Inside the Deals That Decide Power Prices - Renewable Exchange

I'm your host, Ed Porter. Welcome back to transmission. If your energy tariff says it's 100% green, here's an uncomfortable truth. Right now, the electricity actually reaching your home might be coming from gas. That's just one quirk buried inside the deals that really decide how Britain's electricity gets built, priced and sold. Deals called power purchase agreements or PPAs. My guest today is Rob Ogden, founder and CEO of Renewable Exchange. He breaks down how power purchase agreements impact what we pay and how green our power actually is. And we take a look at their expansion to Germany, where a growing market of wind assets are going. Merchants after finishing their subsidy schemes. Before we start, if you want to see what future power prices look like right now. Head to Motor Energy com and ask Co Motor Energy's AI analyst. Sign ups free and take seconds. Let's jump in. Hi Rob welcome to transmission. Hi. Thanks very much for inviting me on. Our pleasure. And as ever we're going to get straight into the detail. So what is one thing that people get wrong about power purchase agreements or PPAs as they're known PPA. So I think there's lots of misconceptions with PPA in the market. But when you think about a PPA, I'm wondering what's what's coming to your mind? Is it a is it the short term utility PPA market where you've got thousands of generation assets striking contracts over one, two, three year durations with all the energy suppliers or, I don't know, is it maybe more like an AWS blue chip 15 year offtake agreement? Where would you go? Yeah, interesting. Um, I think I think about it in a very general sense. Right. So anyone signing any agreement to purchase power? I know that sounds like it's very much. What sort of. Let's break it down. Absolutely. Yeah. I, I think about the the broad bucket of that. I know that you can get those shorter term contracts. There's rolling contracts for people who are looking to, let's say they've got off a feed in tariff and they're looking for sort of additional secured revenue. I also know there's a very corporate angle to this as well. So there are some some big energy users who are looking to get certainty from the market. And so they're going out and they're trying to buy in to lock away portion of their energy. Absolutely. How do you how do you see it. What's what's the what's the divide? Well that's it I think that that is the if we listen to the big corporate marketing hype of the world, I think that's where most people would go. It's the big long term contract with the blue chips of the world. But that really is the thin end of the wedge in PPAs. Uh, a PPA is is a generic phrase at the end of the day power purchasing agreement. So it's a power is electricity. Purchasing is to buy an agreement is a contract. So it is a contract to buy electricity. Fundamentally that's what it is. You could therefore argue so many things are a PPA or power purchase agreement. Everything from your generic electricity supply agreement. So I think where you draw the line is subjective and there's not any kind of one rule. The big corporates of the world have definitely tried the land grab on PPA to kind of make it that blue chip contract, but I think for me that really misses the point. Certainly in the UK every rock project has its subsidy. So rock renewable obligation, one of the subsidies that a lot of the renewable generation projects have been built on in the UK, they get their subsidy and then they can sell their electricity however they like. So for a lot of those projects, they're optimizing them on 1 or 2 year contracts, and they're trading in and out of the market at different times. Uh, feed in tariff exactly the same. You get your feed in tariff subsidy and then you get your electricity, which you can sell yourself. Um, so there's different structures in the market. And in the UK specifically, PPAs generally are short term contracts signed between a generator of electricity and an energy supplier. And there's thousands that get signed every year. And so in terms of what you see through renewable exchange, what's what does the split look like between those sort of 2 to 3 year contracts for renewables under R0 or fit tariffs. And what does the split look like for the corporate. Is it sort of an 8020 split. What does that look like? Yeah it's a really great question. And there's not a lot of data out there on the market in this. If you look at the UK context, which is where renewable exchange is, is, is, is the market leader and the biggest presence. 99% of PPAs are short term utility contracts between an operational generation asset and the energy suppliers. There's a handful of longer term corporate PPAs. Um, and then you go even further. And corporate PPA is generally when people think about corporate offtake, they're thinking about a new to market asset. So something that wouldn't have existed had it not been for that PPA which enabled that project to come to market. And in the UK, I can probably count on my fingers in front of you. How many contracts? How many corporate PPAs actually built? New projects? The UK has been absolutely flush with subsidies all the way from NFFO. The original subsidy, the Non-Fossil Fuel Obligation. That's a long time ago. When was that? That's a long time ago. That was the turn of the century. Yeah. Um, and then we had the renewable obligation came in in 2002. Feed in tariff came in then CFDs now, which you could argue is more of a price support mechanism than a subsidy. But I'd probably argue it's a subsidy given the price levels that it get tends to get struck at. And a CFD is what. A CFD is a contract for difference. So you agree 15 or now a 20 year contract essentially underpinned by the UK government. If you then sell your electricity on the wholesale market and if the price is lower than the agreed price you had from the government, they top you up. And if the price is higher than the agreed price you had from the government, you pay them back. So it's like a price stability mechanism that gives renewable generation projects guarantee over the