Battery storage and bank financing with Bryan Long (Executive Director @ JPMorganChase)

Hello, everybody, and welcome back to Transmission. It's me, Quentin. And today, we're talking to Brian Long from JPMorgan.

Now Brian is a real expert. He's been a couple of decades in the US power markets. And in this conversation, we talk about how JP Morgan and the world's biggest banks are thinking about entering the world of battery storage. So it feels like we're at a turning point.

In our discussion, we talk about power market signals and contract structuring and how risk is shared around the system. And whether you're new to battery storage or new to the US market or a veteran, I think you're gonna really enjoy this one. And while you're listening, if you like this conversation, please do hit like, subscribe, or comment. It makes a massive difference to the impact we can have, and it means we can reach more listeners, and our content goes further.

So without further ado, let's jump in.

Brian, welcome to the podcast. Thanks for joining us.

Thank you. Glad to be here.

So for our listeners, before we jump in about power markets and origination and all of the stuff that you've seen, could you just give us a bit of your background and some trends and shifts that you've seen in the last couple of decades?

I am a twenty year power industry veteran at this point. So basically came in in a entry level, GenDesk, real time role in the industry, and then worked my way up through a West physical power trading desk. I ended up working for Avangrid Renewables for about ten years in Portland, Oregon. So it was part of that business as they expanded their onshore wind fleet and the different trading strategies around the wind assets that they had in the portfolio.

And then after ten years of trading, I moved into an origination role with NRG in Princeton.

And so it was part of NRG's business as it went through a big reconfiguration and was linked with the Caiso, their California thermal assets that went into retirement. And then I moved into originating offtake structures for their conventional generation fleet in New England and the Midwest Gen portfolio in in PJM and some other assets that were outside of ERCOT.

In doing the research for this conversation, I think it's safe to say that you've covered pretty much every corner of the US, and we're gonna have a unique conversation that you can bring bits from each part.

Is that right? Sure. That's so it's interesting because I've always considered myself to be a student of markets. The power markets have just been an incredible place to have a career. And being in sort of a a commercially interactive role has sort of brought in a certain amount of business activity that we've been able to engage in with clients of different firms that I've worked for. And it's one of those things where I really enjoy being able to bring value to clients in their portfolios, be able to engage in trades that help them put on some kind of risk management or other kind of hedge strategy to be able to obtain their objectives.

And whether that's in a specific region or or for a portfolio of ass assets in multiple regions, I've always sort of prided myself in being able to facilitate those kinds of larger deals.

I'm gonna talk all about portfolio effects later on in the conversation. But before we get there, could you just touch on a couple of trends or shifts in thinking or some changes that you've seen over the last couple of decades and Sure. What they mean for us today?

Over the last decade, your sort of previous build out phase where you built a lot of generation in the market was a result of turbine efficiencies, technological improvements around the machinery, lower heat rates, cost optimization.

And so you're you were able to undercut sort of existing generation technologies and the costs.

Now you're entering this phase where you've had environmental policies, you've had a lot of load growth, you've had different extraneous factors that are bringing the need for new generation, new diverse kinds of generation into the supply stacks. And so it's opened up this whole opportunity set because, you need a broader, more diverse resource set in order to be able to accommodate the different swings that you're seeing around the different resource types, the load the load patterns, and as well as the market structures that are starting to emerge.

To set the scene for our audience, this is a very big question. I'm gonna ask you to try and consolidate it. But what does let's start with your team and your bit of JPMorgan. What do you guys do? And then where does that fit within the wider JPMorgan? Everybody knows JPMorgan, but they're known for a lot of different things. And so and if you could touch on some of the scale and the numbers that you guys accommodate, that would be great.

Sure. So, I mean, JPMorgan's global commodities business is probably one of the premier franchises in the entire banking universe. The reality is that JPMorgan's presence in the global commodities markets is very expansive. Right? Touch touching on all of the core commodity products from metals to core energy, oil, gas, to currencies, to all of the other sort of banking products that support the businesses and the industries that are operating throughout the economy.

And I I really think that JPMorgan's scale and breadth has enabled the ability to facilitate commodity hedging from a very different perspective than what's what other banks are able to do.

