Renewables Roll-Out: Saturation Reached?

Europe is developing green energy at lighting speed.  But as solar and wind generation reaches record levels, new challenges are emerging across the electricity system. Negative prices, grid congestion, curtailment and falling capture prices are raising a fundamental question: has renewable deployment reached its limits, or is the rest of the energy system failing to keep pace?

In this episode of the Plugged In Summer Series, we explore whether Europe's next challenge is no longer building renewable generation, but integrating it.

Host Snjólfur Richard Sverrisson, Editor-in-Chief of Montel News, is joined by Dr Lion Hirth, one of Europe's leading energy market economists and Professor of Energy Policy at the Hertie School; Luca Pedretti, Chief Product Officer & Co-Founder of Pexapark; and Professor Jan Rosenow, one of Europe's foremost experts on energy efficiency and electrification, and Professor of Energy and Climate Policy at the University of Oxford.

Together they examine whether current market structures, grids and policy frameworks are fit for a predominantly green energy system,, how investors are responding to growing merchant risk, and why flexibility, storage and electrification could determine whether Europe's energy transition continues to accelerate…or begins to slow down.

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

Guests:

Dr Lion Hirth, Professor of Energy Policy, Hertie School

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark

Jan Rosenow, Energy Programme Leader and Professor of Energy and Climate Policy, University of Oxford

Producer: Alexandra Carlon 

Editor: Alexandra Carlon

Transcript

The System Hits A New Wall

Dr Lion Hirth, Professor of Energy Policy, Hertie School 0:00

Frankly, I think it's it's make or break. So today there isn't such a thing as flexible managed on on a bigger scale. And if it stays like this, then we will not have either a cheap or a clean power system.

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 0:14

Asset level renewable economics have been challenged due to cannibalization, curtailment, negative prices. That's where we are right now.

Jan Rosenow, Energy Programme Leader and Professor of Energy and Climate Policy, University of Oxford 0:24

Most people think electricity is energy and and and they forget about the other almost 80% of our energy use, which is not electricity, it's primarily fossil fuels burned for heat and for mobility. And only now we're waking up to the fact that this is going to be the huge challenge of the next phase of the transition.

Integration Challenges For New Renewables

Richard Sverrisson – Editor-in-Chief, Montel News 1:04

Europe is developing green energy at lighting speed. But as solar and wind generation reaches record levels, new challenges are emerging across the electricity system. Negative prices, grid congestion, curtailment and falling capture prices are raising a fundamental question: has renewable deployment reached its limits, or is the rest of the energy system failing to keep pace? It's with great pleasure that I'm welcoming Lion Hirth, who's professor of energy policy at Hertie School, to the to this podcast. A warm welcome to you, Lion.

Dr Lion Hirth, Professor of Energy Policy, Hertie School 1:13

Hello, thanks for having me.

Richard Sverrisson – Editor-in-Chief, Montel News 1:14

Well , what we're going to be discussing today is really how can can Europe keep accelerating renewables deployment and the green transition without fundamentally redesigning how power markets and and grids operate. But the a first question really so as renewable penetration rises, we're building out solar and winds, you know, massively, are we reaching a point where cannibalization fundamentally undermines the economics of new wind and solar projects? So are we scaring away investors at the same time?

Dr Lion Hirth, Professor of Energy Policy, Hertie School 1:46

I think what's fair to say that in in many aspects or in a couple of aspects, we are encountering problems that that be used to discuss as system integration challenges, and and cannibalization is one of them. Um so I think what we're learning is that system transformation kind of the the second half, going from 50 to 100 percent uh wind and solar is is trickier and more difficult than going from zero to 50 percent. Not because the technology has become different, right? Wind turbines are available and scalable and solar is is cheaper than than than ever before, but because the rest of the system, grids and storage and backup and system management and operations and markets is is tricky and there's hurdles and problems to be solved. I'm confident we will, but we will need to work on this.

Richard Sverrisson – Editor-in-Chief, Montel News 2:36

So the the problems are clear. Um how how do we solve these problems, especially you know, with the cannibalization, with the constraints in the grid, um, and and curtailment issue? I mean, it's it's part of the problem here that, you know, I mean, Germany was a front-runner, amazing uh advances in renewables deployment for many, many years, but the system pays producers even though their production is curtailed, or even they've got no incentive to curtail because they're getting paid anyway. Is that part of the problem, how those markets were designed in the first place?

