Scaling end-to-end with Andrew Waranch and Nick Dazzo (Spearmint Energy)

How much of a slice of this pie are you guys aiming for? It's challenging, but it's a use of risk management expertise in a new market. It's like wartime movement of human capital into energy transition related activities. It's If anything, the IRA has created a number of shortages of labor, It sounds it sounds like a joke, but there might not be enough lawyers.

And what's funny is that a year from now, That battery, which again, can be the largest battery in Texas by volume. It might not be the tenth largest battery a year from now. Hello everybody, and welcome back to another episode of Moto, the podcast. In today's episode, Quentin is talking to founder and CEO, Andrew Warrench, and managing direct of trading, Nick Dazzo, from spermint Energy. If you're enjoying the podcast, please hit like, subscribe, and all those good buttons, it really means the world to us. Let's jump in.

Okay, spearman. Where did the name spearman come from? That's a question we get all the time.

You know, I've I've named companies in the past and it's always a a challenge to find a name that's unique, memorable, and applicable to the industry. When we started, we were very focused on the environmental attributes of storage And so we wanted something that evoked a feeling of of green, of nature, and of vibrance And so we we went through a couple of different options, but we very quickly came to the idea of something that's minty and it's something that that's bright and cheerful and energetic and green. Do you have much mint down there in Florida? Is it You know, believe it or not, you have to be everywhere in the world and so it's it it translates in every language in the world. And, you know, the the sort of other way of thinking about it is mint is very invasive and it it really overtakes every garden and and forest that is planted in. It's sort of quietly takes over.

There's quite a lot of subliminal stuff there, which we could unpack. We'll do that later. Andrew Nick, firstly, just wanna say a massive thank you for taking the time out to come and speak to us today. What you guys are doing right now is pretty ambitious.

And we're really excited to have you on to talk to you. I'm gonna kick it off straight off. I mean, what what is spearman? What's the vision?

And where are you guys headed? So both Nick and I have been in the industry for a long time. I've been a power modeler for at least the last fifteen years. And in modeling the grid, the most interesting aspect is that there really wasn't ever storage.

You had some pump pump storage hydro, but It's the only commodity out there where you had to supply and consume the same amount at the same time. Unlike other markets where you had tanks and granaries and silos.

And so it affected the supply and demand and the pricing and everything related to electricity.

When battery energy storage or specifically lithium based storage became price competitive and the market realized the value of storage and started adding revenue streams to various regulatory markets all of a sudden, the revenues went up and the cost came down and storage became economic.

And so as soon as those two things happened, I was heavily heavily motivated to go out and launch a storage business right away. And that's really the Genesis experiment. It it took price of lithium based solutions. If you seized a few years ago, you had ten and twenty megawatt solutions because they were the only sort of cost cost way cost way of doing things, now you have five hundred and thousand megawatt solutions coming, and that's because the combination of low cost, better technology, and how revenue sort of all came together.

Just a bit on how experiment fits in is the trading aspect, which I think is somewhat unique. There are other folks out there that are willing to warehouse all the merchant risk that comes with owning batteries that they build, but there is a mentality within most of the development community that's kind of akin to the renewables development industry which is yeah we know how to take on construction risk, early development risk.

But once this thing is close to commercial operation, we wanna shed that risk either by sell selling it or finding someone to take an off take through some, you know, PPA and that sort of risk averse mentality is common in the battery development industry as well and and and that's different from our approach. Yeah. I mean, I often think if you're gonna go to all the trouble of understanding the macro and volatility and how electricity markets work, and this, you know, this s curve of lithium ion and all of the complexities of it. And go through all that pain and then build the site and then hand off all the off upside to someone else.

It seems bonkers to me. But, yeah, it it it it happens a lot. And so -- When -- Spirit's point of view, what's the you guys are are are doing developing assets, building assets, operating assets, and and trading them too. I mean, where where are you headed?

What's the what's the big vision? You know, the big vision is one you, when we first started, you know, I knew that this was going to take really three different pillars to be successful. One was understanding the markets and the trading side, why was the genesis of it, that the market needs storage desperately, more solar and more wind, means more volatility, the intermittent nature of their generation, it needs it needs a solution. Right?

