Insider's Guide to Energy

Episode 32 - A new perspective on power purchase agreements

August 09, 2021 Chris Sass Season 1 Episode 32
Insider's Guide to Energy
Episode 32 - A new perspective on power purchase agreements
Show Notes Transcript

Juan Pablo Cerda joins Chris and Johan to discuss how to improve the PPA process.  This episode helps provide a deeper dive into PPAs and Zeigo's vision to improve the process.  Technology allows enterprises a better way of obtaining PPAs.

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 | Timestamp | Speaker | Transcript

 | 06:46.28 | chrissass | Welcome to another edition of insider's guide to energy I'm your host chris sasse and with me as always is our co-host Johann oberg johan how's going.
| 06:58.69 | Johan | It's doing well chris we spoke about the opening up of the of the new normal and that gave me the opportunity to actually travel to stockholm. So I'm spending the next week or 2 here in my old hometown.
| 07:13.79 | chrissass | Well, it's certainly travel season here in Europe I'm about to catch a plane and and head out. It seems that we're able to travel a little bit for the moment. So Hopefully it it stays I hear some scary tales of. Things spiking and maybe there's there's future problems but I'm I'm still planning on traveling as well.
| 07:32.76 | Johan | No I think we we drove up so it took us about 3 days to to arrive. It kept us at distance from everyone else but side to traveling I think an interesting part with this is that you get to either catch up with all friends or you get to know new friends and I had the opportunity to. Visit a very cool place called the fpcenter last night which is a tech hub with a lot of startups a lot of innovative thinking a lot of different people gathering into to this even if it's summertime. It was a bit of a buzz and. Kind of winded me up and got me started for today's call so I thought it was really interesting to get into the to the startup world and to the digital world a little bit more slightly outside of the energy but still extremely enthusiastic.
| 08:22.14 | chrissass | All right I Love the fact that you're charged up that you're ready and and looking forward to the show I suppose because you're always looking forward to it. Um.
| 08:26.96 | Johan | Ah I dare not to say that anymore. But yes I'm looking forward to another.
| 08:33.74 | chrissass | What what? I'm looking forward to is is really understanding ppas and understanding how things are evolving to to make that relevant and how if you're a large corporation. You know how? how do you use this tool. What what can you do. And our guest that we've lined up is a specialist in this he he he understands this implicitly started a company that that helps solve this problem. So for me this is kind of exciting stuff. How about your thoughts. What do you?? What are you hoping to do here.
| 09:03.10 | Johan | No I agree I think ppa is on the on on kind of the the trend for for a lot of companies both on the producing side on on the investment side but also on the corporate side I'm. I'm with you on 2 things. But I'm I'm kind of looking at this is either. You're looking at what is a ppa and and what is driving this part. What's in it for for the stakeholders but but as of now these are large accounts I'm also quite interesting to hear a little bit more how the small and the medium. How how we can get them on board around this and and see is there an opportunity also not just for the the big dragons around this but is in order to go Renewable. Can we also get the rest of them So I'll be interesting to hear a little bit more about this.
| 09:48.15 | chrissass | Well I think as always we could pontificate for hours or we could just invite our guests to the program and have our guests to educate us and and share their experience. So let me go ahead and introduce our guest this week we're proud to have 1 pablo certa founder and ceo of zygo. But welcome to the show.
| 10:08.12 | Juan Pablo | Thank you very much guys. Thank you very much.
| 10:11.50 | chrissass | So you you heard our little banter before the show. We've got some expectations of you but before we really go into that I think it makes sense for you to introduce yourself to our audience and give them a little bit of a background of what makes you this me that I said you are.
