Plugged In: the energy news podcast
Coming from the heart of the Montel newsroom, Editor-in-Chief, Snjolfur Richard Sverrisson and his team of journalists explore the news headlines in the energy sector, bringing you in depth analysis of the industry’s leading stories each week.
Richard speaks to experts, analysts, regulators, and senior business leaders to the examine not just the what, but the why behind the decisions directing the markets and shaping the global transition to a green economy.
New episodes are available every Friday.
Plugged In: the energy news podcast
Rising populism and energy markets
Europe’s energy sector is caught in the crossfire of rising populism. With elections approaching in Norway and Germany, governments are under pressure to prioritize short-term price stability over long-term market efficiency. Norway’s decision to impose fixed electricity prices has sparked concerns about weakened price signals and energy market fragmentation. Meanwhile, in Germany, the far-right AfD is gaining ground, threatening the country’s renewable energy expansion and interconnectivity with neighbours.
This week, Plugged In comes to you from Essen at the E-World Energy & Water trade fair, where the future of Europe’s energy markets hangs in the balance. Montel’s Siobhan Hall sets the scene before we hear from Hanns Koenig, Managing Director for Central Europe at Aurora Energy Research, and Amund Vik, former Norwegian deputy minister for petroleum and energy.
We discuss Norway’s shift toward energy protectionism, the growing backlash against renewables, the risks of fixed electricity pricing, and whether Europe’s integrated energy market is at risk of political unravelling.
Host: Richard Sverrisson - Editor-in-Chief, Montel.
Guests: Hanns Koenig, Managing Director for Central Europe at Aurora Energy Research; Amund Vik, Senior Advisor, Eurasia Group; Stephen Woodhouse, Director, Afry; Siobhan Hall, Brussels Correspondent, Montel News
Podcast editor: Bled Maliqi, Montel.
Hello listeners and welcome to Plugged In - the Energy News podcast from Montel. Each week we bring you in-depth analysis and insights from across the energy sector. This week I'm in Germany at the E-World Trade Fair that's brought close to a thousand companies in the energy sector, institutions and associations together under one roof. My focus this week is on the rise of populism in Europe and beyond, and the impact. It's having on the energy sector and energy markets after decades of integration and liberalization in Europe, could the wholesale energy markets be at risk? Norway is a classic case in point, a government breaking up over the adoption of EU energy laws. Elections loom for Germany on the 23rd of February, and for Norway in September with the politicization of the energy transition at the heart of the debate. Before we go into the heart of the matter, I spoke to Siobhan Hall, Montel's Brussels correspondence. A warm welcome Siobhan.
Siobhan Hall, Brussels Correspondent, Montel News:Hi, Richard. Hi.
Richard Sverrisson - Editor-in-Chief, Montel:So what's occurring in the nub of EU policymaking? What in particular, I'm interested in what steps the European Commission has taking to avoid a backlash against energy markets or what appear to be potential failures in the energy markets themselves?
Siobhan Hall, Brussels Correspondent, Montel News:Yes. So it is a very interesting time in energy policy because like you say, there have been issues about prices and how the markets are integrated, and this is something that is causing problems in certain countries. So we're at an interesting time because we're at the beginning of a five year cycle of policy, and what the commission, the European Commission has been saying is that it is. Sensitive to these concerns about prices, energy, market prices, and it, one of its priorities for the next five years is we'll be looking at ways to bring down prices for households, but also for industrial sectors to help them be more competitive with the outside world.
Richard Sverrisson - Editor-in-Chief, Montel:Thank you very much indeed, Siobhan. My guests alongside me here in Essen are Hanns Koenig managing director Central Europe at Aurora Energy Research. Warm and welcome to you, Hanns.
Hanns Koenig, Managing Director for Central Europe at Aurora Energy:Thanks a lot for having me again.
Richard Sverrisson - Editor-in-Chief, Montel:Yep. And Amund Vik, who was Deputy Minister in the Norwegian Ministry of Petroleum and Energy from 2021 to 2023 and is now senior advisor to Eurasia Group, focusing on Europe's energy transition and European geopolitics. A warm welcome to you Amund. Welcome back to the pods.
Amund Vik, Senior Advisor, Eurasia Group:Thank you.
Richard Sverrisson - Editor-in-Chief, Montel:Before we dive into discussion. I had a chat with Stephen Woodhouse, director at Afry and expert on changing energy markets and the energy transition. We chatted about the concerns of a rising tide or populism in European energy markets. Yeah. Stephen Woodhouse, a warm welcome to the Plugged in podcast.
Stephen Woodhouse, Director, Afry:Richard, thank you very much. Thank you for the invitation.
