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
Green transition fears amid tariff turmoil
This week, Trump's staggering tariffs on Asia and Europe caused turmoil in global equity and energy markets - as they took effect and were paused - raising many concerns within the energy sector about prices, trade flows, and the future of renewables investments.
With the situation changing day-by-day, even hour by hour, Richard speaks to Norges Bank Investment Management - Norway's Oil Fund - about the state of the global renewables markets, and what long-term impact the events of this week will have on the energy transition.
Presenter: Richard Sverrisson - Editor-in-Chief, Montel
Contributor: Olav Vilnes - Norway Editor, Montel
Guest: Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management
Podcast Editors: Oscar Birk, Bled Maliqi
Podcast Producer: Sarah Knowles
Hello listeners and welcome to Plugged In - the energy news podcast from Montel, where we bring in the latest news issues and changes happening in the energy sector. This week we've seen Trump's tariffs on Europe and Asia caused turmoil throughout the markets for the European energy sector. Concerns have been rife about what his new policies will mean for the global energy transition and investments into green and clean power. However, it might not be completely doom and gloom as we will hear from our guests today. In this episode, I'll be speaking to the Norges Bank investment management, also known as Norway Oil Fund, about how the news this week has affected renewable energy investments globally. As I spoke to the oil fund, equity markets were slumping. As Trump's announced, tariffs were set to take effect, but since then, markets have rallied substantially as the White House paused, additional tariffs on countries willing to negotiate with the US. This new topsy-turvy world highlights the unpredictability of US policy and the impacts on global markets, not just energy markets. But first, I'm joined by Olav Vilnes. Our Norway editor here at Montel. Hi, Olav. A warm welcome back onto the pod.
Olav Vilnes - Norway Editor, Montel:Thank you very much.
Richard Sverrisson - Editor-in-Chief, Montel:I think let's start off by talking about the initial reaction from the engine markets to the US tariffs since they came into force.
Olav Vilnes - Norway Editor, Montel:Yeah. You could see huge moments from the, in the week, from the second to 9th of April, you could see the gas price, for example, falling close to. 20%. Oil prices are down 20%, carbon down 12%, and even the power markets fell up to 10% if you look at the German markets. So it clearly had a huge impact. And and after you had this 90 day break announced late on, on Wednesday, you've seen a slight recovery, but not nearly as much as they fell previously.
Richard Sverrisson - Editor-in-Chief, Montel:It's obviously had an impact. I mean, but what is the sentiment more generally across Europe, towards Trump and the new White House administration? What would you say?
Olav Vilnes - Norway Editor, Montel:I think it's very nervous. You had a, you have had a Europe that came out of the energy crisis in 2022, just got rid of the dependence on Russian pipe, gas line, gas supplies. And then of course you have no affair that you have just replaced one dependency with another. And also with an erratic. Precedent to just make policies every week and you don't really know about the stability of these energy imports.
Richard Sverrisson - Editor-in-Chief, Montel:Almost from day to day as I said in my intro from almost, could be hour, from hour sometimes. But but that's, that that's very interesting Olav I think we are gonna be hearing from an always oil fund shortly about the tariffs and their perspective. They're in it more for the long term. But could you give our listeners a bit of an overview of what the fund does here in Norway, what it invests in, what it focuses on, and what it concentrates on?
Olav Vilnes - Norway Editor, Montel:Yeah. It was set up in 1996 to, to shield Norway's economy from the ups and downs in the oil price, and also to save revenues for future generations and not use up all the. Earnings at once. And investments are spread across markets, currencies different countries around the world to diversify risks. And the value has increased quite a lot. I think there's now $1,700 billion value of the fund. So it's, it has a huge exposure in global markets. It's also, in recent years expanded into investments in renewable energy. So they own several wind farms.
Richard Sverrisson - Editor-in-Chief, Montel:We'll hear more about that later. But thanks very much for setting the scene for us there Olav. I'm pleased to be joined by Harald von Heyden, global head of Energy and Infrastructure at Norges Bank Investment Management, also known as Norway Oil Fund. A warm welcome to the podcast, Harald.
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Thank you. Thank you for having me, Richard.
Richard Sverrisson - Editor-in-Chief, Montel:How would you evaluate the investment climate into renewables at the moment? There's, it's certainly turbulent times out there.
