Using batteries to support Ukraine’s energy security with Julian Jansen (Fluence)

Welcome to transmission, the podcast that uncovers the business of clean energy. I'm Ed Porter, VP of insights at Moto Energy, and today's episode is all about Ukraine.

Since twenty twenty two, Russia has actively targeted Ukrainian energy infrastructure. Power plants have been hit. Substations have been destroyed. The grid has to run with fewer big steady machines keeping it stable and with damage that can't always be repaired fast. That's why the system is precarious, and it's why Ukraine is pushing in two directions at the same time. They're moving towards energy independence, meaning less reliance on imports or vulnerable fuel supply.

And Ukraine is building stronger ties with its European allies, which means synchronizing with the NCOE grid. This ties Ukraine into a larger, more resilient system. Renewables are still being built, wind, solar, even in wartime, but variable power on a fragile grid creates its own risk, and that's where batteries come in. Today's guest, Julian Jansen, joins from Fluence, a German based battery system provider, and the conversation is all around Fluence's work in Ukraine.

Seven grid scale batteries around five hundred megawatt hours in total built to provide essential services like frequency support, the fast precise balancing that keeps a weakened system from tipping over. We also need to talk about the pace of deployment. These projects were delivered in roughly six months around half the usual time. And they did it with a wartime mentality, simultaneous builds, tight coordination with the grid operator, and remote commissioning.

And that's the lesson Julian keeps coming back to. When the need is existential and the process is stripped back, energy infrastructure can move much faster than we tend to think.

Ukraine is the extreme case, but the logic travels. So this episode is about batteries as a necessity, not as a financial product, but as critical infrastructure. Build fast, build for stability, build for a grid that has to keep working no matter what.

Welcome back to Transmission.

Hello, Julian, and welcome to Transmission.

Great to be here.

And our pleasure to host you. And please, could you introduce yourself and your company to our listeners?

Of course. My name is Jian Jansen. I'm a managing director at Fluence. I was responsible for our business in Southern and Eastern Europe and right now transitioning over to take the managing director role in Germany.

Fluence, to many people in the energy storage industry, it's a known name, but also for many people outside of that, it's maybe not a company you've heard of. So Fluence is one of the leading providers of battery energy storage solutions, software and the long term services. And we're quite unique in a way that we are only doing storage. And we came about as a joint venture in twenty eighteen between Siemens and AES.

And in twenty twenty one, we IPO ed. So we listed on NASDAQ. Last year achieved just under USD two point eight billion in revenue. We're active in forty markets.

We've deployed or currently deploying more than forty gigawatt hours globally and really driving that focus to energy storage to achieve our mission Because Fluence is fundamentally a mission driven company transforming the way we power our world, utilizing energy storage for more sustainable future.

I love that. And congratulations on the role change.

But and today, we could talk about loads of things in in the sort of fluent sphere. Right? Because as you say, forty countries, you are active in many, many grids. But right now, we want to talk about some of the work that you've been doing in Ukraine. So over to you. What have you been doing in Ukraine?

It's a really interesting and impactful work that that we've been getting involved in in Ukraine. So we've been deploying seven large scale battery energy storage projects in Ukraine, totaling five hundred megawatt hours across those seven projects. Six of those with our partner, DTEC, and one other project with another player and investor in the market. And I'm saying they're very meaningful because if you think about the situation Ukraine is facing right now with the destruction of the energy infrastructure during the wartime, the role for energy storage is really amplified, and the value storage can provide is much greater than in most electricity grids. And even their storage is already a great technology class to make grids more secure, more reliable, and ultimately integrate more renewable energy.

So let's so let's do that. What are the specific challenges in the Ukrainian power grid that you are looking at and trying to address with storage?

I think you can break it down into two things. One, I would say is call it market fundamentals, which are there regardless of the ongoing war. And the other element are wartime induced challenges to the electricity grid. So let's start kind of maybe with the fundamentals.

So in March twenty two, Ukraine joined the, NsoE grid. The synchronization was now fully complete in January twenty twenty four. So, basically, Ukraine is now trading with European electricity markets and has the same requirements for grid stability because, of course, being on the edge of that, it could have severe consequences for grid stability across the continent. At the same time, Ukraine is deploying renewables at rapid pace.