price they'll receive for their electricity over a sufficiently long period that enables them to bring in debt and other financing to build that project in the first place. And it's quite interesting because when you do see these headlines out there, it's very rare you see a headline around a rock or a fit getting a three year contract. You never see it, but you always see, you know, I'm going to use Amazon or like a hyper scalar, let's say hyper scalar signs contract for 15 years. Yeah they love it. They always, always makes it into the press. I don't know why that is. I think maybe it's the additionality point that you mentioned, which is that it helps to bring those assets to market. And that's what sort of seems to make it newsworthy. Absolutely. Yeah. It's a marketing play. At the end of the day, you know, they are out there. Um, a lot of corporates now are signing PPAs for economic purposes because it secures them a long term price at which they can procure power. But it was also very much a sustainability drive, ESG, um, you know, and this is this is corporates, um, you know, really trying to demonstrate their commitment to decarbonization alongside price. Yeah. And this I think this comes back to like a Google white paper. I remember like when it was again like it's probably it's probably going back into the history books a little bit around the concept that if you sign to buy energy from a renewable generator, it creates additionality so they can sort of, uh, finance their asset better and therefore they can build out more solar and wind. And it's pretty it's pretty exciting. I the kind of area where I wanted to, to to go on that is, is to start to ask question whether do you think people start to regret a little bit some of the PPA? So what I mean by that is that back in the world where gas price was set or gas was setting the price, you know, nine times out of 10 or 95% of the time, um, you had quite a high price in the middle of summer. And so generally speaking, wherever you set your PPA, you kind of got good value for money on it. Yeah. Now when we see, uh, more often, not more often than not, but quite often you'll see enough renewables on the system. And I think for the first half of this year, it was something like 80% of the time gas was still setting the price, but for that 20% of the price. 20% of the first half of this year, you were seeing some very low prices coming through and sometimes negative pricing. And I wonder if that's having quite an interesting impact on people. Because if you're just buying the PPA just to kind of tick the box of saying, oh, I've got sort of a green supply, then I don't think it was too worried about it. But if you're signing it from an economics perspective, you might sign your PPA and say, um, let's call it, uh, 15 per kilowatt hour, which would be 150 pounds per megawatt hour. And you're buying energy under that PPA. At the same time, the wholesale market has gone to sort of minus ten, and you're thinking, oh, why am I having to buy from this PPA when the market is kind of coming through at these negative prices? Are you starting to see the dynamics of of that hit on how people structure those PPAs? Yeah, absolutely. And this is, uh, it's getting more, more and more prominent now, but it's been around forever. So the ability to actually price a PPA, a power purchase agreement is, is complex. So you are essentially forecasting its production over a long period of time into changing macroeconomic, um, market factors. So an increased penetration of renewables like like you've said, starts to decouple the electricity price from the gas price. And the marginal cost of running a wind farm is how much how much we pay for the wind. Yeah. Um, you know, it's next to nothing. So they will bid into the short term markets incredibly low. As long as the price is positive, they want to run. So it definitely has a pull down, um, effect on on prices. This is all priced in and negotiated upfront and alongside a number of terms that that accompany that from the PPA. So things like can the off taker turn that asset off if the power price has gone negative because they don't want to receive electricity, when they would essentially have to pay for receiving that power? Be better for everyone. If they turned off that wind farm, bought it from the market for free, and compensated the wind farm owner in some way. So there's different mechanisms that you can price into a PPA from the start. You're talking really now about those 15 year PPAs. And it depends when you struck them. So if you struck a contract kind of pre 2020 you know market prices were quite stable. You know you were trading range bound. I don't know 50 to 70 pound a megawatt hour typically. Always almost always driven by where the gas price was. Almost always driven by where the gas price was. Okay. So if you then committed to a long term PPA at those kind of price levels, 15 years, you probably went you went through the wave of Covid. We hit kind of 30 pound a megawatt hour baseload summer in the peak of Covid as as demand was just destroyed over that kind of summer 2020, that there was a lot of regret. Then there was a lot of hindsight traders going, uh oh, why did we sign that PPA? Um, but then you went you, you roll forward, you know, only 18 months and you hit the kind of peak of the Ukraine crisis at the start of that, of that conflict. And you have wholesale prices over 400 pound a megawatt hour. So it's this volatility that a long term PPA will avoid for a corporate off taker or for any off taker. And I think you've seen more and more appetite from the energy suppliers have now taken kind of seven year, ten year PPAs with with generation assets. They just might not have that requirement for it to be a new to market project or a new to Earth project. That additionality element where actually me signing this contract with you brings new renewable generation which displaces gas. But yeah, coming back to that pricing concept, it is. It's tricky. You're taking a long term view over where the market's going to go in the next 15 years. In the UK it's especially tricky because you couple