[MUSIC] Anything else on NEF? All right. So, setting the scene. Maybe before I go into my slides which are very much forward looking, I just wanted to say a couple of things of where we are today. Maybe, first of all, I mean, now it's, I've been doing this a couple of years. I think everyone knows that renewables is sort of the main target of investment in the energy sector today. We've reached one terawatt of clean energy installed worldwide earlier this year, that's equivalent to the entire power system size of the US. So you're not talking about a niche technology anymore. And basically, the vast majority of investment in new generation goes to clean. Why is that? The biggest markets, OECD have a relatively flat power demand. So you essentially don't invest in base load fossil fuel energy anymore. You just add clean energy to meet your targets. And in emerging markets, essentially, renewables have become more competitive and tentative. So there, you start to get a nice balance between the two. Every year now, you have around 50% is solar and wind, and fossil fuels is 40% in new capacity. So globally, renewables are mainstream. But then of course, when we look at the existing asset base, what's delivering your electricity supply today? There, fossil fuels still play a much bigger role. So, when we look forward, we want to know how to maximize or confirm this trend in favor of renewables but also how to transition out of the existing assets. To which, obviously, a lot of investment is tied, a lot of employment is tied. So, the narrative is not so much anymore just how do I get new renewables off the ground but also how do I transition the existing system. Which I think you guys at SciencesPo are in a good place to think about because you have a lot of different topics and things to think of. All right, so our main flagship population is the New Energy Outlook. We've just published a 2019 version in June. And it's quite a good report to build on for our conversation today because it kind of highlights a lot of what BNF does as a group and every year we get together and try to put that into a big house view and project it forward. The first key message, renewables will continue to become cheaper and outcompete fossil fuels. This is, anyone knows what it is? Probably the most important chart in the energy sector today. It's the solar cost experience curve. So what this shows you is over time, how costs decline, this is the line. And at the bottom is the cumulative capacity. What this says is, every time solar capacity doubles, cost reduced by 28%, more or less, this 28.5%. And at the moment, as I mentioned, we just reached one terabyte install, you have to think in terms of solar installed capacity. These doublings have been happening quite frequently. So, every time we see a line that's doubling. And so essentially, there is no technology in the energy sector today that has such an aggressive gas line. And this is not linked to fossil fuel or resources, there is no marginal cost, this is all learning effects of a manufacturing process. And so, these learning curves are expected to continue. Little bit like microchips for computers or things like that. In the wind sector, it's a bit different. It's a bit more, let's say an engineering element. But still cost declines have been going down pretty steeply. So here you see for different markets, the price essentially of wind turbine delivery. And you'll see that they have been declining at the less steep right but they're still down 49% since 2010. And turbines was the cost not go down as fast, they also become bigger. So while the turbine itself might not be much cheaper, it's actually becoming a much more powerful turbine. So, what you see in these two charts is essentially on the left, the turbine capacity size and then the offshore, they're becoming very big. It's going up quite steeply. We're now installing the first 12 megawatts turbines at the sea. And what you have to imagine is obviously a bigger turbine on the same amount of land produces more electricity. So it makes wind energy more reliable. For those who don't know yet what a capacity factor is, essentially that's how you measure the amount of availability of a power plant. Here you see over time where all the blue dots, the actual capacity factors that power plants, on shore wind power plants have realized in the world. And where we expect the trajectory to go as a result, again, of the learning curve of the turbines getting bigger. And so the percentage, you just think about it, 50% of the time. It means that asset was generating half of the year. And so as a result of solar and wind continuing to become cheaper today, when you try to invest and procure a new unit of power generation a new megawatt hour, solar and wind are already cheaper than fossil fuel technologies in the vast majority of the world. So what this map shows you is just colored by country where the of solar and wind has cut across that of the cheapest fossil fuel alternative. Notable exceptions. Japan, very expensive market to develop renewables because not so much space, highland density. Indonesia, probably the cheapest place in the world to produce electricity with coal. Quite often it's also because of a lack of experience, so Poland also has access to very cheap coal. Turkey, also access to very cheap coal. But broadly speaking you can say, as soon as the renewable market kicks off, the prices start to undercut those of fossil fuels. But more important, I mentioned there's a good thing about new investment that already happened. Most of the new investment is happening in the re-clean energy sector. But when we'll get meaningful decarbonization is actually when building a new clean energy power plant is cheaper than running your existing fossil fuel asset. So basically, if I have a coal plant, if I have a gas plant, I have quite high marginal costs, because I need to buy the gas and buy the coal to generate. While solar experience comes down, pretty fixed cost. There's essentially going to be a point where just building a lot of new wind, a lot of new solar is going to be able to displace competitively, a coal or a gas asset. And so this is what this chart shows you. LCOE is Levelized Cost Of Electricity, just an indication of the cost of producing a unit. What you can see in the US is that already today, gas very cheap thanks to shale gas, but also solar and wind have undercut coal. In China, that happens a bit later. Gas is much more expensive, you need to import that. Coal is very cheap, still on the solar and wind but they are also just about to undercut. Some other markets, the UK, there you can see the effective policy. They introduced a carbon price floor, so there is a penalty to fossil fuel generators to generate with coal based on the amount of emissions they do. That's that big uptick in coal. And then it goes down because actually that's just capacity coming offline, and our modeling you'll see later. And then in India, as I mentioned earlier, you still have some very, very cheap running coal. So basically, in terms of trying to meet the Paris Agreement goals, India's cheapest coal power plant is probably your sort of key target. Once you manage to get him out of the market, out of competition or policy, you're probably getting very close to full decarbonization of your power sector. Any questions on this key message before I move? All right. Second one. Renewables will receive the mass majority of new investments. So that is pretty clear. Essentially, if you today, a power sector planner, you're trying to decide, you know, what's the most attractive proposition for have power demand growth to meet it. Increasingly you're going to be watchful of the costs and not just combination of system reliability and cost are probably going to drive your decision. And we're seeing now Ministries of Finance go to their utilities saying, listen, you've invested in coal power plants for the last 10 years, but our neighbor has been procuring solar at a fraction of the cost, why don't we have it too? And that's quite interesting. Part of the policy dialogue is you're not just talking anymore to utilities and energy ministers. You're also talking to the people who are pulling the cash and saying listen, you need to make sensible economic decisions when you invest in the power sector. And so, what we do through our with our New Energy Outlook is we take a demand projections, which as I mentioned, are relatively flat for countries and still growing and emerging markets. And over time, the model as power plans reached the end of their life time, so for example today [INAUDIBLE] planted 30 years in operation, in the model in 15 years, at 45 years they might close it. And, that space that is created, of capacity coming off line because it's not economic anymore or because it's run out of time. We fill it with new investment based on what's the least cost solution. And the reason why we take that approach when we do our modeling is that we say, okay, if we just have a economic lease cost scenario that is clear of policy, we can then