| 10:26.28 | Juan Pablo | Absolutely absolutely. Um, right? So yes, my but my name is comp pavlo um I am the ceo and founder of a company called zygo um, and just to give you a little bit of background. So my my experience in my my previous experience has been. Um, working within very large oil majors in the commodity sector on the trading and operation side. So I've worked for you know shell bp edf man um within different commodities from sugar and coffee to plastics metals. Energy natural gas. So I've no lower the place. Um, but about 7 and a half years ago maybe 8 years ago I thought um about you know, leaving this trading world and setting up my own company. It took me a while to to to make the leap. Um. From you know, a comfy job and a nice salary to the absolute unknown. Um, but I decided to to just go for it. Um I think like you you guys were talking about entrepreneurs earlier and and I think like. You have to be a little bit naive as ah as a first time founder as the first time entrepreneur because if if I knew back then what I know now I'm not show if I would have gone for it. Um, but you you know I went for it and set up ah a company that was advising large. Large corporations on their go-to market strategy specifically around what you mentioned ppas so back then if you think about it like about 8 years ago ppas were not um, as common as they are now a ppa is a power purchase agreement which is ah um, a contract between the. Um, the generator that produces energy and and builds wind and solar farms. Um, and the corporate that offtakes a power and ppa is super important because um they bring additionality to the grid. So essentially if if a corporate commits to sign a 10 year plus ppa for high. Volume then that basically enables a developer to make the project bankable get the the necessary finance to to take the project off the ground. Um and basically that is effectively displaces fossil fuels and replaces them with green electrons on the grid that is super attractive for for corporates right? back then. 8 eight and a half years ago. Um, they were only available for actually there was probably like 3 companies or maybe four companies signing ppas across the world that was google amazon microsoft probably Facebook um, and and that was it and and the reason for that is you know ppa's.
| 13:17.11 | Juan Pablo | Are very very complex because um, you know the the credit rating of the offtaker and the volume matters a lot so you actually have to um, essentially make sure well or the developer needs to make sure that the the credit rating the credit rating of the offtaker is. High enough so they can basically get the necessary finance um from from whatever source. Um, but now what we're trying to do as you mentioned with with zygo is simplify the whole process make it much more accessible to everyone. Um, and. As you said before get smaller companies um to be part of this transition and the the demand is there and the wheel is ah we just need the way.
| 14:07.25 | Johan | So so 1 thing I always think is Fascinating. We talk about ppa and and and in the industry we throw around this word quite a bit with the large organizations as to as you mentioned Aws and Google they have you know procurement specialists. They have energy specialists they they. They have a team around this but where for for a new company a corporate that that looks into this 1 How would you define a ppa and because we're also talking is it a short-term ppa because it's a power contract is is what what?? What is really the difference then. Apart from the renewable and would you say that there's a time difference on a ppa versus a normal power contract.
| 14:53.89 | Juan Pablo | Um, so the the main differentiators for ppas is so so for example, the first 1 will be if the and project exists or doesn't exist. So if if it doesn't exist. Basically um, it's a little bit more complex. To to do because you know as I said the financing um will require ah a different view. Um, you will have to think about like building times and um, you know you need to find the right developer and they need to have the land, etc, etc. Second 1 is operational ppas essentially like ppas that already exists and so they tend to be a little bit more flexible in terms of term in terms of volume etc. Um, but the the vast majority of the corporates are focused on the the new builds right? because. They want to contribute towards building a new wind and solar farm. Um, the second aspect is the the structure of of the vva right? So the the pricing structure the contractor structure if it's going to be physical where you commit to offtake the power that the um but the um win know solar farm is gonna. Produce or if he's virtual which is more of a contract for difference. So he's a financial transaction. Um, and what kind of pricing structure. You want. So it's it's it can get quite complicated. Um, but the the mechanism and the concept is is if you if you bring it. Back to the bare bones. You have a buyer you have a seller you have a contract in the middle and you basically commit to a specific price to to receive power.
| 16:35.76 | Johan | So would you say that a 1 year contract would work the same or would you have the same commitment as the the generator or the the offtake or the producer. So as a 10 year contract is a minimum or a five year contract is a minimum in order to get this deal through.
| 16:52.51 | Juan Pablo | Yeah, so the the lowest tenure the lowest term we've seen. Um, it's 7 years um and and yeah and and you know when when I started with ppa's the term was 25 years um so it has come down substantially I think it's.
| 16:59.43 | Johan | Seven. Okay.
| 17:12.60 | Juan Pablo | It's breach a reaching point because um, a lot of corporates will like it's It's a kind of area that they feel comfortable with but the developers they they need to get the finance to build it and the you know the financiers the financial institutions investors won't feel comfortable with less tenure. Because then they start getting a little bit more exposure. Um, and the risk becomes higher. Um, So there's there's different factors around. You know why? the the term is so so long, but that's something we're trying to to solve because you know 10 years Is is quite Um, yeah, it's quite restrictive for some corporates for sure.