that with with the CFD procurement. So the contracts for difference that we just touched on and you have a huge volume of new predominantly wind and some solar coming online, which is going to just shift gas and displace gas even further. So, you know, this is where you guys come in and build your long term power forecast models that, you know, try and look at these fundamentals and work out okay. Well, what is the captured price of a wind farm likely to be over that long period of time. And that's something we see, um, more and more as we look out to the to to the future, we see sort of less periods where gas is setting the price, particularly in those summers. And so I think it's a harder and harder thing to sort of get that PPA pricing right, particularly for like a 15 year, um, corporate PPA. And are you also seeing some parties starting to deal with it contractually? So obviously you have the sort of standard price setting process, but do you also see some parties saying, as you said or could, could we turn that off I suppose. Are there other variants of that? Are there other, other forms of contracting that give people more comfort to sign these contracts? There's there's all sorts. And, you know, the lawyers of this world absolutely love this stuff. You know, if there's a problem, they can invent a solution to it. You have to you can't ignore the other side of the equation here, though. Like you think about this from a corporate perspective. And they don't want to overpay for power that they're receiving over a over a long period of time. But from a developer's Perspective. It's, you know, they're not necessarily looking to profit maximize all the time. But for them, they're making, you know, usually hundreds of millions of pounds investment upfront to put this project on the ground. They need to borrow money and generate returns for their investors to be able to raise the capital to build that project. And for them, they're looking for a stability of return, then into the future over the period of that project. So it's not always like a complete price maximization play. On the developer side, they kind of have a hurdle of which they need to overcome to pay back the capital expenditure of building that project in the first place and then generating return for their investors. It doesn't need to be. It doesn't need to be massive. Obviously, if the returns are there, great. You could get payback on a new build wind farm in Ukraine. Crisis in three years. You just couldn't get it built. Yeah, yeah. Um, that was just there was some crazy stuff on onshore wind. I seem to remember during the Ukraine crisis around, um, that Ukraine had built more onshore wind in a year than we had in Julia kidding me. Which was yeah, I think that was a sort of a legacy of the planning around GB onshore wind, which is now changing. If you just happen to have a project that was consented, ready to build, but you'd just come off the back of Covid and you couldn't get it financed off of 30 pounds a megawatt hour baseload, and maybe you had some supply chain challenges coming off the back of Covid as well, with actually getting parts here to physically connect. But there was one client of ours who was ready to go, just hadn't pulled the trigger. Ukraine hit. He signed a two year PPA at over 500 pounds a megawatt hour for a new solar farm, and got payback over that two year period for the entire investment. So, I mean, it's, uh, it's kind of a crazy it's crazy that that's possible. It's crazy that that's possible. But we're not expecting Ukraine level power prices on a on a regular basis. Maybe, maybe one thing I think it's really interesting. Right. So if I'm a corporate and I'm signing up to a PPA, which we know is a smaller portion, but let's say I'm a corporate that's signing up to a PPA, maybe that covers 50% of my energy needs over the course of the year. That's then a bit of a sliding scale all the way to 100%. Are you starting to see some PPAs come through that are sort of a PPA, plus some form of flexibility, so that with their PPA they can not only buy like the solar portion, but they can also get some flexibility. So maybe not covering 50% of the supply, but maybe more like 60 or 70%. In theory, all the way up to 100. We haven't seen too many of those come live, but I know people are starting to talk about this concept of getting more covered by your PPA. Yeah, well, I think this is for me. This is where energy suppliers and utilities play an absolutely critical role. And they get they get such little recognition for what they do in the market. Because on the one side of the market, you've got generation. You've got developers building generation assets okay. So they're connecting new power to the grid. And they want to sell that power on. They want they want as high a price as possible for that. They can get for that power that makes that project viable to build. Yeah. On the other side of the market, you've got corporates who, you know, they're running their business. It's just a cost item for them on the PNL. They want to minimize that as much as possible. So you've got this natural kind of conflict between the two income, the energy suppliers, the utilities, the EDF of the world, the energies of the world. You know, that they can they sit in between and they provide the perfect conduit to these two parties who maybe don't have a line that perfectly aligned interests. They don't care fundamentally what the underlying price level is between the two of them. They're negotiating an offtake structure from the from the wind farm, and they're negotiating an energy supply contract for the corporate. So they are in the perfect place to be able to offer this kind of flexibility if you're putting corporate directly with generator. I'm not saying it's impossible, but you have these market players that can manage balancing exposure. They can hedge different profiles. They can actually create inherent flexibility in the contracts because they can let you trade in and out of it. If if you're if you're a wind farm owner, you just want to know that someone's going to buy your off your offtake for the full