use that as a reference point and say, where does that get us? And so today I'll show you a lot of this. Here is whether the economic status is policy or reality in France or behind of the economics. And so, when we fill the gaps based on economics, you see that 83% of the new investment in generation capacity we model to 2015 is happening thanks to renewables. And that's because when you almost adjust the more attractive solution to invest in another time. Fossil fuels play a much smaller share. Most of that goes to gas. If we break that down in terms of generation capacity, the way the system transforms again as a result of economics alone without policy is a completely different picture. So today you have in 2018, the world's power mix is over 50% fossil fuels. On the right you see that essentially you get a much bigger chunk for renewables in particular solar because it's just such a competitive technology. Batteries which we'll talk about that more after also start to come in because it's such a nice bedfellow for renewables in terms of providing flexibility. Any questions on the previous key message? Key message 3, renewables are changing the physics of the power sector. So, this is for the EU. Essentially, if you mapped out the EU's current generation capacity from a size perspective. So from the size of the plant this is what it would look like. So essentially we are tilting to the right and they tend to have big assets, nuclear power plants being the biggest. Coal power stations are also very big and we can say that our generation assets operate at the scale of a country. Essentially between one and ten gigawatts, those are massive installations that are connected directly to the transmission grid. And when you are planning a, for example the French wire across, from a grid perspective around the country was built around nuclear power plants, it's relatively straight forward for power system planning. Here we have a very smaller amount of rooftop solar, and then sort of these one to 10 megawatt renewable projects. And if we go forward, and we see how the system evolves, oops, many, you see that the physical shape where the planets were located and what that implies for the grid. What that implies from who is investing in these things is going to change a lot. So first of all, of course, one thing that's disappeared is those co assets. We have a lot of people still working on code. It's a big topic today called transition. How do we deal with the stakeholder group? That's about to be squeezed out there. Germany has introduced the coal exit plan. Hungary has announced one. Before that of course, Netherlands, UK, France with smaller, smaller coal generation capacity to do with. But that is increasingly becoming a material issue of the policy discussion. And the other is of course this elements of location. So family grid planner and I look at this, it looks like a big headache. [LAUGH] I'm going to have just a lot more distributed assets to deal with, and a lot of investment in the grid. So one of the messages I wanted to say here is, we're showing you the new investment in renewables. That's good news for renewables developers. It's an interesting way of course, it has to come with quite a bit of investment in the distribution grid and the power grid. So this is one of the constraints that the scenario isn't really showing. The other thing is that bubble on the left, because renewables are so cheap and because they're so distributed, you can basically install them on your rooftop. So, a lot of what we model in there using consumer uptake curves. So that's more like a model similar to what you would do to look at the adoption of mobile phones, adoption of washing machines. We also tried to sort of estimate how much of the power supply might move behind the meters. So how much are people going to just build solar on their roofs, companies, etcetera. And that's obviously based also on the fact that retail prices of electricity have been going up and tend to be in general, considerably higher than the cost of producing a units of electricity with a sort apartments. So when you hear about big companies procuring renewables, of course, it's good for their sustainability report. But most of the time, it's actually become just an attractive proposition from a cost perspective. And so from the solar installation you see 60%, 16% sorry, we forecast is going to be behind the meter. And alongside that, a lot of utility scale solar storage during again good bedfellows with renewables but also consumers associate percent of the storage we model is behind the meter. And that again our folks be more the storage part later in the conversation why not section attractive combination. If you are big utility and you already have been suffering your fair bit because the European commition has asked introduce competition across all segments from generation to retail. You've missed the boat on the first wave of renewables investment because you didn't take it seriously. And now, you're seeing that consumers are starting to instill solar on the rooftop and are going to buy less electricity of you. That's obviously a major issue that you're trying to deal with in your strategy. That's why you come to BNF and trying to figure out how you're not going to disappear in this world of increasingly disruptive renewable. >> You may want to explain what is behind the meters. >> Okay, so that's basically the share of total electricity consumption in a year that is being consumed behind the meter, okay, by the customers themselves but they are produced themself. So, essentially, if you're in Australia already today, we're at 15% there's so many people were installing solar on their roofs because of the high solar radiation there. And the fact that they're relatively wealthy, and the solar has become so cheap, that not only is this starting to hurt sales for big utilities they're losing in terms of customers in terms of amounts of electricity sent to them Is also affecting the policy matters. So, if 40% of the power consumption is happening to people who have solely under roofed house. And you're politician and you're saying like Trump, I'm going to get out of the [INAUDIBLE] agreement. I'm going to support coal That's a very simple number for you to measure how many people have an environmental focus in their day to day lives. And so, people installing renewables has also that nice transmission factor to the policy narrative. And so within some markets we're seeing the share go a very high and again, it's a combination of cost, expectation of where the retail price is going. Retail prices are expected to go higher because there's so much investment in the grid because of the new renewables capacity. And that feedback loop drives these adoption curves. Any question, yeah? >> Same time increase the electric bill a little bit more because [INAUDIBLE] electricity so. >> So because of that risk or perverse risk indeed that you have a bigger system as equally as big or maybe even more expensive that's paid for by a smaller amount of customers. Where we have two things is one is this considerations of reforming tariff structures? How do we increase the cost of the amount of electricity bill that is going to the network and reduce that that's going to generation because if generation becomes cheaper for everyone, there is no reason why it should continue to be the biggest part of retail electricity. So access to the grid as a service rather than for the amount of generation like you do. For example, for Internet, you pay only a fixed rate you don't pay any more how much I'm using, and then maybe just what's the size of your connection might become a pricing mechanism that helps deal with this. Because the fact is, even though 40% of the demand might be met behind the meter, the day where it was going to rain, that customer, you're right, is going to need access to the grid. And that kilowatt hour that he's going to buy is going to be valued much more than the one he's buying on a slow day, a lot more on that after. Good, So, essentially, NEO projections are becoming more mainstream. I think [LAUGH] when I was coming here five years ago I think we were still a little bit on the high end of what we were forecasting in terms of renewables deployment every year. Renewables have been growing faster than what we expected. Certainly going a lot faster than anything the IEA is telling you. That's the advantage of being a company that people pay for their research and being fully private is we don't have governments, we don't have industries that whisper into our ears saying, please, keep that shade of gray gas a little bit bigger for me because I can't possibly say that gas is over given how much interest my country has in gas. So we're fully independent in that respect. And so even us who are quite bullish have been always found wrong by the market, whether that's on EVs, on storage, on solar and wind. And now finally, I can say that in the power sector we've become boring. So this is our view for the EU. It's extremely decarbonized, basically, you