| 17:56.40 | chrissass | So I get the term question I see where Johann's going there but let me just step back a step here and so I think in your your career story you you talked about getting into ppas then you've did 1 company and now you've got a startup the focus summit. So. What are some of the problem statements what you're you're trying to solve a problem here. So what are you fixing? What's broken.
| 18:21.42 | Juan Pablo | That's a really good question. So I think that the whole concept of it is it is broken. It's really really difficult because it's the the the concept of ppas um is 1 hundred percent designed for like to a d to complexity. Right? So it started as a very very complex contract between a generator and very large corporates for very large volume for very long term so basically like the contract has to be very chunky. Um and and the mechanisms like there's a lot of. Risk involved for part for for both parties. So the contract has to cover in like has to like you know what happens if there's ah, an earthquake or what happens if I failed to consume the power that I committed to or yeah I failed to produce the power that I committed to so it's it's there's there's a lot of of of risk involved in there. Um, so from from our perspective now as a startup we we started working around the concept of epas so so simplifying the existing structure the contractor structure that you know in. And we we know that that's not the way to go right? So what we need to do is um, take the whole concept apart basically look at it from from outside and then reimagine the concept of pvas right? If even the term is really confusing is a power purchase agreement. Well like if if you get a contract with. Bob or you know edf that's a power per agreement because you're committing to purchase power and so so so the whole concept you know needs to be rethinked redefined our ambition as as a company for zygo is to make it super simple for companies. To come into platform and like in and by power traceable power that a contributes towards building more wind solar farms b deres the risks the model for the developer and c is traceable so they know exactly where that energy is coming from which we with solar acidset There's no ambiguity. There's no like um green washing, etc, etc.
| 20:35.53 | chrissass | So you're you're saying it's complex. You're saying you need to break down the parts to to to reinvent the the solution here. Um I mean I think in the rudimentary understanding of ppas is it's it's it's a financing tool to to put. Generally like a new renewable or new resource in place. So you you basically need to have some assurance of revenue in the future to get funding and if you break it down to smaller chunks. And you lose that commitment from the the monster company that has the ability to commit to these long-term commitments you you you mentioned a handful of you know, large say fortune 1 hundreds or someone that would buy into a twenty year ppa in the beginning or a 7 year 1 today does it still have the same intrinsic value to fund the project or how does how do you get around that.
| 21:27.23 | Juan Pablo | Yeah that's ah, a very good question so we we can start by like I can start by you know saying ah a statement that there's a finite numbers of amazons and google's and um and Facebook's right so it's it's not. Great that or it's not sustainable if every developer goes to I mean they have a lot of volume and they have committed quite a lot of um of it for it for ppas. That's amazing. But what happens with the ninety nine percent of the companies. Um, we need to find a mechanism. To allow to allow them to take part and credit is always going to be a problem tenure is always going to be a problem. So so how we're doing it and we we just created a module where we can basically aggregate volume from various companies and to be off takers of 1 project that's working really well with scope 3 emissions. So basically like maybe your googles and amazons now they need to tackle scope 3 missions so they need to bring in a supply chain and they can enable a ppa for all their suppliers in all supply chain right? So that that's working really well. But also what we're trying to do is you as a standalone company can come to the platform and find groups. You can join that are you know Um, basically adapt to your requirements like the the credit rating is is it's flexible. Um, or the the term is flexible or the price is flexible or like um they are you know the. The start date of the ppa is aligned with your current contract and I got to stop so the more buying groups we have the more flexibility we can bring and to answer your question the way we're positioning it now is saying to the developer. Okay, you you can sign 1 ppa with 1 of taker fine. But. Happens to see that of the offtaker like ceases to exist then that's more risky than if you have I don't know 10 counterparts in and if 1 of them and cease to exist. You still have ninety percent of the volume contracted or ninety percent plus right. So we're actually building a module through the platform where we can manage the assets on the long term and short-term contracts I mean Market. So basically if you um, we we say to the developer. Okay, give here are 10 clients that are um, very aligned. They have really good credit rating. They don't have a lot of volume. They have um, good volume but not like huge. So basically let's group them together. They have really good grade rating. They get off take energy from what from 1 of your projects if 1 of them defaults then we can jump in and sell that energy in the Shorter market right? As a.