And in the world of renewables then, we're gonna talk a lot about battery energy storage That's right.

Which is the next frontier. And there there hasn't been that much involvement by the big super major banks until very recently.

But talk talking about wind and solar then, what's JPMorgan's role in wind and solar asset offtake in those markets? What cog in the big machine do you guys provide? Sure.

So, I mean, think of renewables as an industry is established. It's maturing.

You're starting to achieve certain utilities of scale with the manufacturing of the different components, with the EPC contracts, with the processes behind it being able to the employ this stuff at scale, and that's something that the industry was just starting to have about seven years ago. Over the last five years, that critical mass has really come into play. You're seeing larger units being developed. You're seeing larger transmission interconnections being financed in order to incorporate that supply to the grid, and you're seeing the businesses and the leadership teams that are able to drive that activity having a lot more momentum, swagger, ability to execute because of the market structures that are now established to support that kind of generation.

So our team comes in and basically provides some kind of revenue certainty to those projects based on their market objectives. I think in the renewable space right now, you see a lot of the more motivated buyers coming from the corporate sustainability teams. So you see people who have particular number of reqs that they're looking to purchase, a certain amount of additionality or incremental supply that's being delivered to the grid to be contracted for, driving a lot of those procurement decisions. But when it comes to our bank and our trading group, the items that we're able to facilitate are your standard hedges for those projects, but also other things that are maybe looking more like insurance products or revenue products, revenue put products that ensure that there's some kind of at least minimal recapture amount so that they can satisfy their annual revenue requirements.

And JPMorgan trades everything, basically, doesn't it?

We trade a lot. I wouldn't I mean, we trade a lot of in the fully developed markets.

It's something that is being driven by the clients that we serve and the client requests of us being able to facilitate hedges and being an intermediary among them in the marketplace.

And so it's one of those things where the scale of the business is really large.

Our facilitation, though, is being able to provide that market support for those individual projects.

Just to mention scale for a moment, there must be a minimum size of trade or asset or offtake agreement before it becomes really of significance to a firm like JPMorgan, and, really, it's worth your time. So so are is the is the world of batteries getting to that point? Are we at that point now?

I would say yes. You're at that point. And, I mean, it's interesting because I think we both have been in the battery space long enough where you started working on small one to five megawatt projects.

Now you're seeing sort of minimum sizes in that twenty to fifty megawatt range, and you see most of your projects in this sort of one to two hundred megawatt size just where, like, the utilities of scale are really achieved. I mean, I wouldn't say that there's a minimum size to to gain some kind of momentum, but at the same time, there's now a presence of battery portfolios that are operating, already up and operating in the market, and are engaging in regular hedging activities in the marketplace, not just from one specific unit, but from an a portfolio of units.

And that's a trend that's definitely shifting, right, is that to see this presence of battery portfolios that can come in, can hedge to secure some kind of revenue certainty is something that didn't really exist, I would say, two years ago.

A few episodes ago, we had someone on the pod who said, hey, guys. You just need to realize that batteries are just like pumped hydro. They're just like it's just pumped hydro. And that got a few of our listeners got involved with some feedback and some comments about that. And from your perspective, because you trade or JP Morgan trades so many commodities, do you see batteries fitting similarly to pumped hydro? Do you see the business model looking very similar to that, or do you think it is this brand new thing, this new spaceship that doesn't fit anywhere?

I'm gonna say a hybrid. And now the reality is that once you have a battery interconnected to the grid, you're operating.

If you have a resource adequacy or a capacity contract or some kind of linkage with a retail portfolio, obviously, the sort of dispatch decisions and the way that you're gonna commit that unit into the marketplace is gonna look different than if you're just operating that battery on spec on a completely open merchant basis.

I think right now, you have this sort of universe where it's, okay, there's enough batteries that are operating on a merchant basis that everybody has different tactics that are being deployed around how they wanna position themselves going into the month, going into next week, going into next day. Right? Most of the focus, it seems, from my perspective, is that the focus is on this very short term time frame, this day ahead to real time market. Tomorrow, are you gonna commit your asset into the ancillary service market?