So since the war started in twenty two, one point eight gigawatts of renewables have been commissioned. There's another seven hundred megawatt of wind currently being built in Ukraine during the wartime, and there's a target of achieving twenty seven percent renewable energy penetration by two thousand and thirty. So if you think about the fundamentals, it's similar to many other electricity markets in Europe. You have the synchronization of the grid, the grid stability question and the renewable penetration.

And that's leading to the typical things, more need for frequency regulation, bigger spreads on the wholesale market. But then there's also the war related element.

And I think we watch the news, we listen to to the radio, people have an understanding what might be going on. But when we're sitting here in London or anywhere else in in Western Europe, it's quite hard to really understand what's happening on the ground. And you think about it, since the war started, Russia has destroyed around twenty point five billion US dollars worth of energy infrastructure.

So to put it into context, before the war, there was about thirty eight gigawatts of dispatchable generation. In the first year, we had losses of nineteen gigawatts of generation capacity.

That went down to twelve gigawatt total installed dispatchable capacity in twenty twenty four after another wave of concentrated attacks. So Ukraine has lost the majority of its generation capacity.

Eighty percent of its coal fired and hydroelectric generation has been destroyed. Seventy three percent of thermal units are no longer operational in the market. So it's facing severe challenges in the way grid infrastructure is being attacked. And it's not just generation capacity.

It's substations. It's the distribution grid. It's the transmission grid. So in order to keep the lights on and if you think about energy security and access to electricity is fundamental for security, for staying for being in the fight of the war. And that infrastructure is being attacked attacked every winter. And therefore, building energy storage in that situation has a heightened impact because it helps bring grid stability, helps restore power more quickly, and it makes the electricity grid as a whole more resilient.

Yeah. Some some fascinating stats. And I think this was really kinda clear that's coming through is just how it depends on how close you are to the news, but like just how much of a target this has been. Like if you really want to slow a country down, then taking it off grid is a very very good way of doing that.

And so that some of those numbers are are really striking. When we talk about batteries role, you mentioned kind of two things at at a high level, but perhaps actually a third. So there's sort of the frequency response element. There's a sort of energy trading element or more sort of when there's surplus, you charge and when there's not enough, you discharge.

So the kind of classic case. And then there's also sort of restoration of the grid. For that for the sort of five hundred megawatt hours that you're installing, how do you sort of split the services across those three, or is it possible to stack all three?

So currently, those projects were specifically built to provide ancillary services to really help restore or maintain frequency Off the grid, And it was specifically driven by an auction by the TSO, Okranaga. So those assets have a very specific use case. They are able to stack some revenues. They are able to potentially trade on the wholesale market as well.

And they also have certain requirements around grid forming capabilities. In terms of grid restoration, they have some capability to also deliver that. But the first and primary use case really has been ancillary services, which has been an ongoing auction. So Uchraneo, the TSO, has now run four auctions for ancillary services, awarded about seven hundred to eight hundred megawatt of battery energy storage, and they're planning another auction specifically for that use case. But you did mention the arbitrage element, and I think what we're seeing is there is increasing price spreads on the Ukrainian wholesale markets, and that paired with the renewable penetration is increasing the value in stacking the arbitrage with the ancillary services. Similar to what we've seen in most, let's say, more mature markets, but I would say the acceleration of that journey is much quicker than anywhere else we've seen.

I'd I'd like to talk just a little bit about the the restoration of the grid actually. It's something that we've talked a lot about in this in conversations on transmission around batteries charging when there's too much and then discharging when, you know, there's not enough and then also frequency response. Those happen quite often. Conversations around things like Blackstar or trying to help grids kinda get back onto their feet. We haven't talked about that too much. You mentioned that that you can provide some services to bring a grid backup. Is that more like current injections or is that more like a sort of whole system black star types?

So at the moment with this type of configuration, it's, not the whole system black start, but, of course, storage has the capability to deliver that service as well. In this instance, it's much more providing the inertia that's being lost on the grid as you're destroying a lot of your thermal generation that has the kind of spinning reserves inherent to it. And, of course, again, talking about what we're seeing in most grids, right, we have a transition away, from those traditional generation resources. And here, we just have it heightened because of the destruction.

So being able to provide some of that, capability, providing that synthetic inertia to the grid is very critical, but the primary use case still remains on on the ancillary service. The other element I think that in the Ukrainian context is important is to distribute the nature of these projects. So rather than building one very large project, you're distributing the assets, which from a distribution system perspective allows you to maintain potential grid stability or maintain electricity when maybe there's outages on on the wider grid because of the attacks. So distributed nature here plays a very, very pivotal role as well for grid stability.