And so whether or not you're doing it for the carbon or grid resiliency or for price you know, storage solves a lot of problems. And so from a trading side, it was an obvious need. And then second, I also I understood that both out of US Europe and Asia, the interest in investing in ESG friendly infrastructure, whether it's article eight funds, article nine funds out of Europe or ESG out of the US, there was an enormous amount of capital that was looking to deploy in the US. And so you have this new technology and this problem of intermittent resource and then the storage to solve it.

A huge amount of capital that wants to invest in the space And so we we brought those two pieces together first and the first, I think three or four people we hired were from the development world. I previously had owned assets. I understood what it was like to own, operate physical infrastructure. And so it's really those three pieces of sort of the finance side, the building and operation side, and the trading side, you need to put those three together.

And and that really is what experiment's all about.

Long term, because we are ESG compliant in multiple jurisdictions, I believe that the industry is moving towards a place where all off takers will need to be compliant. And so many of the banks and existing trading firms who currently trade coal, oil, gas, other thermal products will find themselves out of favor as hedge counterparties for renewables. And so long term, I think as a ESG friendly compliant firm, Spierment will be able to provide offtake to solar, wind and storage, package everything up and be able to provide carbon free twenty four hour power solution across the grid. So if

I've got this right, spearman does developing assets, you finance, you fund on balance sheet. Is that right? Actually, this is a good point to say, congrats on the recent deal. I mean, that was absolutely huge.

Thank you. And I'm sure there's a ton of work that went into making that happen. Do you wanna just talk about that deal for a second before I move on?

Sure. I mean, the transaction you're talking about is our delay draw, term loan facility. Where we can use the capital in a very flexible manner for all sorts of things along the development process. Everything from buying land or or getting options on on land to funding engineering studies, deposits with the utility, battery deposits, early stage construction, bridge loans on tax equity and other financing.

It's a very flexible development facility that is used to sort of fill holes at any point in the process while we get our longer term term loan facility, other tax equity in place and the capital can be recycled in a manner that it just moves on to the next project. And, you know, we believe the problem in the US is so massive and growing. Right? Storage deployment is slower than solar and wind deployment. And so the problem is getting bigger faster than we're solving it. And so we think that on a nationwide level, the need for storage is just so enormous that we need to take whatever development capital we can plow it into projects. And as they mature and those projects get term financing, we reinvest that capital into the next wave of projects.

I mean, I I don't you know, there's a lot of research studies out there. And so the US power market should get too a hundred and five hundred gigs of storage over the next fifteen years. And we are on the higher end of that in our forecast.

But that's gonna require, you know, tens, if not hundreds of millions of capital over that fifteen year period. And so the ability to use the capital build projects and then reuse the capital in the next projects. It's it's a great opportunity for experiment. So you've got access to capital and it's go go go time.

And so you do you you find sites, you develop them, you build assets, and you do the whole operational package as well. Right? It's end to end. Yeah.

I mean we are also seeing demand from other renewable owners in the last few weeks. We've had some folks that own wind facilities and solar facilities who need the battery to pair with their existing renewable generation.

In a way that can firm it up, and there are new requirements in Texas and other states coming to firm up your renewable generation. And that'll require pairing it with storage. We also believe that if you wanna pursue a green hydrogen strategy, which is very popular in Europe and around the world and growing in the US, then you'll need to pair your battery energy storage with your renewable energy provider to qualify for that twenty four hour match So there's a lot of work still to be done. We're we're really just getting started. Nick, I wanna go to you for a second. Nick, so I know that I know Andrew comes from a background of modeling power systems.

Nick, what's your background before we get into the the depths of what spearman is trying to do? I've been involved in energy trading for a long time mostly on derivatives, financially settled contracts on oil and gas and all kinds of feedstocks for petrochemical industry, biofuels, and understand corporate risk management around those commodities.