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Yes. I think I almost want to use a cliche that you have to be able to have two thoughts in your head at the same time. Right. So clearly the equity markets are going through a bit of a turmoil and, nobody is unaffected by that. Strangely, I think, in the private infrastructures here, things are looking better than for a long time. We are quite optimistic about, you know, demand forecasts. We are seeing some of the cost inflation tapering off. We're seeing a lot. So projects being built, especially in the battery space, but of course still in the traditional solar and wind space are also picking up. We see PPAs coming up both in length and in prices talking to industry participants. Just yesterday at the gathering, it seemed to be a consensus that, yeah, PPAs now. Typically can come up into 20 years and with higher levels towards the end even than we've seen for a long time. So all in all, I think private infrastructure, if as long as it can remain unaffected by the turmoil that we've seen both in equity markets and the tariffs and so on it's actually looking pretty good.
Richard Sverrisson - Editor-in-Chief, Montel:Excellent. We'll come back to the tariffs there, Harald, but if we are looking at where, this optimism, that, that's quite a refreshing, that's quite a positive aspect of what's happening here. It may be a little bit unusual given the news flow out there at the moment, but where in particular is there optimism? Is it more in Europe? Is it elsewhere Or where are you noticing that?
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:No, I think, the strongest optimism is actually in the US where the demand, the kind of forecasts are being adjusted upwards every second or third month long term demand forecasts. And and we've been told that people are going for gas turbines, just not because they necessarily, want to go back into fossil fuels. But because it's one of those things where it can get volume very quickly. Although it seems that some of the turbine gas turbine. Suppliers are sold out into, way into the thirties. So it's a bit of whatever they can get hold of, whether it's, windows, solar batteries gas and nuclear. The, a lot of the initial optimism around that is I maybe been tempered a bit by, by, by small, the newcomers into the industry. You understood that this is 15, 20, 25 years ahead I think again, of course in the US we would have to discern between the if you talk about wind between offshore and onshore wind, I think Trump has a particular hatred for offshore wind. While I think onshore, of course it's just part of the power industry that everyone needs as much as possible of.
Richard Sverrisson - Editor-in-Chief, Montel:So when you're talking demand, you mean power demands, I guess here not yeah.
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Power demand. Yeah. Yeah.
Richard Sverrisson - Editor-in-Chief, Montel:Yep. So how would you place Europe here in terms of the investment climate for renewables?
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Yeah, it's there's more uncertainty around demand growth. Clearly the whole GDP, the whole industrial sector is not looking as rosy in many places in Europe and others. Also, the ai, the data centers, they're coming, but they're probably, they're not seeming to be coming as fast. As they are in us, and also the alternative to, to kind of power the data center. So the, or any new environment with gas as you have it in the US is more expensive in Europe, obviously since we import most of our gas. So still, but big. Renewable projects are still being F I'D or constructed. It we still have a growth in the industry in Europe, but not that level that perhaps we see in the US or in Asia, of course.
Richard Sverrisson - Editor-in-Chief, Montel:And then that's the same for PPAs as well. I mean, you think the outlook for PPAs in Europe is a little bit behind that in the.
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:A little bit behind. Yeah. But we've seen good PPAs, maybe not 20 years, more in 10, 15 years, but again it's a good demand for PPAs. Yeah.
Richard Sverrisson - Editor-in-Chief, Montel:I'd like to turn to data centers and AI, I think, 'cause there's an interesting discussion there around most of the, having the most service in the US and how that how that pans out because. We've seen this week very clearly Wednesday at midnight, the tariffs from President Trump kicked in. Sparking global market turmoil has been extremely volatile all week, but mostly the arrows are pointing down. Harald, what has been the impact on Norway's oil fund and the way you look at investments and maybe investments more generally into renewables?
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Yeah. Yeah. No, the impact hasn't of course, you everyone can log onto our website and see what has happened to the numbers that are ticking there. And that hasn't been all that positive last couple of days for sure. So equity markets are affected. This has been, we've warned we've warned that. That this might hap may happen. This is not my level, my area of expertise for sure. The equity markets and we'll just have to push through it. I think again the world I'm living in more in the infrastructure, in the private infrastructure market and world. We are, we're long term and. We, of course we see that it causes some disruptions in the supply chain as things are being moved across the border in the us. But we've actually done some stress tests on that as we were involved, for example, with the Copenhagen infrastructure from five. They have quite a few onshore projects, battery projects in the us. We've seen that they have very little. Even in a kind of not so optimistic scenario, impact on the cost of their projects.
Richard Sverrisson - Editor-in-Chief, Montel:It's interesting because I've already felt, speaking to some of my contacts, there has been a backlash generally against American companies. And do you think that, if in, in terms of data centers in particular, you know, a lot of the servers, the big servers are based in the US. Is there a sense that people will be rethinking the way that they lodge data, save data, use these servers? In terms of, the outlook for data centers, if there's a backlash against American companies that would maybe affect power demand.
