This is Dana Perkins and you're listening to Switched on the BNAF podcast. As you know if you have listened to this show before. We speak with BNAF analysts about their research, and we really hear about those themes that cut across so many of the sectors that we cover. One of those themes is supply chains. While we have discussed that affair a few times, and then there are transmission grids, this critical part of infrastructure that enables the rollout of renewables. Whether it was our episode about India with our analyst row Hit, or the interview with Jiggershaw from the US government, or this previous week's episode on URKAT, it's clear that the grid is increasingly in focus. And then there are supply chains again, and today we get into the equipment required to build grid infrastructure and quite literally connect power generation to the companies and people that need those electrons. On today's show, I speak with benf's head of Clean Power, Meredith Annex, and the head of Grids and Utilities at BEENEF, Sunjeet Sangera. Together we just discuss the transmission grid, what it is, what purpose it serves, and why it's so important. We also discuss which countries are successful in implementing policy reforms that encourage grid rollout and which are not. And finally, we get to the components and materials required for upgrading the grid and how some countries are securing their supply chain. If you like this podcast, make sure to subscribe to receive updates on future episodes, and consider giving us a review on Apple Podcasts or Spotify to make us more discoverable by others. But right now, let's jump into our conversation with Meredith and sen Jeet about transmission grids. Hey, Meredith, thank you for joining us today.

This is Dana Perkins and you're listening to Switched on the BNAF podcast. As you know if you have listened to this show before. We speak with BNAF analysts about their research, and we really hear about those themes that cut across so many of the sectors that we cover. One of those themes is supply chains. While we have discussed that affair a few times, and then there are transmission grids, this critical part of infrastructure that enables the rollout of renewables. Whether it was our episode about India with our analyst row Hit, or the interview with Jiggershaw from the US government, or this previous week's episode on URKAT, it's clear that the grid is increasingly in focus. And then there are supply chains again, and today we get into the equipment required to build grid infrastructure and quite literally connect power generation to the companies and people that need those electrons. On today's show, I speak with benf's head of Clean Power, Meredith Annex, and the head of Grids and Utilities at BEENEF, Sunjeet Sangera. Together we just discuss the transmission grid, what it is, what purpose it serves, and why it's so important. We also discuss which countries are successful in implementing policy reforms that encourage grid rollout and which are not. And finally, we get to the components and materials required for upgrading the grid and how some countries are securing their supply chain. If you like this podcast, make sure to subscribe to receive updates on future episodes, and consider giving us a review on Apple Podcasts or Spotify to make us more discoverable by others. But right now, let's jump into our conversation with Meredith and sen Jeet about transmission grids. Hey, Meredith, thank you for joining us today.

Hi Dana, thanks for having us.

Hi Dana, thanks for having us.

And Senji thank you for coming back.

And Senji thank you for coming back.

Hey Dana, how's it going.

Hey Dana, how's it going.

Well, it's going pretty well because we are about to have a conversation around grids, some very critical infrastructure. And let's start with just jumping right in on what are the problems and really transmission bottlenecks that we are seeing and you know, really, I guess why are we here to discuss this and why is it so critical?

Well, it's going pretty well because we are about to have a conversation around grids, some very critical infrastructure. And let's start with just jumping right in on what are the problems and really transmission bottlenecks that we are seeing and you know, really, I guess why are we here to discuss this and why is it so critical?

Look, I think grids is coming up more and more and more, not just within our research, but also within our client interactions here at BNF that's why we now have a full dedicated team to the topic within clean power, and what we're seeing is a change in the way that grids are being used. The grids that were built that we know and see today, those were built for the industrial revolution. What we're talking about now is a massive amount of electrification all being met by renewable power. It's a complete change in the system, and that means that we're going to have to effectively double the size of the global ectricity grid by twenty fifty and we're also going to have to change the way that it operates. It's going to have to become smart, flexible, responsive, and enable the renewable power to move around. Right now, we're kind of at the point where the grid of today is at its breaking point of what it can handle. That's starting to affect the development timelines for wind and solar. It's starting to affect the cost of new generation regardless of what the source is, and it's also affecting things like delivery of electrons to customers and the actual impact on people, especially when you look at natural disasters impacts on the.

Look, I think grids is coming up more and more and more, not just within our research, but also within our client interactions here at BNF that's why we now have a full dedicated team to the topic within clean power, and what we're seeing is a change in the way that grids are being used. The grids that were built that we know and see today, those were built for the industrial revolution. What we're talking about now is a massive amount of electrification all being met by renewable power. It's a complete change in the system, and that means that we're going to have to effectively double the size of the global ectricity grid by twenty fifty and we're also going to have to change the way that it operates. It's going to have to become smart, flexible, responsive, and enable the renewable power to move around. Right now, we're kind of at the point where the grid of today is at its breaking point of what it can handle. That's starting to affect the development timelines for wind and solar. It's starting to affect the cost of new generation regardless of what the source is, and it's also affecting things like delivery of electrons to customers and the actual impact on people, especially when you look at natural disasters impacts on the.

Grid, and actually when we think about the fact that grids for us is living within clean power. It says a lot about how critical it is to the rollout of the industries that live within that space, and argument can be made that maybe grids could also live within the advanced transportation side and what it is that we need to do in terms of rollout of charging infrastructure. So I guess make your best pitch right now as to why it firmly lives within clean power and why the two of you were on the show together as opposed to Senjeet with Colin.

Grid, and actually when we think about the fact that grids for us is living within clean power. It says a lot about how critical it is to the rollout of the industries that live within that space, and argument can be made that maybe grids could also live within the advanced transportation side and what it is that we need to do in terms of rollout of charging infrastructure. So I guess make your best pitch right now as to why it firmly lives within clean power and why the two of you were on the show together as opposed to Senjeet with Colin.

Look, you're absolutely right, but it's more than just ev charging. I think that's the thing that we're seeing taking off right now. But what's going to happen on distribution networks and well, we'll come to definitions of distribution transmission in a moment. It's not just electric vehicle charging. It's also heat pumps, it's other electric technologies, it's air conditioning, it's all of these new electricity demands that are coming into the system. And at the same time as that, you're changing the entire way that electricity is being generated because we're moving to more decentralized systems, more renewable electricity like solar and storage that's being connected at the household or at the end consumer, And because of that overarching impact, it really is a system's question, and it's really affecting the way that the supply side is being delivered as well well.

Look, you're absolutely right, but it's more than just ev charging. I think that's the thing that we're seeing taking off right now. But what's going to happen on distribution networks and well, we'll come to definitions of distribution transmission in a moment. It's not just electric vehicle charging. It's also heat pumps, it's other electric technologies, it's air conditioning, it's all of these new electricity demands that are coming into the system. And at the same time as that, you're changing the entire way that electricity is being generated because we're moving to more decentralized systems, more renewable electricity like solar and storage that's being connected at the household or at the end consumer, And because of that overarching impact, it really is a system's question, and it's really affecting the way that the supply side is being delivered as well well.

So then let's get into that definition that we're going to come to. Senji, Maybe you could tell us a little bit about what are we going to talk about today When we say transmission grid, what does that mean? And paint a picture in my mind.

So then let's get into that definition that we're going to come to. Senji, Maybe you could tell us a little bit about what are we going to talk about today When we say transmission grid, what does that mean? And paint a picture in my mind.