And kind of saw an opportunity here where, again, you know, the sort of risk averse nature of most developers seem to me to present an opportunity where someone who understands commodity risk can play a role and a more active role in managing that exposure. So some of what we did in our various trading activities around oil and gas was trading derivatives with asset owners, storage owners, and and understanding their exposures. This is similar, but a lot more complex in the sense that it's not just arbitrage, it's participation in all of these other ancillary services. So it's it's it's challenging but it's kind of a it's a use of risk management expertise in a new market.

And I I wanna ask you about the state of the company right now then we're gonna talk about what you're trying to build. So how many people are involved in spearman? And you have assets live right now. Where are they?

It's quite a new company. Right? So where are you in your journey? And then then I'm gonna ask you about what you're gonna do to get to the next phase.

Yes. So right now, I think we're sitting somewhere around thirty employees. Our offices are in Miami. It's our home office. We have a second development office in Minnesota. We really like the development and engineering community out of Minnesota.

There's a lot of talent throughout the Midwest, at building things. Many of the trade much much of the trading talent comes out of Houston and New York and Austin but a lot of the engineering and development talent we think is gonna come out of the Midwest.

We have only been operating for about four months, although we were incubating the business for quite a bit of time before that. And so don't be you know, don't let the fourteen months of actual legal operations, you know, show we've been doing you know, we've been focused on this for a very long time. I think if you look at the other friends of ours in the space, they've managed to basically almost double their firm in their second year. And I think that we'll be somewhere along that.

All their renewable firms in the US are growing at a rapid clip fifty forty percent a year if not if not higher.

The the number of people required to build so many projects really does grow pretty rapidly. And so, you know, I think I think despite the fact that there's probably twenty good renewable developers in the US, given us the the size of the problem on the carbon and instability in the grid, you probably need as many developers out there. It's a huge it's it's it's like wartime movement of human capital into energy transition related activities. It's it's the the scale of what we're trying to achieve this century is very easy to underestimate.

So how how do you build the company that you want? So fourteen months you've gone from zero to thirty people. I know you said you've been working on it before, but you've gone pretty fast. And so how do you get to gigawatt scale?

And how do you get to multi gigawatt scale? And what what kind of things have you gotta trade off along the way? I I you have to outsource some bits and do some bits some things in house. How are you thinking about those problems from a perspective of building the business that you want to build?

So first, we're very focused on culture. We want people who who wanna be in the renewables industry who understand that this is a unique opportunity to save the world while also make money. We've discussed in the past that twenty years ago when you graduated university, you may have wanted to go into investment banking or consulting or or some other similar venture ten years ago, you were probably looking at tech companies primarily.

Right? Now people are graduating I think something like twenty, twenty five percent of all of all graduates somehow have sustainability in what they're doing. And so there's an enormous number of people who wanna go into renewable energy. Because they believe that they can help save the world and make money at the same time. And we think that's completely accurate, the quality of the candidates we get both out of school and from other industries is extraordinary.

We're seeing a lot of hiring from big tech. Especially on the data side. Utilities have always had a lot of data, but like most industries, they're still relatively new incorporating AI and neural networks and things like that. And so there's great opportunity to borrow people from other firms outside of energy to come here and improve what we're doing.

So culture is important.

We do a lot of give back to the community and volunteer events. And so we're looking for people that have a certain mindset.

We do have a sort of unique blend of sort of maybe a Wall Street focus on markets.

And more of a developer's focus on the environment and what's possible from a tech point of view. And so that is a big, you know, sort of driving force in in how we hire. We do outsource a lot. We we try and be efficient in our our use of people because you can only grow so fast. You can't hire five hundred people tomorrow and expect to maintain a culture and a level of of quality and having people stay on mission.

So smart growth is important. I think from the beginning, we've been very clear that to build new batteries across the US, it's gonna take between three and ten years to permit.

Different regions have different timelines. There are some places you can get things up and running in eighteen months. But if you want really large scale product, it could take you three years. And so when we launched experiment, we knew that that process which we call a campaign like a military campaign. To evaluate all the nodes in the US and just define where we wanna put pro you know, projects.

Selecting the land, renting the land, buying the land, starting the engineering process and submitting to the local utilities.

That's a three to ten year process. And so what do we do for the first three years? We engaged in a process of acquiring mid stage projects from other people.

There's always been a a history and culture of people finding land, submitting their studies, and then selling those projects because the return on capital is very high.