period of time, ideally at a fixed price. Um, if you're a, if you're a if you're an end user, you just want to know that you can get delivered power to meet your demand profile at a, at a, at a low price forever. The energy suppliers bring these two very different profiles together, and can enable each party to kind of achieve what they what they're looking for. Um, and contract kind of tripartite between the three of them to create that link. That gives the flexibility to the corporate to do what they need to do. Um, even to walk away from the contract if necessary, without disturbing what the developers got from a financing agreement and from the ability to kind of raise revenue from there. I feel like that's getting to be a harder and harder job. You know, back you go back ten years and it was majority of gas generation supplied to consumers. It was slightly easier to work out where those costs were going to be now. Now you've kind of got a big chunk of it sitting under PPA, and then you've got the stuff that's at the margin. So the bits where you need flexibility, possibly harder to price. Um, some of these utilities have got I've got a bit of a tough job, like working out how to make sure consumers get supplied and with that form of flexibility. But what what I wanted to do was to go all the way back on renewable exchange, back to when you first got started to say, how did you get started? Because there's there's kind of an interesting story of kind of creating that company then, because obviously you have to have both sides of, of each trade. And if you've got nothing to start with, then like, where does this come from? So how did you kind of get that 0 to 1 motion in play? Yeah, it's a great question. And it was tough. I think I was probably just young and stupid enough to think that it could work. I was in the I was trading energy in the energy markets. And I kind of saw this transition that you've explained. We're moving away from, you know, maybe 100 large thermal assets that are centrally dispatched to a world where you've got thousands of small, intermittent renewable projects that need to connect with the market. Um, and my observation was that the market was just not Functioning well for those, uh, those developers, those asset owners to understand a what they could sell their power for, be who they could sell their power for, sorry, be who they could sell their power to, and then, um, be able to actually act on that and execute it quickly. So that was the concept for renewable exchange. It was to build a marketplace that brought together all of the different renewable energy generators on one side, with all the different energy suppliers on the other. Make it super easy to analyze contracts and execute PPAs. Getting started with stuff. And I think every business needs a bit of luck early on. So for us, our luck came from Aberdeenshire wind farmers. They absolutely loved the concept. They wanted to connect with all the energy companies, they wanted to get a great price and they wanted to do it quickly. And for us, we, we, we grew with zero marketing spend from day one. We got on the phones and we were trying to reach out to people who had renewable generation assets. Stumbled across some farmers in Aberdeenshire. You do a great job for one over the weekend. Five referrals come in on Monday. We're doing six pieces. By the end of the week, we'll do another 20 and we just snowballed from there. I hope that you still go back to Aberdeenshire and I got a hard time behind. Yeah, yeah. Yeah, exactly. So this this was where this came from? Yeah. No. Absolutely. Yeah. That's what got it going really. And uh, you know, it's it's it's tough getting the business going. And, you know, we ended up, um, we ended up tearing up the platform three times now. So, you know, we built it once to get it going. We had no idea the level of demand for the product. Our pricing engine is like the the nuts and bolts of it. Everything we do, it forecasts all of our PPAs and it analyzes all the bids for tenders going through. And we got to a point pretty quickly where it was taking more than 24 hours to refresh all our models, and we were getting a new input. Yeah. And I think what you know, what you very quickly end up with, there is just absolute system collapse. So we had to tear it up in-house. Everything, rebuild the whole platform again. We rebuilt it and within about 18 months we found ourselves back in the same situation. We'd cut too many corners. We building it again. So here we go. Third time lucky. So we tore it all up again, rebuilt it. And you know, I have our amazing software engineers and product team to thank for now having a fantastic platform, which came just in time for the orange man in the white House to cause absolute chaos at the start of this year, um, where we had almost our entire year of business done in two weeks of March, we wouldn't have been able to do that and operate at that scale and sign that hundreds of PPAs within a, you know, ten day period. Um, if we hadn't got that kind of scalability in that system and that process, I think these are the kind of tools that the market really needs, needs to move more to a world where we can actually act more like a renewable generator, can act more like a power trader, access to market, create value, take value from the market where it's there. We're in this like really weird period of like short term volatility windows. Like even yesterday, power prices spiked 8% for three hours and then back down. So if you're responsive, if you've set your strategy and you're able to then act quickly on that and secure a PPA within an hour, you can you can take that value from the market. Yeah. If you can't do that then and it takes you two weeks, three weeks, you know, to tender in how slow tendering process or for brokers or things like that. It's just too slow and you just cannot capture that value from the market. And we're recording 30th of June here. So um, where we've seen sort of those spikes coming through, it's because we've had the sort of first heat wave coming into GB, and there'll be another one coming soon. So we are seeing