Yeah. So so imagine every single one of these units is essentially trying to keep that grid frequency where it should be. And if they're sort of two hundred, three hundred kilometers apart, if something severs in between the two, then you've still got assets on either side. Correct.

And you mentioned there were it's five hundred megawatt hours. Did you say there were seven sites? Okay. So so roughly speaking, we're in in the realm of that sort of fifty to a hundred megawatts type size, slightly smaller?

Yeah. Slightly smaller. So the most of the projects are between twenty and fifty megawatt, two hour duration today.

Okay. Yes. Oh, that's where the the the doubling is coming from. Okay. So two hours was kind of selected as the option, which is very sort of traditional for for ancillary services and and that type of restoration. I think maybe just to give people a bit of context as why that feels slightly smaller than other assets that someone like Fluence deploys. Maybe you wanna give a a little sort of taster of some of the sizes you're looking at, for example, in Germany?

Yeah. I think that that's right because, you know, I'll give you one example. In in Germany, we just signed, the largest storage project in Europe, which is a four gigawatt hour, so one gigawatt four hour duration asset. So you look at the scale, there's obviously a huge difference.

And when we look at pipelines across the market, whether it's in in GB, whether that's in markets like Germany, we're starting to see really a lot of projects move into the very high hundreds of megawatt hours or even gigawatt hours. In Ukraine, I think, added a add a couple of key elements. One was just the auction size. Right?

The auction awarded, limited capacity, so people were building smaller projects to meet that. Part of it was sites, so being able to find sites that are able to be brought online within a very short period that developers were given by Okla Naga to meet the deadline of getting the projects online from that first auction before winter twenty twenty five. So that was a really critical element for site selection. So when you go bigger, it's very hard to meet that timeline.

You might have to, procure high voltage equipment, etcetera. Here, smaller size was allowed allowed those projects to go faster and also, to a certain extent, kind of investment volume of the projects. Right? You're operating in a wartime environment.

Yes. You're getting a five year, back contract by the grid operator. But, of course, as, let's say, limited international investors Yeah. That are going in into that market.

But at the same time, Ukrainian banks are funding those sort of mechanisms. But, again, the checks you're writing are not going to be able to build a four gigawatt hour project. But also the total need on the ancillary services was defined by about one gigawatt in total. So you can kind of put one and one together and and and see why you've got a build out of a larger number of smaller sites rather than the very large projects we see elsewhere in Europe.

Okay. Makes sense. We'll we'll definitely come back to that piece around the speed of delivery later on. But let's just stay with the the sort of wartime theme. Right? So how is the project different to a traditional project that Fluence would do? So sort of where where did you say, actually, this is as far as kind of Fluence will take this and we're gonna pass over to our partners at this point?

The fundamental differences for this project, one was speed. So we'll come to that a little bit later and and have a discussion around it, but just the real, let's say, heightened requirement to bring the asset online. The other element was how it was being delivered. Right?

That was really a a complete different way on how we've traditionally done it. Fluence invests a lot of money and, people being close to market, being local, having an, having staffing from sales through project management all the way through services. And, of course, given the conditions, we were unable to hire, in Ukraine and and send our people to Ukraine. So we developed a unique concept for us at the time, which was to commission those assets remotely, to train our partners' teams on how to commission the assets, how to install the assets, but also then how to service the assets.

And for us, that was also quite critical. You think about the need for investment and upskilling the sector in Ukraine. Right? There's a lot of very good engineering capability, but very limited experience with storage.

So by training our customers and partners' teams, we've really helped upscale the sector and we now have dozens and dozens of people there that are able to install commission these assets and service them. That was really quite the unique aspect. So we're now through the process of the commissioning, we supported it remotely and the team on the ground were able to, then carry out the commissioning work. And then of course, there's a few, let's say, smaller items to navigate logistics, right, how to actually get the assets into the country.

And then on the operational side, okay, again, training up the teams to service the assets going forward. But I also think that is definitely an area as we have more productization in the industry. It is something that was unique for these projects that offers such great learning and is already being implemented in the way we're approaching projects going forward and being able to maybe serve more customers across more segments and more geographies for a similar model.

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Enjoy the conversation.

I'd I'd I'd love to ask a question, and maybe maybe we're gonna have to cut this one out.

But just around the level of secrecy in the project, was it was it like delivering an a project to any other supplier, or was it very much sort of even with influence? It was kind of only a few people knew that certain projects were going in certain places. Was it was it was it all kind of a little bit under the radar? Yes. It was.