Are you gonna keep it into the energy market? Are you gonna try to do some kind of arbitrage between the low priced hours of the day and the highest priced hours of the day? And then how is that gonna sort of play out with the way that you actually operate your battery in the real time markets? Real time markets obviously deviate from the day ahead markets based on whether load materializing or not, other outages that might be impacting your prices.

And that amount of focus has been concentrated on these bidding strategies, on these algorithms that are looking to optimize in that that that very short term universe of things.

Now I think there's a recognition that it's, okay, you have forward markets. You have a about month market. You have a next month market. You have a next summer, next winter, next calendar year where you're able to basically utilize the attributes of your portfolio when you're you have a battery, your long vol your long volatility product. And so you benefit from that expansion of price spreads that are gonna be driven by the widening of marginal prices. Right? The marginal prices are gonna be widening because of sort of your underlying gas costs, underlying shifts in your fundamentals, the way that your load materializes.

And so your portfolio is gonna benefit from that expansion.

That makes it sensitive to this gas universe. It makes it sensitive to the other cost components of the supply stack and how those units that are competing against or collaborating with the battery fleet are also being bid. And it creates a universe of opportunities that I don't think a lot of people have started to recognize or take advantage of based on their own inherent positions in their portfolios.

That's the first time we've had someone on the podcast say, if you're a battery owner, you're long volatility, and, of course, you are. And it makes so much sense.

The trade off is that people need to recognize that attribute and value it appropriately. And so that I think that's sort of a maturity thing where people kind of reach a scale at which they understand, oh, okay. We have a certain amount of budget and expectations, revenue expectations for next summer, and we can lock that in or a portion of that in today based on where forward price levels are.

Or, conversely, if the outlook is poor or I should say low, you're able to then say, maybe we wanna buy back existing hedges, take opportunity an opportunistic position if the pendulum were to swing back to the other side. I think this is really similar to the way that you see a lot of the gas storage operators take advantage of their positions in the market. And I think that the similarities between trying to monetize the extrinsic value of that portfolio, the gas storage portfolio, is gonna be transferred into the way that battery portfolios will also be transferred into the way that battery portfolios will also be managed in the grid and in the forward markets.

Think of the battery impacts on, like, conventional gas unit annual run to hours. Right? So your gas units that typically dispatch for twenty four hour periods, now that generation is being offset by wind and solar, and so they're now being dispatched for evening ramps and morning ramps. Yep.

As you have more batteries come into the grid, you're gonna start sort of cannibalizing those hours. Right? Instead of needing your gas units for six hours, you're gonna need the gas unit for four hours or three hours.

You also have to build all of your cost components into those sort of shorter intertemporal time frames. Right? Which combined cycle gas units do not wanna run like that.

They wanna run base load, right, or two shift max. They don't wanna be doing this on and off multiple times a day of thing.

I I think there's enough different portfolios and strategies out there that there's I think there's plenty of gas portfolios that are they're fine to do that, especially if they have underlying resource adequacy or capacity contracts.

I mean, the they're flexible units at the core. It's just again, it's a competitive market. The the cost of dispatch for those units is being stacked up against the cost of dispatch for the batteries.

And based on the market conditions in the environment, the the markets will solve for the optimal resources to to commit into the supply stack.

So that thought experiment then, let's take that a bit further. So where as there's more and more batteries on the system, you were describing a world where gas units, their shifts, if you like, are getting shorter, and then they rely on batteries to fill the gap. Is that right? Or the just the batteries are starting to eat their lunch?

No. Batteries are playing a role in providing sort of the regulation for the market. So it's interesting because as the gas fleet evolves, you also have more renewables, more nondispatchable renewables that are being committed into the grid. As you build more solar and wind, you need more regulation, you need more ancillary service products, more ramping products to accommodate it.

And looking at your sort of development cycles and time frames, batteries are able to come into the grid and supply that need quicker. So it's one of those things where it's like the batteries are gonna be needed for integrating ever increasing amounts of renewables and also in this sort of eat your lunch scenario. But if the if gas units or a gas unit were to become economic, it would retire go into retirement. There would be sort of proper market signals to be able to make that cost benefit decision around, and that would then shift everything up where you would need more supply to be able to compensate for that volume that was decommissioned or retired.