some pretty odd dynamics in the power market. On the on the Trump point, I think it's really interesting, like someone who's sort of very anti renewables, like a lot of the actions that have been taken and we've talked about on this podcast before, but like have created a world where actually for renewables, it's been stronger globally to get these projects deployed. Yeah. And it's a sort of funny consequence of the actions that he's taken. I don't think it's I don't think there's some sort of 3D chess going on. But I don't highly doubt it. But it's just a funny consequence that's happened, maybe to go from the sort of very macro down to the sort of nuts and bolts of it, or the person on the street. So if I am outside the energy sector and I hear this episode like, what? How do you think about how renewable exchange your business like, reduces costs for consumers? Is that something you think about on a day to day basis, or are you just do you kind of think, oh, that's just a that's just a function of efficient markets. And my job is to make renewable exchange work as kind of easily as possible. Yeah. No, it's a great question. And renewable exchange exists to maximize revenue for renewable generators. Okay. So for owners and operators of renewable generation projects, we want them to collect maximum value from the market. So you might turn around to me and say, hey Rob, you're pushing up cost to consumers. But I would I would challenge you and say, actually, what renewable Exchange is doing is increasing investment into the cheapest form of generating electricity. Renewables. The more. The more we can improve the business case for renewables and improve their economics, the stronger the signal for new investments into these projects becomes. The more capital flows into renewable energy projects, and the more we displace gas and other thermal kind of generation from the stack. So I reckon Co could probably have a good go quantifying what that is for the for the average consumer. I've not got the figures in. Front to hand to hand. Yeah. We can put something in the show notes I'm sure. Um, okay. Yeah. For me it all comes down to that. Like that market efficiency piece. Right. Which is that if you have these bilateral deals where people negotiate the wrong price and then people get stuck in the wrong price, and that means that people leave the market. That's no good for anyone. It's the sort of the value of markets. If you can give people a, um, the ability to get the best price for their asset, and you can give the sort of buyers the ability to look over thousands of projects. And by then that efficiency feels like a really key thing. Yeah, absolutely. I think it's efficiency and transparency. So in terms of the projects you're seeing. Obviously we're seeing lots of wind, lots of solar. A lot of batteries are now starting to come through. So how many projects are you starting to see the co-located. Is that is that sort of a growing trend or is that something that sort of hasn't really hit the PPA market yet? Yeah, no, I think it absolutely is a growing trend. I think we're finding a lot more, um, operators with solar assets, um, looking at either building in batteries in the planning phase. That's kind of the, I think the best time to look at it or looking at how we can kind of bolt them on later on when there's maybe some grid connection capacity, spare, um, or flexible grid connection throughout the day if they're just exporting in the middle of the day for a solar farm, a battery can kind of work outside of those parameters and come in as well. The big thing we're seeing with co-location is that there's PPA off takers in the market that are great at off taking renewable profiles, and then there's optimizers in the market who are absolutely fantastic at accessing all the different battery revenue streams. And there's a tiny crossover in the middle. And this really surprised me when we ran some tenders for the for battery optimization agreements, for flexibility contracts to the market. There were very few companies in our PPA off taker pool that were really like hot on the optimization side. Like 3. Or 4. There's 3 or 4. And when it's those 3 or 4, it's different teams within those, within those companies as well. So it's almost like looking at two completely different things. And what you really want to avoid is given the keys to your battery asset over to that person, that company that's doing the best possible job on the renewables project, because they're probably not going to be the best optimizer for the battery. So although physically you're looking at co-located these projects and it's probably more of a CapEx saving when you're actually optimizing them and running the operations of the projects, you really want to look at these two things very differently. You don't want to couple the two together. Although I did come across this novel concept of green bays, where the battery was constrained to only work with the output from the solar farm. That's the German system. That's the German system. Okay, fantastic. How does that work? Yeah, I don't think as well. I think it's I think it's a bad in between. Physically constrained to just operate in that way. Indeed it's currently there in cycling overnight. So it's a it's essentially you take an asset that's a really good flexible asset and you are hiding it in this in this way. It's a it's a pretty bad example of of regulation. Yeah. It's a killer. It's like a fully free market asset. And you're just like clipping its wings completely and saying, nope, all you can do is load shift that renewable output to the evening. Great. Well, that's that's kind of like, what, 30% of the picture. But you're missing a bit of the pie. Well here we're layering. On complexity right. So we've started from solar. We've added on batteries. Now we're going to go into the world of REGOs. Oh yeah. So what's a REGO? So REGO is a renewable energy guarantee of origin certificate. So it essentially says you produced one megawatt hour of renewable generation. It's administered by Ofgem. Um who are the UK energy regulator. And they you submit monthly how