So, I mean, actually, it started doing the projects, required the highest level of buy in.

So we really built a structured case why we should be doing these projects. You know, really, in the end, it came down to our mission. Right? We believe that there's no project that align greater to our mission of transforming the way we power world.

And, you know, whatever you might say, a lot of our teams are very driven by the mission. I'm very driven by the mission. And, yes, we're a large publicly listed company, but that's still an inherent motivation. So there's a really clear case of why we wanted to do these projects, and it was motivated much more by the mission element than any commercial aspects.

On top of that, in terms of the secrecy, yes, it was treated very different than most projects. So in terms of site location, for obvious reasons, we cannot disclose the site locations. Even within our internal teams, there was no sharing or knowledge of site locations. The partner knew obviously where the sites were and only a very core team that was working on the commissioning was working through that.

I had the pleasure of visiting one of the sites back in September, which was, you know, quite a proud moment for for me personally, but it it really had to go that way because as you can imagine, this is critical infrastructure.

And even going forward, those sites, of course, will not be disclosed Or known publicly.

So really critical element for us to make sure that they stay online and and continue providing the value that they do.

Well, I didn't know you'd been to the site. So I would love to just hear a couple of lines about going to the site. What were the things you were looking out for? Was it sort of a was it was it very much of was it a practical visit, or was it also just a a more of a visit just just with partners really just to kinda celebrate the work that had been done?

It that one was actually a little bit more the celebratory element, so to speak. It was the formal inauguration of the site. So they'd gone through the market testing, with the grid operator, and this was really not the final inauguration energization. So, obviously, still some some minor work that is, is happening remotely, but all those assets are now operating and are discharging and charging electricity.

So it was a little bit more from from that element, for me personal personally, working with our partners, showcasing the project, engaging with, key stakeholders locally to explain what the technology does. But it was also important to see how it's been installed. Does it meet all of the requirements that we put in place in terms of this is what a site should look like? If you're not actually on-site, it's very hard to check and and oversee that.

And it was a very impressive it was one of the the most impressive projects in terms of build quality installation that that I've seen and, yeah, it was a great great moment to to see that and work with our partners to deliver it.

Because you can always look at a board, a dashboard of of sort of lights and try and work out what the problem And you can always look at photos and try and work out, oh, has that been installed the wrong way?

But actually, like, you sometimes you have to be there to to see to see whether something is as it as it should be.

Okay. But it it was. I I think that was the great great moment. Being able to walk the side, see how it's been installed. Yeah. As I said, I think it was just a a very powerful moment to be in Kyiv and see the site there, see it operating, and the impact it's making. And, yeah, long may it continue.

Very good. And hopefully, more projects coming through. We talked a lot earlier about the speed of these sites coming through. So we you mentioned, I think, six months from start to finish or getting getting the projects there in time for winter. Just to give listeners some context, is is that significantly faster than most other battery projects? And how did you do that?

Yeah. It is significantly faster. So I think if you use a comparable size, right, of course, a larger project will will often take a bit longer anyway, but comparable size, you would typically be looking at around a twelve month delivery period. Right?

That includes everything from manufacturing to shipping the systems to then installing and commissioning and then connecting to the grid running through all the market testing, etcetera. So twelve months typically in the industry has been seen as fairly quickly. If you look at some assets, mainly due to grid connection requirements, grid testing requirements often delayed significantly. So, I think here that makes that makes those projects unique from, you know, signing the contract in in January to, starting the delivery in in spring and then having all the market tested completing completed over the summer, was really a big lift and a big effort by teams on our side, but especially on, from our partners and and customers in in the market.

So it is quite unique in in that sense. How is it done? I think it needs a lot of buy in from us, from the customer, but then also from the grid operator. Right?

And there was a clear goal, these assets need to be online before the winter period because that's the most, that's a challenging period for the electricity system in Ukraine. So it was really accelerating the production schedule, having a lot of people on-site for the installation and commissioning of the asset. Now luckily, our partners have a big team of engineers that they were able to bring across and and to deliver that. And, of course, from our side, providing all of the remote support to enable that, which is significant as you're doing it, in parallel rather than sequencing the commissioning, which you would typically do on an asset.