can say that by 2050 the EU is quasi zero carbon. If you're a power sector planner worldwide and you're trying to be good in terms of being net zero by 2050, this is a dream picture, and this is again, just driven by costs and the current carbon price. If environmental legislation in Europe was to become more stringent in the coming years the effects would be more aggressive in this mix. And so this is us, and this is a little bit about what's been happening in the EU policy world. So we're meeting next year in 2020. Clean energy goals, the EU broadly has achieved them already in 2016. So again, solar and wind went much faster than what we expected. Came with a little bit of a cost we over incentivized in the beginning, we had to learn, we had to correct budgets. There's been a lot of hit and miss, but now we can say we understand that renewables sector and power pretty clearly. And as a result, the European Commission is expecting everyone to be quite a bit more ambitious for 2030. So pretty fun time to be in Europe. The next decade, especially next five, six, seven years we're going to see a steep acceleration of investment in clean energy because we're entering this new commitment period after four, five years of relative calm. Because government does not want to do more than what they've been asked to do. And so broadly, all the meaningful economies are at least double digit, clean energy increase in terms of goal and this is final energy consumption. So this is transport power and heat. You've got some small ones up there who's still trying to be not so ambitious with the commission already told them guys you're going to have to bring a bit more to the table. And, what we can do is now, do each of these member states has proposed basically a national energy and climate plan in which it has targets for each sector, what they expect basically to install to meet these goals. And so, take it extracting them for the power sector for the five biggest markets, Italy, France, Germany, Iberia and the UK. What you see in the middle is what governments tell us the power mix of their country is going to be in 2030. And what you see on the right is what we expect it to be, left is where it is today. And whilst the size of it is a bit different 1.1 terawatt versus 810. Governments love energy efficiency, they're still to show us that they can do it really well. This color is the shading are very similar. So you know, wind and solar are definitely, by far the largest providers of electricity in the government's plan and our plans. So, and this is happening recently. Bigger role for gas as I mentioned, there's always people whispering in the ears. We don't think all that gas is necessary, but in the other piece, I mentioned that the picture I showed was the power sector could be quasi-decarbonized by 2050. This is the share of EU member states who've already agreed to net zero by 2050. Quite small at the moment, 12.3. But interesting to know that in June there was a European Council meeting where, essentially, all member states were asked whether or not they were willing to, next year when we celebrate the five years of the Paris Agreement, come to the table with a EU-wide net-zero by 2050 goal. Which obviously would be a wonderful achievement from a PR perspective. And also in terms of getting a bit more dynamic into the agreement in 24 out of 28 already agreed, obviously those who found it a bit challenging, Poland, Lithuania have essentially legacy fossil fuel industries that were not take this would not accept that this country is going down without a fight. This is a very EU common principle, where the first time we talk about it, you say no. And then you say, okay, how much money do you want? How much support do you need to transition your industries, and then they end up signing up. So I think, given we are 24 out of 28, I'm quite comfortable. We can walk into next year's cup in Glasgow, out of all places, saying that the EU is going to target net-zero by 2050. And thankfully, the power sector bit is easy, so again my job is going to become boring if I don't start working on heat and transport, but that's for me to worry about. Any questions? All right. >> Yeah there is a question. >> Sorry the graph for the samples. Do you have the onshore wind and offshore wind? >> I'd say it's probably 70% onshore. And that's actually a really good thing so I want to say next and see how things are going now, one key constraint to the government's projections and to our projections that not being taken seriously but seeing is very real and we can see it in the market every day is essentially Deploying large amounts of onshore wind is not an easy thing. So Germany can be considered a saturated market. There's a lot of, back in the days, people would always say, look, this is how much free land there is in the country. Let's just take free land and divide it by the footprint of an onshore wind power plant and see whether or not it's a lot. But obviously, you have to consider that you can see the turbine from far away that you're competing against other use externally. And so, the fact that is in Germany right now there is an absolute lull in investment, in deployment or function many times because people are fighting every climate. Regions are introducing moratorium, so there's an issue daily, and that is already starting to shift governments towards offshoring. Because let's see, it's easier, offshoring also is much more reliable. So we saw the capacity factors that typically twice as high, and you can make bigger plans and investors love offshoring, pension funds and whatnot. So, yeah, I think probably what we expect from a pure cost perspective is not going to be true and you're going to have policy reality, neighbors, birds whatnot. It forces to go a little bit more offshore. >> So in geographically difficult places for. >> Yeah, so in the Mediterranean, it's very deep. Japan, basically, any area where it's much cheaper to build offshore wind if you're just going out to a place at sea. But there's only ten meter depths, then it's not much more complicated than building an onshore wind farm. And so actually when you look at your option prices, the signals would seem to, in terms of cost of offshore wind, quite often those are very low. Actually, for projects that are closer to the shore. Because the further you go out, the deeper you need to go and the more expensive it is. But as a result, there is a lot of people betting a bit on floating offshore. Companies most advanced on that right now is a French company, and there is a pilot project in Portugal. Basically, where we are a little bit went up to bullish on it because it's mostly for places where there's really no other alternative to a ground NASA because it is a bit more complicated, a bit more expensive. And we tend to always favor the things that are sort of showing really aggressive cost curves. But relative would be that some governments will support and that there will be some of it in the Mediterranean and Japan. >> Sorry? >> So it has boosted the- >> Yeah, open the market and in general, the off-showing stories were really quite fascinating in recent years because nobody believed in it than the UK did it first see have the option. I think it was only four or five years ago. Prices start to decline at rates that were extremely attractive, especially considering some of these assets are producing electricity 70% of the time. So suddenly, the argument our renewables are unreliable, doesn't work. And so then we had Taiwan become the first to the frontier markets for European perspective, also doing off-show in. Now Japan, Vietnam is looking it, China is becoming big, the US is finally sorting its act together and also doing off showing. So off showing is probably going to play a bigger part, again, than our projections suggest. So a good technology to watch and really interesting companies active in that space. Oil majors in particular, for example, they love big projects at sea. That's what they do. They go out, they build platforms and now it's running down boats. Now that there's been a lack of investment in new drilling at sea, a lot of these boats are looking for work. So they're being retrofitted to and sort of showing. There's a nice link there, too. >> What about the recent declaration from in the north sea were not reaching [INAUDIBLE] >> In terms of amount of electricity produced? >> Okay, I mean, what I said before there was a 10% drop in the share of Austin, there was also a doubling of its valuation over the last five years. It's the company that they shouldn't feel sorry for them too much. Of course, the fact that you do go out, you test the wind. You do so many tests until an investor, as patient, as a pension fund is willing to trust you that this is going to be a very attractive asset. Then you will start operations and things are a little bit less perfect than you expected. But that's, so typical of most energy projects that the resources have a bit of variation. And also, of course, over time, I'm sure climate change itself might make