CFD controversy, coal subsidy spat

In the final episode before the summer break, we look at policy developments in Brussels and Berlin. As the energy crisis appears to be easing, we discuss the main policy issues of the past six months from the European Commission and Germany. Why is a spat brewing over plans to issue contracts for difference to existing nuclear plants and why is there opposition to Poland’s proposal to subsidise its coal plants? In addition, has Germany managed to secure gas supply ahead of the winter?

Host: Richard Sverrisson, Editor-in-Chief, Montel

Guests: Siobhan Hall, Correspondent Brussels, Montel; 
                  Nathan Witkop, Correspondent Germany, Montel.

Transcript

Richard Sverrisson, Editor-in-Chief, Montel: 0:07

Hello listeners and welcome to the Montel Weekly podcast, bringing You Energy Matters in an informal setting. This week in the last pod, before we take a summer break. We look back at the previous six months and also discuss the expectations for the rest of the year after a flurry of regulatory interventions. What's the current thinking in Brussels and Berlin as the energy crisis seems to have eased? Is it too early to say that the crisis over and what are policymakers got up their sleeves? Joining me, Richard Sverrisson to unravel the event so far this year. And looking ahead, Siobhan Hall, our Brussels correspondent, and Nathan Witkop, our Germany correspondent. I'd like to start by asking you, Siobhan as we seem to be heading out to the energy crisis, this may be too soon to say it's over. Can we expect fewer regulatory inventions?

Siobhan Hall, Correspondent Brussels, Montel: 0:53

I think if the market and the conditions continue as they are at the moment, what we are hearing from policy making generally is cautious optimism. So there's recognition that it was an extreme situation over the last winter. But conditions now have improved, particularly on the gas site and policy makers are trying to move away from crisis measures done very quickly and trying to start to think long term again, about how to avoid being in such a difficult situation in the future.

Richard Sverrisson, Editor-in-Chief, Montel: 1:26

And maybe looking towards more standardized sort of pan EU interventions or regulation rather than. Fragmentation across member states. Would that be maybe a correct assumption?

Siobhan Hall, Correspondent Brussels, Montel: 1:36

Exactly. One of the fear is always that national governments will rush to introduce measures that protect their citizens, but at the risk of fragmenting the internal EU market. And so we're hearing a lot from the commission and some of the policy makers that not forget that all the benefits that come from having an integrated electricity market and that. It is important to keep that ability to trade across borders and to have a harmonized and coordinated approach to avoid essentially. Disrupting competition between EU countries at a time when Europe wants to be improving its competitiveness with regions such as the US and China.

Richard Sverrisson, Editor-in-Chief, Montel: 2:19

What have been the key issues over the past six months? Obviously one set of proposals looms very large the market design reform.

Siobhan Hall, Correspondent Brussels, Montel: 2:25

Yeah. So the key issue is always price. The price. We talk about an energy crisis, but it was a price crisis, very much an energy price crisis. And so some of the responses are a limit on how much. How much revenue the cheaper power generators can keep because the price is so high. Policy makers think you've got incredible margins. Everyone's suffering from high prices. Let's claw back some of that money and redistribute it. But obviously, we're also in a situation where policy makers need to have an awful lot of investment in new capacity, and that will only come. If there is money and revenues coming in for companies to invest in the low carbon technologies like renewables, and if you're in France, nuclear to go forward, to have the long term solution to the price crisis. Price crisis, because the price crisis was based on. High prices of imported gas. A lot of it was based on high prices for imported gas. So there's a long term policy to try and move away from imported gas, but you have this short term, how do we help consumers out? And that's when they were coming in with emergency measures like the revenue cap on low cost power generation in certain regions, like in a, in Spain capital, gas prices, use of power generation, and also measures to reduce demand for gas overall. So these were all measures intended to try and soften the below at the high prices on end consumers.

Richard Sverrisson, Editor-in-Chief, Montel: 3:55

So we can see an end to the emergency measures then, do you think?