Negative Prices And The Switch-Off Problem

Dr Lion Hirth, Professor of Energy Policy, Hertie School 3:12

Yeah, I I think you mentioned a whole series of problems. So let's let's let's maybe pick out a few. So one challenge is uh and we've seen this very recently, 1st of May, um, a day there was a pupping holiday across most of Europe, and it was pretty sunny, it was rather cool, a little bit of wind also, and we've seen negative prices very close to minus 500 euros on the day ahead auction, but also Benelux and uh in France was was really deeply negative. And that's an indication, of course, that we're producing more electricity that we can get rid of, which is ironic because this is technologies that are so easy to switch off, right? A solar panel is is much more easy to switch off than than uh hydroplants and fossil plants and nuclear plants and and even a wind turbine. Yet we don't do this, and the problem is, of course, how we organize production. This is mostly small-scale solar um running under feed and tariffs and in in self-consumption optimization under fixed price tariffs, um retail tariffs, which means they don't have an incentive to turn off. They just keep producing and they often lack the technology and the system integration and the IT and the APIs to get to get them reliably turned off. And I was a bit scared actually on 1st of May. I was concerned that we're gonna break the system. And um, and we all know if we're gonna get a big contingency, a major system split or even a localized brownout or blackout, the political backlash would be tremendous. I think um everyone in the energy industry is is very much aware and is working hard to avoid this. And having renewables reliably turn off when they are when we have excess, when we have too much energy in the grid, is something that's just a precondition. And that's something we didn't need to think about uh at at 10% or 20% solar, but we have to think about um this when we go from from 20 to 30 to 40 percent solar on an annual basis, because that means people always and very often have situations where we have much more energy. We could we could produce much more energy than we can actually digest, and then we have to to stop producing.

Blackout Risk And Political Backlash

Richard Sverrisson – Editor-in-Chief, Montel News 5:12

So so you know, do you have faith in in the policymakers certainly in Berlin and and and local politicians to sort this out?

Dr Lion Hirth, Professor of Energy Policy, Hertie School 5:20

Faith is a big word. Um I think on the working level, on on the level of of staffers and and civil servants, there's a lot of awareness about this. Um as as of course is on uh among system operators and TSOs. Um and has been for a long while. It's not new, like no one is is really very much surprised about this. I'm less sure about senior policymakers and parliamentarians and those who who draft the laws. And I'm a little bit concerned that um that politicians sort of love to talk about small modular reactors and fusion energy and data centers and sort of the sort of the big stuff they read read in the news and that sort of gets gets clicks on on social media, but the boring stuff of sort of reliable system operations is is getting much less attention. And um, I just hope that our governing bodies and law-making entities, sort of the machines, work well enough to get this all going. Um I'm broadly confident that this is the case, but I'm not sure. I like if you ask me, would I bet money on we like we don't get like on the first of May of this year? I was nervous. I was nervous, I was nervously looking at the data the whole day, and I was uh cautious and concerned that something might go wrong. Um, so um so among my peers, I did a bit of a a survey, and people put the chances of a major incident between five and ten percent, most of them, on that day. And hell, that's way too much. Like we don't want to have a situation that we have a five percent chance of a major incident, like we don't want to be there, like we want to be at 99.99% reliability reliability at any point in time, at least.

Richard Sverrisson – Editor-in-Chief, Montel News 7:12

Yeah, absolutely. Because um, you know, you've highlighted the potential backlash would be enormous. Um, but i if we look at some solutions here, so if we'd say, you know, in terms of you know, curtailment is increasingly common across Europe, but is it a grid problem? Is it a market design problem, or or simply the cost of moving too slowly on flexibility and storage? What needs to happen here, um uh

Curtailment As Normal And Necessary

Richard Sverrisson – Editor-in-Chief, Montel News 7:36

Leon?