Right? But what we're doing is taking projects buying it from those what you would call a develop and flip shop and taking that and finishing the projects, adding on our knowledge of the trading and offtake market, adding our knowledge of the financing and the tax equity market. And so it's really those two skill sets that we add, which allows us to buy those early and mid stage projects and finish them. And so our goal was been to acquire projects. We started off in Texas. We've announced over a gigawatt of acquisitions in Texas. And we hope to have all of those online in the next twenty four months or so, maybe less.

And the rest of our acquisitions are focused more diversely, West Coast, Northeast, Midwest and Central. And so it's really all about buying mid stage projects, we can finish up over the next couple of years while our own campaign comes to fruition. So it's like two tracks happening here. One which is incredibly patient.

And knowing that the stuff takes time, then there's another one which is let's deploy some capital and get to a gigawatt plus in the next two years. Which are two kind of different mindsets but coming at the same problem. So what does good look like for you guys? Where I were?

How you say a a gigabyte in twenty four months, that's pretty ambitious. How much of a slice of this pie are you guys aiming for? So I think that part of the reason why, you know, we have these ambitious plans were focused on tech but as you said, we're patient. Part of that patience is to allow the construction team, the operations team, and importantly, the trading and analytics team to grow at the right pace to be prepared to handle these gigs and gigs and gigs that are coming online.

You can't just land day one and trade in ten markets at at proper size. And so it's it's giving the the industry and our traders the ability to build out at the right pace.

I think if you if you if other people like us assume that we are gonna get to that hundred gigawatts to five hundred gigawatts of storage, could we be two, three, four percent of the market? Absolutely.

And so we could be ten gigawatts in the next sort of five years, I think, and not not really have a problem on sizing. I think there are some very large developers out there who are targeting twenty thirty gigs. Again, maybe that's ten percent of the US storage market. And so I don't and diversified regionally. And so I I think that even at twenty or thirty gigs, we would not be too big. And, Nick, when I ask you about we talked about taking the company from zero to one or else, we're almost one to ten here now. And for you to build a trading desk and a optimization team, really thinking about all the complexities of battery optimization that you need to cover, how how are you building the organization and the capabilities?

You asked a a moment ago about, you know, outsourcing versus insourcing and that's a perfect example. You know, at our stage here after a little over a year, throughout our trading development, we are dependent on others for things that eventually we expect to do ourselves.

So optimization is something that we're building the capability in house but initially almost certainly will be depending also on external providers to help us make those decisions. Similarly, for scheduling.

You know, we could be our own scheduling entity, but initially there too, we are dependent on other providers for that service.

Research, same sort of thing. We are building a a research capability that will enable us to do our own forecasting.

In fact, you know, we're we're well along in that process, but all of the research vendors out there that are providing useful services or of interest to us at this stage of the game to help us understand the decisions we're making in our optimization efforts. So I would say, you know, as as it's probably common throughout the industry, these early stages we're outsourcing more than we will be, you know, just a year or two down the road. And there's certainly a case for for a company to be vertically integrated that you guys are building that the by bringing together all these things in one place, there is there are gains or advantages of integrating them.

So if you can integrate your optimization and your scheduling with the folks who are doing operations and maintenance and are on-site, making the site unavailable and doing maintenance on a on a schedule. Then you can you can time that in a way which is optimal. There's lots of other examples where bring it all together. If it's highly integrated, there should be marginal gains that all add up.

We shall see. So next, I wanna go to the business model.

So you experiment is a developer and an owner operator.

And so how does that long term change compared to other developers.

So, for example, the traditional developer model builds a business case with certain assumptions in it. It it is Is is your business case does it does it look different because you're thinking end to end about the process rather than flipping it? Yeah. Absolutely.

Most of the develop and flip folks they don't need a lot of people. It can be an extremely light business model to especially if you have local expertise to find property in your local community, run the studies and submit to the local utility and ISO, And that can be done with one to two people.

Right? But from there, actually building it requires engineers technology specialist, construction specialist, as well as project finance specialist, tax equity, knowledge, and the capital to do it. And so it's a massive undertaking to go from sort of that greenfield early stage work and make things a reality. And then from there, trading around assets, if you keep the the risk in a a different company, sort of the trading entity is separately capitalized.