one place more reliably windy one day than another. But, broadly, offshore wind is more reliable in terms of generation profiling on shore. And it's also just bigger projects. >> [INAUDIBLE] >> No, so this is just electricity. However, in terms of the, no, no, not at all. Because, actually, it allows me to tell you an important part of this is EV abduction. So the electrification of passenger transport is part of our demand analysis. And what facilitates some of this renewables deployment is actually that we use EVs to charge a times where there's a lot of solar for example. So if the man was a little bit less dynamic, maybe we would need we have a bit less solar and a bit more gas, for example. Because the fact that you can plug in an EV and make it used electricity at lunch, to power your car cheaply helps integrate renewables. >> I was just trying to compare >> And in fact, also you see that generation curve is slightly going up. But I mentioned that demand over what is flat or even declining, the sum of the added demand comes from EVs. If we remove transport there, it would be quite a bit smaller, probably 20, 30% smaller. All right? Okay, so this is cool. Economics alone will get us quite a bit of the way to Paris Agreement goals. Although, obviously, in reality, there is frictions that might not, might mean that our economic vision is not going to happen. There's also sometimes making things go faster. But at the global level, so you saw that EU picture, this is what generation looks like in 2050. And the reason why we still have sizable chunk of coal is, of course, that I showed you that the tipping point. The moment where renewables become meaningfully cheaper than coal than existing coal plants in countries like Indonesia and India happens much later. And so whilst we have 62% renewables in 2050, we still have 61% fossil fuels. And that means that emissions, which here you see in blue, the ones projected by Neo by this scenario that you see. And in green, the ones that we would need to achieve to meet the Paris objectives are basically not on track. The good news is sort of the next decade is sweet like there's just so much renewables that are happening out of pure economic reasons. That it allows us to meaningfully reduce emissions in the near to medium term. Within the long term, you basically really need to start addressing and working these existing power plants that are, having paid for investors at their money and there is people working in them. They're cheap. Why would I take them offline, because of climate. And that's power six only, of course, you would have to look at the same story for all the sectors. So yes, that's the slide I use as an introduction to my work when I look at storage today. This is a good day in 2035 in Spain, or a good week. What you see is essentially wind absolutely killing it, providing almost all of the electricity. And the wind is already there in Spain, and in solar, all of it in purple. If you show this to a power sector planner, only five years ago, definitely 10 years ago, he would probably rip his hair out of its head because it's all electricity that is wasted. This is curtailment. This is basically, renewables are becoming so cheap. And basically producing twice as much electricity as you need on the days where renewables is abundantly available, is not an issue anymore. It's just basically an issue of grid management but you can waste it. And so what you see here is on the day where you have the maximum renewable output, this is how much excess electricity will be doing. And at the bottom, they are sort of not so flexible nuclear generation and dispatchable continuing, but renewables provide all electricity you need and more. Great picture, good day. >> This is a painting, right? >> This is a painting. So Spain, of course, lots of good way and lots of good stuff. Now this is a bad day, bad week. This is the worst week. And so you had to do one day or I don't have to worry at all about anything, suddenly you have one week where every day almost half or more of the electricity generated is provided by dispatchable generation. Which today with the technologies we have would be gas, hydro, if you're lucky you have a lot of hydro but basically gas. It needs to be something you can easily ramp up and down. And coal if you also have some time to plan here is a nice week you can plan from one day to the other. And so we create a real problem is essentially we need flexibility throughout the year to manage one week to the next, then we need flexibility within the day. You see that these ramp rates, the sun going up and down, the wind. This is from system management perspective. 100 years ago you turn the coal power plant on and maybe somebody calls you, says, I'm going to need a bit more power or less power. Now you need to manage on a second by second basis, incredible swings or even less than a second when its frequency response. And so this is just sort of creating a lot of operational constraints. But also one thing you have to think about which we're going to look at now is who gets paid how? Because if 70% of the year, this is what it looks like, Mumbai renewables are getting most of the money all the time. And then suddenly, there is a week like that. These guys in gray, for the small amount of time they're there, we need to make sure that they are remunerated properly. But also when you have swings like that you get internal of the intro of the day at price arbitrage opportunities. There's just a lot of dynamics that are set by rules of economics, of financial markets that the physics don't deal with. Like these two worlds right now are colliding heavily and this is why there's so much head scratching, how are we're going to deal with it? You mentioned on the retail side, or should we move from a generation base to a subscription flat fee which I compared to Internet costs? And the wholesale side is way more complicated, it's crazy what's happening. And so this is a really interesting part of the discussion. And that's why we're going to talk about storage. >> [INAUDIBLE] the fact that you were talking about more decentralized, localized generation? Or this can look across. >> This is the whole generation base in the country including small scale, large scale solar. So this is in Spain, I can't remember what the figures were. The rate of behind the meter, solar is quite high as well. >> Do you at Bloomberg have a role to play in this design of economics that this [INAUDIBLE]? Are you working with [INAUDIBLE]? >> Yeah. >> [INAUDIBLE] >> Yeah, maybe I didn't show at the beginning the slide with our clients, so we have sort of two sides to what we do. There is one for every type of industry, we try to work with at least 10 biggest companies. So I was actually we were talking about with Jacob, I needed to mention oil and gas. Majors are major clients of ours because this disruption is coming to them. The power utilities of course, project developers, investors who are supposed to put their money and stock. And then a huge part, also, historically, at the beginning even it was half, is governments and regulators. So they come to us, they ask us to break the economics part of it, show that things are going bad, and then they say okay, how can we turn this into a coherent, promising narrative? Are there rules that need to be changed? So whether that's to regulate the grid operator, ministry of energy, we work a lot with them, yeah. All right, storage, I had to learn a lot of this myself for today because I am not the storage expert. But I think I'll do okay. So first, technology outlook. So one thing to say about storage is essentially, still today, lithium batteries have sort of won the storage race. They're definitely the ones that are being deployed the most. So this is for every year, the different technologies are being installed. One age, it looks like there's a big drop in lithium. That's just because there's one very bloated project that came in using single sodium but overall we expect that trend to continue. And that's of course because at the moment lithium battery learning curves, and penetration, and manufacturing has been driven not only by the power sector but also by the transport sector. And so they are the ones who have the highest amount. And before that mobile phones. In terms of experience curve, I showed you solar before. I said that was the most important graph in renewables, clean energy sector today. That's probably the second one. Batteries on track to sort of mimic the learning rates that we're seeing in the solar industry. So, they're getting cheap, incredibly fast. And that's again, driven by learning rates of dimension is the doubling of manufacturing capacity. How much cheaper does that make a battery pack? Right now, manufacturing capacity of batteries is doubling very fast because every car manufacturer in the world is trying to secure access to battery packs. And so, you can just compare in nine years, that's the figures. Here's the experience curve, 18% learning rate. So we had 28.5 for solar. That just shows as how steep