Dr Lion Hirth, Professor of Energy Policy, Hertie School 7:37

I think it's all of the above, right? Uh it's all of the above. But let's start with the with the obvious solution. It's just very common and will be very common, and it's perfectly normal that we have so much wind and solar capacity that we don't need it all the time. It's the same for conventionals, right? Also, we have a lot of gas and coal plants that we stop. We don't call those curtailment, we just call it turning off or whatever. But but sort of no one would ask a coal plant that could theoretically run 24-7 to actually run 24-7 when we don't need the electricity. And the same for solar and wind, just because the variable costs are zero doesn't mean that they need to run always when we need them, right? The value of these technologies is that is still tremendous if they provide energy 95% of the time when they could produce, but curtail the other 5% because either there's a localized surplus or there's a system-wide surplus. So that's just perfectly normal. And and many people have kind of an emotional response sort of against wind turbines being standing still in in a windy condition, but it's it's just very normal. It should be. Um, second is um, of course, better than not using, I mean, better than wasting the energy is using it,

Batteries Grid Access And Local Markets

Dr Lion Hirth, Professor of Energy Policy, Hertie School 8:46

right? And and for many reasons, we need to scale up batteries quickly. And the preferred technology certainly is large-scale utility scale batteries because uh they are much better integrated in markets and provide system services and um and are sort of is professionally managed. Um, and across Europe, we're running into constraints here, right? Again, the technology is becoming cheaper and cheaper. Sale prices have gone down 90% or what um since 2010. Um and and also the whole system integration, I mean the the kind of the packaged, um, ready-to-use assets that you can buy from China, it's just like cheap, reliable, scalable, ready to build. But the problem is, of course, grids, right? Getting grid connection. And if you get a grid connection, getting a grid connection that you can actually use, not a flexible grid connection, which of course isn't flexible, but it's quite the opposite. Flexible uh grid connection agreements, FCAs really mean you can't use it when you how you how you want it as a as a as a BES, as a as a flexible assets. And this is for a reason. Grid uh operators are concerned for battery grid impact for good and bad reasons, but also for good reasons. The the grid impact is real, and you need to figure out rules and regulation and incentives that kind of get the best out of batteries, which means making them operating in a way that they don't hurt the grid, but they they they they that they they reduce congestion and uh and reduce grid uh uh problems um to the possible extent, um, and hence um bring them online on larger larger scale.

Richard Sverrisson – Editor-in-Chief, Montel News 10:23

There isn't I mean the part of the issue here is you know, it's been very widely reported the extent of the the the cues amongst the grid operators for the batteries. So this would be, you know, you're saying this would be an elegant way of dealing with the problem of what I've called the three C's, the cannibalization, the congestion, and and the curtailment issues.

Dr Lion Hirth, Professor of Energy Policy, Hertie School 10:41

Um I it wouldn't make the physics go away, right? So if you have a region with a lot of solar energy and uh and limited uh transmission constraints, then then of course, if there's too much energy, then the system can either digest or export, then you need to curtail, right? That but but regional markets, regional wholesale markets are of course the best way to organize flexibility, right? To make batteries locally charge and make consumers locally consume, if this is hydrogen electrolysis or heavy industry or smart charging of cars or um or uh heat pumps in in winter, um uh to organize these millions of assets so they actually do consume mostly when and where there's abundance and try to save energy and and and shift load to other times when and where there's scarcity of energy. That's the whole idea of the electricity market. And this is a problem that's increasingly short term, like like changes happen on just hours before they're there because a lot of uh solar and wind is installed and and weather forecasts just become weather forecast errors just become bigger with the with the installed capacity. So we need to kind of organize the response, organize the the uptake and the flexibility both quicker and more local. And that's exactly what power markets are built for.

Flexible Demand Needs Real Price Signals

Richard Sverrisson – Editor-in-Chief, Montel News 12:04

I mean, you you mentioned the demand side. I mean, how how important is flexible flexible demand in solving the next phase of the energy transition? And do you think which sectors do you think are best positioned to prove it at that at to provide it at scale?

Dr Lion Hirth, Professor of Energy Policy, Hertie School 12:18

Frankly, I think it's it's make or break. So today there isn't such a thing as flexible demand on on a bigger scale, almost almost anywhere. Like demand is is up to date despite the progress that some countries have made, really not responding to system needs to prices and and and signals uh in any meaningful way. And if it stays like this, then we will not have either uh a cheap or a clean power system. It's a precondition, we'll we'll need this. And uh from from an engineering perspective, it's also such a such a no-brainer, right? If you have a car, um, you have to charge it on average maybe 30 minutes per day. Why should you do this at 5 p.m. during system peak and and grid load peak? Like why on earth? Why not 3 a.m. and why not maybe if you're charging at work at at one 1 p.m. during the uh solar peak? I mean, it's almost you almost get crazy, right? Because it's such an obvious solution and such a low cost or zero cost solution. We just have to organize things and just that just organizing things is a bit more complicated and lengthy that than we than we would like to have. And the components that we that we need to solve for this is uh regional wholesale markets, which we already discussed, uh reform of grid tariffs, um, and dynamic pricing and and corresponding metering, which is of course a big headache, especially in in my country.