Richard Sverrisson - Editor-in-Chief, Montel:We are here at E-World the meeting place of the energy sector in Europe. That explains a sort of hubb the buzz in the background. We're only just getting going now, but I'm here to talk to you, Stephen, about a wave of populism that seems to be sweeping certain countries in Europe. And potentially a backlash against the energy transition. Should we be concerned?
Stephen Woodhouse, Director, Afry:I think, yes. So I'm a naturally optimistic person, but my faith in the future has been diminished somewhat. Well, going back to 2016, there was a couple of particular events. In 2016, which dented my faith. I live in the West Midlands. I go to the Hay Festival in Britain every year. And it restores my faith in humanity for a short period. But it's an increasingly short period that my faith is restored. I think we should be very worried about this. I'm a technocrat. Which is the opposite to a populist. And technocratic solutions and populist solutions are almost the complete opposite. So populist solutions tend to be conservative with a small C, if not a big C. They tend to be localized, they tend to be short, termist
Richard Sverrisson - Editor-in-Chief, Montel:and often very simple.
Stephen Woodhouse, Director, Afry:And simplistic. Yeah. Yeah. And simplistic. Technocrats solutions tend to be multilayered complex. They tend to be global or multi-regional in their nature, and they tend to be long-term. And they're about paying today for long-term, broad benefits in the future. And climate change is the ultimate externality where the actions of one individual region or nation or group of people. All on its own makes no difference, but it's a global problem. So it's incredibly difficult to get solutions to these, you know, in economics terms, externalities without global agreements. And we see those global agreements breaking down.
Richard Sverrisson - Editor-in-Chief, Montel:Absolutely. It is very much a worry. And we are here in Germany where, you know now the AFD the country's second biggest party if the polls are to believed is calling for wind windmills or wind turbines to be torn down. And is this, do you think this is also a warring development that there is a backlash against the energy transition in countries such as Germany, which has been a leader, if you like and certainly in wind power.
Stephen Woodhouse, Director, Afry:And Britain as well. There'd been a backlash against onshore wind in England and Wales since before we even had any onshore wind to speak of in England and Wales. We're just about to change the planning policy in Britain to enable infrastructure, but the anger of the lobby groups and the voice that these lobby groups seems to have in either social media or real media is becoming amplified. So it's, it again, it's the ultimate, somebody locally faces a consequence for the wider benefits. And they're not prepared to do and they get a very loud voice.
Richard Sverrisson - Editor-in-Chief, Montel:Yep. I think at core as well is in, in Scandinavia, suddenly friendly neighbors are talking about not renewing interconnectors or cutting off exports to their fellow Scandinavians. And this is quite a new development in many ways. And isn't there a sense that, we are faced with a very uncertain, unpredictable world at the moment, geopolitically. Isn't there a case for saying we should be more connected rather than less connected?
Stephen Woodhouse, Director, Afry:Absolutely. With the renewable led system that we are building, interconnection is a vital part of that. But there are so many fractures in that I. I'd been with the company I work for now a free, they were a different company name when I joined a small group of 30 people in the uk. But one of the first projects I worked for was on the North Sea Interconnector from Norway to the uk, which got abandoned on political grounds because the Norwegians didn't want to raise their prices. So some of this isn't new. That was more than 20 years ago. But we're about on 1st of January, 2026. If nothing changes to introduce something like a 45. Five euro per megawatt hour tax on all imports to the EU from third countries, including Britain. So that will cause havoc with the way our interconnectors operate and with the development plans of the next round of interconnectors.
Richard Sverrisson - Editor-in-Chief, Montel:Is this the carbon border adjustment mechanism?
Stephen Woodhouse, Director, Afry:Carbon border adjustment mechanism
Richard Sverrisson - Editor-in-Chief, Montel:so what kind of consequences could that have, do you think, for the Interconnectors and
Stephen Woodhouse, Director, Afry:it will drag back our development of Interconnectors by years. It will collapse the price in Britain and probably in Ireland because neither country will be able to export its surplus wind to the continent with a 45 euro tax on per megawatt hour. So the consequences of that on the integrity of our European trading system are awful. The consequences of Brexit on the idea of the. Developing a North Sea hub for hybrid interconnectors and wind connections has already been incredibly damaging. So at some level, these kind of concerns have been going on for many years. But it's becoming visceral. The backlash against the move towards electric vehicles is another example. The, the petrol heads who are simply up in arms about the idea that their favorite jagi was with petrol engines won't be available anymore. Power that these lobby groups had is quite incredible.
Richard Sverrisson - Editor-in-Chief, Montel:No, absolutely Stephen. And I think, and what we're also seeing, in Norway is a government imposing fixed retail price at a certain level. What kind of impact or repercussions could that have? So I know that you may not be, it's not your core home market at Stephen.