So then a wider point then to think about markets more broadly. You're clearly a very much a markets person, which is awesome.

How have wholesale markets enabled the this massive expansion of batteries on the grid then?

What what's happening to wholesale markets? From my perspective, you're in California, you hit sort of reliability constraints. Right? A massive amount of long start steam units were retired. These ones through cooling units along the California coast, several other older age class conventional units were sent into retirement.

And all of a sudden, there was a recognition that you needed more capacity for the grid to cover these summer heat wave time frames. Right? This led to this midterm reliability requirement from the California PUC. And so the regulators implemented a a certain amount of procurement requirement for each of the load serving entities, which was basically linked with batteries, solar plus storage projects in order to be able to get enough capacity for the grid to be able to operate reliably reliably.

So I think that was the catalyst to get a a tranche of four hour batteries into the grid in the west to be able to be part of providing system resiliency in this peak summer time frame. I mean, there's an enormous amount of that the batteries that have been built in California that are not only there for the capacity requirements for the summer peak periods, but are also there to accommodate the renewable swings and be there to provide evening peak power and the flexible ramping that's needed to accommodate that. As that has played out over the last, I'm gonna call it, like, three to four years, your ERCOT markets have also sent a signal for deployment, a price signal for deployment, where investors have been able to build batteries to capture ancillary service revenues.

And, also, there's a lot more price volatility with the swings in wind, solar, and the increasing amount of load that we're seeing in the state of Texas. In California, you've built a four hour fleet that's there for capacity and accommodating ramping. Very different approaches.

It's based on market construct and price signals. I think that's my motivation for being here today is that it's okay. The US power markets are still, like, the sort of champions of the globe in terms of being able to send, investment price signals, long term signals to deploy capital into the space. As we look at what the power industry is transitioning to going forward, we're gonna need a lot more investment. We're gonna a lot need a lot more sort of confidence from the investor community.

And having the right market structures in place is one of the major benefits that we have. And the benefit is that you have multiple market structures in place that compete against each other to attract capital, to attract resources.

And you have different market structures to have a diversification in the way that the regulators and the markets themselves actually are set up to be able to accommodate generation and link that with the demand that's there in those regions.

So I wanna take us back to something you said a few minutes ago, which I really wanna zoom in on, which is about forward hedges and the the it felt like you were getting a a trade off between how batches are optimized right now, which feels very short term, and I totally agree with you, versus the majority of the liquidity in the power markets, which is long term. So how do you think about the trade off between those two things? And it may be a false binary. I don't I don't wanna push you into that. But how do you think about opening up the longer term markets for batteries will help, firstly, the ecosystems, the the markets as a whole, but also for asset owners, how does it help them?

So I think with the batteries that we have in the grid right now, a lot of them have been a lot of the thesis for having those resources is to participate in the short term markets and capitalize on those short term market dislocation scenarios where you have massive amounts of volatility because of some kind of system condition or some kind of incidents that happen.

I think, though, to transition to having a larger stabilized fleet of batteries, you're gonna need to have a different kind of market signal that is being reflected in order to attract that capital to make the investment in building those units. And that's really gonna be reflected in the way that we have the structure of the forward curves.

And right now, when you look at the forward curves, you can basically see a certain amount of price shape around your hourly scalers on a month to month basis. The difference between your peak periods and your off peak periods, morning ramp versus evening ramp. Everything has sort of different values associated with them. And you can also see the risk premium that the market is willing to pay for that. Right? Because if you're able to if think about this, if you're a retail load provider or utility, you're serving customers, if you wanna have some kind of cost certainty for your budget on a forward basis, you come to the market and you can procure that power, and you have that in your portfolio in order to sort of smooth your results as things materialize.

From a battery standpoint, because there's this hyperfocus on these short term time frames, being able to capitalize on those forward procurement activities, the forward markets that support those kinds of activities.

It's not something that I've seen the linkage mainly because maybe you haven't achieved enough scale with the shorter term battery durations, maybe because also some of the investors and the other asset managers aren't fluid in the forward markets or aren't wanting to actually transact there because of other constraints.