Richard Sverrisson – Editor-in-Chief, Montel News 13:45

But it's it's it's changing the mindset as well, isn't it? There's like you know, you you want people to to change their behavior according to market signals. Just a just a final sort of comment question as well, Leon. Uh you know, so the the solutions are there, they're on the table. It's more, you know, the people who need to enact this need the courage and the conviction to push it through. Is that is that the the is that what you're also saying here?

Dr Lion Hirth, Professor of Energy Policy, Hertie School 14:08

I am, and that's that's of course a big deal, right? So um we talked about uh um regional wholesale markets, which is a very political issue because a lot of policymakers have really entrenched themselves into into Nets uh and and and just say no without considering this, um, which is a problem because that's not easy to solve, right? Um another issue is uh smart metering and dynamic tariffs. Um many countries have have have gotten there. Germany is has been trying for 15 years, and we have developed uh the the um a solution that no one else has even thought of, which we call a smart meter gateway. And I think that's a that's a good example of um of Germany as a country having difficulties in software engineering, but also it's an example of the the perfect is the enemy of the good. Like we've been trying to really make this perfect, and the result is that it's not there. Um it's taking up, but it's taking up speed painfully slowly. Um so yes, I do agree. Sort of the solutions are there, they just have to be enacted, but just enacting them is a is a harder nut to crack than it may sound.

Richard Sverrisson – Editor-in-Chief, Montel News 15:21

It's certainly much easier said than done. Leon, thank you very much for being a guest on the Plugged in podcast.

Dr Lion Hirth, Professor of Energy Policy, Hertie School 15:27

Thanks for having

PPAs And Merchant Risk After Saturation

Dr Lion Hirth, Professor of Energy Policy, Hertie School 15:28

me.

Richard Sverrisson – Editor-in-Chief, Montel News 15:28

So, if falling capture prices and market cannibalization are becoming bigger challenges for renewable generators, the next question is how developers and investors are adapting. Power purchase agreements and new merchant strategies are playing an increasingly important role in managing that risk. To explain how those markets are evolving, I spoke to Luca Padretti, Chief Product Officer and co-founder of Pecapuck. Welcome back to the pod, Luca. Richard, glad to be back. We're talking about um the saturation potentially of renewables in Europe. Um, how if I'd just like to start off by asking you, how significantly are our cannibalization and falling capture prices now affecting renewable project economics and PPA pricing?

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 16:17

Well, they're uh massively impacting them. I think uh a few years ago we had a a show together and we called it the calming energy wobbles. I think we're energy transition wobbles, and we're right into it. Um yeah, I think uh asset level renewable economics have been challenged due to cannibalization, curtailment, negative prices. Um that's where we are right now.

Richard Sverrisson – Editor-in-Chief, Montel News 16:42

I I heard uh I was in Sweden. We're talking here at the start of June. I was in Sweden at the end of May, and I said that no no new PPA deals were made in Sweden in the first half of uh of this year. Uh is that a surprise, Lucas?

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 16:56

No, it's no surprise. I think we we saw the market stagnating or um uh even reducing in volumes by 20% last year. But you know, it is an energy transition. So uh we're transitioning from one state to the other. I think we had 90 gigawatts of PPAs built uh or contracted over the last uh eight, seven years, and now we have the equal volumes uh even faster being built on FPAs, uh, which enable storage flexibility purchase agreement. The market is still very large on the PPA side, but it's shifting from long-term to short term. At some point, the system will be built. Yeah, uh, we're going into a renewable-dominated market, and they cannot absorb 15-20 gigawatt or more of new build every year.

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

And that that produces that wobble that we've talked about before, Luca. Are investors becoming more cautious about merchant exposure as volatility and negative pricing uh increase?

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 17:53

Well, it always has been uh top of the mind. Uh I think investors and developers or lenders, there is a premium paid for secured revenues, it just takes more work. I think also when we see on the minimal duration of PPAs, they have become shorter, but there is a minimum threshold, seven, eight years, which you need to contract. And as I said, it

Portfolio Strategies And Market Consolidation

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 18:17

takes more work. And one big trend which we see is that we shouldn't think of revenue certainty just on asset level. So you should see it on a portfolio level when you combine wind, solar, battery, or even other technologies, you can achieve stable returns, uh stable revenues.