Yeah, the word grid can be kind of ambiguous, so I think it's good to get the definitions upfront. So when we talk about the grid, what we're talking about is the piece of infrastructure that's going to move power from where it's being produced to where it's ultimately consumed. We tend to segment this into two major categories. One is transmission and one is distribution. So transmission you can think of the highways that connect cities together, and distribution you can think of the roads that connect from a highway back to a person's home. So these are two kind of segments that run together. Now, the real distinction is in voltage. So voltage is a characteristic of these power lines, and the distinction can be different for each markets. But it's meaningful because the companies in this space have aligned themselves with these definitions. So you tend to have companies that are transmission utilities, you have companies that are distribution utilities, and you have some that are both T and D, so they run both sides of the network in terms of what you're actually seeing when you're driving in a car on the side of the road. So yes, these are the wires and the poles, the pylons that are stringing together to move energy. The second major component that we typically see is transformers and circuit breakers. So transformers are not aliens, robots from another planet, So these are specialized devices that allow you to change that voltage up or down, which you need to be able to move power long distances. And circuit breakers are just switches and these when power lines come together at a certain point, you need to build a station. We call these substations, and these end up being the nodes for the power system.

Yeah, the word grid can be kind of ambiguous, so I think it's good to get the definitions upfront. So when we talk about the grid, what we're talking about is the piece of infrastructure that's going to move power from where it's being produced to where it's ultimately consumed. We tend to segment this into two major categories. One is transmission and one is distribution. So transmission you can think of the highways that connect cities together, and distribution you can think of the roads that connect from a highway back to a person's home. So these are two kind of segments that run together. Now, the real distinction is in voltage. So voltage is a characteristic of these power lines, and the distinction can be different for each markets. But it's meaningful because the companies in this space have aligned themselves with these definitions. So you tend to have companies that are transmission utilities, you have companies that are distribution utilities, and you have some that are both T and D, so they run both sides of the network in terms of what you're actually seeing when you're driving in a car on the side of the road. So yes, these are the wires and the poles, the pylons that are stringing together to move energy. The second major component that we typically see is transformers and circuit breakers. So transformers are not aliens, robots from another planet, So these are specialized devices that allow you to change that voltage up or down, which you need to be able to move power long distances. And circuit breakers are just switches and these when power lines come together at a certain point, you need to build a station. We call these substations, and these end up being the nodes for the power system.

We're going to rely pretty heavily on our conversation today on thinking about different case studies, and before we get into those case studies, though again on the definition end of things. When we're talking about the transmission grid, and bottlenecks. Are we talking about a grid that largely needs to be retrofitted that's existing or is a lot of the activity and is a lot of the friction really in creating new infrastructure and assets on the energy generation side and then connecting that to the rest of the system that we all interact with.

We're going to rely pretty heavily on our conversation today on thinking about different case studies, and before we get into those case studies, though again on the definition end of things. When we're talking about the transmission grid, and bottlenecks. Are we talking about a grid that largely needs to be retrofitted that's existing or is a lot of the activity and is a lot of the friction really in creating new infrastructure and assets on the energy generation side and then connecting that to the rest of the system that we all interact with.

So we need to do a bit of both. We need to retrofit the existing grid because it's not really fit for purpose, and we also need to expand the grid that we have today, right, and so let me talk a bit about this expansion. So we've expanded the grid over history number of times. There's usually these cycles of build out that are very regionally confined. Now what we're seeing unfold is a global need to expand the grid to meet net zero targets. So the grid today, if you add up all the kilometers in the world both transmission and distribution, is about seventy two million kilometers, and when we do our modeling for net zero, we find that it needs to grow to about one hundred and fifty two million kilometers. One hundred and fifty two million kilometers happens to be the distance from the Earth to the Sun. Wow, right, which is I think a bit poetic given that solar has to play a critical role in the transition. But if we put this into mathematical terms, so that's a two point seven percent compound annual growth rate on the grid, and when we look back in time, the grid has really only been expanding. So if we look at like say the US transmission grid, historically, it's been growing at a rate of about one percent, and so you can see the kind of the step up that we need to do to get to two point seven percent. We do need to modernize the grid as well, and there's a numberumber of technologies it will inevitably have to pursue, just because building a grid that large is going to come with some challenges when it comes to permitting and dealing with stakeholder issues and the environmental impacts. So every bit of infrastructure that's there today will have to be reevaluated. We're looking at digitalizing the grid, so this is stuff like dynamic line ratings, where you have capacity on a transmission line that is being calculated our hour as opposed to just two numbers that we've conservatively picked. And looking forward, like looking further out, we're looking at a number of powerflow control devices as well that allow you to throttle the amount of energy that's moving through given transmission and distribution links as well.

So we need to do a bit of both. We need to retrofit the existing grid because it's not really fit for purpose, and we also need to expand the grid that we have today, right, and so let me talk a bit about this expansion. So we've expanded the grid over history number of times. There's usually these cycles of build out that are very regionally confined. Now what we're seeing unfold is a global need to expand the grid to meet net zero targets. So the grid today, if you add up all the kilometers in the world both transmission and distribution, is about seventy two million kilometers, and when we do our modeling for net zero, we find that it needs to grow to about one hundred and fifty two million kilometers. One hundred and fifty two million kilometers happens to be the distance from the Earth to the Sun. Wow, right, which is I think a bit poetic given that solar has to play a critical role in the transition. But if we put this into mathematical terms, so that's a two point seven percent compound annual growth rate on the grid, and when we look back in time, the grid has really only been expanding. So if we look at like say the US transmission grid, historically, it's been growing at a rate of about one percent, and so you can see the kind of the step up that we need to do to get to two point seven percent. We do need to modernize the grid as well, and there's a numberumber of technologies it will inevitably have to pursue, just because building a grid that large is going to come with some challenges when it comes to permitting and dealing with stakeholder issues and the environmental impacts. So every bit of infrastructure that's there today will have to be reevaluated. We're looking at digitalizing the grid, so this is stuff like dynamic line ratings, where you have capacity on a transmission line that is being calculated our hour as opposed to just two numbers that we've conservatively picked. And looking forward, like looking further out, we're looking at a number of powerflow control devices as well that allow you to throttle the amount of energy that's moving through given transmission and distribution links as well.

Now, when we're thinking about the new infrastructure and this kind of rapid rollout of clean energy that is actually coming online, certainly after you've built the project, you need to connect it. Hence why we're here talking about grids, and I'm aware that there's a waiting time, So what is the average waiting time for this sort of connection.

Now, when we're thinking about the new infrastructure and this kind of rapid rollout of clean energy that is actually coming online, certainly after you've built the project, you need to connect it. Hence why we're here talking about grids, and I'm aware that there's a waiting time, So what is the average waiting time for this sort of connection.

What we're finding is that we have giga now not you know, a small number of literal gigawatts of solar and wind projects waiting to connect just within Europe and the US. But as Sanji said, this is a global problem. If we looked in Japan and Australia, you would see similar stories coming about. If we stick with Europe for second, since that's where we're recording, what our analysis finds is that in five markets the UK, Italy, Spain and Germany as well as France, there's a total of about six hundred gigawatts waiting for an interconnection at the moment for the grid. That's about twice as much installed capacity for win in solar as we have today and eighty percent of the twenty thirty targets for the European Union, So that just shows you the scale of what's currently waiting to connect now. The waiting times are also growing right so we're talking about anywhere from three to eight years usually just for the grid interconnection. That's not even including things like environmental and construction permits. When you get to that point, the development timelines now can be so long that it's putting twenty thirty targets at rest.