So bringing individual cores online simultaneously across multiple sites rather than just sequencing and and starting one by one and going the team goes from one to the next. So that was really an important effort there for everyone. And then ultimately, the grid operator doing the testing very quickly, very rapidly. But, of course, that was a mutual interest because they needed those assets online as well.

Yeah. It's really it's kind of really striking. Right? If you were to if you were to compare some projects in some areas of the of the world, you could be say seven or eight years before, like, from initial inception through to project delivered.

Right? It really could be something like fourteen times longer than than how long it took you to get those projects deployed. So I think that's I think that is really striking. And we do often hear that people kinda say, oh, like, we need we almost need like a wartime mentality or like a COVID like response to go ahead and try and decarbonize sector faster.

And I think this is really what they mean. Right? That if everything aligns in the right direction, you can get these projects moving very quickly and you can get it done within six and twelve months. One one one of the things that stands out for me, do do you think sort of more broadly with influence, do you think you'll try and sort of use remote commissioning more often now that you've tested it out in possibly the hardest conditions?

Do you think you'll now look to go ahead and do that in more places?

Yeah. Absolutely. The learnings we've taken from from these projects are huge, right, all the way through the whole kind of process, including, let's say, the contracting and how we move quickly through the production, how we prioritize, and then in the end, the the training and remote commissioning models. I think it will it it does depend on the type of project, the type of location, the type of segment because often for the very large scale projects, it's still the better option for us to carry out the whole work.

We we sell a lot of turnkey projects as well where we don't just provide the technology, but we, carry out the whole, construction of the of the entire project. So, obviously, on those sites, that type of model wouldn't work anyway. But certainly, to access more segments to also deliver, let's say, within the smaller parts of the market where project sizes are a little bit smaller to go into geographies where maybe this is very complementary and also taking the learnings into our next generation product where we speed up the commissioning significantly, which is a good thing when we're delivering the project.

But the easier and faster the commissioning is because we do it front ended, the easier and faster it is to deliver it in this type of model.

When you say you do your commissioning front ended, what what do mean?

So we're doing a lot more on the software within the factory. So when the product actually ships, what you have is a lot of preinstalled software. Commissioning is a lot faster once it lands on-site, and you don't necessarily need the same size of commissioning team going from each enclosure to the next enclosure to actually start the commissioning somewhat more manually.

Yeah. Makes sense. And one final question on Ukraine then. So what does the what does the sort of long term plan look like? I saw a number out there for five hundred megawatts of battery storage being considered, obviously, a large number than today. But but do you see kind of storage evolving into something that can go beyond frequency response and to provide resilience for longer periods?

Yeah. I mean, I think, first of all, let's look at at kind of the facts. So, right, I said earlier, there's this twenty seven percent renewable target that the Okronogos has got and and that Ukraine has got. So you obviously have the again, the fundamentals are moving in the right direction.

You have a real need for flexibility because if you think about you you because of the destruction, you now have about seven point seven gigawatts of nuclear capacity across three power plants. That's not a flexible generation technology. Right? So you have a very strong base load, and you have a lot of renewables on top of it.

And a lot of your flexible generation has been destroyed or is under attack. So storage comes in and and can really fill that gap, from a system perspective. We think of kind of a nuclear renewable hybrid system. Storage is almost like the perfect complementary technology to manage the flexibility requirements within that.

So there's clearly a need. There's going to be another option or at least it's planned to have another option for the ancillary services, but there's also more and more interest in co locating with renewable plants. So then in those cases, it's slightly smaller project sizes. And we're starting to see a belief in the arbitrage case.

I mentioned earlier, we're seeing quite significant spreads on the wholesale market in Ukraine, and there's a lot of buy in from certain investors that that will continue. So we're also starting to see a shift in duration. It depends a little bit on your kind of brisk appetite, I would say, and you believe in the long term fundamentals of the market and the availability of capital. When you do, we're starting to see customers looking at longer duration assets, whether that's four hours or even above that because they see the spreads in the market potentially driving a payback on this longer duration type of asset.

For us, directly, we have about a one gigawatt hour pipeline of additional projects in Ukraine. Hopefully, many of those will be will be realized in the coming years, and we're gonna continue working with our partners there. But also doing more than that, right, helping people understand the role the technology can play working with stakeholders within the electricity system to really highlight what else storage can do beyond the ancillary services, especially as you're rebuilding a grid that is transformed postwar with storage, with renewables, and other technologies.