Siobhan Hall, Correspondent Brussels, Montel: 3:59

So we will see some of the emergency measures may become permanent and they are things like having a European LNG index, which is put together by the EU regulatory agency asa that's administrative. So that's okay. That doesn't really. Have much day-to-day impacts on where prices are. It's just about bringing more transparency to the market. But there are some things which are much more disputed. And for example, there is a debate at the moment on whether they should keep cap on revenues and by low cost power generators. And that's something that's been debated in the European Council, which is national governments and also in the European Parliament. And they will have to agree on that. The commission doesn't want it. The commission is clear that cap, it serves its purpose. We shouldn't have it going forward. The risk of fragmenting the EU pound market is too great. So it'll be really interesting to see how that argument, that debate plays out.

Richard Sverrisson, Editor-in-Chief, Montel: 4:55

So Siobhan. The market design reform package what are the main sticking points at the moment?

Siobhan Hall, Correspondent Brussels, Montel: 5:00

So one of the main, the key sticking point is about how two-way contracts for differences are going to be used. Now, a contract for difference is a way of fixing the price for a generation from a, from a. Generation asset. And if the market price goes above that fixed price, then the generator has to pay money back to the government. And if it goes below that fixed price, the government has to pay money to the generator. So it's a way for the generator to have visibility, long-term visibility on the returns. And it's a way for a government to support a particular asset knowing what price it is supporting it at, and that it's not going to. It is the government is not exposed to losing lots of money if the market price falls and too much, so that's the contract for difference. The problem that in the debate is that the commission has proposed an option that would allow such contracts for differences to be used to extend the life of nuclear power stations, and this would be a major advantage to France. Other countries are concerned that this will close off the market in France, because in France there's a big national operator, EDF, which has a very large nuclear fleet. And so if all of that nuclear fleet ends up being on a fixed price, there's no more, or there's very little marginal pricing going on in France. It's a big problem for Germany, for Belgium, the Netherlands, but particularly for Germany. That's a very big sticking point. And then the next big sticking point is that Poland is asking for a temporary lifting of emission limits for power stations that can be supported through a capacity re remuneration mechanism, which is another way that national governments can encourage particular technologies to. To be invested in and Poland's argument is that it needs to be able to support Ukraine where their power system is under pressure because of the Russian invasion. So these emission limits that were set and agreed some years ago, they were very contentious at the time. And Germany's again is very unhappy at the idea of these emission limits being reopened. The idea that coal plants could be subsidized. It's happening with coal plants being able to run, but not subsidizing it. So those are two big issues in the market design, in the market design debate.

Richard Sverrisson, Editor-in-Chief, Montel: 7:38

And how, I wonder how that will how they'll reach a compromise on those issues.

Siobhan Hall, Correspondent Brussels, Montel: 7:41

Although people talk about, we are always interested in the key issues and the key sticking point, but it's a very common understanding. But nothing is agreed until everything is agreed. So we have a lot of horse trading that we come to and agreeing EU legislation. And so if you get something in one part, then you have to give up something in another part. So there's also a proposal going, there's all the, as I was saying earlier, there's also differing views on what to do with a revenue cap for low cost power generators. And and that's something that might get caught up in the mix between. The capacity mechanisms and the contract for differences, they might, how it lands will depends on the majority that the negotiations confined with the most countries, which, yeah, so basically it's very difficult to say at the moment, but at the moment it looks like there's clearly sympathy for supporting Ukraine. So there might be something to give Poland on that. And France will need extra nuclear capacity because as we saw in the last 12 months or so, French nuclear availability has a big impact on prices. So these are all issues that people will have to take into account. How it will end will depend on finding some kind of technical language that reassures people that the desired goal will be achieved and not like her. A car launch to go and do whatever you like. So very clear, defined, strict rules on, on what is allowed.

Richard Sverrisson, Editor-in-Chief, Montel: 9:16

But would you then expect, I mean that, the contracts for difference for existing plants that would go, that would be passed, that would go through?

