And, yes, I I it's still I can reassure you it's still contrarian, in in in GB.

I would say, yeah. So q two, we should get a a bit more information. And then depending on who you are and what you believe, the the speed of rollout, anything from three years to six years in terms of actually getting that implemented. So, yeah, it's the the the debate is rolling on.

But do you think it will come? Do so for for my money, I think it I think it will. I spend a lot of time looking at battery dispatch, probably way too much time looking at battery dispatch. And so I I see instances where a national price and then a locational balancing mechanism price give, different signals.

And so I can see for batteries, it's really hard to know which way you're supposed to be charging and discharging, and and that can be quite complicated.

And that's because the constraints get fed into the balancing mechanism, but they don't get fed into the wholesale market. Yeah. And so I I see that as a real problem. I do recognize issues on both sides, but from from from what I see, I think a a a zonal system would would help.

We shall see where it all ends up. Fully agree. Okay. Gillian, thank you very much for coming on.

You've been a fantastic guest. We'd love to have you on again soon. Thanks a lot, Ed. Great to be here.