it is for solar, considering this is driven by all the largest auto manufacturers and technology companies in the world. But at that learning rate, by 2030, we're getting really, really attractive, cheap prices for storage. So they're not only getting cheaper, they're also getting considerably better. I don't know if this will speak to you or not, but essentially the way you assess the one of the ways you can assess the capacity of a battery is its density per weight. So how much electricity it can discharge relative to its size. And this is what the manufacturers have either delivered or committed to for two types of sales. And you see that again Between 2010 and where we're expecting to be in 2025, you have a very, very steep increase in capacity. And why is that important? So, basically the more capacity you want for a battery the bigger it needs to be. If I can make it more dense for the same amount of weight, I save space, it's cheaper, less investment, etc. And these cost declines are being, I thought that would be good also to break down the cost curve for you guys. Obviously there is the battery rack, that's the part I mentioned around sort of building the pack, the. But all the elements of a final storage project. So if I'm a electricity market player and I want to do storage, I expect it to also learn. So when I showed you the series of solar in SCOE, there is me buying a panel. Then I need to buy the land. I need to have the person who is installing it. I need to have operational maintenance costs. I need to get an insurance and have a cost of finance. There's a lot of things that you need to stack up for. And so again, what you see is learning effects across those costs. And in storage, we don't only have the technology bit that's become cheaper. We're also expecting learning effects throughout the delivery process of the storage project. And this is our teams. Basically, we always try to do things bottom up and top down. This was top down. I take a delivered cost learning curve and I project it forward. Anyone with, I guess, A level, or maybe GCSE mathematics can do that curve. This is where we spend a lot more time speaking to developers, manufacturers what do you expect? Where are you going to see the margins? Where you going to squeeze? And what's quite interesting is some of these parts are delivered by different people. And so of course, they will not want to be the ones who say, yeah, we're going to deliver 20% to the client, because they'd rather keep their margin. And so it's a pretty difficult game where you need to survey a lot of different people throughout the value chain. And tell them okay, you're going to have access to this information in aggregated way. And as a result, it's going to tell you more about your sector. This is why it's worse if you tell us what you expect you can do. And that's what we do the same for. >> Also what is the ETC? >> Sorry? >> ETC [INAUDIBLE]. >> Yes, so that's clearly essentially for the developer. What does it stand for again, EPC? >> EPC? >> The acronym, I need to Google it, but it's basically post-installation, the person who does the whole management of the asset, how they run it and stuff. >> Isn't that energy performance [INAUDIBLE]? >> Let's see, EPC margin. I'll follow up, I'll have to check that one with the team and I, I think. >> Engineering performance contracting? >> Okay, yeah, exactly. >> Yeah, [INAUDIBLE] >> [LAUGH] And what does it say? The definition, I think it's part of the operation project, no? >> It says includes a 10% EPC margin. [COUGH] I don't know what it is. >> You can interrupt me when you- >> Is it normally an engineering, procurement, and construction, like EPC contract? >> That's it, that's it. Engineering, procurement, and contracting, yeah, exactly. Okay, but so then it's, yeah, [LAUGH] you're right. Although I liked also energy performance certificate, engineering, procurement, and contracting is- >> [INAUDIBLE] procurement. >> It's a very common term, actually in energy project finance. And so I think it's very much related to that part between having all the parts you need of a project and then actually getting it to work. Okay, and this was, sorry, this is the price of small packs. So the ones that you would put in a car or the one you would use as a residential storage system. And this is the ones for large scale, utility scale utilization of the assets. And basically, you see cost declines in both. The reason why I spit them out is that we're going to talk about the applications in a slightly different way. One thing to note is as solar battery projects have started to be deployed a lot more- >> Go back one, sorry, please. I mean, the numbers that you have there are very high. I mean, 700, $800 per kilowatt hour. >> Yeah, as opposed to those ones. So basically- >> Well, I mean, the others are very high as well. >> Still. >> What's the cost of a kilowatt hour? >> Yeah, but so let's say if you compare it to now, the cheapest solar tender we've had now is $20 per megawatt hour more or less, you can say. So those prices are very high. But of course, you have to think that a battery is a very different operational process. So, whilst the costs are high, we're going to see that the revenue you make are also slightly, it's a very different narrative. Basically, you obviously have to use the electricity from the grid to charge yourself up and then discharge it at a different time. And so, whilst the series are high, the revenues also are different. And so but batteries are, one thing to mention is, as I said, the bigger the battery the bigger its capacity. That also means it has a longer discharge capacity, so it will. Basically, currently, storage is attractive under current market conditions and revenues for shorter periods of time. If you try to use a battery to deliver electricity for six hours, you're going to need a battery that's sort of half the size of the building, probably. It becomes really not that attractive of a proposition yet. So they're doing much better in smaller units in their distributed weight than these very big assets. Which as Jacoby mentioned, the costs are still very high at 782 on the left. And so as we start to see a bit more deployment of storage, we're also starting to see a bit more accidents. So South Korea in particular had a big deployment project program over the last couple of years. And we started to see fires. And if you think about some of the recent headlines, in particular in California, where the forest fires and stuff. Obviously adding technologies to the grid, the have a risk of fire in a volatile environment is a bit of a tension point. So one of the things we do suspect is going to potentially slow down a bit, reduction in some markets, is actually regulators saying you need to prove us that this is not going to be a risk, in particular in dry countries. I don't know if that's something you looked at already as part of the course. One of the reasons why this year, at least on our side and from the investor perspective, but also from a policy narrative perspective. We've had seen a big pickup in people taking very seriously the carbonization narrative, was the bankruptcy of PG&E last year. So the California utility that essentially, because of the wildfires that have been caused by its transmission. Cables sparking onto a dry wood, had to essentially declare for bankruptcy because they couldn't afford to pay for their liabilities. And that was probably the sort of first climate change related disaster that caused the bankruptcy of utility in which a lot of people put their pension money. It was a bit of a perfect storm for them. But that's also brought quite a bit of sensitivity around anything that risks catching fire. So now the flexibility problem, which is the interesting part. This is a map of U.S. power generation assets. In purple, you see gas, that's in 2005. In black, you see coal, a lot of coal. In dark brown, a bit of lignite. And so essentially, you see, obviously distribution a lot around the bastions, where you can access code. Then around the big cities, so east and west coast. And now let's look at how that distribution looks like today. And essentially, you see first, a lot of solar and wind dots going a bit everywhere. But the other thing you can notice, you can see that a bit better in the top right chart, is essentially coal capacity declining a lot. And that narrative has been essentially that gas, fueled by cheap shale gas, has displaced a lot of coal. Coal assets have been aging and then of course renewables also came in. And so essentially that has meant the deaths of U.S. coal declining very fast. And now it's an age of essentially a lot of renewables and a lot of gas. And that's bringing really interesting dynamics to the U.S. power market. Particular, the hotspot, of course, California, for solar. And that's why we're going to look at that a little bit more. And so this is all the coal capacity that's retired. If you think about it, sort of, in a single year, 20 gigawatts of coal are coming offline. For the U.S., it's manageable, but in terms