What we're finding is that we have giga now not you know, a small number of literal gigawatts of solar and wind projects waiting to connect just within Europe and the US. But as Sanji said, this is a global problem. If we looked in Japan and Australia, you would see similar stories coming about. If we stick with Europe for second, since that's where we're recording, what our analysis finds is that in five markets the UK, Italy, Spain and Germany as well as France, there's a total of about six hundred gigawatts waiting for an interconnection at the moment for the grid. That's about twice as much installed capacity for win in solar as we have today and eighty percent of the twenty thirty targets for the European Union, So that just shows you the scale of what's currently waiting to connect now. The waiting times are also growing right so we're talking about anywhere from three to eight years usually just for the grid interconnection. That's not even including things like environmental and construction permits. When you get to that point, the development timelines now can be so long that it's putting twenty thirty targets at rest.

So in which countries or general parts of the world if you prefer? But where are we finding these wait times to be the longest? And I guess the situation to be most dire So.

So in which countries or general parts of the world if you prefer? But where are we finding these wait times to be the longest? And I guess the situation to be most dire So.

In terms of wait times, parts of Europe are looking pretty hard right now. I think the UK is one of the worst markets that we've looked at in depth. The Nordics have antcdotally also heard are extremely long waiting times. But it's not just about the length of time that it takes to get the permit. It's also the cost of the great interconnection when that happens. And what we've seen is some recent data in the United States that came out earlier this year from the Lawrence Berkeley lapse, which is showing us that the costs are doubling now for interconnection for wind and solar in MISO, which is the Midwestern ISO independent system operator in the US, as well as PJM, So you're really talking about like Minnesota, Illinois, Pennsylvania, those types of states within the United States. What we're finding now is that the cost of these systems has gone up to the point that you're seeing them erase the benefits of the Inflation Reduction Act production tax credits. They're about equal in size the cost of a high grade connection and the benefit that you get from the new US tax credits. Now, median costs are still pretty low. The issue is that you have a lot of geographic clustering when it comes especially to wind, so you're finding wind industry being hit particularly hard by this new grade interconnection. Applications from wind are dropping in these markets because developers are having a harder time getting an economic connection, and then the risk to developers is also high. Another market where that's the case is in the UK. In the UK, if your project is going to connect and trigger an upgrade to the transmission system, you and any other project in that connection. Who's causing that upgrade need to share the cost of the upgrade. So if there's ten of you and the cost is say one hundred thousand, but one of those projects drops out all of a sudden, your individual project just got hit by a higher bill. So this is adding In markets where develop sloppers pay for the cost of interconnection, you're seeing a greater risk on development and the greater risk on the upfront cost of a project as well.

In terms of wait times, parts of Europe are looking pretty hard right now. I think the UK is one of the worst markets that we've looked at in depth. The Nordics have antcdotally also heard are extremely long waiting times. But it's not just about the length of time that it takes to get the permit. It's also the cost of the great interconnection when that happens. And what we've seen is some recent data in the United States that came out earlier this year from the Lawrence Berkeley lapse, which is showing us that the costs are doubling now for interconnection for wind and solar in MISO, which is the Midwestern ISO independent system operator in the US, as well as PJM, So you're really talking about like Minnesota, Illinois, Pennsylvania, those types of states within the United States. What we're finding now is that the cost of these systems has gone up to the point that you're seeing them erase the benefits of the Inflation Reduction Act production tax credits. They're about equal in size the cost of a high grade connection and the benefit that you get from the new US tax credits. Now, median costs are still pretty low. The issue is that you have a lot of geographic clustering when it comes especially to wind, so you're finding wind industry being hit particularly hard by this new grade interconnection. Applications from wind are dropping in these markets because developers are having a harder time getting an economic connection, and then the risk to developers is also high. Another market where that's the case is in the UK. In the UK, if your project is going to connect and trigger an upgrade to the transmission system, you and any other project in that connection. Who's causing that upgrade need to share the cost of the upgrade. So if there's ten of you and the cost is say one hundred thousand, but one of those projects drops out all of a sudden, your individual project just got hit by a higher bill. So this is adding In markets where develop sloppers pay for the cost of interconnection, you're seeing a greater risk on development and the greater risk on the upfront cost of a project as well.

So that risk is being borne by the developers, even if they've secured a really good price at auction, there's a lot of variables that they may not necessarily be able to see the future for correct.

So that risk is being borne by the developers, even if they've secured a really good price at auction, there's a lot of variables that they may not necessarily be able to see the future for correct.

In markets like the UK and the US, Yes, that's the case.

In markets like the UK and the US, Yes, that's the case.

Are the cost of grade connection, which it seems like we are not able to get around. Is it discouraging companies and developers from wanting to go into some of these markets?

Are the cost of grade connection, which it seems like we are not able to get around. Is it discouraging companies and developers from wanting to go into some of these markets?

Not always. What we're finding is that the threshold costs for a great connection in the Midwest ISO in the US is actually gone up before you'd see a project cancel. It used to be that in myso if a win project was hit by one hundred dollars per kilowatt grade connection fee. That would usually be the point where the project was deemed uneconomical by the developer. But now, according to the Lawrence Berkeley Lab data that we've been reviewing, that numbers nearly two hundred and fifty dollars per kilowatt, So you're fine finding basically the cost appetitive developers is going up because they need to bear it in order to build their projects. And oftentimes there's still an economic case because of policy programs that are encouraging additional renewables build, because of higher demand for power purchase agreements, because of higher wholesale power prices in Europe from the commodity crisis. All of these factors are still helping developers build this. But that's not to say that it's not causing a strain, right, it's a more expensive transition than you would have had otherwise.

Not always. What we're finding is that the threshold costs for a great connection in the Midwest ISO in the US is actually gone up before you'd see a project cancel. It used to be that in myso if a win project was hit by one hundred dollars per kilowatt grade connection fee. That would usually be the point where the project was deemed uneconomical by the developer. But now, according to the Lawrence Berkeley Lab data that we've been reviewing, that numbers nearly two hundred and fifty dollars per kilowatt, So you're fine finding basically the cost appetitive developers is going up because they need to bear it in order to build their projects. And oftentimes there's still an economic case because of policy programs that are encouraging additional renewables build, because of higher demand for power purchase agreements, because of higher wholesale power prices in Europe from the commodity crisis. All of these factors are still helping developers build this. But that's not to say that it's not causing a strain, right, it's a more expensive transition than you would have had otherwise.

Let's talk about a case study that might be deemed a turnaround story or something mildly positive in this space. So Spain had a dysfunctional system, one might say that has actually turned out to be a bit of a success story when it comes to grids. Can we go into some detail on what has happened and what is now currently happening when it comes to Spain, and not only their clean energy roll out, but their transmission grid.

Let's talk about a case study that might be deemed a turnaround story or something mildly positive in this space. So Spain had a dysfunctional system, one might say that has actually turned out to be a bit of a success story when it comes to grids. Can we go into some detail on what has happened and what is now currently happening when it comes to Spain, and not only their clean energy roll out, but their transmission grid.