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:In the US? Yeah. Let's hope it doesn't come to that. I mean, let's hope that you've heard the news as well and talking all about, excluding American companies from tenders in Europe and so on. That's let's hope we don't get to that place. But on the supply chain issue, I think more interesting thing is to talk about the Chinese supply chain, right? And how we. Can get around maybe a black and white thinking around that. It feels so comfortable for many from a security standpoint, right? We saw the 5G grid a few, couple of years ago, and now of course the wind turbines, the batteries, they all come with quite advanced electronic control systems, right? And I've seen people proposing solutions that, that. That I think is sensible is that, the hardware where can be imported from China, where the pure stripped down wind turbines or solar panels or even just the battery cells and then the whole electronics, the balance of plant the steering system around it can be. Produced and assembled in, for example, Europe or in the us I mean alleviating any kind of the fears of embedded malware and so on. I think that to, to find the compromise there is probably very good for the cost inflation or in our supply chain.
Richard Sverrisson - Editor-in-Chief, Montel:Also for accelerating the energy transition in places such as Europe, and maybe this is where Europe gets to benefit from the obvious trade war between the US and China.
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Indeed. Yep, indeed.
Richard Sverrisson - Editor-in-Chief, Montel:Are you concerned about a rise of protectionism? Generally, we've seen certain moves across Europe, a lot of backlash against interconnectors between countries. Certainly people looking for simple solutions to complex issues. I know you are, you know, you are more looking at long-term infrastructure investments, Harald, but I a rise in protectionism could maybe jeopardize some of that thinking.
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Yeah. No, I think, I mean it's, I think the power system is such an clear example of the benefit of international corporation and international internet connection is probably at least one of the clearest examples I know of, right? The whole security of supply situation for an interconnected continent versus countries that are not, or the whole weather situation with the wind and the home and being able to optimize across different weather systems and all these kind of. Things that are so fantastic in our industry that they should be rolled back. That would be a bad day for sure. I don't see it yet, but, yeah.
Richard Sverrisson - Editor-in-Chief, Montel:We hope that there isn't a danger for pendulum swinging against the energy transition, would you say Harald?
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Well, it has swung against it in the sense that I think the enthusiasm or the belief that this transition will happen within 2050, that we will reach a one and a half degree target. I think that the hope is more or less gone. On the other hand, renewables are more and more, just seen as another. Power source and they're competing. When they're cheaper and better they'll be used. And if they're not, something else is being used. It's a kind of a rational. Thinking creeping into it. But yeah, we've heard criti some NICs. I mean, they said that we are not in an energy transition. We are more in an energy addition, right? Where the renewables are just a country for the growth and not really replacing a fossil. And unfortunately they they have more or less been right so far. But again the pendulum is still firmly in the renewables court in terms of what we see from new investments going forward.
Richard Sverrisson - Editor-in-Chief, Montel:That's very Sure. And especially if you. Proponent of the energy transition, but how you mentioned data centers and focusing more on, on the us but what about in Europe or in other parts of the world what's the outlook here? In some parts of Europe, you're seeing already a saturation of data centers and people being, prohibited from building nuance until there's a, strengthening of the grid. But elsewhere. In Europe, I'm thinking particularly Ireland, but other, in other parts of Europe. Is there a growth in data centers?
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:I mean, we've seen, yeah, Microsoft rumors that they're maybe pulling back some of their plants in Europe. Whether that's rumors or true, I don't know. But clearly, you would have to, you should put those data centers where there are plentiful of renewables, whether it's sun in Spain, or wind in Ireland, or in or in Finland or somewhere where the, yeah. You have the right conditions for it. And I think they will come for sure, but it's always a a question is, are there other things that you should rather use it for? Norway being being a case in point there.
Richard Sverrisson - Editor-in-Chief, Montel:And are you and what's your view on, on, on the outlook for green hydrogen as well? Because obviously that requires a massive infrastructure boost. Not just maybe in Europe, but also in if the are gonna produce it in other parts of the world. Harald?