| 24:22.20 | Juan Pablo | Utility Ppa. So Basically we can sell that energy to suppliers on a short-term basis for 1 2 3 year contract whilst we find another cover it to plug it in um and that is the risking the whole model for them because like surely it'll be much but like they they can achieve. Higher prices. Um, and like we can work with them to do ah a dynamic pricing system that basically that and we can determine a fair price for each 1 of these counterparts now the the treat that sorry the the tricky bit with that is going to be. Contracts right? So Do we have 10 separate contracts. Do We have the same contract. You know do they have to adhere to the same contract terms. So that's going to be probably the trick of it.
| 25:08.44 | chrissass | So you're pooling. You're pooling potential users to to help derisk it. It's what I think I heard you just say right? So you have ah a larger pool. Maybe you oversubscribe or you do something because you know there's can be some attrition. You got some formula or actuarial type of a thing where you're looking to see.
| 25:15.99 | Juan Pablo | Yeah.
| 25:26.72 | chrissass | But the likelihood of default is um I get that now is this like a tokenization type scheme or is it just purely the fact that you know I've got a large number of users signing up for a long period of time or you you have some sort of rolling model where you're confident. You can continue to Add. Users to consume the power over time and it's advantageous to the enterprise because they know they're getting green power and it's advantageous to the producer because they know of a revenue source is that kind of the marriage. You're setting up.
| 25:56.38 | Juan Pablo | Yeah, correct, that's yeah, that's very very close. So um, um, I'm not allowed to talk too much about future products and but but actually what what we? what? What I can say is that um, we're trying to make. The whole process is more flexible, not just for developers but corporates um and easier to transact right? So we want transactions to happen in the platform. It could be via you know blockchain it could be via other technologies. Um, as long as there's traceability right? So as long as you can trace. The the block of power that you purchase through the platform or or whatever 2 source and and that um you know it. It can be done via um Rigos or certificates or whatever but they have to be traceable the source um and not allow for you know. Like double counting or or greenwashing or whatever. Um, so our strong focus is to offer the purest energy and the most impactful kind of energy um coming from directly from winds sort of farms. Um, and and that you know and making it accessible to to small companies is. Our strong mission.
| 27:12.90 | Johan | So which I think is really interesting and anything that's process driven if you can digitalize it and you can automate as much as possible. Obviously it's it's it's productive. The 1 thing I'm always thinking around this is as you described in the beginning you have the offtakers looking for a ten year contract the lowest 1 you saw on a ppa was 7 if you're now moving into corporates, especially targeting the smaller 1 in the pool or the bundle or whatever word we're going to use ah is there a commitment is there today a market for small.
| 27:32.18 | Juan Pablo | Okay.
| 27:48.43 | Johan | Let's say maybe not the moms and the pops but the medium companies to commit to more than 2 years you know is there an interest of this because otherwise it's you're in a little bit of a challenge here even if you have ah an automated digital system that can that can pull them but it's still. The commitment of the years that becomes a little bit of a breaking point here.
| 28:10.44 | Juan Pablo | Yeah, absolutely and and it really depends on how it's positioned. Um, so basically the reason like Amazon google etc etc are buying quite quite a few ppa 8 is to um, create trenches. Essentially and and basically hedge um those tranches of power in the long term. So basically they're diversifying the portfolio or the the purchasing strategy and saying okay you know thirty percent of my volume will be for pva's so basically they're going to be set. And the long term so I can um I have security of supply security of price I can do price, predictions, etc. Um I mean depending on the pricing model. But um, and then you can say that the remaining seventy percent or the remaining sixty percent or or whatever it is then you can say up I'll buy as I normally do in the in the. Wholesale market or buy the wholesale market on Shortterm basis. Um, what we want to do is give that option basically like yes you can contribute towards you know having your own. Um, we know solar farm to your name and enabling that to to exist. Um. But you can actually transact small contracts or small short-term ppas in the platform as well to make up that volume and because most companies will want to see a diversified portfolio even the the medium size companies and you know the the large to medium size ones. And they understand the value of having like a long-term fix for the next 10 years because it brings them a hedge a natural hedge to their portfolio.
| 29:54.65 | chrissass | So interesting I was on a call with an exchange leader earlier today and 1 of the trends that they were predicting is they said much like in telecom. They give the analogy of you where we used to pay per minute for our phones that that we don't do that anymore, right? So with your cell phone. You get an unlimited plan. And and what they were predicting in energy is down the road in a not too distant future energy will have these kind of tiered usage and not per usage have you have you heard that or is that play into your future model I mean that was kind of a new thing for me to understand today I get the hedging right? because you're. You're not totally exposed so you're you've got good upside if you've got a certain percentage in future done. But if the model changes does it still work. You know if I'm committing for the next 10 years and people are talking about new models. How does that impact me.