It's a selling business.

So myself and many people on the team here have experience in running various businesses.

We have people who have run Wall Street trading desks and hedge funds, people who have run development arms for other firms, CEOOs from, you know, well known renewable energy firms. It's really bringing in the right people and letting them run their own departments.

Is is I think the the only way this can work. To do this conversation without talking about the inflation reduction act would be a big mistake. So how are you thinking about the IRA and how it affects your business? And there's an awful lot of opportunity out there.

How are you thinking about capturing that? So we focus very heavily on modeling the IRA its effect on build out over build out across the US. I'll tell you the incentives, especially if you locate your product in an energy community zone, and I will tell you that most of the products we see nowadays are being located in that ten percent bonus zone to get the forty percent credit. And then they're also focused on domestic content they're hoping to get up to fifty percent ITC plus additionally you have some bonus depreciation from previous programs.

And so if those tax credits can fund up to half of your project cost, obviously it's an extreme tailwind in solving today's climate crisis.

And so when we originally started experiment, we bought our first project. The IRA hadn't passed. And we were actually hoping to grow our pipeline and portfolio faster before the IRA or whatever the program would be, would come out just to scale up we immediately saw after the passage last summer the price of acquisitions go up of hardware go up of waiver go up and even if capital go up.

And if if anything the IRA has created a number of shortages of labor, it sounds it sounds like a joke, but there might not be enough lawyers and engineers in the space.

There's just not enough people. I was at a conference last week and one of the lenders said that their team just can't grow fast enough to process all their request for loans related to renewables.

And so whether it's engineers, lenders, bankers, lawyers, staff. I I mean, the industry is just growing so fast. And so all of this will take time. There's opportunity in almost every sector of the renewable energy industry, there's there's this huge opportunity for growth.

And so no matter what you're doing or what part you play, I think, everyone has an opportunity to be successful and the IRA really is sort of the the tailwind that's out there. It's as a as a European, it's been quite remarkable to see it happen. I mean, over in Europe, we're used to having governments meddling in markets. And you kind of put you you put one incentive in one place and you have lots of other things that pop second order effects you don't really think about or quite difficult sort of to model.

But it was quite remarkable seeing it in the US. But it looks like the money's been pointed in the right direction, and it's actually being extremely effective.

But as you say, driving up costs of the the the input costs, capital costs, and labor shortages.

Maybe that's just a natural response kind of stimulus that we needed to do anyway to get the energy transition moving. But it's been really interesting to watch. From a European perspective, it's quite quite exciting to see hopefully, what Europe can come up with to contend with it, watch the space on that one. If I may, just on that topic.

I mean, one way to think of it would be if, you know, you had a doubling in the carbon price in Europe which would have a similar impact probably on all of those, you know, sourcing markets but for the the comment Andrew made about lawyers. I mean, that's the thing about our system is we're not using carbon as an incentive. We're using tax credits as an incentive, and that's a specialized knowledge So you know, that constraint having accountants and and legal advice is is something that is is really sought after you probably wouldn't have to worry about that. But all of this all of the other components would you know would presumably be similar if you just how to change in the carbon price over there.

That's a great parallel. I guess tax credits are quite a blunt instrument, but effective nonetheless. Particularly if you're a lawyer. Okay.

I wanna talk about operating in energy markets. It's very rare for us to have folks on who come from both a modeling and a trading background. And I wanna ask you some questions about the the power market or the electric market in the US and how that compares to your previous experience. So, Nick, I know you come from a background of trading or oil and gas derivatives or other feedstocks you said.

How how is the world of batteries and renewables different to that? Oh, it's a lot different.

And you know it wouldn't be so different if it weren't about the unique character of storage which is an arbitrage asset that happens to have all of these other that are associated with it. Right? So if you think of a gas cavern or an oil tank or a green silo, that's a pure r play. You are playing for time that might incorporate some understanding of, you know, regional disparities so you might actually decide to charge or, you know, put oil in the tank with an expectation that after a couple of months, there might be some arbitrage to another part of the world. So It's not to say that it's all about time, but it is really just about what are the incentives for, you know, charging and discharging.