I think Spain's a good case study because it shows this really comeback kid type of story. So Spain has an interconnection queue. It's about one hundred and forty four gigawatts, so those are projects with permission to connect as of March twenty twenty three. For contexts, Spain has a ninety three gigawatt solar and wind target for twenty thirty And Spain also has a few characteristics that are probably relevant to note. So developers can request a grid connection before they secure site planning permission. So what that means is the barrier to get nominated in the queue is kind of low, so you end up with a lot of these speculative projects that may not all get built sitting in the interconnection queue. And so that's been a problem for Spain historically, and so they did a number of things to try and address these issues. And the net result of this is that they've actually been able to keep the interconnection queue at this one hundred and forty four gigawatts for the last several years by implementing these measures. So one thing that they did is they started removing stalled projects from the queue, and so if the projects weren't progressing fast enough, they were removed. They started easing the environmental process, so that was allowing projects to move more quickly. But the most interesting thing that they actually did was they implemented this tender process to award grid capacity. It's kicked off in twenty twenty one, but the idea basically is to flip the whole interconnection process on its head, and so instead of developers applying for network capacity, operators are actually offering connection capacity in specific regions, and the developers are bidding in these competitive processes, and so the operator gets to choose what the criteria is for who gets to win. And this allows them to be much more proactive in creating grid capacity, where the old model you had to be very reactive. You'd wait for all the connection requests to come in and say, oh, okay, it looks like I need to upgrade this part of the system. Which point you already have all this demand and it's a little bit too late. So I think these solutions are not really a panacea. We can't apply them broadly across the world. That's part of what interconnection processes have been challenging. But being open to innovating and looking at different ways to do things is going to be critical moving forward.

I think Spain's a good case study because it shows this really comeback kid type of story. So Spain has an interconnection queue. It's about one hundred and forty four gigawatts, so those are projects with permission to connect as of March twenty twenty three. For contexts, Spain has a ninety three gigawatt solar and wind target for twenty thirty And Spain also has a few characteristics that are probably relevant to note. So developers can request a grid connection before they secure site planning permission. So what that means is the barrier to get nominated in the queue is kind of low, so you end up with a lot of these speculative projects that may not all get built sitting in the interconnection queue. And so that's been a problem for Spain historically, and so they did a number of things to try and address these issues. And the net result of this is that they've actually been able to keep the interconnection queue at this one hundred and forty four gigawatts for the last several years by implementing these measures. So one thing that they did is they started removing stalled projects from the queue, and so if the projects weren't progressing fast enough, they were removed. They started easing the environmental process, so that was allowing projects to move more quickly. But the most interesting thing that they actually did was they implemented this tender process to award grid capacity. It's kicked off in twenty twenty one, but the idea basically is to flip the whole interconnection process on its head, and so instead of developers applying for network capacity, operators are actually offering connection capacity in specific regions, and the developers are bidding in these competitive processes, and so the operator gets to choose what the criteria is for who gets to win. And this allows them to be much more proactive in creating grid capacity, where the old model you had to be very reactive. You'd wait for all the connection requests to come in and say, oh, okay, it looks like I need to upgrade this part of the system. Which point you already have all this demand and it's a little bit too late. So I think these solutions are not really a panacea. We can't apply them broadly across the world. That's part of what interconnection processes have been challenging. But being open to innovating and looking at different ways to do things is going to be critical moving forward.

There's definitely something to be learned about taking something that has long wait times and lots of administrative burden and figuring out ways to streamline it. And there's one area that you brought up, so streamlining the environmental permitting process that I think can sometimes raise flags for people in this industry because invariably these processes exist for a good reason to protect certain parts of well the environment that we live in. That oftentimes some of the reason why people are building out clean energy infrastructure to begin with, when we come down to the basic fundamental premise that a drive to net zero is what is driving part of this industry. Have there been negative outcomes to streamlining that process or is it more of just a focus on making sure that things are processed in a timely fashion and that it's prioritized and it's more to do with government bureaucracy rather than loosening the reins on our standards.

There's definitely something to be learned about taking something that has long wait times and lots of administrative burden and figuring out ways to streamline it. And there's one area that you brought up, so streamlining the environmental permitting process that I think can sometimes raise flags for people in this industry because invariably these processes exist for a good reason to protect certain parts of well the environment that we live in. That oftentimes some of the reason why people are building out clean energy infrastructure to begin with, when we come down to the basic fundamental premise that a drive to net zero is what is driving part of this industry. Have there been negative outcomes to streamlining that process or is it more of just a focus on making sure that things are processed in a timely fashion and that it's prioritized and it's more to do with government bureaucracy rather than loosening the reins on our standards.

I've spoken about streamlining permitting processes before, and the feedback I get is that actually we made a lot of progress, like we've made a lot of environmental progress by creating habitats and making the rules stricter for these projects, and that's actually important to preserving the environment. And I would agree, but there is a tension here because we have these renewable energy targets and also to try and safeguard the environment, and there's really no way to realize these projects without also building out a power grid. And so I think the narrative needs to shift towards cumulative impacts assessment, where we're thinking holistically. So, yes, there's an impact to building a transmission line, there's also an impact to not building a transmission line, and so we need to make sure that we're thinking of this in a centralized way and that way we can manage impacts the best.

I've spoken about streamlining permitting processes before, and the feedback I get is that actually we made a lot of progress, like we've made a lot of environmental progress by creating habitats and making the rules stricter for these projects, and that's actually important to preserving the environment. And I would agree, but there is a tension here because we have these renewable energy targets and also to try and safeguard the environment, and there's really no way to realize these projects without also building out a power grid. And so I think the narrative needs to shift towards cumulative impacts assessment, where we're thinking holistically. So, yes, there's an impact to building a transmission line, there's also an impact to not building a transmission line, and so we need to make sure that we're thinking of this in a centralized way and that way we can manage impacts the best.

I think this also spreads not just to the grid, but also to renewables development as well, where a lot of effort is being made not just on speeding up grid interconnections, but also environmental permits for wind and solar. And in some cases the way that that's being done is by putting a timestamp on how long an application can be open, or how long you can be fielding objections from the public for or how many objections can be fielded from the public. Other times it's saying that you can only take up an objection around certain criteria, so it's limiting rather than saying everything to the sun is acceptable as a complaint against this project, you have to look at limited things. I think where that balance falls in terms of helping to speed out renewable projects without overlooking important environmental impacts is still being figured out right now. The area where we're seeing perhaps the most innovative changes on this is with offshore wind auctions. There's a lot of data that we still need to be gathering on biodiversity within the oceans the impact that these site selections can have. So what you're starting to see in parts of the US and Europe is the introduction of biodiversity impacts in the original auctioning of the site, and that's quite cool. It means that you're having non cost impact considerations taken into account before the project's even awarded.

I think this also spreads not just to the grid, but also to renewables development as well, where a lot of effort is being made not just on speeding up grid interconnections, but also environmental permits for wind and solar. And in some cases the way that that's being done is by putting a timestamp on how long an application can be open, or how long you can be fielding objections from the public for or how many objections can be fielded from the public. Other times it's saying that you can only take up an objection around certain criteria, so it's limiting rather than saying everything to the sun is acceptable as a complaint against this project, you have to look at limited things. I think where that balance falls in terms of helping to speed out renewable projects without overlooking important environmental impacts is still being figured out right now. The area where we're seeing perhaps the most innovative changes on this is with offshore wind auctions. There's a lot of data that we still need to be gathering on biodiversity within the oceans the impact that these site selections can have. So what you're starting to see in parts of the US and Europe is the introduction of biodiversity impacts in the original auctioning of the site, and that's quite cool. It means that you're having non cost impact considerations taken into account before the project's even awarded.

That's really interesting because biodiversity and how we quantify it is certainly a topic under discussion right now, and I expect to see a lot of development in that space. Over the coming months and years. Sticking on this idea of let's talk about some positive case studies. There's another one, and let's stay in Europe for a minute. How about Germany? What have they done and what lessons can we learn about that on a global scale.