| 30:42.53 | Juan Pablo | Yeah,, that's that's something I've heard um like minute by minute matching or have hour but half hour matching of your demand with clean supply. Um I mean that's that's something that we are aware and something that we're looking into but it's. Still far away and is still quite complex as well because um, you can. It's It's all about predicting the price. Um, and it's all about understanding what price to to produce or to keep whatever because if you if you think about renewable Energy. There's No. Wholesale Market for renewable energy right? So there's There's a poser market which is driven by the fundamentals that push the normal energy price like supply Demand import export weather, etc, etc. There is no index or there's no Um. Wholesale Market for renewable energy taking into considerations. The um, the fundamentals that drive the price of renewable energy which are very different to Wholesale. So The prices drive renewable energy is the cost of building a wheel solar farm the cost of operating and the cost of managing it and like demand specifically for renewable energy. And how you know shiny is the sun and how wind is doing and so it's's it's super different to to your normal market. Um, so unless there is a specific market that you know that you could basically base your minute by minute purchase To. Or link to then it's very difficult to decouple it from from the Wholesome market as it is now.
| 32:25.39 | Johan | So from coming back a little bit to to then to the corporate drivers. What what would you say with your experience. Why is this interesting if if you are yeah, we always we. We tend to talk about the aws and the Microsoft but they're in a different world.
| 32:41.98 | Juan Pablo | Yeah, definitely.
| 32:44.31 | Johan | But so so what? why what? What drives. This would you say for the rest of of the Ninety percent. What why are they interesting in in committing to something that is x amount of years who could also be uncertain in terms of pricing with with fluctuations in price. It's a little bit of ah, a gamble I would say but. But what what? you What are the drivers is it. Green is a sustainability is it proof but they you know what would you say is why are they committing to this or are they.
| 33:10.92 | Juan Pablo | Super yeah, yeah, I mean super super good questions. So so we we work with some of the largest most most known companies in the world right? and something that we've noticed as a company is ah ah and a very interesting trend which is. It's not like the vast majority of the time is not the company but the individual that drives like change within the organization. So we speak to very very passionate energy buyers or very very passionate sustainability directors very passionate you know finance directors in in companies that want. The company like so stirred whole company towards like impactful energy sustainability etc. Um, and sometimes yes, it's ah ah, um, its part of the ethos of the company but the vast majority of the time. Relies on on the individuals. So. So so so we work with amazing individuals that you know drive change within organizations. Second thing is more and more companies are being pushed by their and the boards. Um and their stakeholders but mainly their consumers. Right? So consumers are getting very savvy and they if you if you buy carbon offsets like they want to know exactly where that come from and is it. You know, ah it is it. The deforest are they chopping trees to plant new ones just because. You know it's it's very profitable. Um, or if it's biomass where the palette's coming from like and so the the consumers are getting quite savvy and and that's amazing. So basically the the consumer is driving that as well things like um volatility in the Market. So recently there was. A lot of volatility in the short-term wholese market. Um, so you can avoid vol price volatility by saying a bpa um and the other thing is institutions like the r 1 hundred are um so if you if you want to join the every 1 hundred they have really high standards. In terms of the energy that you have to consume right? So you can't just buy like renewable energy from a supplier you need to know exactly where it comes from. So basically it's it's it's a big mix. Um and a lot of companies as well. Are. Um, focusing on um, setting really ambitious targets and covid did help as well like actually covid um was a driver for companies to to react and say actually you know it's our time right now to do something and so yeah, it's a it's a.
| 35:59.36 | Johan | But if I understand you correctly, then if I understand you correctly, then it. It's more the sustainability than the business driver as of now when you're talking to individuals.
| 35:59.53 | chrissass | So so what is it then you do.
| 35:59.81 | Juan Pablo | Interesting mix.
| 36:11.48 | Juan Pablo | Yes, it's it's definitely the sustainability mainly in in in in these organizations that we we am that we speak to like super known like but they're not doing it for the marketing. They're not doing it for. Like the the main driver is because it's a right thing to do um and the next thing is yeah that we have very strong targets and we have ambitions whateverever we are a sustainable business the other and if like we can avoid volatility of the markets and. You know, most pricing. Most forward curves are pointing towards you know Ah, ah, a bullish market in the long term. So. Basically if you if you sign for a ten year ppa you are very likely that you will have savings at the at the end. So but but that's a bonus right? That's not the main driver.