Yeah. It's a super exciting time, right, as storage goes goes from this sort of ancillary service provider into something that does multiple hours and a longer duration. I don't sort of hesitant to say long duration because sort of a moving a moving number, but but certainly longer duration. And we see that in Germany as well. So we've been looking at sort of the the saturation of those ancillary markets and how the sort of best duration for some of those battery assets is now looking like four hours, You know, it was two hours now looking at four. It's a repeated theme from battery markets all over the world, and I'm sure you're seeing it too in the orders of the and, well, it obviously is coming through because you mentioned a four gigawatt hour project that earlier on in this episode.

Yeah. It is completely coming through. And, I mean, why is it happening? I think, one, it's the spreads of the market are starting to justify that investment case, but I think the other piece is grid connections are incredibly valuable right now.

If you can have the grid connection but increase the energy that you're storing on that same side and deliver additional value from that and maybe look a bit more long term because it's gonna be very hard to get another grid connection for the next project, well, let's go four hours straight away, take a little bit of risk, into the future, but potentially have a much higher payback in the medium to long term on that same project. The other thing that I think that we're seeing though is that a lot of sites are quite constrained. So people have planned on two hours. They're now looking to expand to four hours, but they have land constraints, they have permit constraints in terms of noise.

So what's really great to see, and especially in the German context now with Fluence's new product, the SmartSac product, which is higher and drives a lot higher density at a site level, we're starting to see projects that are being enabled to go from two to four hours within the current permit conditions, and that's obviously extremely valuable for a developer because you're not having to re permit, but you can already shift to four hours, take advantage of the greater economies of scales, lower cost that we continue to see coming down on the battery side, and max out your grid connection with the four asset that fits onto that side.

It's such an exciting trend, you know, that those batteries that went in five years ago, turns out you can just lift them out, but in something that's the same twenty foot shape and yet could be giving you three times, four times the duration because the tech has got so much better. I would say that that Fluence asset, has it also got a bit taller as well?

Is it is it's kinda gone from a standard twenty foot shipping container to like is it a high cube?

Is that the right height for it now?

It's it's about yeah. It's it's about four meters ten, four meters twenty, so a lot higher than a standard shipping container. There's also obviously ability to change the structure, on the same product platform. That's a little bit the philosophy behind it. But at current level, it's kind of in those rounds.

So there's there's some flexibility in terms of how you configure the product.

But for us, it's it's really about bringing two things together. And I think the whole industry went density, density, density. Like, how do we pack as much as possible into the same twenty foot enclosure? But then the problem is you start having issues around weight.

Suddenly, that thing weighs forty five, fifty tons. Yeah. How do you maneuver it? How do you install it?

You need special cranes. You need special transport. So for us, it kind of went back to the drawing board and looked at our roots when we had a very, very modular product, which at the time was great for where the market was. I was like, how do you bring the density and the modularity together?

And that's how SmartZag was born, where you have the SmartSkid at the bottom, and you put the battery pods on top of that SmartSkid And through that, achieve the higher density because you're going higher. But you also have the modularity required for logistics and installation because you're not installing or delivering and installing it as a single enclosure.

And if you can get everything onto the back of a lorry and lift it with non specialized cranes, it makes everything much cheaper.

That's right.

That's secret sauce.

That's right. And I think the I think what people are forgetting, right, if you're now reducing a lot of the cost around the battery storage system, the impact is much higher. Right? Wasn't that long ago that the battery made up probably sixty, seventy five percent of total project costs. Right? But that total project cost proportion has massively come down depending a little bit how you count all the different elements, but it's probably down to about thirty five, forty percent in terms of the core battery enclosure and inverter element. So if you're now reducing other costs as well, if you're reducing the installation costs, if you're reducing the civil works that is required, the cabling that's required, how much concrete you're pouring for foundations, the proportional effect of those cost savings is significantly greater than it used to be.

Yep. It's really interesting. Right? So we're we're now starting to look around the edges to see where else we can save in addition to having a much cheaper battery on-site.

Now we've talked a bit about about GB. We've certainly talked about Ukraine. We've talked about Germany. But in your role, you're looking at growing markets or emerging markets.

What other markets are exciting for you?

For me personally, Poland is a really exciting market. I mean, a lot of people and investors have woken up to the fact that, there's a great opportunity for storage in Poland over the last kind of eighteen months, but I still think there's a lot more runway, there. And it's just looking at the fundamentals of that market. You have a lot of renewable build out.