That's really interesting because biodiversity and how we quantify it is certainly a topic under discussion right now, and I expect to see a lot of development in that space. Over the coming months and years. Sticking on this idea of let's talk about some positive case studies. There's another one, and let's stay in Europe for a minute. How about Germany? What have they done and what lessons can we learn about that on a global scale.

So Germany is also an interesting case study. We don't have data on their interconnection cues because apparently they don't track it, but when we talk to developers, everyone's quite envious about what's going on in Germany. So there's a few key things that it can highlight. So the German grid is kind of unique because it's actually quite a dense grid. So if you just take the total kilometers of transmission and distribution grid and divide it by the total land area, you end up finding that they're anomalous compared to the European peers. And so we describe this as having a very capillary grid system. So capillary is kind of talk about bloodstreams.

So Germany is also an interesting case study. We don't have data on their interconnection cues because apparently they don't track it, but when we talk to developers, everyone's quite envious about what's going on in Germany. So there's a few key things that it can highlight. So the German grid is kind of unique because it's actually quite a dense grid. So if you just take the total kilometers of transmission and distribution grid and divide it by the total land area, you end up finding that they're anomalous compared to the European peers. And so we describe this as having a very capillary grid system. So capillary is kind of talk about bloodstreams.

Checking out the body.

Checking out the body.

Yeah, so it's like the grid's kind of similar, and so you have this very branched out network and what that means is if you have a renewable energy project you want to connect to the grid, likelihood that you'll have some viable connection spot that's close to you, that's robust is there. And so we're finding that that Germany has had that benefit because of the way the grid has expanded over time. They're also using this connect and manage approach. Now the UK is also doing something similar, and this is a way of allowing grid connections to happen before all of the wider upgrades to the grid have happened. So you do need to connect the new power plant to the grid. Sometimes you trigger an upgrade that's very deep into the network. The question is should you wait for that upgrade to be done before you allow the power plant to start producing power or should you maybe curtail the power plant from time to time until that upgrade is completed. And in general, we feel it's better to actually allow the connections to go forward and then that'll creates some sort of momentum around where these upgrades will ultimately need to be so Germany's been doing that as well. You've got to make sure that that doesn't get too far ahead, because then you end up having to address a whole bunch of backlogged upgrades to the grid, which we see is happening in the UK. And maybe the final thing I'd point out is that they have a dispute process for interconnections. Now this isn't used extensively, but we've heard from developers that it's nice to just have a conduit to have a conversation when things don't go right, and this often isn't baked into the interconnection process as a default, and so the developers really don't have a recourse when something didn't go the way they expected it to go.

Yeah, so it's like the grid's kind of similar, and so you have this very branched out network and what that means is if you have a renewable energy project you want to connect to the grid, likelihood that you'll have some viable connection spot that's close to you, that's robust is there. And so we're finding that that Germany has had that benefit because of the way the grid has expanded over time. They're also using this connect and manage approach. Now the UK is also doing something similar, and this is a way of allowing grid connections to happen before all of the wider upgrades to the grid have happened. So you do need to connect the new power plant to the grid. Sometimes you trigger an upgrade that's very deep into the network. The question is should you wait for that upgrade to be done before you allow the power plant to start producing power or should you maybe curtail the power plant from time to time until that upgrade is completed. And in general, we feel it's better to actually allow the connections to go forward and then that'll creates some sort of momentum around where these upgrades will ultimately need to be so Germany's been doing that as well. You've got to make sure that that doesn't get too far ahead, because then you end up having to address a whole bunch of backlogged upgrades to the grid, which we see is happening in the UK. And maybe the final thing I'd point out is that they have a dispute process for interconnections. Now this isn't used extensively, but we've heard from developers that it's nice to just have a conduit to have a conversation when things don't go right, and this often isn't baked into the interconnection process as a default, and so the developers really don't have a recourse when something didn't go the way they expected it to go.

We're talking about positive case studies here at the moment, and that's because we're really at the start of this transition. The grid is a challenge at the moment for renewable developers, but it's not because they're not trying. We are seeing a lot of efforts globally. So it's given some examples already, and we'll talk about a couple more different ways that people are trying. But it's as much of an opportunity as it is anything else. If you think about EV sales versus charging, you wouldn't nowadays say that EV charging is the bottleneck on EV sales. You would say it's the opportunity created from EV sales, And I think that's what we're shifting towards in the grid. Right now, it's a chicken and an egg renewables or grid, But increasingly, as we figure out the right solutions for enabling grid build out, that's not going to be the case anymore. It's going to be a sort of combined opportunity with the two scaling together.

We're talking about positive case studies here at the moment, and that's because we're really at the start of this transition. The grid is a challenge at the moment for renewable developers, but it's not because they're not trying. We are seeing a lot of efforts globally. So it's given some examples already, and we'll talk about a couple more different ways that people are trying. But it's as much of an opportunity as it is anything else. If you think about EV sales versus charging, you wouldn't nowadays say that EV charging is the bottleneck on EV sales. You would say it's the opportunity created from EV sales, And I think that's what we're shifting towards in the grid. Right now, it's a chicken and an egg renewables or grid, But increasingly, as we figure out the right solutions for enabling grid build out, that's not going to be the case anymore. It's going to be a sort of combined opportunity with the two scaling together.

When we think about opportunities only one of the themes of this year has been the US Inflation Reduction Act and what that really means for spurring a lot of the industries we cover, including clean energy in the US and in a way that they specifically do tend to attack problems, which is through the capitalist marketplace, and how this then becomes an opportunity for companies. And we actually in a previous show had Jiggershaw, who is with the US Loan's Office on here to talk about what that really looks like in terms of some of the money that's actually being allocated to certain projects. But you know, Meredith, you had previously mentioned that some of the high costs that are surprising developers later on are eating into some of the profitability of these projects and in some case making them perhaps neutral. And what I really want to understand is is the Inflation Reduction Act going far enough in order to inspire companies to want to do these sorts of projects and really to get the end result that we need. Taking into consideration that grids are a necessary part of this.

When we think about opportunities only one of the themes of this year has been the US Inflation Reduction Act and what that really means for spurring a lot of the industries we cover, including clean energy in the US and in a way that they specifically do tend to attack problems, which is through the capitalist marketplace, and how this then becomes an opportunity for companies. And we actually in a previous show had Jiggershaw, who is with the US Loan's Office on here to talk about what that really looks like in terms of some of the money that's actually being allocated to certain projects. But you know, Meredith, you had previously mentioned that some of the high costs that are surprising developers later on are eating into some of the profitability of these projects and in some case making them perhaps neutral. And what I really want to understand is is the Inflation Reduction Act going far enough in order to inspire companies to want to do these sorts of projects and really to get the end result that we need. Taking into consideration that grids are a necessary part of this.

The Inflation Reduction Act did a number of things for clean power generation. It didn't do as much for grid, so it didn't go as far as we would have liked to have seen. So we've done an update on our clean energy market outlook. We see six hundred gigawatts of solar, wind and storage capacity that's going to come online between twenty twenty three and twenty thirty, and that's a boosted number from Inflation Reduction Act when we look at the amount of money that was really allocated to grids, right, So we've done the kind of done itally. We looked at the Jobs Act and the IRA it's about twenty nine billion in funds for grids, and about twenty percent of that is actually just studying the grid to figure out what the bottlenecks are, what the challenges are, where we need to go next. So I think there's more to come on this rather than the Inflation Reduction act was going to be the hammer that solves this. And Meredith's point around these costs going up, that's not forever, that's not a sustained cost. Eventually you reinforce the grid, you create new connection opportunities, those costs come down. So now wind and solar projects are able to get cheaper connections and so those costs go down, and then the developers have those opportunities. So it's good to understand that those will eventually wear away.