And it's on a monthly frequency. I mean for all of these other commodities it's it's it's a long term game.

You know, there is short term gas cavern storage that that can move in less than a month, but generally speaking, the tools that one uses to manage that risk are monthly futures contracts.

So here you know, we're talking about certainly daily opportunities to charge and discharge.

Which you know that frequency alone being hourly or sub hourly changes the game. But the whole optimization process incorporating opportunities to participate in, you know, capacity markets, ancillary services, all of those things that the ISO will pay for as another level of complexity.

So you know it's very different and the you know the research and the analytics that support it you know to me or are entirely different. But the brisk calculation and the understanding of sort of var analysis and stress analysis that is similar. It's not the same but those aspects of it come into play in in in that regard, you know, experience in other markets, I think helps. I've been in the power markets for twenty five years.

And I've seen them grow up from physical only markets where no futures contracts in some cases in Ercot when I started trading Ercot, There was no there was no nodal or even Zonal or hub pricing. Everything was what we called undelivered, unplanned b. Which was physical power where you would literally rent or reserve the lines and move it from point a to point b and sell it, but there was no open market. So I I've watched over the last twenty five years these markets get more and more complex.

The one thing that I can you know, I can show you back to the the mid eighties even is that power is quite cyclical and you have low prices. People stop building. You have high prices. People build too much. And then a few years later, they have low prices again. And so the cyclicality of power is something that we expect to continue which is why you need to be regionally diversified and each region really is in many ways an island or at most connected to one or two other regions.

And so it's important we are while we're in Ercot now and we expect Ercot for at least an extra four or five years to be quite a great place to play.

You do have to be regionally diversified just given the history of the of the commodity. But do you have a target in mind? When you talk about diversification, you think about a portfolio of financial assets and you think about, you know, you sell in bonds, some in equities, some in other stuff. How are you thinking about geographic diversification?

Do you have targets in mind? You you know, or thirty percent in echo, thirty percent in California, but in p j m. How are you thinking about that? Yeah. Absolutely. So if you look at the US power market, Ercot really is only about, you know, seven eight percent of the US power market, but it does have enormous amount of price fall utility and evolution as load is growing dramatically.

Places like California are much smaller, three or four or five percent of the US, but they also offer good price volatility.

When you look at PJM, ISO, and SPP, you get closer to to fifty percent of the US from those markets. And those three markets, while they have a lot of wind, they don't have a lot of solar. And so we think that over the next decade, PGM alone will probably have a hundred gigs of solar SPP in my cell, maybe half that. And so the opportunity for storage to piggyback on that growth is just traumatic.

And so I I and then you go to New York and New England. Again, smaller than Texas, but in some ways larger than California, Each one of these markets has different rules. It has different supply and demand drivers. I mean, New England is still heavily dependent on oil prices and sort of in some ways even European natural guests as a competitor in the winter. And so the supply demand issues at each region is is wildly different. As is the weather patterns today we're entering a weather pattern where Texas is quite hot in the East Coast and the West Coast are a little cool year over year quarter over quarter month over month, you have regional disparities in supply and demand.

And in penetrating Only of only someone sat in Florida could say Texas is quite hot right now. I think it's forty two degrees.

In Houston. Yeah. And it's quite hot. Into it might even be hotter at at one of our facilities we're building.

You'd asked earlier about construction We have one asset in late stage construction in West Texas, which I think if we're on track will be the largest battery in Texas by volume. There'll be bigger ones by by by size, but not by volume. And that'll probably be the eleventh or twelfth largest battery in the world. And what's funny is that a year from now, that battery which again can be the largest battery in Texas by volume.

It might not be the tenth largest battery a year from now.

Yeah. Right? A bigel go through. And so we're seeing stuff in California, the Southwest, over a gigawatt in such, in size.

So when I when I talk about diversity, it's really because you have fuel mix diversity, regulatory diversity, weather risk, and they are quite different markets similar to Europe. And now I wanna give you a chance to plug. So two more questions. It firstly, is there something that you wanna talk about on the pod, an announcement, or a new project, or something that you wanna get out to our listeners?