Siobhan Hall, Correspondent Brussels, Montel: 9:23

I guess it depends on what France and the commission and other countries can do to reassure Germany that it won't end up distorting the internal energy market. So there will need to be some kind of guarantees and reassurances written in to reassure Germany that if it sees a problem, it can save. You're out of line. You need to get back in line.

Richard Sverrisson, Editor-in-Chief, Montel: 9:43

Absolutely. But but that, those are the sticking points. Those are difficult areas. Siobhan, what, what's actually been been agreed on?

Siobhan Hall, Correspondent Brussels, Montel: 9:49

So this legislation is being discussed and debated on a very fast timeframe. So the easy things, from what I heard, some of the easy things, easier things that have been agreed is. Things like promoting energy communities. So you know, individuals have solar panels on their rooms. They can form groups and share power between them. So the legislation has to be agreed by both national governments and the European Parliament, and those negotiations between them haven't started yet. So we're still at the stage where we're waiting for the national governments to decide as we speak. It may have changed for the time this goes out, but we're still waiting for the national governments to decide what their. Negotiating position is, we won't know the parliament's negotiating position until mid July. So there was some slight delays in the national governments reaching their position, but it doesn't affect the overall timeline. EU leaders being very clear, they want the whole package agreed by the end of this year.

Richard Sverrisson, Editor-in-Chief, Montel: 10:45

Okay. So what can we expect in the coming weeks and months then, Siobhan? What's on the, what's on the agenda in Brussels?

Siobhan Hall, Correspondent Brussels, Montel: 10:50

Sears lobbying from all the interested parties from the power sector on what should be in the final European market design. There are lots of things in there that the power market, the power industry is not keen on. So they're not necessarily keen on the, on contracts for differences for existing plots. And there is some issues in there about mandatory hedging, which they think might be counterproductive. But one of the things that everyone in the industry is very happy is in the proposal is keeping the marginal pricing system. So keeping the mari order of using the cheapest cloud for, and that's a big thing because there were, there have been some countries that have been pushing to go for weighted average pricing. Pricing according to the technology, all kinds of things that. That the sector argues would completely fragment the market again, and we'd list the benefits of having an integrated market. So that's what we'll see in the next few weeks on, on the market design. And then in the background there are lots of proposals that have already been in agreed in principle that will be coming through and being rubber stamped and entering into the door. So like the renewables directive to set higher targets for renewables, we just saw. New criteria for defining hydrogen, renewable hydrogen has been adopted. They're coming into full sea.

Richard Sverrisson, Editor-in-Chief, Montel: 12:07

That's the additionality, isn't it? Yeah, it's explain that to what?

Siobhan Hall, Correspondent Brussels, Montel: 12:11

So because because the EU will still decarbonize its economy, it has identified that it will need to use more decarbonized gases and the from, and those decarbonized gases are likely to need to be produced from renewable power. So we will need more renewable power, but we also need more renewable power to meet decarbonization targets in other areas. So the hydrogen additionality rules are intended to ensure that the renewable power that is used for. Creating renewable hydrogen is from new capacity, so you're not cannibalizing the renewable electricity that you need to decarbonize the sectors that can directly need electricity.

Richard Sverrisson, Editor-in-Chief, Montel: 12:48

Yeah, no, that's also been quite a big sticking point, hasn't it? But but for some parts of of the market. But and apart from that, you've also got the net zero, the legislation

Siobhan Hall, Correspondent Brussels, Montel: 12:57

as in the encouraging investment in industry generally to go net zero. Yes. So that's the sort of the new a, a slightly newer area. It's tangential to the energy side, but it's going to affect all the components that the energy sector will need to build the renewable. To go to net zero so that the commission's response to the US Inflation Reduction Act, that's also coming through, it's a bit more tangential, but the energy sector is keeping an eye on it because it could affect the costs of the investments that they need to make in order to meet the decarbonization target.

Richard Sverrisson, Editor-in-Chief, Montel: 13:31

And from what I understand, some companies are waiting to see what kind of proposals, what's on the table from the eu. In order to, whether, to the decision about where to make their investments.