The Inflation Reduction Act did a number of things for clean power generation. It didn't do as much for grid, so it didn't go as far as we would have liked to have seen. So we've done an update on our clean energy market outlook. We see six hundred gigawatts of solar, wind and storage capacity that's going to come online between twenty twenty three and twenty thirty, and that's a boosted number from Inflation Reduction Act when we look at the amount of money that was really allocated to grids, right, So we've done the kind of done itally. We looked at the Jobs Act and the IRA it's about twenty nine billion in funds for grids, and about twenty percent of that is actually just studying the grid to figure out what the bottlenecks are, what the challenges are, where we need to go next. So I think there's more to come on this rather than the Inflation Reduction act was going to be the hammer that solves this. And Meredith's point around these costs going up, that's not forever, that's not a sustained cost. Eventually you reinforce the grid, you create new connection opportunities, those costs come down. So now wind and solar projects are able to get cheaper connections and so those costs go down, and then the developers have those opportunities. So it's good to understand that those will eventually wear away.

Absolutely, and that's why we really do you think this is a sort of combined investment. You have to invest in renewables and you have to invest in the grid as well. One of the concepts that we work on to understand whether enough grid investment is happening is this idea of a grid investment ratio. We think that you need to be spending for every one dollar that you put into investment for wind, solar and storage build you need to be matching that with one dollar spent on the grid to be on a net zero trajectory. Currently, globally we're only seeing about fifty cents being spent on the grid for every dollar spent on clean power, So we're really going to have to see that that amount grow over time. How that is going to happen could be through rate bases, but it could also be through merchant lines. That's something the US in particular is working on outside of the Inflation Reduction Act, is trying to make it easier to build some of these merchant power lines are privately owned transmission lines that cross state boundaries, things like that could help to balance that ratio out and bring it more in line with a net zero pathway.

Absolutely, and that's why we really do you think this is a sort of combined investment. You have to invest in renewables and you have to invest in the grid as well. One of the concepts that we work on to understand whether enough grid investment is happening is this idea of a grid investment ratio. We think that you need to be spending for every one dollar that you put into investment for wind, solar and storage build you need to be matching that with one dollar spent on the grid to be on a net zero trajectory. Currently, globally we're only seeing about fifty cents being spent on the grid for every dollar spent on clean power, So we're really going to have to see that that amount grow over time. How that is going to happen could be through rate bases, but it could also be through merchant lines. That's something the US in particular is working on outside of the Inflation Reduction Act, is trying to make it easier to build some of these merchant power lines are privately owned transmission lines that cross state boundaries, things like that could help to balance that ratio out and bring it more in line with a net zero pathway.

Just to put that into context, So we're spending about two hundred and seventy four billion annually on the electricity grid today. So that was as of twenty twenty two, and if you assume that doesn't change all the way out to twenty fifty, that's eight trillion and cumulative spend between now and twenty fifty. Now, we've ran a few scenarios to figure out what might actually happen and if we use our economic transition scenario as a more likely outcome, So here we're allowing certain policies that are infect today to play out, and then we're allowing economics to guide the long term. There, we end up spending thirteen trillion on the grid between now and twenty fifty, So a notable step up for me, but that does not get US Paris aligned. That's not enough to limit warming to two degrees. So our net zero scenario is actually twenty one trillion in spend between now and twenty fifteen. That just shows how much we need to ratchet up investment in this area.

Just to put that into context, So we're spending about two hundred and seventy four billion annually on the electricity grid today. So that was as of twenty twenty two, and if you assume that doesn't change all the way out to twenty fifty, that's eight trillion and cumulative spend between now and twenty fifty. Now, we've ran a few scenarios to figure out what might actually happen and if we use our economic transition scenario as a more likely outcome, So here we're allowing certain policies that are infect today to play out, and then we're allowing economics to guide the long term. There, we end up spending thirteen trillion on the grid between now and twenty fifty, So a notable step up for me, but that does not get US Paris aligned. That's not enough to limit warming to two degrees. So our net zero scenario is actually twenty one trillion in spend between now and twenty fifteen. That just shows how much we need to ratchet up investment in this area.

So let's do one more case study to another really important part of the world when it comes to rollout of renewable energy, because it's certainly happening at scale, and that is China. What are they doing about their grid and what does it look like, because certainly they're attacking the problem of grid roll out in a way very fundamentally differently than the US's.

So let's do one more case study to another really important part of the world when it comes to rollout of renewable energy, because it's certainly happening at scale, and that is China. What are they doing about their grid and what does it look like, because certainly they're attacking the problem of grid roll out in a way very fundamentally differently than the US's.

So China has really mastered this long range transmission project in a way that no one else on earth has. So when I talked earlier about voltages for power lines, so we have these terms, right, So the lowest voltage we talk about for something to be transmissions called high voltage, and then if things get really high in the voltage, we call them extra high voltage. I'm not kidding. These are the actual terms. In China, they have one further class. It's called ultra high voltage, and here we're talking about eight hundred thousand volts to a million volts.

So China has really mastered this long range transmission project in a way that no one else on earth has. So when I talked earlier about voltages for power lines, so we have these terms, right, So the lowest voltage we talk about for something to be transmissions called high voltage, and then if things get really high in the voltage, we call them extra high voltage. I'm not kidding. These are the actual terms. In China, they have one further class. It's called ultra high voltage, and here we're talking about eight hundred thousand volts to a million volts.

Now.

Now.

You know, there's been projects in Canada and Brazil and in India, but China has taken it to a whole new level. So they have two hundred gigawants of capacity commissioned today of these transmission lines that go thousands of kilometers, like I think one of these projects is thirty three hundred kilometers that have three six eight gigawatt links and it allows them to move power from these very remote regions to the coastal demand centers effectively. And this is something that we see having to have play out in many different markets. Germany is having to do this to bring power from the wind rich north into the demand centers that are more in the south. The UK is having to do this, and they're using a wide array of technologies. But this is a classical problem that even the US will ultimately have to wrestle with as well. And China's really done this in a fantastic way.

You know, there's been projects in Canada and Brazil and in India, but China has taken it to a whole new level. So they have two hundred gigawants of capacity commissioned today of these transmission lines that go thousands of kilometers, like I think one of these projects is thirty three hundred kilometers that have three six eight gigawatt links and it allows them to move power from these very remote regions to the coastal demand centers effectively. And this is something that we see having to have play out in many different markets. Germany is having to do this to bring power from the wind rich north into the demand centers that are more in the south. The UK is having to do this, and they're using a wide array of technologies. But this is a classical problem that even the US will ultimately have to wrestle with as well. And China's really done this in a fantastic way.

And this network is cutting edge technology and we're not losing tons of energy and the transmission process because certainly that distance you would imagine it would make the entire project much less effective.

And this network is cutting edge technology and we're not losing tons of energy and the transmission process because certainly that distance you would imagine it would make the entire project much less effective.

Going to ultra high voltages allows you to minimize losses, So losses is dependent on the voltage that you're using, and by going to these really high voltages, you can transport over long distances and not lose a lot of.

Going to ultra high voltages allows you to minimize losses, So losses is dependent on the voltage that you're using, and by going to these really high voltages, you can transport over long distances and not lose a lot of.