many megawatt hours of green electricity you uh, you exported to the grid or you generated? Actually, you don't have to export it. You could just have to generate it to get REGOs. Yeah. Um, and, uh, and they issue you with, with that requisite volume of REGOs. And so as a generator, you can then feel free to sell that REGO to whoever you see fit. And then they can then someone else can buy it and say, I've in effect I've bought uh, that REGO, which means that my supply is now, uh, green for once. Absolutely. It's trying to avoid double counting of greenness. So it's saying the person that owns that one certificate for that megawatt hour has the right to claim that their supply was green. Okay. And over the last few years, what's happened in REGO pricing. So REGO pricing, uh, has been on an absolute roller coaster ride. So if you roll back to I mean, roll back to the inception of REGO, the market wasn't born of a natural demand for green energy. The market in the UK was born of subsidy schemes creating renewable supply. So there wasn't really a market to buy REGO and have green energy. And then we had the birth of some of the kind of green energy retailers. And for those that were the mainstream retailers, we then had the birth of green tariffs where they were saying, hey, if you buy this tariff that's a bit more expensive, it's a premium product. We'll procure repos on your behalf. That created the start of the demand for REGOs. And REGOs were so cheap, all you had to do was cover the costs of doing the legal work and writing the contract. Ten £0.20 for a REGO. 5:33 p.m.. Nothing. Absolutely nothing. Um, and and and energy retailers could sell them at a premium. You know, maybe selling them at £0.50, maybe selling them for a pound in an energy contract. And that just created an absolute influx. It was a bit of a slow burn, surprisingly, but it created a slow burn influx of, uh, energy suppliers selling green tariffs. Um, and that then bore the demand. We got to a tipping point kind of early 2020s, where we had certain energy suppliers that hadn't really been taking REGO hedging seriously, so they ended up, um. Their strategy for REGOs was REGOs are really cheap. There's loads of supply will come at the end of the year and buy all the REGOs we need for the electricity that we've sold throughout the year. They came to market at the end of the year. It hadn't been the best renewable production year and they ran out of luck, came, came to market and there just wasn't many REGOs around. It ended up pushing up prices absolutely enormously. We coupled this with leaving the EU, which removed some ability to import European guarantees of origin certificate, which are like the European equivalent of a REGO. But you could match them, you could translate them, or. You used to be able to import them and use them to, um, use them for a number of reasons, but one of which was to evidence your green supply that got removed. So all of a sudden you had all these, um, energy supplies that had been procuring, um, guarantee of origin certificates and importing them cheap, more cheaply than REGOs. They had to come to the REGO market. So you kind of had this like complete clash of of demand explosion in the market in this one period. And prices went up and we saw REGOs trading above 20 pounds a REGO for a very short period of time. Yeah, like that's like a quarter of the price of the power. Um, so so what we found was that this artificial oversupply that was created with a lack of demand. Finally we hit the that inflection point. Demand, you know, caught up with supply, prices exploded. And then we found out who was actually willing to pay to be green. Yeah, because the prices started becoming material. So when you got to your contract renewal as a business or as a domestic, you had to pay an actual premium. But to be to have a green tariff. Yeah. And a lot of businesses said. No thank. You. No thank you. Walked away and we got the demand destruction. High prices kill. High prices. Low prices kill low prices. You know, we found the point. Since then, we've had a lot more supply again in the market. CFD has been rolling through. We've got a lot more capacity of new renewables coming to market, and I kind of think we're going to be back in this world of infinitely growing supply without the demand that's really there. So where are prices today? If I was to buy a REGO. Well, if you look at prices for REGOs that were produced in the last compliance period, so 2025 to 2026 compliance period. Um, I could buy REGOs today for like £0.03 a REGO. Okay. So we're almost like back down and and back down I think. And this is the really interesting part about REGOs. Right. Which is that as you enter a more renewable dominated system, you get more wind, you get more solar. And so the availability of REGOs are quite high. And and so you may get this period where you actually have more REGOs than your demand needs. And so the price gets very low. And there's kind of two options here. Right. So one option is the REGO market stays as is. And you still have this kind of this this concept of within yearly matching, which is the compliance period. You talked about an option I'm going to I'm more excited about and I'd like to see happen is more like 24 over seven matching. Which is not to say you can use a REGO from the middle of summer to offset your consumption in winter, but you could use that. Everything has to be matched within the particular hour. And so, um, if the market is genuinely flush with REGOs, like there's lots of wind, lots of solar, then it costs nothing. But if the market is generally short so there's not much wind, there's not much solar. Um, then it is, it is quite expensive. And then you kind of are starting to give price signals to get some sort of flexibility from low carbon sources. I'm quite excited about that. 24 over seven REGO I think the market should go that way. But what do you see and what do people say to you? I think it's got to go that way really, because fundamentally to be green, we don't really care about, you know, matching year by year how much supply we had with such demand to go to have