So how would you, in practice, say I came to you and I've got a four hour asset in ERCOT, and I wanted to it says enormous, four, five hundred megawatts. Yeah. And I want to talk about how we get exposure to those long term markets.

How would that conversation actually go? Isn't me asking you to pitch. I'm just interested because they are such shorter duration assets. What does a contract look like in a in the forward market for a battery? You pay would it be an availability payment? Would it be a a put? Would it be some sort of look.

You tell me.

Alright. So, interestingly, four or five hundred megawatts for four hours is achievable these days, and, actually, there's larger projects that are in the pipelines out there.

It's remarkable.

It's, yeah, it's absolutely incredible.

There's always sort of this hope that it's, oh, maybe we'll be able to contract in one shot, and we'll be able to achieve our return targets with one offtake PPA or a toll or something that's a a full requirements product to be able to satisfy our capital demands.

The reality of it is it's okay. There's usually gonna be some kind of risk that's gonna be taken. Right? You might be able to structure a couple of different contracts for portions of the unit that all give you a different flavor. There could be sort of a annual revenue put structure for a portion of it. There could be some kind of option structure like a collar where you have a price floor, and you're also selling an option from some of the upside.

There could also be a swap that's done on the top and bottom hours.

And the reality is that you'll probably want to compose a portfolio of multiple different offtake structures that look different. That way then as you manage the battery into those shorter term time frames, you're able to trade in and out of the positions that make sense at that time for your portfolio.

The key here, though, is that we do benefit from having forward markets. We need more liquid we do need more liquidity in our forward markets. That comes from market participation from generation owners and also load participants as well. And a lot of that is driven on the confidence of, okay. Are you seeing the right price signals? Are the levels that you're seeing in the market justified based on historicals and reasonable risk premium assumptions that are being added.

And then also understanding that it's like, as the time frame rolls forward, you're able to trade in and out of those hedges in medium term time frame, short term time frames, and that there isn't this sort of condition where you're gonna be beholden to having to liquidate a hedge that was put on the books ten years ago, and you're not able to get out of it. Right? Like, the benefit of the US markets is that we have established marketplaces that facilitate the ability to move in and out of positions based on your risk your comfort with risk, with your risk assumptions.

And having more participation in that is gonna lead to better results.

Can we talk about portfolios for a second? So, of course, JPMorgan has massive expo exposures probably not the right word, but you're in and out of lots of different markets with lots of different types of assets. And there's a big port there there's lots of different portfolios, and those portfolios might be constricted of different types of contracts or different types of asset classes.

But in the battery world, we're still in a world where most asset owners own single digit number of assets. This is not me disrespecting them.

I just think this is where we're at, and many of them only own that one.

Probably gonna change very fast.

Yes. Many of them only own that asset class. Can you just talk about portfolio effects or fleet ownership effects and how that affects risk?

Sure. Maybe we'll actually take a step back, though. Right? I mean, if you think about where the industry was ten years ago, you had massive amounts of consolidation.

You had this sort of integrated Jen Taylor construct where you had portfolios with large amounts of generation, large amounts of load, and they were sort of pancaked together into a business model that could withstand a lot of different variables around high power prices and low load prices and high load prices and high power price prices. So it I mean, it's it was one of those models that has now bifurcated.

You've had enormous amount of generation, single assets and small portfolios of assets that have now sold and been bifurcated into the hands of different private equity, different small IPPs, different infrastructure funds that own enormous amount of just generation pocket generation in different areas and of different compo composers. Right?

Batteries are part of this bifurcation story where it's, okay, you now have this marketplace of hundreds of different different groups and different investors and different capital that's all trying to optimize around their own particular interest for one resource or three resources or ten resources.

It's different than trying to balance an integrated portfolio and optimize around the edges. And so as we have this marketplace now that has more participation in it, and I don't think there's any questions about just the sheer number of participants that are operating resources, that are in the interconnection queue, that have investment capital, that wanna be deployed into the US power industry.