of how much is being invested or deployed, this is huge amounts of generation capacity that have come offline in the U.S. in recent years. That's been linked then to the policy narrative. Quick pause here. Trump saying I'm trying to get the support of coal regions, that's the picture that explains why he saw those were a weak population. That it was worse trying to get the votes.up. Unfortunately, he hasn't been able to save coal because the only reason why coal has gone offline is because it's not competitive anymore. It's not because renewables have been given incredible gifts or anything like that. And so if we look at how that change that I just mapped out, this change in assets, has impacted the daily load. So earlier, you saw I showed you a graph of weekly loads with everything, those are just days. On the left, you see 24 hours. Average that load, so for every hour of the day, what does the demand curve net of the renewables generation look like? Let me just go back quickly to that, you can make a parallel, that should be quite useful. The net load is what's left if I remove the blue and yellow bit. And so that's what the rest of the market is trying to fill, basically, those who are not decarbonized. And what you see is that in the U.S., the rapid growth of solar start to push down the middle of the curve. And so that means the amount of, and Christine, you mentioned supply is going down. But it also means that the ramp rates are becoming much steeper. And so if you look at the shape in the middle, it's more to show you sort of how extreme the days have become. The average is to show you more that there's this belly in the middle. And then, the one in the middle is to say the volatility of the load, the shape it takes, is becoming much steeper. And then on the right side, the steepest example. So in one day, how much suddenly thermal generation and imports have to increase to replace the solar electricity that comes offline at the end of the day. And so this, from a market perspective, is a very ripe environment for technologies that try to leverage these big variations. The other thing we've seen a lot, as I mentioned that we have essentially sometimes excess electricity in a power. Have you already done a bit of power market discussions in your courses? Essentially, obviously, price is set by demand and supply. If you have mass excesses of supply, you tend to have zero or even now negative prices. The reason why we have negative prices is because there's inflexibility in the market. For example, a coal plant can't go offline this easily. But also, renewables generated might be paid a fixed tariff that he wants to continue to get paid and he doesn't care about market prices. And so the number of instances of negative prices on markets is increasing. And that means that there is a time where people are being paid to take electricity off the grid. Rather than you to paying get electricity. And so when we mentioned earlier that some of these levelized cost of electricity looked very expensive, you have to imagine that a storage person. Somebody who can extract something from the market and then deliver it at a different time. Quite often now, it's a very attractive proposition to do so because he's being paid to take that electricity. And so, going back to the distribution a little bit just because that was a pure U.S. example. This trend is happening everywhere. So in the United Kingdom, you're starting to see these curves, California, and South Australia. This is just to show everybody the trend is accelerating across the markets. And the other thing is essentially, prices. Because of that variation in ramps, prices are also becoming more volatile. So it's not just as simple as there's a time where prices are negative and I could buy it there and destroy at a different time. It's because of the variability of renewables, you see just much more change in prices during the day. So here on this chart, you essentially just see the percentage time at which a certain price, the percentage of the year at which a certain price materializes. And the flatter the curve, the more volatility you have throughout the year. There's just a lot of divergence of prices. So if it's a very narrow peak, you have most of the time your prices within that range here. And the flatter it goes, like Australia where there's just so much now, the more volatility and diversity and prices you get. And obviously the height is also important. And so, to show you very clearly now what's driving this is, in most markets, is rapidly increasing. And solar, and that's also the one that, from an investor's perspective, if you looked at trying to leverage this volatility, solar has one of the advantage. Is that it's relatively easy to predict, first of all, you know when the sun comes out and the sun goes down. And then the weather forecast would also be quite good in terms of how the cloud coverage is. Wind, we're also getting much better at forecasting, but solar has had a much clearer impact on power prices than wind in most markets. And so here you just see it that's a California power pool, between 2011 and 2018 what's been happening to, in yellow, solar generation. Solar generation at a given time. And then the power price and it's clearly inversely related. So whenever solar is extremely available, the price goes down. And in 2018, I think it's a very clear picture. And so what does that mean also from just to take a break on the incumbents. Before they were making most of their money at lunchtime, and that's where they were sort of delivering electricity to the economy. That's when everybody goes to work and stuff. And now when there is the largest demand, the moment where everyone is producing things, it's down. There is the least amount of people to supply because solar is taking all there is to deliver. And on top of that it's depressing prices for everyone. So this is making operating conditions for gas generators, for example, particularly difficult. And it's called the missing money problem. Basically, you struggle to make an investment decision based on a price curve that looks like that. And the other thing perhaps to note is how steep the increase is just after the solar stop. So if you look at the last bubble, when the solar comes down, you see that massive jump in the power price, that's because, suddenly, as solar comes offline, a lot of gas generators have to turn on and meet the generation that is the climate. And now, as I've described this clash between renewables solar in particular, and gas and these dynamics that are creating volatility and change during the day, that is basically screaming arbitrage opportunity and something that storage can exploit. And so here on the left essentially, you see that quite nice crossing point between when gas and solar helps. And in the middle from a pricing perspective, that differential is in a simplified manner, what arbitrage a storage asset could do You have any questions on that? Is it clear or not? >> No, can be talk about possibility to create an overall lower cost option than the current one that is going on? >> Yeah, it could smooth, exactly. I mean, the question is, lower cost in whose perspective? From a total system, right? >> But let's take the region can do almost that. >> Exactly, so from a system cost, of course, by being able to take solar when it is available in excess and inject it in the grid when the sun has gone away, I'm offering a cheaper option than replacing that solar generation that's coming offline with gas that needs to buy the gas and generate. >> This is despite the prices to be projected for installing. >> Yeah. >> Okay. >> And so the, basically from battery investor perspective, I just need to look at the difference between the low part of the black curve and the high part of that curve. And I say okay, as long as this is wide enough for me to generate the profit, it's worth putting more storage into the system. To exploit that and bring those to curse that eventually end up with a flatline, that's going to take a long time before it arrives. But at the moment because there's so many storage but already so much renewables, that price arbitrage opportunity is huge. The opportunity to buy cheap and sell high essentially is very large, and that's what's driving a lot of storage investments. Any other questions on that concept? >> On this statement, you create a grid to ask, that's why also, I was asking for EPC, because I was wondering whether that was part of a grid costs. The grid management to reject at that moment, all those storage and power, is it considered? >> So storage assets are good bedfellows to grid operators, because aside from the fact that they need a connection point like anyone else, they actually provide a services in grid. This type of rent rates are not something that grid operators is particularly enthusiastic about. In fact, that's what we call it system services. So balancing services, frequency services, I've been talking only about wholesale markets. And then you have grid services markets that are operating on a