Stephen Woodhouse, Director, Afry:No. No, but I've been looking at that a little bit not in any of the detail, but we talk b blindly about the electrification of our world. And the decarbonization of the power sector leading to the electri and electrification, which then leads us to decarbonization of our entire economies. And two of the most important steps in that are the electrification of transport and the electrification of heat. And we often. Can talk about those in one breath as if they're similar. They're actually incredibly different. Different with the advent of renewables, we moved from we've done studies the times of system peak system tightness. On average, in Britain today, it's around four hours by 2035, 2040. In a decarbonized power system, it's more like 40 hours. So the type of flexibility that you need to bring to this. System. System in a highly renewable world is the German dunk Lauer, calm still, period. Hold costs come still.
Richard Sverrisson - Editor-in-Chief, Montel:So this is four hours a year to, from four to 40
Stephen Woodhouse, Director, Afry:for the average duration of a scarcity event. So it's not about the frequency, but the average duration of one of the, so the things that you design, your capacity payment mechanism, if you have one for. Moves from a four hour to a 40 hour problem, you can imagine a battery can make a reasonable contribution to a four hour problem. It makes an almost insignificant contribution to a 40 hour problem. So batteries are not the solution to renewables Intermittent. We need longer term flexibility solutions. Electric heating does not have that multi-day window of flexibility. It can do short term stuff. But if you replace, conventional gas boilers with heat pumps, you can be flexible for a short period of time, but not a long period of time. And when it's really cold, the heat pumps kick into a different mode and the consumption goes up above transport is hugely flexible. I've got. An ev, I do the average number of miles a year. I need 10 hours a year charging 10 hours a week, charging. That's it. Anytime so I can be part of the four day problem with vehicle to grid. We're currently doing a study for the UK government on vehicle to grid with vehicle to grids. You can be an even bigger part of the solution, but all of that requires the customer, the domestic car driver, to have some kind of access to a real time price. And if you slap in a flat tariff in a minimum floor Norway, which is the world's most advanced country for electric transport and electric vehicles, and by the way, nearly 99% rollout of smart meters and lots of customers on dynamic tariffs. We risk killing it in the leading market for all of this to show that it works.
Richard Sverrisson - Editor-in-Chief, Montel:Absolutely. And I have an EV and I have solar panels. I might as well just bend the solar panels now because the state's gonna fund my my, my electricity costs. Yeah. No, it's
Stephen Woodhouse, Director, Afry:let me tell you an unrepeatable story, but you'll probably repeat it. I did a fantastic project a few years ago for who said, please, could you investigate the behavior of. For Nordic TSOs who have agreed that their decisions will be in the Nordic interest, not in the national interest. Could you please investigate the extent to which that's true? And we concluded that in operational terms, that was generally true. Or, but in investment terms, it was very much not true. They were very much looking at their national interest for investments. But along the way, I went to visit the RSC in Copenhagen on the desk as I walked in. They don't have a reception, they don't have visitors, but they had the Xenophobes guy to the Swedes, the Danes, the Norwegians, the Fins, and the Germans, and the guy, Danish guy. He said, people think of the Nordic nations as being a kind of a cohesive group that thinks, like he said, it's not like that at all. He said The Norwegians well. Farmers who found oil. He said, we Danes, we are the original Vikings and pirates. You count your fingers after you shake hands with a dane. He said The fins they look east as well as they look west. We don't quite know what they're thinking. And he said, and nobody likes the Swedes, which. Which I take, like nobody in the British Isles likes the British, the English, because we're the biggest nation in that. I take it to mean that, but yeah.
Richard Sverrisson - Editor-in-Chief, Montel:But I think, you've touched on something here because it's often put forward as the epitome of regional corporation. But at the core of it, it won't take much if people start cutting exports or cutting cables or putting in place a fixed retail tariff. These have reverberations across the whole regional market. Do they not just in
Stephen Woodhouse, Director, Afry:like a marriage, you have to work at cohesion. You cannot just take it for granted. Because there are always shortcuts you could make. That look like a good idea at the time. But make a lot of damage to the cohesive agreement that you have and in a benevolent world, those small things don't matter. But when it gets tight, if you've lost your cohesion, you will regret it a lot later on.
Richard Sverrisson - Editor-in-Chief, Montel:And it doesn't take much of this sort of unilateral, decisions or policies put in place without calculating what it does mean. What it means for neighbors or for the country at large.
Stephen Woodhouse, Director, Afry:The thing about populist solutions though, is that because they're simplistic and short term, they don't deliver the outcomes that people want in the long term. But we've got a very limited window to get people on board with the solutions to climate change, and we can't afford to lose 10 years in this. We've been trying to keep average temperatures below 1.5 degrees above, you know, pre-industrial levels. We spent more than 12 months above that, and I know it's an average over 10 years or something, so we technically couldn't breach that for 10 years, but we already have. January was 0.2 degrees higher than the general expectations. I don't think we have time for a 10 year populist interlude. And by, by the way, I don't see this, you talked in the sort of pre-discussion about it being swings and pendulums. That's not my perception of how popularism works. It's a gradual downwards. Slides until something catastrophic happens and you rebuild the world afterwards. I don't see a, I don't see a steady way back outta this. It's a slippery slope. And you end up in a pit.