Siobhan Hall, Correspondent Brussels, Montel: 13:40

Yeah. So a lot of the discussion at the moment is about, and this is a discussion, I've been in Brussels 20 years, I've never heard a discussion that didn't include the phrase. What we want is strong, stable, predictable regulation. And we have sympathy for that. I'm sure policy makers have sympathy for that. One of the difficulties is that they also, in this battle against climate change, they're having to ratchet up the targets every few years. So every few years they're going, okay, but to get to net zero by 2050, we need to ratchet up what we're doing now in order to achieve that in the future. Which means that we need to go back into our stable, predictable legislation and tweak it. To make it to make sure we're on this right track. So we hear often about that all the industry wants is predictable timeframes going out 20, 30 years. Ideally, it's not going to happen because they know that the stable outcome is, it has to be natural by 2050. So it will be tweets every five years. Every five to 10 years, it'll be ratcheted up to get to 2050. So the call from the industry is to make those tweets as predictable as possible, but that's obviously very difficult because things happen that no one expects. You go from a COVID crisis where demand plummeted to a Russia invade Ukraine supply crisis. You need 40% of Russian gas virtually overnight, and we dunno what's gonna happen and. It's very difficult to have stable. It's very difficult to have stable.

Richard Sverrisson, Editor-in-Chief, Montel: 15:19

Exactly. Absolutely. Legislation, I can understand the desire and the wish for that to happen, but it's quite hard to realize. So it sounds like a very busy few weeks and months ahead Siobhan, but I also, everything stops in August. In, in, in absolutely. But July and August.

Siobhan Hall, Correspondent Brussels, Montel: 15:34

July and August, it's basically there's a rush to get things to a certain point by the middle of July. Then tumbleweed was, everyone was on holiday and then come back at the end of August, early September, and there'll be, then that'll be a very busy time when people are finalizing the details and really pushing for their desired outcomes. Because once it's agreed and then it's in law. And then we move to the implementation side, which is always interesting about, it's one thing to agree what people should do. But then you always have to see whether people actually do it.

Richard Sverrisson, Editor-in-Chief, Montel: 16:08

Exactly. That's the other side of the coin. It's

Siobhan Hall, Correspondent Brussels, Montel: 16:10

not the end of the, it's not the end of the story just because it's in law.

Richard Sverrisson, Editor-in-Chief, Montel: 16:13

Absolutely. Siobhan, thank you very much for joining the Montel Weekly podcast.

Siobhan Hall, Correspondent Brussels, Montel: 16:17

Thank you, Richard.

Richard Sverrisson, Editor-in-Chief, Montel: 16:17

So we've been talking about Brussels, but I'd like to switch our attention now to Germany. Nathan, what have been the key issues in the country over the past six months?

Nathan Witkop, Correspondent Germany, Montel: 16:26

I think energy security came to the forefront. If we cast our mind back six months ago, we were still in the middle of winter. There was still plenty of concern about whether we would make it through without an even more severe energy crisis. The first signs of the energy crisis was going to be not so bad that we would make it through the winter, without blackouts or without. And even sharper spike in prices were probably already better to be seen in late December, early January because we'd made it through the first. Hump, so to speak. We'd managed to save quite a lot of gas early on, but even though we're in a better position, much better position now than we were last year, everybody I think from the regulators down wants to reaffirm the message that when not out of the woods yet, that there is still scope for, I guess very high prices to return. That we will continue to need demand saving measures or at least reduced demand. And we will need to bring on as much new supply as possible, as quickly as possible in order to get through at least the next year or two.

Richard Sverrisson, Editor-in-Chief, Montel: 17:43

I think you've seen a massive growth in LNG capacity is quite remarkable. How quickly that has been achieved, isn't it?