Then the second one is my my favorite question, which is what's your contrarian view. But first, let's go with the plug. What what do you wanna say to the world? You know, one of the things that we may not have accentuated all that clearly in this discussion is we have this trading capability and we've been talking about how it pertains to spearman's own development plans.

But if spearman is successful in its development it will also be a risk absorption agent for other developers. Right? You know, we talked earlier about so many other developers out there that just aren't willing to warehouse that merchant risk and are looking for folks to take it off their hands.

We are building a capability to absorb that merchant risk not only of our assets but for many others as well. And similarly geographically diversified. So does that mean you guys would sign tolly agreements and provide a, like, a fixed a a floor or you know, a a a fixed amount of revenue, and you will take the risk of optimizing the asset. And then the asset owner knows this is what I'm gonna get for the next five, ten, fifteen years, whatever the time period is.

That that that's exactly right. We are in discussions now with you know, somewhere between fifteen to twenty developers, private equity, asset owners that are looking for someone to provide offtake and manage their their battery and provide risk offtake. And and that's something that our trading team is heavily focused on today. The other so the other shameless plug I would say is I've been focusing the focused on the sort of SFDR article eight article nine investors.

For almost seven years now. And what's what's amazing to me is that so many of the American developers, their view of ESG compliance is very limited. And so as a result they have not put themselves in a place where they will qualify for ESG funds. And I think if you look at what we're doing, we've been following a little more of a European model.

And so I believe most renewable developers, they think that because they're on mission reducing carbon, that it gives them sort of a green light in other areas of the business and so we're heavily focused on not only giving back to the community and treating our people fairly being transparent doing no harm I think we go a lot deeper than most other renewable firms. In in fact most renewable firms, if you really look at what they're doing They're only an ESG investment because they're reducing carbon, not because they're running their business in a more ethical manner. And so we focus very heavily and we spend an extraordinary amount of time planning our investment decisions and everything about what we do.

So ESG for spearman, it's much bigger than carbon production. It's the whole the whole thing, and you're building up rates in the business to to ensure you catch of every single part of that benefit that you can provide? Yeah. I think the European, they lay out the rule the sort of rules regulations taxonomy in a much more complete manner and not saying that it's all encompassing, but it it provides a lot more direction and the ability to track what you're doing, then you find in in the US or Canada.

And now the fun one. What's your control This is my favorite one. So -- Yeah. I did a good search.

-- there are thirty one gig of factories in the world that are currently under construction.

They are all betting heavily on a global demand for batteries, not in the US, not in Europe, but everywhere.

For autos, for power, for everything.

The miners are and the mining capital and mining growth is massively underfunded.

And will not be able to support all of those factories.

And so as the US is growing to a hundred, two hundred, five hundred gigs of storage, Europe will too, as will Asia, South America, and Africa. And so you have a lot of factories being built but the mines will not be able to keep up with it over the long term. And so my contrarian view, which is it complete the opposite of what the national renewable energy lab came out with earlier this week. Is that battery prices go up and they go up considerably.

And so engrailing No more. There's more. And engrailing well, the demand, the global demand in in Europe and elsewhere for solar and wind is enormous that will require storage to go with it. And so I think that those investing in batteries today will find five years from now that that asset has appreciated in value dramatically just for the mineral content.

And so I think that is a contrarian view out there and people should be racing to install batteries today while prices are reasonable. Not just energy storage, but also minimal storage in these things. I mean mining listen. Mining itself is a tough long business with very delayed permitting cycles and investment cycles, and they have their own ESG issues which are hard to overcome.

And so I think that the metals and mining sector is a real growth area of the world, especially to do it right and clean. And that will lead to much higher mineral prices, much higher battery prices and Sadly, probably delay the rollout of storage once we get past a few years. That's a huge call. Love it.

We're gonna we're gonna go for a beer in five years time, and we'll have to we'll have to do some some checks on this.