Richard Sverrisson - Editor-in-Chief, Montel:Stephen, thank you very much for being a guest on plugged In: the energy news podcast. Thank you. I'd like to start really maybe by focusing on Norway Amund. It was quite a surprise move almost two weeks ago when the government announced a fixed retail price at 40 a kilowatt hour which is close to around 34 euros per megawatt hour. I think. What's, what was the view? What was the reason for that? Do you think?
Amund Vik, Senior Advisor, Eurasia Group:Oh, that's a great question. I think the last couple of weeks in Norwegian politics have been very intense. A lot of things has been happening as you introduce the podcast with the we us starting this month we had a two party minority government. And then after a bit of back and forth, the minority party in the government, left government and protest against joining into three EU directives from 2018. 2019 on the energy market integration. And as part of the breakout, the Labor Party that I belong to also launched this Norway price thing, which is a, as you say 40 per kilowatt hour fixed price which has been very popular. But of course it's been criticized from different from all directions really. But voters seems to like it,
Richard Sverrisson - Editor-in-Chief, Montel:vote seems to like it, and it's got broad political support as well, has it not?
Amund Vik, Senior Advisor, Eurasia Group:Yes. Or I think it's got broad political support to the sense that no one in politics want to criticize having low energy prices. And I think that the fact that it comes from the Labor Party gives it some more credibility than if it came from one of the smaller fringe parties who habitually say the government should intervene in the energy market. I do think it does a few valuable things, right? It takes the pressure out of the ity price. Debate, which I think is good for maintaining the system as a whole over time. It's good. I think that it doesn't involve government intervention in the wholesale market. But then again, it also removes the price signals completely on the end user side, which is some of the commentators have appointed to, is a, it's not the greatest thing to do in a purely hydro based system like Norwegian. But then again the emergency compensation scheme during the energy crisis as well. Basically kept the prices at 90 per megawatt hour, 70 per megawatt now
Richard Sverrisson - Editor-in-Chief, Montel:so this is another move but it does very little to basically provide. Consumers of electricity with the price signals to lower demand when it's most, for example, most needed in the system when it's very cold, when you know, when it's dark and cold, for example.
Amund Vik, Senior Advisor, Eurasia Group:Yeah I absolutely agree and I've worked with Nordic electricity market design for most of my career, and for me it's it's a little bit like nails on the blackboard, doing this kind of move, but also I think it's important for us, especially here in this environment. To recognize that there's a trust that needs to be in the system between the consumers, the regulators, and the power companies, and the people who sell the power. And I think over the last couple of years we had the increased volatility, price spikes, very high prices. And in a country like Norway where the, we're used to having very low electricity prices and people have built sort of their lifestyles around it, electric heating or big houses that require a lot of electricity consumption when prices of electricity skyrocket or start to be very volatile. I think you have to find a balance between what's the correct regulatory move from a pure market design perspective. And what is needed to maintain the system components that are most important. And I think if you look at Norway, European system, the most important thing is to preserve the wholesale piece of the market. And then I think you can accept some compromise on the retail side as long as you find some manageable ways around.
Richard Sverrisson - Editor-in-Chief, Montel:But in, in a sense, the government is then sub. Subsidizing people with large houses or have cabins in the mountains, and there's jacuzzis. It's paying, it is paying for their power. And as the water reservoirs, wear down, come down, then you know, you get to a point where you ask, is that really? Yeah, a sensible solution?
Amund Vik, Senior Advisor, Eurasia Group:This is one of those times that it's a good feeling not to not be in the government or represent the government. So I feel very liberated talking about this. But I do think and the government's been pretty light on a detail on how this is to be implemented, but I do think you have to parrot with some measure of demand control to maintain power supply in, in times of stress. And I think that would be important, not least for the Swedes and the other participant. In a sort of synchronous market where if the Norwegians just keep on powering down when there's little hydro capacity in Norway or Sweden, I think that could be difficult. But also I don't think that the absence of information is necessarily to be interpreted. Like the government hasn't thought of that or won't 'cause it. It's it will be rolled out in October, so they still have some time. But I am very curious to see how they'll plan what the details gonna be, demand response if you're not doing it during there needs to be some mechanism to make sure that the consumers reduce their demand. So I think two things will happen. One, I think the bigger consumers will play a much larger role and demand response in the system like so professional consumers, big industry people who have a lot of demand to var, to swing, I think will be more important. But also I think there needs to be some kind of mechanism, but those typically aren't very popular. So if you're not using it via the price, you have to use some formal regulation to make it happen. So I guess it remains to be seen what they choose.