a fully green grid, we have to have that flexibility that enables us to kind of supply to demand in some way. And I guess batteries have a really interesting role in like, could they load shift REGOs to like, you know, Rico's produced in a surplus period with demand that's got a shortage of REGOs. Could the battery actually physically take that you almost end up with like power market 2.0 for REGOs where you've got to match them? You know, the UK's market settled half hour by half hour. You can kind of pick your time frame that you want to match them. By, but at least that's then. So if I'm a consumer, right, I'm a corporate or a domestic and I, I say I've got 100% green, um, tariff. And then I look at a National Grid app and I see like what's, what's running on the system right now and it's just pure gas. You kind of think like, I feel like I'm kidding. You don't have 100%. No, no, it's clearly not. I'm clearly getting something from gas. Right. So I think the 24 over seven rego matching would give you it just feels more transparent. It feels more honest. You'd be able to say right now your consumption. No it's not it's not green because. Because when the sun is not running. Absolutely. But you'd be able to say with much more certainty. Kind of. When is and when isn't? I feel like I agree with you on the 2.0. I don't know quite how you'd run a rock through a battery, kind of arbitrarily clip it by 15% for round trip efficiency or something. Um, someone with a with a with a big model can work that out. Yeah. No, it's it's really tricky. I think the, the the rigor market is, is fascinating and it's a bit of a journey right. You know we started with this like oversupply. Let's subsidize renewables. This feels like a good thing to do. Let's create a new industry, a whole green economy. And then we kind of moved into this oversupply, really low prices for for Amigos World where everybody's green. I think we've got to take that next step now as an industry, we've got to move to looking at matching things more real time and doing that properly. The other concept that you have for, for REGO is the other alternative is to look at maybe something like the French model where if if the REGO came from a, from a, from a project that was subsidized, then it doesn't it, it shouldn't have a, it shouldn't necessarily have a REGO certificate with it because it got built by the subsidy scheme. So why should businesses and and consumers be able to claim the greenness of that project? They didn't actually contribute to that green energy being on the grid. That was the subsidy scheme which we're all paying for because we're all bill payers, you know, businesses and customers. There was a horrible untangling to that because I'm sure the French generators would say, well, we only built it in the first place because we were expecting to get the REGO. That was at this. Price level was made. That made sense for them to do that, because the French have even taken it one step further. And the state say those REGOs are our REGOs because you got you got the the, the project was built off the back of the subsidy contract that we gave you. So those REGOs are owned by the state. We will auction them off every quarter. So they run regular auctions for all the guarantee of origin certificates that came from those projects, and they used the revenue they generate from that to pay back on the subsidy. So to reduce the cost of the subsidies, it's a lovely circular system. So I think there's there's a lot of potential for looking at this properly and I really call on Ofgem to. To really get stuck into this because there's a lot of opportunity to kind of go with the times here and like really make a difference. I agree, I think it's a great point. Ofgem, if you're listening, I know some of you do. So take a look. Take a look at the REGO space. Um okay then let's move on from GB. I also want to talk about Germany because you have been looking at GB but also looking at Germany. Why did you pick Germany as a next region to look at. Yeah. Great question. So for renewable exchange we're a marketplace. So we need a high density of projects on the one side of, of of of generation assets that are operational. They're looking to sell power. And we need a high density of energy suppliers on the other side that are looking to buy power. Germany for us was a fantastic market. The main reason we we looked at Germany was because they have a 20 year kind of feed in tariff subsidy for that 20 years. You can't really do a lot in the market and you get paid by the German state. Um, your feed in tariff amount. But in year 20, you're thrown to the wolves. You have no idea how to connect with the different market players. You've got no guaranteed revenue and you've got a generation asset, so that's still got some life in it. So for us, we kind of got started. Um, we got started in Germany around the turn of 2020, which was kind of when those first 20 year contracts were up. Okay. So those are wind turbines from 2000. These are wind turbines from 2000. They're really old technology. They're they're kind of rolling off there and coming into that kind of end of life phase. Yeah, it's really interesting. I remember the wind turbines kind of in those, those early 2000 wouldn't have been very big. You're kind of like one megawatt might be probably. Half a. Half a Meg is probably about right. And then around sort of the 20 tens, you get into the 4 or 5 six megawatt type type sizes. So I imagine that you're seeing like you're you're like opening like a time capsule a little bit, um, and seeing those sights. Are you starting to see those kind of like bigger volume coming through as you're getting the bigger turbines and the more up to date tech? Yeah, it's scaling through, but it's a slow burn. You know, it's year by year. So we're 2026 now. So you're looking at 2006 projects that are rolling off. Um, these are all these are old assets and it's very old technology as well. You kind of it's great to open that time capture and look at how far the engineering's moved on since then. So some of these projects, um, you know, we have we have assets in Germany