You have a very inflexible coal fleet. Eventually, that coal has to be, phased out, albeit slowly given the political challenges of that in Poland. So you're then looking at where does the flexibility needs to come from, and it's not gonna come from natural gas from a geopolitical perspective. That's not that desirable.

So storage has a really key role to play in the Polish market. So very excited about the prospects there, you know, probably up to about twenty gigawatt hours, by, two thousand and thirty is is what we expect in in that market. The other market, I think everyone is fully aware of just in a scale and speed perspective is now the the Italian market. I think a lot has been talked about it, so I won't go into too much depth, but just the level of commitment from the grid operator, right, to go from and and the Italian market, it's interesting because it's kind of the four phase if you think about it.

Right? Started with some pilot projects, and there was a specific Turner pilot, between the north and south. And at the time, it was, like, the largest storage project in the world. I think it's back twenty fourteen, fifteen.

Then it kind of died. Then they had a fast reserve auction, which was a really interesting concept on ancillary services.

Then that was a one off market opportunity. Then they had a big capacity market auction where over a gigawatt was awarded. Then nothing happened for two, three years. We're actually in the fourth deployment phase, and people are like, oh, Italy is interesting.

Right? But it it is way more advanced. But now Turner is going to be procuring fifty gigawatt hours in the in the three year period for the for the MAXIA auction. So really interesting market from a scale perspective now.

And and if you think about the the levels of market development, I think it's it's very curious because a lot of people have forgotten that it is actually the fourth phase of deployment there. I think what I'm really always keep an eye out for is where Spain is against some more ambitious, discussions coming out of Spain. I lovingly call Spain market development purgatory. I have a long career in market analysis and then new market development, and to me, it feels like it it it kind of perpetually stuck in in market development purgatory.

But I think now after the the purchase scheme and and now some of the more aggressive targets and regulatory changes, I'm hoping it can kind of come out of that hibernation and and be a core market. Because, again, look at fundamentals. Spain should be the most attractive storage market in Europe. Right?

Very limited interconnection, very high renewable penetration, great opportunity, a lot you know, land available, etcetera. And then I think, you know, from a scale perspective, we we don't necessarily see it that much when we're kind of in Europe or in GB. But last year, spent a lot of my time in the Middle East, and the scale of individual projects, it is just eye watering when you're comparing to the types of projects we that that are being built here. Again, right, grid connections probably a lot easier to to achieve.

Land is certainly less of a challenge than maybe if you're in kind of dense south of England. But, again, the scale that's coming out of there, the this the way scale across the globe drives ultimately also the competitiveness of storage in European markets, I think, is something to keep an eye out because that continues to drive down cost, improves performance, and just firmly establish just lithium ion batteries as the core technology now scaling, obviously, all the way through the six, eight, twelve hour duration as well.

Do you think some of these additional grids or some of these other grids have have got lucky is the wrong wording, but by being a second mover. Right? So California, Caissou is already fifteen gigs, fifty gigawatt hours plus. So, you know, bigger than those markets we just talked about.

It feels like if you built projects really extensively over the last ten years, you sort of paid some of the higher prices for them. And now we're getting into this time where not only we're sort of starting to optimize the batteries themselves, but we're also starting to optimize how they go on the back of lorries and how how we sort of reduce costs from cranes to put them into play. So we're getting to that game where we're really trying to, like, get the last sort of few bits of cost out of the system. Do you think some of those those grids that are second movers are are really gonna come up trumps in terms of having the lowest cost deployment of storage on their system?

I don't think so. And there's two reasons. One, because I don't think we're at the point where we're really squeezing out the last cost. Right?

If you think about the deployment curve of storage, we're still pretty early on in the deployment curve in most markets and and globally seen. So I think there's still a lot more to do. I think it's only really over the last two, three years that we've seen a shift on the battery manufacturing side. Storage has become a lot more of a focus, a lot more suppliers, and there we've seen performance improvement.

We've seen density improvements. We've seen cost declines. Right? So it's not just you're reducing cost.

No. No. You're reducing cost while improving the performance and the density of the same, technology. So I think we're really still quite we're not at the end of that, and especially when you're looking at longer duration optimizing the product design and improving the overall competitiveness of six, eight, twelve hour storage solutions using lithium ion batteries.

There's still a lot of runway in my eyes to go. So that's kind of point one because we're not at the end yet. But also, you have to think about, for me, it's the wrong way of saying, k, the people who went early or the grids that moved early are somewhat being punished because at the time, they had a need. Right?

And I think it's just a natural progression.