Richard Sverrisson – Editor-in-Chief, Montel News 18:35

And and where is that happening? Where do you think that's that's the where the prospects are best for that kind of portfolio, Luca?

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 18:42

I think what we're definitely seeing is uh consolidation in the IPP asset management space. So you see ever bigger owners when there has been a theme over the last 10 years is is this uh scale. So big portfolios are now seven gigawatts, five gigawatts, and uh they're multi-technology, multi-country. So we're seeing it in all core markets: Italy, Spain, uh, Germany. The better the markets are integrated, like on the continental shelf, the easier it is to actually achieve those portfolio effects.

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

Where are you currently seeing the biggest bottlenecks uh for renewable deployment? So, you know, is it permitting? Is it grid access? Is it financing or just market uncertainty, Luca?

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 19:27

The whole thing altered. Oh, really? Yeah.

Richard Sverrisson – Editor-in-Chief, Montel News 19:29

How would you rank them? How would you rank them, Luca?

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 19:32

Yeah, it's a good point. I think right now, top of mind, definitely on an asset level, is uh can I secure demand, can I secure uh stable revenues and get financing and order returns right? I think cannibalization was much faster than expected, and it wasn't offset by falling costs on the technology side, which has been a big theme on the solar side for for 10 years. But there's also progress. I think we see positive policy and regulatory development in many markets on the permitting side. Things are improving, but also we need to acknowledge how much progress we've made. When we started 10 years ago, man, I mean, solar capture was above baseload. Yeah, at midday, I just remember this was peak pricing time, and now it's just the opposite. Renewable integration, we were laughing at five to six percent and discussing whether this is actually feasible to do. Now we have markets with 50% all over Europe, so huge progress. Yes, progress leads to problems, and now we solve them away with storage and co-location over the next one, two years. So I think challenges always will be there, but private market and actors will find solutions.

Richard Sverrisson – Editor-in-Chief, Montel News 20:43

Absolutely. So, in in terms of what are the kind of policy regulatory uh positive outcomes that you you you'd like to highlight there, Luca?

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 20:52

I think we see permitting reform all over. Uh, we're seeing structural discussion on how shall consumers um and producers be incentivized on the grid. Uh, I must also say these are battles. I think it's not easy to change those. You see discussions around locational pricing, but overall, I think across markets we see a huge effort to improve conditions, to create demand, improve credit side, everything. And it takes a while. I think it just it's nothing which you do quickly. And in the end, uh energy grids are the modern foundation of our societies. Um huge trillions of of euros invested, and change overall is slow, even if if you're very happy about those tens of gigawatts being built every year.

Richard Sverrisson – Editor-in-Chief, Montel News 21:49

Absolutely. Is there anything you know, if we're sticking with policy and regulatory, is there anything more you'd like to see uh on the EU side of things?

Policy Wishlist: Interconnection And Simplicity

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 21:58

Yeah, I think I think for me it's interconnection. So if I could just change one thing, it would be having massively more uh intra-grid and integrid connections. Like look, Spain to uh France, no real progress. Uh it would be so beneficial then uh just across the market, this is too slow and it has the biggest impact economically in integration um but also in insecurity um of everyone's supply. So I think this is where I would ask for the biggest change, and otherwise keep it simple, keep it as simple as possible. We have seen that private markets, if if if the conditions are stable and certain, they will find ways to finance and uh deploy capital.

Richard Sverrisson – Editor-in-Chief, Montel News 22:50

Keep it simple in an increasingly complex uh electricity system, the uh Luca.

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 22:57

Yes, it is uh more complex, but it always has been uh a very complex system. And yes, we're digitizing uh the whole system, we're thinking it more from the demand side, uh, but these are positive things. I think we still have huge uh sectors in the wider energy system where not much has happened. 20% 80% of the distribution rate are not yet utilized. Yeah, demand side is not yet really incentivized to act flexible. We still have huge legacy fleets of subsidy renewables which don't react to market signals. So there's so much to do. Uh, but complexity is an issue when we see CBAM, when we see it feels like every month there's a new book of regulations coming out. Maybe I'm now sounding a bit uh over the top, but it is a concern.

Richard Sverrisson – Editor-in-Chief, Montel News 23:50

I mean, we you see on the on the grid side as well, or on the balancing, on the balancing and intraday, um, you know, uh certainly increased complexity on the and then moving down to the granularity, 15 minutes is certainly adding to that as well, however necessary that was. Uh Luca, if we talk to the developers, how are they um adapting their strategies in response to curtailment risk and changing uh market dynamics?