Richard Sverrisson - Editor-in-Chief, Montel:In a sense, I feel quite sorry for those companies trying to sell heat pumps and solar panels.'cause if the state is guaranteeing a certain price, then why bother? That's, maybe it's. Cynical approach though, Amund?
Amund Vik, Senior Advisor, Eurasia Group:I don't think that's cynical, but I do think that I occasionally also with the sort of emergency compensation scheme I tend to think that some of the commentators from the market perspective underestimate the sheer force that this has hit the region, consumers and voters with the power prices over the last couple of years. And I, I think there's a tendency to underestimate the need to have some form of public trust in the system. And so Norway has been. What was the first country? I had one of the first countries to fully liberalize the markets in the early nineties. And I think from then until now, this has been a major success story with lower prices year by year, increased efficiency. But these last couple years have been difficult and I think there needs to be some level of compromise, whether this is, will turn out to be the correct move. I think it's early to say, but I do think, I don't think it's cynical to say what about the heat pump manufacturers, but also I think we need to do some measure of con of action to maintain the system integrity.
Richard Sverrisson - Editor-in-Chief, Montel:And then the trust in the market or the trust in the companies. Hanns Germany's also has got an election looming in just a couple of weeks is the same. Is there, has there been a call for the similar kind. Price movements here in the retail sector, certainly for the industrial sector, isn't there? Could you enlighten us a little bit about what the level of the debate is in Germany at the moment?
Hanns Koenig, Managing Director for Central Europe at Aurora Energy:Exactly. So I think the debate in Germany has been going on for probably ever since the energy crisis really. But it's been more centered around industry where there is a feeling that energy intensive or power intensive industry in particular is not is struggling to remain competitive. Especially compared to the us where of course you you just, you didn't, not only, you didn't have an energy crisis, but you also have fracking and extremely cheap and natural gas, which translates into low gas prices and low power prices. And that has been a big topic for debate over the past couple of years. However I don't see any very concrete proposals on the table that would alter with the. Mentioning of all the passing along of the wholesale market signal, it's rather than being about continuing grid fee, rebates abolishing taxes abolishing the renewables that we and making that tax funded. So the past government has done a lot on that, but they haven't subsidized yeah, either, either consumer or industrial tariffs in a way now that the Norwegian government is proposing to do. However, just to provide a bit of a. Fact from this fixed tariff thing. I do think that is a pan-European phenomenon in a way.'cause out of the European response to the energy crisis came a right to a fixed tariff which has been encoded into the electricity market director and which every or European consumer will have a right to it won't necessarily be a subsidized fixed price such as a Norway, but it will be a fixed price. And I think even that already is actually quite problematic'cause you're losing a lot. Of savings potential through being flexible, right? If you have an, if you have an electric vehicle, the average German drives something like 20, 30 kilometers per day that means you really only have to charge your EB once a week or even less than that. So picking the right hours for that can mean you can basically charge your car for free. But if you take if you take that incentive away you never raise that that potential for ization on the on the retail side, which. Overall will make, which the long term will lead to a much more expensive system to run.
Richard Sverrisson - Editor-in-Chief, Montel:No, absolutely. Yeah. Amund, yeah.
Amund Vik, Senior Advisor, Eurasia Group:I just comment on that.'cause I remember one of the first things we were working on when we came into government in 2021 was this sort of demand flexible grid fee. Which also became surprisingly to me, very controversial. And you have, because there was a very mild propo proposal saying you have one grid fee controlled for effect. And it will a staircase go up. And certain times of days it would be more expensive to charge a car just as everyone is making their dinner. It would be incentivized doing it at night. And that became super controversial and people were in the news would saying what about grandma who has 15 sons coming to visit, charging their electric vehicles all at the same time while she's making dinner? And then she's faced with this huge grid fees the day after, which is it is it's very hard I think in the current political. To communicate these things properly and not be misunderstood either on purpose, which I think a lot of these people did or accidentally, which is why I think you have to allow for some policy overreaction occasionally simply because this co this sector is so ripe with misunderstanding out in the political sphere,
Richard Sverrisson - Editor-in-Chief, Montel:but it's also very complex, isn't it, Hanns? If the search for simplistic solutions in a very complex market is not always that help. For, is it?