I hope you're wrong. I hope you're wrong because the the the second order effect of that means it will diminish the demand for storage, I think, and would end up using other things. I mean, I guess it's good if you own assets, they're gonna appreciate in value. So there's a window and everything. If I'm wrong, it really just means that the solar and wind has been built out slower.

Right? And that'll be that'll be SaaS. I hope I'm right. Yeah. Yeah. Yeah. If I'm right, the global transition to EVs, solar, and wind happened, and the demand was so massive.

And so I hope I'm right. You know what? I changed my mind. I hope you're right too.

And, Nick, how about you? What's your contrarian view? I'll go with the kind of as I perceive at the conventional view that before long, I e like two years out, we'll have battery saturation in parts of the US including Ercot.

I think you know, if you subscribe to any of the expectations that we've discussed already today in terms of the build out of renewables continuing even in that part of the world, certainly in that part of the world.

You know we we have an perpetual growth in demand for storage services that will continue to you know provide premium to those who are willing to invest in it. So we about factories to utilize our trading capability to extract revenue from arbitrage opportunities in all of these markets, but even the ancillary services that a lot of folks basically take a a very static view of and say, well, you know, if we build another couple of gigs in Ercot, you know, we'll sort of wipe out that opportunity entirely to me doesn't take into account fully or or even, you know, remotely the opportunity for additional need for those services that comes from the build out of of renewables particularly solar.

So another big cool So I guess to believe that, do you have to believe that the the number of gigawatts of ancillary services that Ercot is gonna procure is gonna increase significantly in the next couple of years alone. I think that'll match the if you get the solar and wind build out that we expect you've seen people forecast the duck curve, becoming a super duck curve, becoming a chasm.

Certain in in some ways like California, where you have, you know, a lot of price spikes in the morning and then zero prices throughout the day, and then a lot of price spikes in the evening. Which would be great for batteries and also great for ancillary services as you have several times a day with massive inflection points. Power has always been about ignoring the long term supply and demand in minute to minute dispatch and really looking at what the inflection point of the next megawatt is. And so even if it's just thirty minutes every morning on the morning ramp and then the ramp down and the evening ramp and the ramp down, we believe the in sort of service needs during those periods will be extreme and growing not shrinking. Fascinating. Fascinating.

One other thing that I I failed to mention previously was power markets have always been path dependent.

Right? You have winter storm Yuri, people change the rules. You have winter storms in New England. You get PCM mechanisms.

Over the next two to three weeks, you have an extreme heatwave forecast for Texas. Some weather forecasts are showing extreme heat.

If Texas has another power crisis, which it certainly could over the coming weeks, it will force more regulatory change enforce market dynamics to change. And sadly, we're setting you know, we're forecast to set new all time power records in Ercot in early or I guess in mid June, what could happen by by late summer? And so one of the biggest risks to our business is a regulatory response that comes from another power crisis.

And so in Texas specifically over the next few weeks, as you guys were saying, it's over forty Celsius in most of the state and getting worse. And so by the end of the summer, this sort of continued heat wave, you know, it could lead to further regulatory change.

And and it's sad, but that's unfortunately how power markets work is you need some extreme event to sort of fix the market. So surely Texas of all places the risk of that is lower you think because it's a free marketplace with light regulation and that's in their blood. Over the last three years, ERCot has twice changed its ORDC price curve by shifting it to the side.

It has increased the volume of ORDC. It procured. It's added an ORDC price floor and other in some hours. It's added an ECRS mechanism.

It did add a price cap.

All in all, Ercot's probably made five to six market design changes in the last three years to incentivize changes to the grid, more storage, more power. If you have yet another power crisis, I feel that they will continue to evolve their process just two weeks ago, I we we joke that there was, you know, fifty bills in the Senate with respect to changing the power market rules. Only really one or two past at the end of the day and one of those still needs a statewide referendum.

So you know, depending on how things go this summer, it could force further action and further market rule changes. Interesting. Guys, I just want to say a massive thank you for coming on. What a conversation. You guys have come up with so much that I listen to gonna love.

So until next time when we can come down to Florida and do this face to face, I want to say, thank you. And for anybody who's listening, please do hit like, subscribe, and all the good buttons, it means the world to us. Thanks, Andrew, and thanks Nick. Mix again.