much smaller scale, a much narrower time horizon. That's just to smooth things out, that's just there to make sure at all times the system is balanced, its frequency is right because small frequency deviation can cause a blackout. Since that storage assets are really good at that because they can just control their input and output instantaneously. It is basically turning a switch automatize, it's electronics rather than gas power plant, I have to sell a camera to ramp up. So I'm going to increase the gas supply the fires and increase, turbines going to spin faster, that has a bit of a lag time. The storage asset from a grid cost perspective is extremely attractive because you can pilot it instantaneously. Of course, connecting a massive grid storage to the grid will have a cost from an infrastructure perspective, you need to build a connection for it. And maybe one thing to add because you open that part, is I've been showing you that there is today opportunities for storage to find revenue in wholesale markets which are these the biggest markets. But system services, so preserving the frequency balancing within 15 minute blocks to more narrow, precise stuff is actually paid at a premium. It's a more regulated market, it's done by a small group of market participants. But this people who just keep things running smoothly are being paid more than the bulk providers of electricity. If you think a little bit about video game, Mario, you take Mario on Gameboy, it was just a couple of pixels. The guys who deliver these big pixels, that are wholesale market. And then the service providers, they're the ones who start going like PlayStation four. They're the ones that do the detail and things start to look more precise, essentially moving from the, I sell a month ahead, a week ahead, a day ahead to the guy who ordered quarter of a second basis ,ensures that everything is running smoothly. So he obviously gets paid a bit better for a smaller amount of. >> So you essentially think that the scope for value rapid services in the power sector are much larger than the value of the products of the cost sector, etc.? >> Say it again. >> The protection for value rapid services [INAUDIBLE] to speed market? >> Yeah, yeah, yeah, yeah, yeah. >> Are way more than [INAUDIBLE]? >> So, and in fact, that's why system services as a market has been growing quite rapidly alongside renewables deployment. And why is that, is because the system is becoming more versatile, so system services become more critical. Again, if you have 85% of your power being supplied by a massive nuclear power plant, and all you need to do is switch it on and never turn it off again. That's also how it runs the best from an engineering perspective. There's not so much to worry about on a daily basis. You have a bit of hydro in France, it will take care of any deviation. But if you're in a system where things are going up and down all the time, everyday ramp rates and stuff, suddenly the person who is allowed to help manages you to help you from one state into the other, is becoming a lot more valuable here. And allows you to make them have an overall more efficient system So what we mentioned around, US storage and you start to seeing these price curves flatten again. >> If you took out all these dynamics, would you say that on average the electricity bill is going to increase, decrease? >> [LAUGH] I think, >> The average cost of electricity for [INAUDIBLE] consumer, it's going to decrease thanks to renewables and everything that [INAUDIBLE], or- >> I'm 100% confident that bulk generation, generation of unit of power is decreasing. That's a never ending trend. Now, before we've solved all of these problems, before each of these technologies has been introduced, matured, etc., there's going to be a considerable cost associated with that. And the other thing is also from an investor message perspective. One, the narrative I just described, one thing you could imagine is essentially just a bit of if you had to look at the power price, average yearly power price, you could imagine seeing this. Because essentially, it would have a lot of solar investment, price goes down. Then we move forward, some assets come offline. Prices go back up. Storage removes that different. You just have solar storage, solar storage, solar storage, sort of canceling each other out continuously. So there's a big question whether or not we'll see just price reform to avoid this boom bust cycle that's not particularly attractive to anyone. But yeah, overall for sure in the next, you're going to see less generation investment I think and a lot more grid flexibility. So very rapid gas, small gas generators, storage assets, all of these guys are not going to come cheap. So I'm not confident to say that the power system in the next decade is going to be cheaper than it is today. Is it going to be cheaper in 50 years? Probably, yeah. And so the spreads that's the average amount of money you could make, essentially by capturing that differential in the middle. Key energy storage applications. So today, because of these dynamics in wholesale markets that I showed you, most of the storage is being installed at the utility scale level. Because it's people trying to play in the wholesale market in the grid services business. But we're also starting to see commercial and residential assets be driven and I'm going to show you the dynamics that drive that. So far, I explained only that yellow bit. This is in terms of just within broker knowledge slightly more different. I mentioned the grid services, etc. So at the bottom, you have ancillary services. That's people providing that smoothing, the flexibilities. People who are not operating in the wholesale market but rather in the correction market in the grid services. Peak end capacity, it's a power plant who is focusing very specifically on when there is a demand peak being available. So, because we broke wholesale markets, there's quite a few countries who are willing to give a premium to someone because he's able to deliver that very small peak of demand. That's only materializing, 5, 10, 15, 20 times a year. And that from an investor perspective helps you commit to building an asset. So this is called the capacity market. The capacity premium is just people being paid for that highest, highest point of demand. Energy shifting. That's the thing I mentioned earlier, moving electricity from one point to the other capturing price arbitrage. And then transmission distribution is again more of a service perspective. What I've mentioned earlier. And then at the top residential. And so you can see sort of it's quite diverse application but energy shifting, which is securing revenues through the wholesale market. And then citizenry services, the system services that I mentioned earlier, smoothing things out are the two main applications for storage assets, okay? And from a consumer perspective, so, we've got residential and commercial. One thing that I mentioned earlier is renewables are becoming increasingly cheap. And I showed you that, increasingly, we expect customers, especially companies, to invest in renewables to procure their power at a cheaper cost. This is in the US, corporate PPA prices. So this is, and utility PPA. So this is basically the prices at which the consumers, large consumers, but also utilities, have been able to procure solar and wind. And the same story goes down what I showed you earlier. It's not just the cost of the solar, that pack that goes down. It's also the concept of electricity that's being generated. And Giacomo mentioned earlier how expensive the series were for the storage. Here you can see just how cheap it is for renewables. And those obviously, then become an attractive combination in this case. You can have electricity very cheaply and use the storage to have it more frequently and it's a good thing. And so what I've isolated here is solar or wind projects that have added a storage dimension to their project. And what you can see is they're all in price of which they're willing to deliver electricity has gone down very steeply as well. It's a relatively new thing. But some of them are already today saying that they basically have access to such attractive renewables resources. That the electricity they get from solar and wind is so, cheap that they can deliver more reliable. So, more continuous electricity because it's obviously, the renewable generation as a plus to storage, at a price that is comparable with the pure renewable asset. So, this is prices that have happened combining battery and renewables. Those two things work well together and they drag the prices down. Here you can just see, again, a similar thing with, this is just, I forgot to label that one. But the yellow line is the levelized cost of electricity of PV alone, yep. >> I have a question about, so how much storage capacity does there need to be for you to configure something [INAUDIBLE] solar plus storage? Is there a benchmark or is there [INAUDIBLE] storage capacity to say, okay we're solar and storage. >> So it's a contract that is tied