There were markets where that need was heightened at an earlier stage, and then there's markets where that need is coming more to the fore today. And at the same time, storage has become more competitive, so it's easier to tackle more applications. But we wouldn't be at a point if there wouldn't have been grids that would have had that need and storage was able to meet that need back then.

Yeah. Agreed. Agreed. Okay. Let's move on to our final two questions. So is there first of first of all, is there anything you'd like to plug?

What what would I like to plug? I think I mentioned earlier, I'm moving roles. I'm gonna take over, in the German market, and I think just the excitement of the German market right now, it's palpable. Again, right, a lot of people are aware of it.

A lot of people want to buy projects there, but I think the scale and how many large projects I mentioned the four gigawatt hour project earlier, but how many large projects are now coming through over the next two, two and a half years, in the German market, I think, is really going to be something people sit up and and take note. So I think for me, that that's really clear. It's our capabilities investment in Germany, but across Europe. Right?

Fluence has a very European heritage even though, you know, we're headquartered in the US, but we have a strong team, over four hundred people across Europe. A lot of value creation happening. Right? We're not just selling here.

We have teams that are doing the product development, the testing, software development happening in our lab in Erlang and across our locations in in Europe. So we really have that strong local understanding, we help customers on that whole journey. Right? It's not about giving you a box filled with batteries.

It's about helping you make more money from this asset, and that's how we want to approach it and how we bring that together. So kind of plugging a little bit Germany, but also the value that has to be created in market. I think it's often overlooked when people are just kind of driving the cost down and they're forgetting the whole business case behind it.

I totally agree. Time after time, we look at these battery projects and there's sort of a perception that the availability of an asset is commoditized, The duration of the asset is commoditized. The location doesn't matter. And actually, when you do the forecasting for all of these parts, the duration, the location, the warranty commitment that you make, the types of services you go with, the optimizer that you use who chooses how your battery actually operates, all matters. It's all significant. Absolutely.

The way you service the project, how quickly are you on-site? Are you smart enough to understand that and take the German context, you probably don't wanna be doing any plant maintenance after April in Germany because that's when you're more likely to make higher revenues. Right? Do you really think about that as you're building and and servicing the asset? And is your technology partner thinking about that, or are they saying, here's a box filled of batteries, your problem?

And we we really see that. I think we really see it in the markets like, Texas where in ERCOT we had a we had a crazy stat something like this was a couple of years ago, something like seventy or eighty percent of the annual revenues were in ten days. And it's sort of I think it actually may have been a higher percentage than that. And it's like, well, look, if you organize your outage at the wrong time, you really paid for it. Anyway, and moving on to the final question. So is there a contrarian view that you hold?

Some somewhat. I don't know if it is that contrarian, but I do a lot of work at a European Union policy level. So I'm one of the vice presidents of Energy Storage Europe. And because of that, I've I've had a lot of kind of exposure to what's happening in Brussels and and some of the trends we're seeing.

And what as a, I would say, quite a proud European and also a believer in in in the European continent and what we're offering as a whole, right, everyone everyone included, not just the institutions, I see a lot of worry in a changing world around how we keep our grids secure. So from a cybersecurity standpoint, how do we make sure that what we're building now is critical grid infrastructure? Right? I'm not talking about a twenty megawatt PV plant where an outage doesn't matter.

We saw what happened in Spain when there was a blackout, and there may not be a relation, but you see, we are so reliant on electricity. Right? We're so reliant for our daily life. We're even more reliant from a security aspect.

So energy security is security. And whether we like it or not, we are living in a changing world where there's a lot more threats to our way of life, to our values, to our democracy. So having a risk within our critical electricity infrastructure on a cyber perspective, to me, is very, very worrying. And I think what and maybe this is what what's somewhat contrarian.

We need to understand, is there risk of kind of ripping it out and replacing it? We've seen what happened in five g networks, and I think we have to ask ourselves, one, what do we want in our electricity grids? What is important for us as a European continent? And secondly, if we're developing projects, is there risk that I have to respond to changing regulation in one, two, three years time because the world is changing around us?

Yeah. I think Trudy Contrarian that we haven't had it mentioned before, We're at least two hundred episodes in. So I think definitely points for that. Yeah.

For sure, we we aren't thinking about this enough. And so I think that's a great place to leave it. Julian, thank you. You've been a wonderful guest and I'm sure we'll have you on again soon.

Thank you very much for having me. It was great fun.