Coming soon: Don’t fall in love with old plants

In this week’s pod, CEOs at two of Europe’s largest energy companies discuss the massive transformation currently happening in the sector. Utilities should avoid becoming too attached to their old fossil fuel-fired plants and plan for the green future, they say. 

Transcript

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SPEAKER_01 0:06

We are at the Euroelectric annual conference in the beautiful city of Florence, as you can probably hear from the background, and we have the great pleasure in welcoming to the pod Marcus Hall, CEO oftenfeld, and the new president of Euroelectric, as well as Francesco Starazze, CEO of Anel, and the outgoing president of the Trade Association.

SPEAKER_03 0:30

I certainly do. Going back a little, not just to the fragmentation that we could see in the new parliament, but actually what we see throughout Europe. We see a northern Europe, we see a southern Europe. Baden Fall, uh, for example, is uh it's a renewable champion, it's a wind champion. Yet it's n uh its presence in southern Europe is uh testimonial to put it uh in a way. However, there is uh a lot of wind and solar potential. Italy's not picking up, Spain again is not really picking up, the plants are formidable. What is missing from the equation? And I go back per sa perhaps to the answer we had uh on the screen early on the Euroelector conference, that it's a regulatory installing, uh, that it's just not clear too clear to attract investment. Do you see uh this as a problem?

SPEAKER_00 1:17

Well, to be honest, we are sort of uh geographically limiting ourselves to a certain extent to northern Europe, but that doesn't mean that we will move further out uh uh in due time. Uh so we're really not that versed with the situation in Italy or Spain. We're looking now to the next phase going from where we are to France where we're participating, and I think we will take a stepwise approach on that. But we also have um a considerable amount of projects available in the geographical area where we are, so we think that we can cater for the the growth that we are looking for internally as we speak with the situation we have. But we, you know, for the future we don't rule out anything. So uh let's see. But in the near term it's it's not uh on our agenda.

SPEAKER_01 1:59

Francesco Sparazzi here, who is CEO of NL and the outgoing president of uh Euroelectric, the the European electricity trade organization. You made some quite interesting comments today about companies either choosing to defend their legacy or to move forward. Could you say a little bit about that? You know, I think it's very important for the utility sector in in Europe as a whole.

SPEAKER_04 2:20

Let's say that the utility industry, like many others, but this is a very heavy-intensive, capital-intensive industry. So all utilities in Europe have a legacy of assets that sit on their books, that are part of it's their culture, their decades of investment in the past. The trend uh every time that this happens of an industry is invariably to try and squeeze value out of these assets the more you can. And year after year this uh reinforces itself. You know, if you were able to work uh money out of depreciated assets or assets that were built years and years ago, you can try and do it again and again and again. And this is, I think, nothing wrong with that. I think it is, however, uh an attitude that might prevent you from seeing what happens. What happens around you, what happens next to you, and what happens on these assets to these assets. So I think utilities need to take um step back and say, let's revisit the value of these assets going forward and separate those that still make sense, provided they are perhaps refurbished or perhaps digitized or used in a different way, and notably this is the field of grids and distribution grids. And let's look at those assets that have basically no future. And say, guys, do we need to still keep them up? Or why is it that they don't have any future? Is there anything else that will displace them? So let's look at that.

SPEAKER_01 4:01

We finished this week's pod uh by talking to Christian Ruby, the Secretary General of Euroelectric. I've been coming to this conference for many years, and I think the topics at this this year's conference were certainly right up there with reflecting the change in their technological environment. Um do you find then that the regulators are far behind or are they close behind the sector in terms of providing that framework for you to operate in this brave new world? Well, you know what?

SPEAKER_05 4:31

I I think uh honestly speaking that regulators are also grappling with this with multitude of change that we're seeing. So it's it's generation that's changing, it's digitalization that's changing, it's everything that's changing at the same time. Electrification is coming on very strongly. And we're going into uh a new uh analysis uh uh exercise, which is about trying to understand if we want to make all this happen at the same time, make sure that more and more customers choose the electric option, make sure that enormous volumes of uh self-generation do not undermine the fundamental cost recovery of the system. If we want to make sure that we can continue to connect all the stuff to the grid and so on and so forth, what is required in terms, let's say, of regulatory signals, because one thing is the overall regulatory framework, the other thing is the uh tariff setting and and everything that goes along with that. And and this, let's say, is is really being overhauled, is seeing a fundamental, let's say, challenge from the old system um to what we need to do in the future to to make this accelerated electrification, accelerated decarbonization happen within the next decade or two.

SPEAKER_03 5:45

To listen to the full episode recorded at Euroelectric annual Paris Summit in Florence, tune in to the Montel Weekly on Friday.