Nathan Witkop, Correspondent Germany, Montel: 17:50

Yes. I think many Germans were surprised at how quickly they could get this done when they needed to. There's been a bit of back patching going on in terms of well done. Everyone having said that there is also the admission that a lot of this came down to a lot. We had a very mild start to the winter, I think it was the mildest start to winter in 30 years, or at least in, in the 30 years of measurements. It was one of the mildest winters not the mildest, but one of the mildest that we've had over this period too. So that helped a lot and reduced the call on storage until later in the winter. So that gave everyone a break. The challenge is that as we go into the next winter even if we have full storage, we could potentially go through that if there is a cold winter. So there really is a continued need to limit demand. And there's a continued need for stable flows from alternative suppliers to Russia. And at the moment, that looks fine. And we are seeing demand reductions maintained. At the moment I think it is down in total in Germany on a weekly basis, it's down 20% from normal weapons for the time of year. That's, this is staggering.

Richard Sverrisson, Editor-in-Chief, Montel: 19:12

That's, I, sorry, Nathan, I didn't mean to interrupt, but is that industrial or household or both?

Nathan Witkop, Correspondent Germany, Montel: 19:16

That's total, right? So that includes industrial and in fact industrial consumption is that on a weekly basis has at times been even. Even lower than that. So up to, a quarter or so down, year on year. And I guess that points to another part of the problem, which is how persistent is this going to be? How much of this demand is going to come back, and how much have we already begun to. Reduce that demand permanently through a loss of industry, through a loss of industrial competitiveness.

Richard Sverrisson, Editor-in-Chief, Montel: 19:47

That must be a big concern for German policy makers and politicians. And indeed the electorate at large, the population at large. Even how much of this is de-industrialization of one of. Europe's, most lively and most important industrial centers.

Nathan Witkop, Correspondent Germany, Montel: 20:04

Of course, yeah. Germany's economy is oriented towards exports. It's oriented towards selling into a global economy that you get the impression is rapidly disappearing. We're, we have this problem with our first while main supplier of gas, a cheap source of commodities. We may have a problem with one of our largest export markets in future China. And this is very bad news for the German economy broadly, and we've seen the last two quarters of gross domestic product have contracted. Technically we're in recession and yeah, industrial production remains lower. It rains weak. Sectors like that are very exposed to energy costs, like chemicals. Complain about the ongoing costs, even though, the front month contract that we look at on the Dutch TTF hub, that might be down a lot from the crisis levels that we saw last year. Still, the overall costs that are fed through, over the course of this crisis continue to remain elevated by historical standards and. That's weighing on industry. They want relief as quickly as possible, and they want the government to find a way to make energy cheaper.

Richard Sverrisson, Editor-in-Chief, Montel: 21:20

That's, in a way, in a global market, that's obviously quite quite some task I would say. But in terms of, so we have security supply and obviously the energy price crisis has been at the center of what's happening in Germany in terms of poly policy makers and attempting to shield people from. The crisis, but what are the other kind of sticking points over the last six months, Nathan? In terms of German energy policy?

Nathan Witkop, Correspondent Germany, Montel: 21:45

It ties into this, so ultimately Germany needs to marry its energy security demands that have been amplified now through the crisis, through the war in Ukraine. It needs to marry these to its long-term. Ambitions regarding climate change addressing emissions, bringing them down to, net zero by, the middle of 2040s. So on one level it looks like these things can be married, of course less use of gas, et cetera, less use of fossil fuels. Is going to need to occur in order to cut emissions. But on the other hand, you can't just do that overnight. And people need the energy security here and now industry needs the gas here and now. It's the big challenge, of course, was then to switch to LMG to get as much LMG supply in the near term. Of course it's like a triangle bringing down the costs for doing all of this. I guess the sticking points going ahead, you've got two areas on the industrial side. Industry is clamoring for cheaper energy. They are concerned about what happens when emergency measures introduced last year, expire at the end of this year. We need an interim solution. Germany hopes that in the long run it'll bring down the costs of its energy through mass deployment of renewable energy, which is low cost renewable energy. If you follow developments in renewables, of course the cost of solar and wind just keep on falling in the long run. That's all well and good, but before we get there, over the next coming years, industry needs a solution and so yeah, you have. Proposals Robert Beck, the economy minister, wants to try and target a price level of around 60 euros a megawatt hour for German industry. But how do you do that? Are you going to basically subsidize them, pay Peter by taking away from Paul? Are you gonna put the costs onto the backs of German energy consumers more broadly? How's that gonna fit in with. European competition law. There's some reservations around the idea of using contracts for difference, where basically two parties, producers, consumers agree on a price that energy should be. And if wholesale prices deviate around that, then one or the other compensates the other. And that all sounds nice, but if the government is backstopping these things intervening more in markets, it's taking away liquidity from the market itself to come up with its own solutions. And that's a concern that industry expresses as well as how much is the government unleashing a cascade of further interventions that get rid of markets. By intervening to try and save things in the short term. So that's one side. And of course the other side is what this means for the general public. In terms of the transformation of our heating systems.