There's this sort of level of vibrant activity that we've just, we haven't seen it in a long we haven't seen it ever before. That's what I'll say. It's phenomenal. The conversations and the interests are just phenomenal because, again, because of the market structures that we have in order to support the development and the deployment of this kind of capital and also the expanding load that's there. And it's not only is it coming, you can actually see it in the load that materialized this winter in the particular markets. It's here, and it's evolving very quickly. And so we now have this scenario where it's like you're still planning for the future, but you're also able to see what's here live.

But back to sort of the questions around, like, the fleet effect, right, is that when you have a portfolio that's concentrated on just one, two, three assets, you're highly exposed to how the weather materializes.

Are there specific transmission constraints that impact that asset's ability to deliver to the market or not? Are there operational issues at the site that prevent something from happening that can create all kinds of wonky, really lumpy returns? Right?

Once you achieve a fleet effect where you have five, ten, fifteen, twenty assets, and it's you know that one resource is gonna benefit in certain market conditions, another resource or two might underperform because of operational issues. Another resource might have transmission constraints.

Issues, another resource might have transmission constraints, another resource on in a different region benefits from some other kind of weather pattern, you end up with this sort of smoothing effect in your returns.

And it's something that is really hard to visualize that when you're cons when you're enormously concentrated on one, two, three assets. But once you end up with a portfolio effect, it really creates a lot of confidence in the way that you're able to navigate into certain market conditions and also the way that you're able to plan on a forward basis for your o and m, for your replacement augmentation, for the way that you actually wanna balance your hedges, which creates, again, more inertia behind it for more activity.

So so who so in in this world, you you talked about owning lots of assets and then being in different locations or different operating parameters, which I totally totally understand. But what about cross asset ownership? So for owners big players who own we can think of some names, who own lots of gas units across the US.

You I mean, you've had incredible success with gas units in California, gas portfolios in California that have added battery storage onto their sites that have been able to utilize that battery dispatch to supplement and enhance the conventional resource dispatch.

And so it's I don't view these technologies as being sort of mutually exclusive. Right? Like, there there's this unison, this conjunction that the grid benefits from because you have different resource technologies and you have diversification by technology type. Right? The benefit is with building batteries at the gas unit sites, you're able to basically benefit from existing transmission interconnection infrastructure that's in place. So you're able to utilize that battery quicker than having to wait to navigate through an interconnection queue and have some kind of delayed development cycle risk.

May I ask you about load growth then? You just touched on that, and it's a very it's it's it's basically the it is the topic in our sector, right, in the US. When we're thinking about load growth, have you seen hype like this before about load growth? And do do you think we have reason to believe that it's legit?

The load growth that we're seeing now, though, is very real, and it's heavily concentrated in a couple of areas, Virginia, Houston Ship Channel area, and in in ERCOT as well as sort of that Dallas residential load growth pocket. It's not new. Right? ERCOT has been experiencing load growth for seven years now because it was the sort of preeminent spot to do manufacturing industrial activity because it had stabilized and cheap power prices.

Data center alley in Virginia has been underway for the last five, seven years as well. You're now sort of reaching that critical mass where the sort of step function to be able to take those load profiles into larger volumes is something that's possible just because of AI and the chips that are required for the computing power. I do think it is very real. It's, it's one of those things where if you start looking at the data, if you looked at weather normalized load numbers in PJM and ERCOT, you will definitively see that load is materializing expected rates.

I think also this this forward looking narrative where it's a kitchen sink approach where the grid planners are saying, okay. Anybody who announces or submits a application to have major a large load at a particular point, I think that's a bit of disservice in terms of being able to calibrate what's real versus not real. But at the same time, that wouldn't be there if there wasn't sort of an underlying catalyst to make it happen. The trend is clearly going from bottom left to the top right.

And if it materializes at six percent versus seven percent or seven and a half percent, like, it doesn't matter. It's coming. We're seeing it, and we're seeing the major corporations that are in the power industry tilting their business lines to be able to capitalize on it.

It feels like America's industrializing again right now. It's in a digital way. It's an exciting time to be in this country, I must say.

What just a side note, though, is I mean, it there's not the same kind of this excitement in the UK. I mean, it feels like Europe Europe has a pretty vibrant energy scene as well. Okay.