Hanns Koenig, Managing Director for Central Europe at Aurora Energy:No, it's not. And I think it's actually quite damaging. And that's why yeah, maybe I'm not plugged in enough into the Norwegian political discussions. But in my view, Norway already had a well designed mechanism to to cap the effects of the highest power prices on consumers. There's a certain threshold above which 90% I think it was, of the of the increase was refunded. And that's a. Way of of not hurting consumers but maintaining incentives to, to ize the demand, right? So in a way it was a a well-functioning system, but still it was it was scandalized in this way. And that's something for me, I guess as an energy economi is that's, that, that's quite hard to grasp. But but then I'm, I guess I'm too much into the weeds there, and then not enough into the politics.
Richard Sverrisson - Editor-in-Chief, Montel:But I think that, that, that's an important point. It is all about the details and the technicalities here, but let's turn to the German election. We've got the AFD now are they polling almost the second biggest party now? Are they load low twenties in the party? The low twenties. So that's quite substantial increase from previously, yeah. I think maybe it's safe to say that it's unlikely that there'll be a party of government. Highly unlikely. But what are their kind of energy related policies? I've heard the leader talking about tearing down windmills and maybe cutting off power exports. Is that. This realistic,
Hanns Koenig, Managing Director for Central Europe at Aurora Energy:the windmills of shame she called it.
Richard Sverrisson - Editor-in-Chief, Montel:Really?
Hanns Koenig, Managing Director for Central Europe at Aurora Energy:Yeah. It's a quite a difficult political situation we find ourselves in. And if you talk to, especially conservative politicians behind the behind the scenes, they, I hear a lot of concerns that basically the next government has one shot to sort things out and fix the German economic model. And if they don't manage. Will quite likely have an AFD left led government by 2029, which I think in the eyes of most Germans at this point in time would be quite a concerning development, especially because the German economic model isn't easy to fix. Because it's really been hit by a perfect storm of the energy crisis, but also China's sluggish economic growth more competition from China. Trade barriers going up everywhere, especially in the us that has fundamentally challenged how Germany is doing its business and sorting that out in a couple of years in a way that will be convincing to voters is a big challenge. So I, I am quite concerned there on the energy on the energy policy side, to be honest it's not very concrete and it's also not very thought through. This tearing down windmills, that's something ATIs vital. The the main candidate for the. Said in a said in one of her rally speeches, and then she said, then a couple days later when we questioned about it, she said, oh no, I didn't mean all wind windmills. I already meant the windmills in that particular forest.
Richard Sverrisson - Editor-in-Chief, Montel:And so there's a bit backtracking as well.
Hanns Koenig, Managing Director for Central Europe at Aurora Energy:Yeah. There, There's a lot of, there is, there's a lot of populism and don't see, I don't see an overarching energy concept which or energy policy, which they would have and which they would which they would implement.
Richard Sverrisson - Editor-in-Chief, Montel:I think I think that's. That's the key area here. But isn't there a danger that some of the, that the mainstream parties will react to that populism in a way and introduce a populist measures or that sort of rubs off even though, then they don't mean to go to those extremes. Isn't that a danger? A little. The, that, that this proposal from the Norwegian government is a little bit along those lines, isn't it? Amund. Yeah. Isn't that fair to say?
Amund Vik, Senior Advisor, Eurasia Group:Yeah I think that's fair to say, and I think it's fair to say that any political force has to react to voter movements, right? So I think there are two, there are bunch of reasons why there's growth of populist parties in Europe. One is of course, that there is some real grievance on the cost of living. Things are more expensive, things are hard to explain. Things are complex. And also established political parties has to respond to that that movement of voters. But also I think in general, I can't very much agree with what's been said. I think the, one of the big populous risks for energy is that it gets harder to do anything at all. Because you have much more parties on the outside of the sort of center consensus where so Center life, center consensus has been European integration. It's good to do renewable energy. We should have interconnected. Between the countries, you should have a rational system. And you should have a system that allows you to use to optimize all the resources, which then the flip side of that, which will be expensive occasionally, but I think the more parties you have outside of that consensus, the harder it is to get anything done. So I think interconnectors will be more difficult. Market integration will be more difficult. Explaining all the things will be more difficult. So if you're an energy player, I think the main concern would be will you get the politicians to do difficult things because I think the. The key characteristic of populist parties is that they're they want to do easy things and they want to simplify. They don't want to do complex things. They don't wanna do unpopular things. So the more they are, the more, more difficult it is to do energy business.
Richard Sverrisson - Editor-in-Chief, Montel:These are not easy or simple markets. Hans, what's your view here?