Richard Sverrisson, Editor-in-Chief, Montel: 24:56

That was a, that was an almighty spats wasn't there in the coalition about the heat pumps, the installation of heat pumps for households.

Nathan Witkop, Correspondent Germany, Montel: 25:03

Indeed. So on one level indeed electrification of heating to where it is possible, it makes a lot of sense. And heat pumps are from an energy perspective more. Efficient, and that would be a great way of bringing down Germany's demand for gas, for heating purposes. And you have to remember that gas for power generation in Germany is not that much. Most of Germany's gas demand and Germany is the biggest source of gas demand in Europe goes towards heating and industry. So if you can. Electrify this sort of SEC sector, then you can bring down a lot of the, you can eliminate a lot of the problem by yeah, displacing that with electric heat pumps. The trouble is, who's gonna bear the brunt of this and how are you gonna go about doing it? And I suppose from. And another perspective is and should the country not be more if the government is saying that this is the technology that we're picking, they get into that discussion about are we picking winners and isn't the market better placed? Sometimes I think that's a bit disingenuous if I'm gonna just comment myself, because I imagine that certain people who are trying to protect their own. Industry use this as a way to keep certain structures in place longer. So it has been a controversial topic, not least also because of the ownership structure of homes in Germany. Most people rent, and so who pays for modernizing households heating system? The, a landlord doesn't necessarily have an interest in this and he certainly doesn't want to have to foot the bill and then get nothing out of it. So you, you do have some sort of. Missing money problems. Who's going to, what's the role of the government in driving this? How, what incentives do you put in place? What penalties, which do you lean on more? And of course yeah, the, what are the alternatives? Basically in cities where you've got a lot of old housing stock there aren't that many alternatives. Heat pumps don't necessarily make sense here often. But then you're left with what is the other solution? And then it could be district heating. But in the near term it's difficult to get around gas and this is the problem. And I suppose the government has come up with a bit of a compromise in rather than forcing swift changes already from next year, they've kicked the can down the road a bit and given people essentially a breathing space of four years so that anyone. It can go and install new gas or even oil heating systems for at least the next four years. And I don't know why you'd necessarily want to, if you know that beyond that point, you're also gonna get penalized, especially with a carbon market that is increasingly taking on the role of pricing. The fuels that, that, that heat us as well. But yeah, so they, they've kicked the can down the road a little bit. You can say in, in their compromise, but you can see where the trajectory is going.

Richard Sverrisson, Editor-in-Chief, Montel: 28:05

And also, quite significant this half of the year or the first half of the year I should say, was the end of the nukes. The Germany basically stopped producing electricity from nuclear power plants.

Nathan Witkop, Correspondent Germany, Montel: 28:14

Yeah. That's to be expected given that it was such a longstanding and hard. Policy decision in the first place. It wobbled because of this energy crisis. And I suppose you have to remember that even the CDU and although the FDP was probably not very happy with, so that the FDP or the liberals, they're also a part of this government the CDU the Christian Democrats, conservatives under Chancellor Mekel they had agreed on this, although they might not have been happy with it they had agreed with it a decade ago. And I think the energy crisis opened an opportunity to revisit that. But I think it was unrealistic to expect that all of a sudden Germany would would then say, oh no we're gonna abandon our nuclear exit. That's. It's quite a deep seated objective and reinvest in nuclear because ultimately it does mean reinvesting in it. It means upgrading these nuclear plants as well as refueling them. It's a long term policy to do that because everything was based around exiting nuclear by the end of last year.