So Europe's got an awesome energy scene. Yeah. It's great because it's so disjointed. You got so many different states, of course, with all the complexities of different TSOs and different languages and different products. You have two major exchanges with tons of liquidity that both have day ahead interstate markets.

And Europe is you've got industrial powerhouse in Europe, some countries, and then you have some countries that are just net low net loads who import a lot. You've got really interesting geographies. So the UK, for example, has got tons of the continental shelf. It's around GB, which is perfect for offshore wind. The North Sea is fantastic for that. So there are there are lots of good things and exciting change happening in the European power sector, but the feeling I'm not sure. I think we need to Europe's been in the dumps for a couple of years, and we need to get this positivity back because Europe's an incredible continent with so much innovation.

But, unfortunately, the power the load story in many European countries, including the UK, is one of load decline at the moment rather than which is a was a proxy for you can say it's behind the meter development or efficiency, but I think it's actually a proxy for deindustrialization, which has huge ramifications and consequences beyond just our world of power markets. It's people. It's industries. It's it's politics.

It's the value of your currency. It's everything. I'm very hopeful that Europe will have its industrialization moment again that I'm seeing firsthand in the US, and it's just a feeling of excitement. And I've got great faith that you that that Europe will find that.

It's just in a bit of a funny place at the moment. Yeah. And then so much of the European manufacturing base has been totally transformed by competition in the Far East. And it's almost like no one saw it coming.

I think I'm not saying I saw it coming. None of us did really. It just happened so fast, and that's starting to catch up with us. And so we've gotta we've gotta think we've gotta we've gotta think differently and innovate rather than just try and do things cheaper, I think.

I think we wanna do things differently.

Yeah. I mean, that's that's the interesting part about this digital infrastructure is that it's like the dollar is required to build it and to develop it are so substantial that you want to be doing this in stabilized economies and in market structures that have regulatory support, that have the right sort of investment ability to be able to actually make sure that it's successful when it comes to fruition.

And that's, I think, the incredible part to see that the US power market, the European power markets as well are there, and it's just a matter of price signals and stability in order to sort of attract these large loads that are on the horizon.

I'm sure you guys are.

You just just see how much American capital is partaking in European commodities markets or gas markets Yeah.

And now carbon markets. Europe is an attractive place to do business.

Yeah. I mean, from, like, a market's perspective. Right? I mean, like, the US power markets are sort of intentionally built to have separate regions that have separate rules, that have separate stakeholder and rural regulatory processes to to craft the market structures so that they can, number one, have diversification in terms of seeing where the results are best and also then to be able to learn from each other in terms of being able to make things better for the future.

Right? Now this is expanding into the more globalized story where it's, like, seeing the market structures in the UK and the EU, the way that the transfer of electron works across country lines and how those, again, the price signals reflect where that supply is needed or not needed and how those electrons move is also leading to better understanding of how to structure markets here. I really think that a lot of the power markets into the future is going to be about how do you transfer how do you transfer supply from all of these more remote regions, more transmission constrained points into these load pockets that are gonna have enormous demand because of AI, because of the data center activity.

And being able to coordinate that with the generation that's available on the grid today with batteries, with things things that are gonna be built into the future is gonna create all this complexity that having more than just one market solution, having multiple market solutions that can be evaluated to benefit from that is something enormously valuable.

I'm actually greatly optimistic about the power markets in Europe, of course, but Europe in general. And I think it's I think Europe as a European, I'm feeling this we've got a big question of our identity because, you know, so many elements of what it means to be a European. Our politics is going to the fringes, and it's that kinda you gotta you gotta break a few eggs to make an omelette thing. I think we're breaking the eggs. I think it's I think it's part of the thing we need to go through, and I think we're gonna come out the other side with a pretty bloody good omelette. But, yeah, I'm a very strong British European and an optimist.

Well, I mean, look. The battery fleet in the UK is also substantially grown in the last several years. Seeing how that It's phenomenal.