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 24:18

I think on the developer side, I would say what is very interesting is like how is asset design changing? Like you need to think about how your asset fits with the grids and can you ramp it up? Can you ramp it down? Does it fulfill all the data aspects? Whereas on the owner side, it is more about do I get all the data? Do I have the team and tools in place to actually day-to-day manage it? Because so much more value and risk is now in the actual operation of the assets.

Richard Sverrisson – Editor-in-Chief, Montel News 24:50

No, absolutely. So looking ahead, Luca, what what practical changes would most improve investment confidence and allow renewables in Europe to continue at scale?

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 25:03

I think it's uh those policy uh interventions which we discussed. So you see it in Spain or in Italy, it takes a while, but when you have systems in place like Moxie that are properly designed, you see capital flocking in. The other element was uh interconnection, uh this and electrification on my side, I would add, because it adds structural demand. Um, this is a bit what I see on my wish list.

Richard Sverrisson – Editor-in-Chief, Montel News 25:31

But you don't think there's there's not a case to sort of redraw the whole market design that we currently have? I mean, we continue along making little tweaks or I I I think so.

Luca Pedretti, Chief Product Officer & Co-Founder, Pexapark 25:40

That's the most realistic. It's incremental change, uh, reform by reform. Um to be seen whether it works. I think for me, probably one of the most important questions which I will be personally looking out for is what type of gas are we building? Like, will it be baseload CCGTs or are we building flexible gas peakers that are designed to also work with capacity markets?

Richard Sverrisson – Editor-in-Chief, Montel News 26:06

And the urgency is only going to increase, I think, as uh as we can sort of. Thank you very much for being a guest on the Pluggedin' Podcast, Luca. Always a pleasure. Thank you,

Electrification: Tackling Heat And Transport

Richard Sverrisson – Editor-in-Chief, Montel News 26:15

Richard. So, while the market is finding new ways to finance renewable projects, the bigger question is whether Europe's energy system is evolving quickly enough to support the next phase of the transition. Is the challenge really renewable saturation? Or is it that electrification, flexibility, and demand simply aren't keeping pace? To explore that bigger picture, I spoke to Jan Rosenau, Energy Programme Leader and Professor of Energy and Climate Policy. A warm welcome to Plugged in, uh Jan. Thanks for having me. Let's get now into a little bit of the nitty-gritty, Jan. Um, do you think we've reached renewable saturation? Or are today's challenges, you know, congestion, contament, negative prices. Is that are they evidence that the rest of the energy system is failing to keep up the the pace with renewables growth?

Jan Rosenow, Energy Programme Leader and Professor of Energy and Climate Policy, University of Oxford 27:07

I I think so. And uh yeah, there's there's sort of I would say there's at least three elements here. One is um flexible demands have flexibility, so really low cost or negative cost indicate that you know there is an opportunity to store really cheap electricity and then dispatch it later on through storage. Um, yeah, or using thermal batteries in industry and storing electricity in the form of heat and then using it later on um for process heated industry. Uh, and that is now slowly, or maybe a bit faster now than a few years back, starting to get deployed. But that's one of the opportunities, I think, to take advantage of low-cost electricity. And once you do that, you will see less periods where you have really low prices because there is um yeah, an opportunity to absorb that electricity. I think the second element is demand side response. You know, we still have um a huge potential that we haven't leveraged on the demand side, and that includes households and businesses, to respond to price signals, shift their load away from peak hours when it's expensive to you know hours when you have an abundance of clean energy supply. Um, so that's the second element, and there's still huge potential to do that. Um, some countries have been doing rather well on that front, others not so well. Uh so that's the second element. Uh, and then I think the third is grids. Um, I mean, often this is also an imbalance in in the European or in the in the regional grids where you might have um you know lots of renewables in one part um and you have high demand in another, but they're not connected, uh, and you can't get that cheap electricity to where it's needed. So that there's there's that's a third element behind maybe better in building assets where they're needed, um, where they make sense from a system perspective, and also be able to shift electricity around Europe, and that means more interconnection, that means a bigger grid, a better interconnected grid.

Richard Sverrisson – Editor-in-Chief, Montel News 28:59

So absolutely. I mean, uh you you mentioned flexibility, demand side response. You know, there's been a lot of focus on supply. Should policy make us be focusing on those areas in more than that than they're currently doing?