to an asset. The developer says here's a 20 megawatt solar plant with a 10 megawatt hour battery storage, it will feature on this chart. These are all prices that were delivered. Each bubble is a contract. >> So when they say the solar storage, does it guarantee that they will provide that amount of electricity across the day, or? >> So that's a good question. I removed the slide about contractual structures, but there's four typical contractual structure. One is neutral, it just again focuses on price. You have no reliability expectation. You're just selling the electricity whenever you can to the public domain at a fixed price. That's the least sophisticated one and it's typically people who are buying renewables. Involved for looking good in their ESG rating and happy to themselves go in the market and provide the difference. But then you also have essentially people who are willing to add a premium to a contract as a reliability expectation. Because they say we want to be able to guarantee that we have access to clean electricity more continuously to power our things. So you have a bit of a mix of options how that's being structured. But in terms of the size of asset, there's no Differentiation and we put them on. So here's just similar picture to what I showed before, essentially mapping some of the PPAs sort of storage against this UI. And what you can see is that they're converging to the level of in terms of size. They're quite diverse, but the smallest ones tend to be the cheapest. So as I mentioned, building very big master class is still quite expensive and so the storage components tend to be quite small and leverage these very narrow windows of price arbitrage the system services, these small gaps before they can. In fact, one thing that's interesting is another actor in the market that we didn't expect to play with storage is actually coal plants. So coal plans is slow to turn on if you want to, before you go into the market with a coal plant, you need to turn on the furnace. It's much, much slower to light up than a gas. I mean just think about lighting a barbecue versus turning on your burner right. And so what storage units have been able to do for coal generators is help them smooth their entry into the market and the exit route. This is essentially, rather than saying okay, I'm only going to be available in 20 minutes, they have the storage acid there to cover those to be able to much more quickly respond to price signals. And then the coal unit comes online. So we've seen quite a few cold operators install storage now. That was just showing you the market. Also because there's some usual suspects. Essentially, most of the major clean energy project developers in the US. It's a very big renewable energy market, thanks to this sort of corporate PPA and [INAUDIBLE] PPA are already announcing sizable pipelines of projects with storage. You seeing an excess of gigawatts on the top for the next era. That's that's a very big pipeline of projects. So, for example, all of France we installed 1.5 gigawatts of wind per year. And that developer alone is offering to install equivalent amount [INAUDIBLE] Storage, it's not a niche application anymore. And so behind-the-meter, that was the last parts I think of today. Is in California number of systems installed, you see quite a steep rise, cumulative we're at more than 2000 now. And the reason for that is that the consumers, they have two parts that are driving their investment. Is one, of course, they've got their solar asset on the roof and they want to maximize it's situation, but they also increasingly facing time of use pricing. So we discuss that because of these swings, price structures were going to have to change. Time of use pricing which decides when you as a consumer of electricity, you pay a different price based on the hour of the day, is one of the first responses of regulators to this swing in renewables. And so in California, and particularly in the summer, essentially the regulator has said at lunchtime and before that in the morning, prices are extremely cheap. But around four, which is when that sort of comes down and the system needs to ramp up. Electricity prices for consumers have gone up. So basically we're trying to tell consumers listen, from a system perspective, things are pretty tricky to deal with around five o'clock. So please, if you use electricity be aware we're going to charge you more. And we hope that is enough of an incentive for you to not use electricity at that time. And so as a consumer you have couple of options. Is one you're unfortunately, low income family, don't have a choice, I'm going to run my washing machine in the morning. If you're a guy who can buy a Tesla, you're going to be like perfect. I'm going to get myself a power pack and I can just smooth out these price differences so I can maximize the use of my solar rooftop. I don't, I'm not exposed to these different, you just extract yourself from these dynamics. But but that's, you know, here's one of the ways retail prices are already changing as a result of higher renewables generation. And so this is similar to the spreads I showed earlier from the wholesale market perspective. This is just difference in price from a retail-customer perspective. If you already have done a little bit your conversion class from earlier, these are kilowatt hours. You see that retail prices are significantly higher than wholesale electricity prices, of course. And so whilst an individual customer doesn't use as much electricity, the savings are maximized by the fact that retail prices are, all right, so the economics are made more attractive by that. >> So [INAUDIBLE]. >> So this it's, you remember this? So this is basically winter and summer on the right. It's the price different, the spread between the high and the low price you have here that a customer is looking at when he says, okay. How attractive is it for me if I am a customer of PG&E? Remember, the one that went bankrupt in the summer? To this is how much more expensive it is between the peak price in the low price, between the higher blue line and the lower blue line. So this is what I'm trying to shift. This is what I'm trying to cash in on potentially. In that some more progressive cities will increase those gaps bigger. And here you have payback periods. So that's one of the ways from a consumer perspective you even from a energy investor perspective, you try to decide is it worth investing we do a lot of project level finance, essentially, based on these price differences. Based on the spreads. If you run your storage asset, just to maximize how much of that money you cashing in, this is how much time. >> Is. >> Or is this is how much time it would take you in years to pay back your solar plus storage system. So based on how big the spread is obviously that makes a difference five to 8.2 years. And that's driven also because there's a tax credit for people to buy it. It means that, when you think about how when you buy a boiler for your house, for example, or you change your windows or things like that. Or payback periods, or thinking this is an investment I'll make for ten years is probably quite realistic. You don't even your own boilers. I'm sure people change maybe even every 20 years. So something that enters the world of less than ten years payback period becomes an investment that a consumer can really grasp quite well. Even if you're somebody who's trying to sell this, and you're knocking on someone's door and saying, listen in 8 years, you'll start to cash in on this thing and the lifetime of the asset is 20 years. It's a becomes a quite a compelling thing and this is what's driving a lot of California installations. In here just to show you see that's those are the tax credits. So what I've shown you in terms of attractiveness is also because there is currently support in California, for the systems to be installed subsidies to play a part. And that's not so important now is just to close it. These dynamics that I showed declining costs response from regulators that are making terrorists more interesting for behind the meter perspective but also wholesale market dynamics. I mean that we expect the storage market to grow considerably. So it's a lot of what our team is do is taking all of these different signals, what's happening in regulation, what's happening in manufacturing, what's happening with investors. And try to project forward what do we expect the market size will be. And so you can see that across all application, in particular in energy shifting because of all these massive swings you see in the power markets today, we expect storage to grow considerably. And this is by geography 2014, the US and China China, it's 100% policy driven. But those are all big, big markets for for storage. And that's it for me I think. >> No. >> No? [LAUGH] The global outlook in geography versus application. Again, energy shifting, higher renewables, bulkier volume, bigger amounts, and in all of these smaller things. >> Okay, copyright and disclaimer, thank you very much, I think. >> [APPLAUSE]
