Can you give me a bit of background about you and about Renewabl
I'm the CEO at Renewabl. My background was initially strongly focused on trading and operations, about 25 years ago. I started my career in commodities, that is commodity trading, for companies like BP and Shell, and a company called ED&F Man Commodities as well. So, trading from natural gas and electricity to plastics and metals in the London Metal Exchange to sugar and coffee um with ED&F Man. I've always been really interested in the trading aspect, physical trading, and different commodities because I'm passionate about commodities. And then about 12 to 13 years ago, I decided to leave the trading world and focus more on entrepreneurship. I wanted to make a shift and move away from oil and gas and brown electricity and move more to renewable energy, which is my passion.
About 12 years ago, renewable energy wasn't really a thing, so I decided to contribute towards it. I built my first company which was a consultancy for power purchase agreements called Almach and we specialised in PPAs. 12-13 years ago, they were not as popular as they are now, so basically it was helping structure contracts for large organisations.
That company got acquired by South Pole Group and then my whole team went to South Pole. Then I decided to build my second company, Zeigo, which is a digital platform that enables a simplified contractual route for PPAs. I wanted to make it digital, wanted to build a marketplace and eventually we got really good traction and were approached by Schneider Electric, selling the company to them about 3 and a half years ago. I then basically stayed with Schneider for a year and then decided to leave to build another startup with Renewabl.
Renewabl is a little bit more sophisticated and complex because it focuses more on hourly matching which is I believe the future of energy procurement. So, the whole infrastructure and focus of the company is to bring those hourly solutions and make them simple to understand and transact for the corporate sector.
This has been underpinned by the Greenhouse Gas (GHG) Protocol Scope 2 emission update that was released. The focus on hourly matching was specified 3-4 months ago which gave us a good push with corporates. Our platform focuses on the corporate sector and allows the digitisation of the processes, reporting, evaluation, analytics and transactions as well. We work with large organisations making or trying to make their life simple by providing them with a digital platform where they can connect their consumption and basically comply with different regulations like CDPI 100, SVTI uh etc etc.
Can you explain more about GHG Protocol Scope 2 developments and what’s going on with these?
The Greenhouse Gas Protocil is an accountancy standard that most companies use to report their Scope 1, Scope 2, Scope 3 emissions. The status quo has been annual reporting standards. So, if I consume 10 gigawatt hours (GWh) then I can buy 10 GWh worth of energy and then report that I'm 100 percent renewable. The big difference now and the shift that they're proposing, not as a legal requirement but as a kind of accounting requirement is to go deeper into understanding your consumption pattern and making sure that you match your consumption as a company with the production or the output of renewable energy sources on an hourly basis.
So what that means is that if you're an office, and you and you don't use energy during the night and you are basically just open during the day, then your solar shape corresponds better to a solar profile than a wind profile that is generating energy in the middle of the night when you're not using it. So, the whole idea and premise of this is to have more accurate matching of when you know renewables are produced and when renewables are consumed.
One of the main reasons for this is again Robin 13-14 years ago renewable energy was a very small portion of the energy mix of most countries probably 2-3 to 5 percent. Now, a lot of countries are running mostly on renewable energy, so the UK is 45 percent to 50 percent, so the paradigm has shifted and there’s a lot more focus on renewable energy, like with AI, and the consumption patterns that are evolving right now in terms of energy demand, then it's going to be crucial to use any kind of energy to satisfy that demand and renewable energy coupled with batteries basically produces a very reliable source of energy. So, that's why there's been a strong shift on the requirements from Greenhouse Gas Protocols for energy disclosure.
So basically, that's a way of kind of matching demand with renewable energy production?
Correct.
It seems to me you are looking at PPAs and Contract for Difference (CfD) and all that kind of thing. How do those GH protocols dovetail with PPAs and CFDs?
That’s a really good question. There is a strong shift in the way that corporates are buying energy and how they’re buying PPAs and what the top considerations are at the moment, compared to five or six or ten years ago.
We’re noticing that there is more flexibility in terms of the standard of a PPA. What does a PPA mean? Ten years ago, a PPA was a 15+ year contract that was basically quite chunky, let’s say 50 GWh or more and it was a direct contract between a generator and a corporate consumer. Now, there’s been some evolution on that and one thing about 15 years ago was that Google and Amazon came up with PPAs just to increase the uptake of renewable energy, not just for them but also for other companies, creating a reliable standard that suppliers and developers can attach to, to build more wind and solar farms.
It worked and a lot of companies signed PPAs and the main reason they were doing that was additionality, right? They wanted to contribute and build more renewable energy assets.
Now, we’re coming to a point where there’s quite a lot of renewable energy assets and there’s quite a lot of wind and solar. Obviously, we need more, but a lot of corporates right now, with the Greenhouse Gas Protocol Scope 2, are shifting the way they think about renewable energy and focusing more on avoiding greenwashing claims, making sure they have renewable energy contracts, operational or new to earth PPAs, rather than additionality. So, there’s been a bit of a shift and corporates are more worried about making sure that the contracts are traceable to a specific asset, even if they are operational or not.
On top of that, they are focusing as a next stage on additionality rather than on additionality first and then preferring a new project to an operational one.
So how is this affecting the market at the moment?
Well, it’s the Contract for Difference (CfD) scheme. If we talk about just the UK, the CfD scheme, the intention is good. Basically, the government wants to support renewable energy generators and give them some value for the energy they produce, but it is affecting the availability of projects in the UK. That also affects corporate standards, because a lot of corporates have strong targets in terms of contracting energy directly from wind and solar assets and making sure they comply with different regulations internal and external. Winning a CfD isn’t necessarily easy for a supplier or generator, but once a project can go into the CfD scheme, you just get paid by the government. The way that PPAs are shifting now is that they’re becoming more flexible in terms of operational assets. Repowered assets and offshore contracts are becoming quite popular now, because there are no other options, no other options in the market.
What is the impact of all this on project development?
The true impact is on the innovation side. I think when you as a seller, as a developer, put all your assets on the CfD scheme, there’s no requirement for innovation from any angle, because you’re just getting money directly from the government. The problem is that we need a lot of new ideas in terms of connectivity of these assets, like where these assets are going to be connected, and it’s becoming more challenging.
And the impact on developer confidence? Is this improving confidence in developing projects?
I’m not sure. That’s a good question. I think not, because as a developer you have confirmed revenue for the next 20 years because they’ve just expanded the scheme and so I am not sure what the incentive is to increase profitability to create more assets.
Typically, when you sell your energy on a merchant basis, or you sell it on a corporate PPA basis, you rely on negotiations and on the wholesale price of energy, which has the potential of increasing your revenue. With the CfD scheme, you have constant revenue for the next 20 years, which I don’t think drives the build of new assets in my opinion.
The big thing I am wondering is how this is affecting the UK renewable energy market generally?
The thing that is becoming challenging is battery storage. We need more innovation in terms of battery storage and hybrid assets, where you can actually connect a wind and solar to a battery and then basically produce more of a baseload output. That is again not like a second option because you’re in the CfD scheme and getting paid just for producing power. I think innovation is more the challenge than availability of projects.
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