Jan Rosenow, Energy Programme Leader and Professor of Energy and Climate Policy, University of Oxford 29:12

I mean, I've always worked on the demand side. Yeah, my entire career was uh devoted to working on energy demand, and and only now it's become uh the center of attention because yeah, electricity is now largely decarbonized. I mean, there's still work to be done, but it's now about the demand side, and we it's all about shifting the demand side from basically from burning and combusting fossil fuels to using electricity. I mean, to put it crudely, and that's a demand side transition. Policy is not yet on top of that. You know, we're still in a deb in a debate where most people think um electricity is energy and and and and they forget about the other almost 80% of our energy use, which is not electricity, it's primarily fossil fuels burned for heat and for mobility. Uh, and only now we're waking up to the fact that this is going to be the huge challenge of the next phase of the transition, is to tackle that. And that's a demand side transition fundamentally, not a supply side transition. Of course, the supply side will have to evolve with it, um, but we now know how to do that. Absolutely.

Richard Sverrisson – Editor-in-Chief, Montel News 30:11

And what about the incentives for demand side for customers, either be they industrial users or retail households? Are there incentives in place for them to switch or to adjust their their use of electricity?

Jan Rosenow, Energy Programme Leader and Professor of Energy and Climate Policy, University of Oxford 30:24

Not sufficiently. I mean, there are good examples and very bad examples across Europe. Um, I mean, that is from um ranging from sort of taxation of electricity, you know, if you overtax electricity and undertax fossil fuels, um, you artificially inflate the price gap between electricity and gas prices, for example, which disincentivizes electrification, or uh an absence of um your time of use um uh price signals, so where you incentivize consumption of electricity during periods when electricity is abundant and cheap, and you disincentivize its use uh when it's very expensive and the grid is congested. We still don't have a lot of that across Europe. I mean, picking up speed, but it's not not enough yet. Um and also location. I mean, locational pricing is something that is quite far advanced in the US, but in Europe we're pretty behind, um uh pretty much behind when it comes to locational pricing. So better price signals, we need them. Uh if we don't have them, uh it's got to cost us more. It's as simple as that, because you know, we will make uh the wrong decisions incentivized by the wrong price signals, which then lead to higher system costs that we all have to pay for.

Richard Sverrisson – Editor-in-Chief, Montel News 31:35

Well, Germany in the UK, you're you're German living in the UK, so they both decided against sort of zonal, zonal prices, haven't they? So it's still a lot to catch up, especially with the US on that front.

EVs Efficiency And The Five-Year Test

Richard Sverrisson – Editor-in-Chief, Montel News 31:45

But how you know how important are technologies such as electric vehicles, heat pumps, and you know, industrial electrification in absorbing those growing volues of green power?

Jan Rosenow, Energy Programme Leader and Professor of Energy and Climate Policy, University of Oxford 31:57

I think hugely important and very flexible. That's the advantage, especially electric vehicles, um, are of course incredibly flexible and a great resource to balance um a more variable supply side. Um and even in in you know home heating and industry, there is ample opportunity for flexibility. Uh, you know, we we know now, now know from companies that run flexibility programs with heat pumps that it does work, and people are willing to offer flexibility within certain constraints, right? I mean, you don't want your home to be freezingly cold or super hot because it's been preheated, but within certain certain boundaries, people are very willing to give away maybe some um controllability and and offer flexibility if they see a significant saving. And the same goes for industry. Yeah, industry can be much more flexible if we encourage it to be more flexible. Um, it doesn't have to be 24-7 static demand at all. It can be much more flexible than people think.

Richard Sverrisson – Editor-in-Chief, Montel News 32:55

Yeah, absolutely. And I think with electric vehicles, um, you know, we're we're I'm interviewing at the Euroctric conference, but um, and it was in the you made very clearly what's very interesting, had some excellent slides about the uptake of electric vehicles across Europe. I mean, my the town where I live or the country I live in, uh it has been very has up, you know, has increased the use of electric electric vehicles rapidly. I I drive one. Um, but you know, the the if you have hundred thousand of electric vehicles um uh at you know you're taking what between five and seven kilowatts uh uh seven euro cents a kilowatt hour, um that's a huge uh amount of of electricity that you have that you can you can adjust.