Hanns Koenig, Managing Director for Central Europe at Aurora Energy:Yeah I definitely see the danger of a popular response by the by the mainstream. However, I think there's also a more positive potential outcome, which is actually a rationalization of German energy policy in response to this to this challenge. Just to what do we mean? What do I mean by that? Just to give you one example all of German Germany's planning for the energy transition over the next couple of years is under the assumption of. Electricity consumption of 750 terawatt hours in 2030. That's what all the renewables build out plans and so forth are geared towards. Last year we had something like 520 which means basically a 50% increase over five years, which even with all the AI and electrification of what we which we will see is according to our analysis, but also lots of others, very unlikely to happen. We're more likely to end up somewhere 600, 650. So it would be actually be a Russian. Nothing to say. Yes, let's continue building renewables and let's continue building them at a historically a very high rate. But let's not build them at the rate that is currently foresee.'cause that very likely gives us a system that is oversized for the amount of demand that we will actually have in the medium term. And that means of course if demand has to pay for the system that means a very expensive system, right? So I do think there are steps of rationalization, which mainstream politics can and should take. Without throwing out the baby with a bath water.
Richard Sverrisson - Editor-in-Chief, Montel:That's a crucial point. Yes Amund!
Amund Vik, Senior Advisor, Eurasia Group:I just I agree with that point. I think that's one of the things that drives these populist parties is the sort of the slight inconsistencies and ex segregations of classic centers politics as well. Like you say demand will grow with X amount, and then the popul say no it won't, and we're investing in this for no reason. And then you get in this discussion like, who is right and who is wrong? So I think in general, a more rashonell approach to all these targets would probably be beneficial for politics in general and make it easier to plan.
Richard Sverrisson - Editor-in-Chief, Montel:But the classic approach from these populistic, certainly on, on the right, I dunno about the left in Germany, but has been very much anti wind. And in some parts of Europe as well. Pro-nuclear. Are we seeing the more of the politicization of the different kind of generation Technologies Hanns here, do you think?
Hanns Koenig, Managing Director for Central Europe at Aurora Energy:Yes, it's but that's not necessarily a a very new development. So with wind, there's always been nimbyism, I think in most countries. So that's nothing particularly new. But what's always been striking to me is the rights infatuation with nuclear that also seems to be a fairly a fairly global phenomenon. Not just in Germany. And of course, you can have an. Not very long discussion about whether it was sensible to turn off Germany's nuclear reactors. From an emissions perspective and cost perspective, probably not. But that's an entirely different discussion to building new nuclear reactors. And usually very pro-market people will go out and say, oh, this, the state should spend tens of billions to build a huge fleet of new nuclear reactors. Which in my view isn't all that consistent. But that is certainly also something that is. That is coming from also from the AFD, that we need new nuclear rather than building wind and so forth.
Richard Sverrisson - Editor-in-Chief, Montel:I'd like to bring the discussion back a little bit to what you were talking about here, Amund, about the interconnectedness and how that, how important that is. There has. Been some some criticism from Norway's neighbors with not just a fixed price fixed retail price, but also the cable discussions in Norway when they're talking about maybe not renewing or hesitate to renew cables with Denmark. It sends signals to its neighbors that. Norway first kind of policy, yeah. How has this been? How has the fixed retail price been? How has it been taken in in, in, in Norway Neighbors? I'd say very badly.
Amund Vik, Senior Advisor, Eurasia Group:It's not, I think that's understandable. I think if you look at the retail price first, I think if you're Sweden and Norway implements a system that guarantees that Norwegian consumers will not be demand responsive. That's bad news. Like from. From a system perspective, but also from a from a price perspective, right? So you can easily see that drive drive a price that's more clearly linked to the wholesale price further up in southern Sweden that would otherwise be the case. So I think for sure that there's controversy around it, but also I think that's one of the things that if the government's serious about doing this is one of the things that really should try to untangle. Also, I think there's a sad development on Interconnectors, both in Norway and for that matter in Sweden, who just recently rejected. The tso's proposal to build another cable to to Germany that there is for, in the markets that have an his surplus of energy, the cables are controversial 'cause the market coupling raises the price in that market. And I think that you can see around, you can see it and various markets around. And I think that's a sad development. And I think one of the things, clearly, one of the most important things that got Europe through the crisis over the last couple of years was the interconnectedness. The fact that you could move power from. Norway to Germany, you can move power from Germany to France when the nuclear capacity was down. And now that you can move power from the Nordics and from the middle of Europe into Ukraine when their system is under attack. So I think that's clearly one of the most important facets by the system, but it's also controversial and, do I think it's a, generally the smoothest of plans of the Norwegian government to say we're not gonna renew cables to Denmark in 20 28, 20 29 to fix a problem today. No, I don't really think so. But it is it is a reflexive of the, particularly in Norway, the two last cables, the one to Germany and the one to UK has been very controversial'cause it over time increased the capacity quite a lot. And those two markets have been very heavily hit by the energy crisis over the last couple years. So that, but I I would say not enough effort's been put into explaining it. But it's also been very difficult. So I think the fact that it forces the government to into a position where you have to say something. To take the some of the air out of that balloon. But I don't think it's like that. In my personal opinion, I wouldn't do that.