The capital markets in the UK the capital markets in the UK are one of the best things about the UK. You just see how much innovation and deployment of gigawatts we've seen from lots of independent parties that were willing willing to take risk on an immature technology. Yeah. It's incredible.

Yeah. And it it's only recently that ERCOT has overtaken Great Britain, small Great Britain's little island with about half the net load of ERCOT, and yet we had far more gigawatt hours installed than ERCOT until very recently. But there's some quite that said, it's a tricky time in Great Britain at the moment because we've got interconnection queue issue issues just like over here, and there's just so much policy confusion about it. It but that's a podcast in itself.

But But, I mean, look.

I think having this ability to attract multiple market participants, new market participants is something that I mean, any anybody in the US would be remiss not to look at what's happened in in in the European power markets last couple years as well. And I think as we start looking at how are we gonna deploy new technologies into PJM, MISO, New York, New England, even the southeast, where it's the market structures haven't completely sent a a deployment signal to to private capital to commit.

Having a narrative that attracts this sort of speculative capital that wants a position, wants to be in the market, wants to figure things out as they get going is something that entrepreneurial spirit is very, you know, appealing in the US, and I think it's also here in the US power markets as well.

The Brits and the Europeans have got it. Hey. It would be crazy for me not to ask you this question. So you and your team and your desk are constantly thinking about how you can put products together to manage risk in the power markets.

So what's hot right now? What structures are currently being experimented with? What is the water cooler conversation like in your office at JPMorgan about structuring these deals?

Yeah. There's an enormous amount of focus on scalers.

How are people valuing the evening peak versus the morning ramp versus the solar afternoon hours versus the overnight hours? And nobody has a complete right answer at the moment because we don't know how exactly the load's gonna transpire, how the different market conditions are gonna evolve.

But the ability to trade between these low and high hours and have some kind of positions that have an impact on how those forward values materialize or don't materialize is, I think, the primary focus for all trading desks in the power markets at the moment. And you've had we already talked about the amount of merchant battery length that's already been developed in the markets.

You also have a lot of load and utility buyers that are looking to be able to hedge so that they're not exposed to price volatility, to uncertainty around weather conditions.

You're looking at a big data center fleet that's gonna be coming in that is also gonna need to hedge and have supply contracts so that they have some kind of operating certainty.

And so it's not just this generation of, like, how do we capitalize on this vol position that we have between these high and low hours? It's like, how do we interface with the market around providing the product that's gonna be needed based on how this load is gonna be materializing?

Maybe just to kinda extrapolate on that is that it's like you are seeing changing load patterns.

So, I mean, that is something that's sort of a function of climatic weirding. It's a function of different residential consumption behaviors. It's also a difference of industrial consumption behaviors where you have more participation in different demand response programs and behind the meter solutions.

And so they're in addition to sort of having variability around your supply, you also have changing assumptions around your load and your consumption patterns that are starting to deviate from historical averages.

Everything's getting wonderfully squiggly and on both sides.

And I guess the argument would be if there's enough batteries that'll smooth all of them out.

I mean, in those squiggly events, you wanna have deeper a deeper bench of reserves. And so the more supply that you can have committed that's standing by and available to and we've seen the batteries in California be available during these peak events. The CAISO has come out and said that undeniably that the batteries helped the grid through these peak load conditions. We've seen this winter in ERCOT that the batteries were there during these ramp periods.

And ERCOT is also openly thankful for that too. The point is that as you have more demand on the grid, on the whole system, you need more reserves. You need more energy. You need more reserves to accommodate that energy.

And it's one of those things where it's like the role that the different technologies are gonna have to play in that over time is definitely increasing.

And on that note, we're gonna we've run out of time. Yeah. I wanna say a massive thank you, Brian, for joining us on the podcast. If you're listening to this and you wanna find out more about what JPMorgan is doing in the past, then we're gonna put some links in the comments.

And, Brian, it was a real delight to have you on. You really know your stuff, and I know that our audience is gonna really enjoy this one.

It's great. I've been very lucky to have a career in the power industry. Just hitting my stride. Have a long way to go. It's also my role to be a client outward facing person, so I'm easy to find and always happy to be engaged in commercial opportunities with people.

Great. Thank you very much. Thank you.