Jan Rosenow, Energy Programme Leader and Professor of Energy and Climate Policy, University of Oxford 33:37

Exactly. And and that's a point uh you can adjust. I think that's the important um uh part of the sentence there that you just said. Um because I think it's often then assumed, oh, everybody plugs in and charges at the same time. Um, but that's an unrealistic scenario because most people don't charge every single day. Uh yeah, they might be charging the car once a week and that's enough for their commute. Um some people will go on a longer trip and do a resour rapid charger. Um, yeah, there are lots of different charging patterns, and diversity is actually good. It's helpful. Uh and and for those who have home charging, I mean, you can very easily, and it's already happening, have a cheap tariff that encourages nighttime charging when demand is low and electricity is cheap, um, and thereby shift uh load away from peak hours and and actually even have vehicle to grid now where uh yeah, we see still a very small share of the market, but we start seeing that coming in where um yeah, EV owners can benefit from actually you know trickling electricity back into the grid uh and then earning some revenues from that. So um I think EVs are probably the easier part of electrification because they are really quite flexible and have the this this ability to store electricity. Absolutely. Once you get heavy transport on board as well, then that's going to be a situation. 100%. And we see it with buses now and and depot charging, um, and yeah, and and light um uh so trucks. And I think heavy heavy duty is is is is is now also happening. Uh again, uh maybe five to ten years ago that wasn't quite so clear. There was a lot of debate will that ball be hydrogen or biofuels? But I think there's now very clear that even heavy duty is probably gonna be mainly fully electric.

Richard Sverrisson – Editor-in-Chief, Montel News 35:19

And how about energy efficiency? Is that getting forgotten here? Um, I mean, uh are there sort of gains to be made in promoting um that side of things?

Jan Rosenow, Energy Programme Leader and Professor of Energy and Climate Policy, University of Oxford 35:28

Yeah. I mean, I I I would say yes, it's often forgotten, um, and it's always a Cinderella of the transition. Uh here, never never been taken seriously enough, in my view. Uh, and electrification is efficiency. I mean, when you look at electrified processes, they are vastly more efficient than combustion processes. Um, and uh that is feeding directly into energy demand. So we'd be sort of modeled what this would mean in a hypothetical scenario of you know very high electrification using existing technologies and using um clean electricity. Overall, we're seeing about a 50% reduction in primary energy use just by electrifying and by switching from fossil fuels uh to renewables. Uh, and that's a massive saving without even thinking about maybe we can incentivize people to drive their car less and you know move to electric to uh public transport uh or insulate their homes or incentivize process optimization in industry. So if we also add some of these other things on, we can more than half our energy demand by being smart about it. But uh it's not yet uh reached, I think. Uh yeah, we're still discussing whether we should get more oil and gas out of the North Sea rather rather than thinking about the opportunity for reducing energy demand in the first place, um, which I think is a missed opportunity. Absolutely.

Richard Sverrisson – Editor-in-Chief, Montel News 36:45

We need the smart thinking here, and that's where you come in, Jan. That's very important. So if we were recording this uh five years from now, Jan, and uh what would success look like?

Jan Rosenow, Energy Programme Leader and Professor of Energy and Climate Policy, University of Oxford 36:56

Five years from now, I I would like to see um Europe having built a lot more storage. Um uh uh first of all, battery storage, of course, um grid connected, but also thinking much more about long-durational storage. Um, seeing, of course, continuous build-out of renewables. That's a sort of a given, I think. Much better grid management uh and and finding ways of also optimizing the grid that we already have rather than just focusing on building new transmission lines uh and upgrading the distribution system, but also optimizing what we have and using it better. And then electrification rate has to go up. You know, we can't stay at 23% of what it is is currently. You know, that has to go up um and has to go up quite quite quite fast. If we if you want to get on track to where we need to be uh and phasing phasing out fossil fuels and imports, um we we gotta go much faster on electrification. So in five years' time, I would love us to see um uh being much more electrified and have a much cleaner and power system to back up that electrified economy. Fantastic.

Richard Sverrisson – Editor-in-Chief, Montel News 37:59

Thank you very much, Jan, for being a guest on the Plugged In summer series. Thanks for having me.

Closing Thanks And Listener Actions

Richard Sverrisson – Editor-in-Chief, Montel News 38:04

And to you listeners, thanks for listening to this episode of Plugged In. If you enjoyed this discussion, please like, rate, and follow to make sure you get the latest podcast episodes as soon as we release them every Thursday. Finally, you can head to Montanews.com for more news and analysis from our team of journalists across Europe and beyond. See you next time.