Richard Sverrisson, Editor-in-Chief, Montel: 29:25

Of course. And from the outside looking in, it looks as though, what's Germany doing? It's got this sort of very relatively carbon free form of electricity generation. And it's turning it off

Nathan Witkop, Correspondent Germany, Montel: 29:35

of course, and this comes back to what's I suppose. How Germany sees these things differently and that's a widespread cultural view. It's not just something that's restricted to the greens. There are plenty of conservatives who are also wary of nuclear energy and have been for a long time. It goes back to you can take it back as far as you like, it can go back to the cult or the associations of nuclear energy with nuclear weapons. The disaster in Chernobyl, the experience of people in Bavaria being told that they have to keep their children indoors and they can't play in sand Pitts or government mushrooms because these things are now infected. And also, where is Germany gonna put the nuclear waste? That's been an ongoing cyber for decades. Associated with corruption and yeah, bribery and it's a big mess that ultimately a lot of people became, turned off by. And I guess you eventually got a majority of the population who just agreed with the position of. Leaving this technology'cause of its long-term problems and Absolutely. Yeah. And I think, that you'll never get that majority support back. And so yeah, it, and it, and ultimately it doesn't really sit comfortably with the technology of choice, which is a system built around solar and wind. Because that is a, there is a strong consensus in favor of that. I think you are always gonna find that there's not really any deep support for for nuclear energy in Germany. It's, they don't fit together so comfortably, those technologies and they will erode each other's profitability, put it that way. One or the other. And so they will require support and intervention from the state. Both

Richard Sverrisson, Editor-in-Chief, Montel: 31:40

there are other member states in the EU who are using very differently, of course, using it very differently. But Nathan just a final sort of roundup question. What are the issues that you'll be they'll be the main points or the main issues going forward in the next six months?

Nathan Witkop, Correspondent Germany, Montel: 31:54

I think the government's going to. Trying to resolve this heating law dispute. I think that has bearing on Germany for gas demand in the coming years, how quickly is Germany gonna be able to reduce its gas demand And reducing demand is not just something vital for climate policy. It's also a key lever for being able to reduce its dependence on its exposure to international prices. A lot of the crackle that Europe is in is because it is dependent on the outside world for energy. And that's not really gonna change, but the degree to which it's dependent on the outside world for energy, it's always gonna it can't support itself with its own sources of renewable energy sufficiently. It's gonna need to produce masses of hydrogen and. It's always gonna be easier and cheaper to get this from abroad. So reducing its exposure to natural gas that's one thing that the heating law, what it's able to get in place ensuring that it gets those LNG terminals built. One of them probably won't be completed for this winter, but maybe that's not so bad. And then ensuring that the build out of re renewables does in fact pick up pace especially compared to last decade. So government's already taken steps to clear the hurdles that were obstructing faster, build out of solar and wind. It's going to be I think under pressure to, to make sure that works. Of course power market design. How do you occult, how do you, improve the incentives so that we get the gas plants that we need to bridge the period that we're going to need them and to provide that backup capacity while ensuring that that the people who would operate such a thing, are interested in building and maintaining these things because. They're obviously not gonna get enough running hours in a system that is increasingly dominated by solar and wind.

Richard Sverrisson, Editor-in-Chief, Montel: 34:03

That's, again, that's maybe for some, that'll be watering down a lot of the market mechanisms, but maybe we'll leave that for another discussion. Nathan thanks very much for being a guest on the Montel Weekly podcast.

Nathan Witkop, Correspondent Germany, Montel: 34:13

Thanks for having me, Richard.

Richard Sverrisson, Editor-in-Chief, Montel: 34:15

And listeners, we are gonna be taking a break over the summer, but we'll see you again in early August. Thank you. Goodbye.