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Yeah, no, the, of course the optimists have been pretty disappointed by the lack of growth there. But then again, it's to say that it's not gonna happen. It's also wrong. So we, we're seeing some serious players doing some serious moves. Total, has a big project in Germany. That they're building, for example. I mean there's maybe that we've under underestimated the long-term effect of this and it's in Europe, which imports 70 to 80% of its energy and most of that being fossil fueled. It feels strange to put the them to spend that energy on on, on making. Some kind of power brakes. So it would have to be in very special places with special conditions. I think the rational thing for producing green hydrogen and its derivatives is, I think outside of Europe, but
Richard Sverrisson - Editor-in-Chief, Montel:interesting. Very interesting. Yeah. Yeah. No Harald, the Norges Bank investment management has also invested in wind farms in Germany and Denmark. Are you concerned? There are some concerns about wind power. I'm not sure if you share them in particular about the cannibalization effect, when there's an oversaturation overproduction that then has knock on effects and it means that investors sometimes hold back because the returns aren't there anymore. Is this a realist real issue in certain parts of Europe in particular?
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Absolutely no it's a huge concern and something that we spent a lot of time on. So yeah, we are banking on that the interconnectors between the different countries are not going away or that they're even getting strengthened. We are banking on a strong growth in the battery sector for sure that we're seeing Also we're seeing batteries. Come down dramatically in cost, right? To something like a hundred dollars per per kilowatt. And and we've seen that the battery parks now are being built going from two hours to four hours, to six hours and even to eight hours. And I think. When it becomes really profitable to have eight hour battery systems, that's maybe a tipping point. That when, the whole, even in whole industrial shift can be covered by, by, by a battery part like that. So we're, it is gonna be an interesting race, right? Between negative hours and the build out of Patrick Parks and the build out of even more solar and wind. And and it's gonna be volatile and it's gonna be interesting here.
Richard Sverrisson - Editor-in-Chief, Montel:That's it. And the main thing is keeping the grids of course, resilient at the same time so that the lights don't go out. And I suppose, the interconnection issues is crucial here. That all parts of Europe actually benefit from the wind and the solar and the batteries. I think that's probably quite crucial going forward. But to, to a round off here, Harald, is what's happening currently. I know it's very short term. It's day to day. It changes by the hour in the current markets, but, and I know it's very equity focused, but it's also hitting oil and gas and by, in, in effect also sentiment and psychology in the renewables market. But is it gonna change in any way that the way that you guys invest or look at these markets?
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Yeah, I think, we, we have to follow our, especially look at the demand forecast very closely. The growth forecast and that we have at the moment. We have to make sure that the counterparties that we are dealing with are strong, continue to be strong. That's really important to us. But no, as you say, every day brings up new surprises. Every week looks different from the last at the moment, we focus on our fundamentals. That's what we have to do, and
Richard Sverrisson - Editor-in-Chief, Montel:fundamentals and more the medium and the long term and not the short term?
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Yes. Yeah.
Richard Sverrisson - Editor-in-Chief, Montel:But how do you see this panning out this year? Obviously I'm not as, you don't have a crystal ball Harald, but there is a sense we're on a sort of precipice here, and we could things could come to a bit of a standstill. What are your kind of red flags in this situation?
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:No I think we're in uncharted territory here. I mean that, this is, we haven't really been here before. I think our demand really coming down. Over a long period of time. That's surely something we don't want to see. That, that's, power is the fundamental call it yeah infrastructure of society. And if these things if society shows that they're not interested in that anymore, that's when we really have a problem again, I'm sure. That would be the one I'm looking at. But I'm sure others with other focuses have different indicators.
Richard Sverrisson - Editor-in-Chief, Montel:Because the key, as you say, the key to the energy transition is the electrification of several different sectors, and if that power demand looks weak going forward, then you know that's the concern. Absolutely. As you rightly point out, and I think, do you think, you would be seeing the lasting effects maybe of this tariff war for a while? Repercussions in in other markets because of the sentiment is very uncertain at the moment. And you'll see maybe, not your fund necessarily, but others holding back.
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Yeah, I'm sure. There, there are very few investors who are not exposed to the equity markets one way or another. So those who are will surely also. Be, have less firepower for the infrastructure or the private markets. And but on the other hand, it could also be that we see a rational thinking around it that, the private infrastructure markets especially, there's been a lot of talk about around grids, right? There could be no safer haven than that, right? In, in a turbulent world. And also the same goes for a solar park or wind park with the 10, 15, 20 year PPA with a solid counterparty. That, to me, that sounds like a safe haven. As, as far as you can get it. But
Richard Sverrisson - Editor-in-Chief, Montel:I think it's very important to, to end on a note of optimism there Harald and looking at the safe havens rather than, and then the turmoil that's that's occurring all around us at the moment. But Harald von Heyden, thank you very much for joining Plugged In, and we hope to have you back on again soon.
Harald von Heyden - Global Head of Energy and Infrastructure, Norges Bank Investment Management:Thanks for having me, Richard. Thank you. What a pleasure.