The power long the way, everything is made of something, and we BF certainly understand that we have entire teams dedicated to the critical commodities that are needed for the transition, and we also have a team dedicated to supply chains. And supply chains have been in a period of disruption as of late, and I want to know how do supply chains fit into building out this infrastructure. Are countries building all of their own kit or is this actually adding to the bottlenecks as they've got to source it from around the world.

The power long the way, everything is made of something, and we BF certainly understand that we have entire teams dedicated to the critical commodities that are needed for the transition, and we also have a team dedicated to supply chains. And supply chains have been in a period of disruption as of late, and I want to know how do supply chains fit into building out this infrastructure. Are countries building all of their own kit or is this actually adding to the bottlenecks as they've got to source it from around the world.

So at a high level, the scale of grid build out that we're talking about is going to raak havoc on supply chains, but.

So at a high level, the scale of grid build out that we're talking about is going to raak havoc on supply chains, but.

It hasn't yet. This is a coming storm.

It hasn't yet. This is a coming storm.

It is starting to.

It is starting to.

So we're seeing the reality is that the supply chain here is quite concentrated, so there's not a vast quantity of people who can make these specialized pieces of equipment, whether you're looking at cables, high voltage power cables, or whether you're looking at transformers and these types of components. There's a few players in the world that are doing this. What are some of those, Yeah, so on the cable side, this is like Prisme, nkt Nexon. On the station side, abb Hatache, Siemens and ge for example, and there are a few others. One I think benefit of the grid supply chain is that it's not entirely consolidated within a single country, which we have for a few other pieces of the transition. We do have a lot of Western players, but if you look at the order backlog for cable manufacturers, it's in the billions. If you're looking at the lead time for a transformer, it's gone from years to multiple years. And so we are starting to see science that this system has gone under constraint and utilities are responding. So there's been multiple utilities that have now made large orders worth billions of dollars years in advance, so kind of batching them together to try and secure the equipment that they'll need. So Tenet signed a five point five billion euro deal to buy cables and engineering works for seven thousand kilometers of offshore grid. France did something similar for three thousand kilometers, and this itself can be quite disruptive. So the markets that have this scale and are willing to make so orders can basically buy up the supply chain for multiple years. But ultimately, I think this is an important part of creating certainty for the supply chain. We've been in this kind of chicken and egg situation where the supply chain manufacturers haven't been willing to expand their production because they haven't really seen the order book, and the utilities have been postponing some of the projects because they're concerned about the delivery of their equipment, and so somebody has to move first, and so I think this is an important step for the industry.

So we're seeing the reality is that the supply chain here is quite concentrated, so there's not a vast quantity of people who can make these specialized pieces of equipment, whether you're looking at cables, high voltage power cables, or whether you're looking at transformers and these types of components. There's a few players in the world that are doing this. What are some of those, Yeah, so on the cable side, this is like Prisme, nkt Nexon. On the station side, abb Hatache, Siemens and ge for example, and there are a few others. One I think benefit of the grid supply chain is that it's not entirely consolidated within a single country, which we have for a few other pieces of the transition. We do have a lot of Western players, but if you look at the order backlog for cable manufacturers, it's in the billions. If you're looking at the lead time for a transformer, it's gone from years to multiple years. And so we are starting to see science that this system has gone under constraint and utilities are responding. So there's been multiple utilities that have now made large orders worth billions of dollars years in advance, so kind of batching them together to try and secure the equipment that they'll need. So Tenet signed a five point five billion euro deal to buy cables and engineering works for seven thousand kilometers of offshore grid. France did something similar for three thousand kilometers, and this itself can be quite disruptive. So the markets that have this scale and are willing to make so orders can basically buy up the supply chain for multiple years. But ultimately, I think this is an important part of creating certainty for the supply chain. We've been in this kind of chicken and egg situation where the supply chain manufacturers haven't been willing to expand their production because they haven't really seen the order book, and the utilities have been postponing some of the projects because they're concerned about the delivery of their equipment, and so somebody has to move first, and so I think this is an important step for the industry.

It certainly seems like with all of the demand for these components, given that rollout is looking to increase, that there also might be an opportunity for new interests into this space. And I want to know is are the barriers to entry just too high and are we expecting to see the current equipment manufacturers really grow or do you think we're actually going to see this become a really increasingly fragmented and maybe some day crowded space.

It certainly seems like with all of the demand for these components, given that rollout is looking to increase, that there also might be an opportunity for new interests into this space. And I want to know is are the barriers to entry just too high and are we expecting to see the current equipment manufacturers really grow or do you think we're actually going to see this become a really increasingly fragmented and maybe some day crowded space.

The barriers are high when it comes to traditional grid investments. So these are very specialized pieces of equipment, and more than that, the utilities that are buying them are very risk averse, and so they've negotiated over years, over decades, relationships with these manufacturers and they've come to trust the components. So these are utilities that have regulated requirements for reliability right and once you install something, to go back in and have to retrofit it afterwards can be very costly, and so it is possible that under severe constraints, so you could see new manufacturers come into the frame, but I don't see that as as a huge opportunity. Where we are seeing a lot of new players is not in the legacy development, but more on the modernization of the grid. So on the digitalization front, we're seeing a number of players coming into being able to help monitor the grid and get the most out of every single asset that is there.

The barriers are high when it comes to traditional grid investments. So these are very specialized pieces of equipment, and more than that, the utilities that are buying them are very risk averse, and so they've negotiated over years, over decades, relationships with these manufacturers and they've come to trust the components. So these are utilities that have regulated requirements for reliability right and once you install something, to go back in and have to retrofit it afterwards can be very costly, and so it is possible that under severe constraints, so you could see new manufacturers come into the frame, but I don't see that as as a huge opportunity. Where we are seeing a lot of new players is not in the legacy development, but more on the modernization of the grid. So on the digitalization front, we're seeing a number of players coming into being able to help monitor the grid and get the most out of every single asset that is there.

What are the different metals that are required for grid infrastructure, Because of course you can onshore or nearshore manufacturing, but where certain commodities are located is something that we don't have a lot of control over.

What are the different metals that are required for grid infrastructure, Because of course you can onshore or nearshore manufacturing, but where certain commodities are located is something that we don't have a lot of control over.

So the two big ones that you're talking about in terms of metals demand for the grid are copper and aluminum. It's also steal and lead, but copper and aluminum is basically your main conduit for the electron. So given the demands on those metals for other industries as well, do we expect that there will be enough supply for this industry going forward? I think both copper and aluminum are going to be put under stress based on our energy transition metals outlook, especially copper. Aluminum has an ability to scale up supply using recycling. But with copper, what we're seeing is that the grid today accounts for probably around sixteen percent of current copper demand, but with the buildout that we're talking about, it could reach thirty seven percent of copper demand by twenty fifty. And that is in a world where copper demand is massively growing across all of the different parts of the energy transition. At the same time, if we just look at current plans for copper mining, you would see a decline in supply over time. So you can see a mismatch between the direction the energy transition is taking copper and what's actually happening today. On the supply side, that could be a challenge. Fortunately, there are substitutes. You can substitute aluminum for copper that might help, especially on the grid side, and then other sectors would have to look at substitutes as well, or we'd have to be increasing copper supply globally.