now where they're entering into PPAs and they have to specify as part of the tender that they don't allow the off taker to economically curtail the asset, so they don't allow them to turn it off, because if they turn it off, there's a high chance it won't start up again. I think anyone driving a car from the early 2000 probably has a similar feeling in a long journey. Just leave the car, just leave the engine running. Just leave it. Running. Yeah, exactly. Yeah, it's a real challenge for them. It's it's crazy. And so you're in Germany, you're looking at the the wind. In Germany, you're also looking at solar assets as well. We'll look at some solar. But solar didn't kick in in Germany for quite a while after wind. So for us a lot of the projects we deal with are wind farms where we do solo. It tends to be new projects that are looking for that kind of 15 year offtake. Looking at the corporate market, looking at what are the routes to market they have, can they take maybe a one or a two year short term PPA to get it going before their subsidy kicks in? They're looking at all kind of optimization options, but mainly for us it's it's those those old wind farms. And maybe to close off the old wind farms like what's next for them. Do they kind of do they run for another few years and when it eventually wraps up, it eventually wraps up. Or are they looking to refurb and to come back? Not as a 500 kilowatt wind unit, but they want to recycle the site and come back as a, you know, shiny new 5 megawatt or 7 megawatt onshore wind turbine. Yeah, I mean, that's the dream, isn't it? I mean, you look at the UK renewables fleet and it's 2026, probably almost every generation asset right now, by 2050 will need to be torn down and built again. So in Germany. Absolutely. I think the idea is to get that oil can out and get get that wind farm limping along as long as it can while you go through the kind of repowering or in some cases, the decommissioning process. So you might not be able to get new planning permission for that project. When when these projects were built, they tended to have like a 25 year planning permission. That said, you have to put it back to the green field. It was at the at the start when you finished with the project. So we're now kind of encountering that end of life phase and looking at these and really, you know, testing ourselves and saying, hey, is this the right thing for the grid? Or should we be looking at repowering that site, taking down the the ten, 500 kilowatt turbines that were there and maybe putting up two four mag turbines now or whatever kind of makes sense in a kind of modern age. But yeah, for asset owners, it's really kind of eke it out as long as they can. Yeah, it's a fascinating part. I think in the same way that we probably saw people start up businesses for new PPAs coming through or new technologies like batteries, I'm sure there are going to be some people who are going to fire up businesses or start up businesses around decommissioning of assets, and it's just a fascinating space, like there's a wave of projects coming through. Um, I'm sure there are, like, entrepreneurs out there who are already deep into this, but it's kind of interesting to get the get the feeling of it. Maybe just to wrap up with one final question. So what is one contrarian view you hold about the energy market or indeed the PPA space? Yeah, I mean, full of contrarian views, but I think probably the, the, the main play to throw out there is, is that we really have to kill off subsidies. Like, it was amazing to have subsidized the renewable energy industry from the, you know, early 2000 all the way through. And Europe did a fantastic job of this. And, uh, I think when you get to a point where renewable energy is the cheapest form of generation, it really grates on the average Joe in the street to say, but we have to subsidize the the price that they, they receive for their electricity to, to make sense for them to build. So for me, the energy transition and, you know, moving to the full kind of green economy is just so it's far too important to be in the hands of politicians and subject to the change of, you know, political winds. Yeah. Um, around the world. So I really think we have to take the fight on the economics here. We've got to look at different structures. We've got to look at different financing arrangements. We've got to look at different power purchase agreement options, and we've got to kind of move to a world where you don't need a long term, you know, 15 year, 20 year contract to underpin the build out of a new renewable generation asset. This isn't easy, but I think as an industry, it's kind of our responsibility to just not sit on our hands and say, hey, keep rolling out those CFDs. And, you know, UK PLCs just sat on a book of gigawatts of, of of CFD exposure. That is the accepted norm now. Like what what would be the would you see that the PPAs would start to offer the same level of certainty that the CFDs do? Is that is that how you see it? I think it's maybe it's maybe the way investors are looking at these projects. And then the really interesting one is the government sat on gigawatts of of CFD exposure that they've procured. Why aren't they looking to back that out? They're just sat on that exposure. And if you know, if prices rise, then you know their exposure reduces. And if prices fall, their exposure increases. But at the same time, there's a whole foods market out there of businesses, domestic customers, all sorts that would love to access that volume. Why can't they start de-risking this position and offering out these kind of reverse PPAs? Call it a PPA if you want to go with the corporate PPA hype still. Yeah, but why don't we take that to market. Package that pass it on to someone else? Okay. Fascinating. Rob, thank you very much for coming on transmission. You've been a wonderful guest. We've covered all things PPAs, regs, Goos, all the acronyms, and I hope people have followed along and got a really good understanding of how the renewable market functions today. So Rob, thank you for coming on. Nice one. Thanks very much. Pleasure to be here.