Richard Sverrisson - Editor-in-Chief, Montel:Yeah, I think it's also, it's very short termist, isn't it? Because in the long term you, when you've got the UK or other password, we're building up massive offshore wind. That power's gonna flow back and bring prices down as well.
Amund Vik, Senior Advisor, Eurasia Group:It is, right. But I do think for a hydro based system, there is a real thing to consider, whether you are through being the producer of last resort in sort of Northern Europe outside of thermal power. You are basically paying balancing power prices in Germany for your base low power in Norway, which is, it is controversial. So I think that it's not a bad idea to think a little bit about how that could be done better and how the market could be set up better. But yeah, it's it's, it is of course the case that it might, the power might come the other way that's not today.
Richard Sverrisson - Editor-in-Chief, Montel:Yeah. Hanns, just to bring you in here as well, have cables been as controversial in Germany as well, or interconnectors?
Hanns Koenig, Managing Director for Central Europe at Aurora Energy:I wouldn't say so. They certainly haven't hit that degree of politicization. However, we've also generally been, as these German consumers have been on the benefiting end from interconnection into Sweden, Norway, and and so forth. And, but actually two points on this one first point it may prove quite shortsighted to to, to cut all these cables now because it's not at all inconceivable for for Norway to actually have a demand development. That will make it make it cease being a net exporter and turn it into a net import, right? With all the data centers, with hydrogen, with heavy industry relocating there, right? There's a lot of demand growth going on in Norway, and there may well be a world in five or 10 years where Norway is quite happy to be connected to the uk, to Germany and and so forth. I think the other point that's also under discussed in this context is that, of course, whenever there's consumer prices go up, there's also. O produce a surplus that's increasing. And actually a lot of the producer surplus in the Nordic countries has has gone to basically state owned companies. So there would also be an option to actually redi, redistribute some of those earnings back to back to consumers where without tinkering with the electricity market design sure.
Amund Vik, Senior Advisor, Eurasia Group:I think that's absolutely true. And we did government that's. Kind of what the government's doing, right? He's shifting the revenue both on the power companies and from the TSO bottleneck fees back into both the the cap emergency mechanism and also the proposed nor Norway price. But I do think it's interesting that there, one of the arguments from the Swedes are not doing the German the new German cable. And one of the arguments I think from the Norwegian government currently on will. Why you want to be hesitant in doing more integration is serve the, unstableness of the system and the fact that Germany has just one price zone, which kind of artificially increases the price. So I think it's an interesting parallel not to we're in Germany and but I thought it's an interesting parallel to see the surplus energy countries doing to Germany. What Germany did to the people needing cash during the financial crisis. Thought we need some form of structural reform to this in order to get it, which I think is a fascinating discussion.
Hanns Koenig, Managing Director for Central Europe at Aurora Energy:I think on. I think on the German wholesale wholesale market zone we had complete agreement. I think I think we need this bit for actually even all kinds of internal reasons, but also to stop stop haling issues for our neighboring countries.
Amund Vik, Senior Advisor, Eurasia Group:Yeah, absolutely.
Richard Sverrisson - Editor-in-Chief, Montel:Yep. Just a final question really to you, Hanns. And this is about, we're in a week where Donald Trump has announced a slew of tariffs. What does this mean for Germany as the industrial heartland of Europe and in particular, I see the steel industries come out saying this is a disaster for them. For example, what does it mean for Germany and its industry?
Hanns Koenig, Managing Director for Central Europe at Aurora Energy:If this stays, of course it's, if it's bad. And there's also a certain risk that this is only the beginning, right? And the opening salvo in in a whole a whole marriage of of tariffs and protectionism. However. I guess the hope is, and I don't think that's inconceivable is that there is a deal to be made and there is a deal to be made around defense. I think most people in Europe now accept that we need to be paying for own security and we can't we can't rely on American taxpayers fronting the bill for European security. So that could be part of the deal. What also was part of the deal last time Trump stepped tariffs on on, on, on European exports, is that. We retaliated with some very well targeted tariffs, I think against inter against whiskey. And and actually within a couple of months, there was a deal that then that led to the removal of all of all the tariffs. I think there is hopefully also to also some deal making to be done there to, to reduce the effects. But yes, if they stay, it's bad.
Richard Sverrisson - Editor-in-Chief, Montel:Yeah, it's good to to close on a little bit of optimism there. It could just be a start of new negotiations. I like that. Hanns, so Hanns Koenig and Amund Vik, thank you very much for being guests on plugged in, even listen to plugged In- Montel's Energy News podcast. Our episodes are released every Friday. For the latest news from Montel, please visit montelnews.com and you can follow us on LinkedIn and X. I'm Richard Sverrisson. See you next time.