So the two big ones that you're talking about in terms of metals demand for the grid are copper and aluminum. It's also steal and lead, but copper and aluminum is basically your main conduit for the electron. So given the demands on those metals for other industries as well, do we expect that there will be enough supply for this industry going forward? I think both copper and aluminum are going to be put under stress based on our energy transition metals outlook, especially copper. Aluminum has an ability to scale up supply using recycling. But with copper, what we're seeing is that the grid today accounts for probably around sixteen percent of current copper demand, but with the buildout that we're talking about, it could reach thirty seven percent of copper demand by twenty fifty. And that is in a world where copper demand is massively growing across all of the different parts of the energy transition. At the same time, if we just look at current plans for copper mining, you would see a decline in supply over time. So you can see a mismatch between the direction the energy transition is taking copper and what's actually happening today. On the supply side, that could be a challenge. Fortunately, there are substitutes. You can substitute aluminum for copper that might help, especially on the grid side, and then other sectors would have to look at substitutes as well, or we'd have to be increasing copper supply globally.

Now you'd referenced Senji, that's there were certain parts of the world where the materials and the components that are required have been stockpiled. And my question really has to do with or all the parts truly global in nature, and is this a global supply chain or is there a density somewhere.

Now you'd referenced Senji, that's there were certain parts of the world where the materials and the components that are required have been stockpiled. And my question really has to do with or all the parts truly global in nature, and is this a global supply chain or is there a density somewhere.

Yeah, I characterize this supply chain as fairly global. So you have manufacturing sites across Europe, the US, North America, and so at present it is a global supply chain. Now there are pressures to start to localize that as we've seen across other clean power technologies, and the manufacturers are resisting this. Ultimately, that's going to increase costs that are already rising with metal prices have been higher than normal, right and so at present we do have a global supply chain, but how that plays out in the future we don't yet know.

Yeah, I characterize this supply chain as fairly global. So you have manufacturing sites across Europe, the US, North America, and so at present it is a global supply chain. Now there are pressures to start to localize that as we've seen across other clean power technologies, and the manufacturers are resisting this. Ultimately, that's going to increase costs that are already rising with metal prices have been higher than normal, right and so at present we do have a global supply chain, but how that plays out in the future we don't yet know.

And that's fair across the whole clean power space. I'd say that the two biggest themes that we're hearing about from our clients today are grids and supply chain localization. We're to looking at policies like the Inflation Reduction Act, which will offer subsidies in order to localize say solar manufacturing within the United States, but then other industries in other countries are just looking to enforce and mandate local manufacturing without any subsidy to the manufacturing itself, and that could really really raise the prices of equipment even before you get to the point of the grid connection, right, we're just talking about the pure equipment that's going into a battery of solar or wind project. How that starts to affect the cost of product development, the economics for developers is still to be seen, because how effective these policies are at forcing supply chain localization really hasn't been tested yet.

And that's fair across the whole clean power space. I'd say that the two biggest themes that we're hearing about from our clients today are grids and supply chain localization. We're to looking at policies like the Inflation Reduction Act, which will offer subsidies in order to localize say solar manufacturing within the United States, but then other industries in other countries are just looking to enforce and mandate local manufacturing without any subsidy to the manufacturing itself, and that could really really raise the prices of equipment even before you get to the point of the grid connection, right, we're just talking about the pure equipment that's going into a battery of solar or wind project. How that starts to affect the cost of product development, the economics for developers is still to be seen, because how effective these policies are at forcing supply chain localization really hasn't been tested yet.

So the last thing I want to discuss is actually really at the very other end of the line. It's consumers. Well, certainly over the course of the last year, we've seen electricity prices go up and gas prices go up, and you see different governments actually intervening on the end consumer electricity price. Do you see these costs that invariably are going to need to be passed on somewhere, ultimately impacting consumers in what is already a very constrained and very expensive electricity market. Or is this something where between the companies and the consumers, governments are going to have to get heavily involved.

So the last thing I want to discuss is actually really at the very other end of the line. It's consumers. Well, certainly over the course of the last year, we've seen electricity prices go up and gas prices go up, and you see different governments actually intervening on the end consumer electricity price. Do you see these costs that invariably are going to need to be passed on somewhere, ultimately impacting consumers in what is already a very constrained and very expensive electricity market. Or is this something where between the companies and the consumers, governments are going to have to get heavily involved.

So who's ultimately going to pay for this?

So who's ultimately going to pay for this?

That is the question.

That is the question.

Yeah, it is a big question. And where we allocate those costs it's important, right, So this is a natural monopoly. We have regulated assets, and a regulator comes in and allocates costs to rate pairs. There's only so much rate pairs can absorb the rate increases. You can't just ratchet them up very heavily in a single year, and so that ultimately starts to constrain the path that we can take here. How fast we can really scale up is in part depends on what could the average homeowner absorb in a rate increase today, and so that is a factor. So now who else could pay? So we could allocate some of the costs to developers, and we've talked about some of that already. So there's a share of costs that developers are already paying to connect to the grid, and those deeper upgrades on the grid, should they be paid off by the rate base or should they be paid off by developers, And so there is a complicated question and different markets have divided that up a little bit differently. But there's an allocation of risk there and how fast we want to move that needs to be considered. But we're also seeing consumers, like power consumers and I'm talking about largely like large power consumers, who are also starting to take a large part of the bill too, right, And they're upgrading the kit that they have in their own facilities, they're buying storage, they're buying solar, right, you know, they're putting in these variable frequency drives and they're able to modulate how their load is going over time. And that flexibility is a resource that the grid will ultimately be able to use as well. And so that becomes part of the solution. And let's even extend into homeowners with buying small scale solar and storage systems at their houses. And there's a rule for governments to play as well, like subsidies, loans, grants, especially when it comes to interconnectors that they've been critical to getting these projects funded and approved.

Yeah, it is a big question. And where we allocate those costs it's important, right, So this is a natural monopoly. We have regulated assets, and a regulator comes in and allocates costs to rate pairs. There's only so much rate pairs can absorb the rate increases. You can't just ratchet them up very heavily in a single year, and so that ultimately starts to constrain the path that we can take here. How fast we can really scale up is in part depends on what could the average homeowner absorb in a rate increase today, and so that is a factor. So now who else could pay? So we could allocate some of the costs to developers, and we've talked about some of that already. So there's a share of costs that developers are already paying to connect to the grid, and those deeper upgrades on the grid, should they be paid off by the rate base or should they be paid off by developers, And so there is a complicated question and different markets have divided that up a little bit differently. But there's an allocation of risk there and how fast we want to move that needs to be considered. But we're also seeing consumers, like power consumers and I'm talking about largely like large power consumers, who are also starting to take a large part of the bill too, right, And they're upgrading the kit that they have in their own facilities, they're buying storage, they're buying solar, right, you know, they're putting in these variable frequency drives and they're able to modulate how their load is going over time. And that flexibility is a resource that the grid will ultimately be able to use as well. And so that becomes part of the solution. And let's even extend into homeowners with buying small scale solar and storage systems at their houses. And there's a rule for governments to play as well, like subsidies, loans, grants, especially when it comes to interconnectors that they've been critical to getting these projects funded and approved.

So Meredith and Senji, thank you very much for joining today and walking me through all things grid.

So Meredith and Senji, thank you very much for joining today and walking me through all things grid.

It's been an absolute pleasure, Dana, thanks for having us absolutely thanks Dana.

It's been an absolute pleasure, Dana, thanks for having us absolutely thanks Dana.

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Bloomberg NEF is a service provided by Bloomberg Finance LP and its affiliates. This recording does not constitute, nor should it be construed, as investment advice, investment recommendations, or a recommendation as to an investment or other strategy. Bloomberg n EF should not be considered as information sufficient upon which to base an investment decision. Neither Bloomberg Finance LP nor any of its affiliates makes any representation or warranty as to the accuracy our completeness of the information contained in this recording, and any liability as a result of this recording is expressly disclaimed