| 37:11.73 | chrissass | so so I guess I'm a little confused. What is it? you do today. So so you're you're incrementally solving this problem. We're talking about playing an emotional play for for people to do the right thing you're you're saying that. Most likely you're going to hedge. You're going to have some sort of upside by prepurchasing your power for the future for some spot. So it's kind of a hedge against risky market volatility. So what's on the truck today. What if someone called you up today in your day job and said help me out. What are they calling you for.
| 37:44.77 | Juan Pablo | Um, we are basically the enabler right? So there's a lot of complexity within the ppa Market. Um, you know for companies that haven't signed ppas before it's a complex thing to do. Um you you don't. Directly go to your normal supplier. You have to go through developers finance, asset, owners, etc, etc. So it's it's a complete different scenario. You have to negotiate on um on a very complex contract. So what we're trying to do is enable that transition making making that transition happen. Quicker and easier so we are kind of the driver of the transaction and we're not trying to like I don't know convince more companies to go renewable. Although if we buy our simplifying our mechanism allow more companies to do so like it's. Amazing. But we're not like um, consulting or not. We're not trying to to be to replace consultants or whatever we're a tech company and we're um, an enabler and for for that transaction and simpl find the transaction making it happen quicker faster.
| 39:01.14 | chrissass | So so is it safe to say that then you court both sides of the equation. So you're you're trying to get developers to sign up to your platform So they sign up and then you get corporates to sign up and you're.
| 39:01.26 | Juan Pablo | And digitally.
| 39:16.70 | chrissass | You're kind of putting the 2 together. That's what I think I've heard you tell me in in an earlier conversation that you're kind of matchmaking between the 2 and both sides see economic upside by going this from the customer who being the.
| 39:21.98 | Juan Pablo | Um, correct.
| 39:32.23 | chrissass | Enterprise side. You're saying you're simplifying a complex process for them so that they can maybe buy power and play in a market. They may not be comfortable in or may not even know how or have the skills in house to do today and then from the developer point of view. You're saying. There's only so many googles in deep pockets out there. So you really need to access a larger market and you're making a larger market available to them so the project's more likely to be successful is that what your goal is.
| 39:56.41 | Juan Pablo | Um I couldn't have said better myself exactly.
| 40:01.85 | chrissass | I'm sorry I Just we've we've gone all over this conversation I'm trying to figure out. Actually what it is you deliver right.
| 40:07.49 | Juan Pablo | Ah, Ah, yeah, it's just there. There are many moving parts and there so many aspects around you know, renewable energy supply demand. Um, you know the the objective is exactly that right is to facilitate more transactions make Motorcycles happen. Connects a planned amount of renewable energy. Um allow corporates to understand bit more about the market pricing Trends Um, what kind of mechanisms that are available the ability to run tenders really really quickly sign contracts that kind of stuff. Um.
| 40:39.55 | chrissass | And what about resale in the market. So you sign up for a ten year plan you you have surplus energy and all that is that just go to regular market. Are you involved in that as well. For these enterprises if they they have power. They don't need capacity. They can give.
| 40:51.67 | Juan Pablo | Well, that's that's part of our like products we're designing for the future. Um, so right now as I said we are focusing on the current state of the market on how ppas work right now and what transaction how to. Ah, transaction happens right now in the future we're moving to things like secondary markets. Um a more dynamic matching system. Um the ability to sell like shorten ppa's blocks of power So basically in and technology plays a huge part in this basically now we're strongly. Like make us strongly focused on like building the ditch so infrastructure of the future.
| 41:33.32 | Johan | So I I Hear what you're saying and I really like it and we talked on this show quite a bit on the digital part of the transformation of the energy industry and also including the renewable which I think is extremely interesting but this is also Market Driven. So. Even if you are an enabler you you have all the tools in place to help this matchmaking. We we operate in different markets. So from your experience is there a difference where who are leading this is there specific regions or specific. Ah, continents is there a difference between Europe or do you think this? They're all the same now they're all looking to jump on to the platform when it's ready and and and go or do you see any big differences.
| 42:19.60 | Juan Pablo | Yeah, we're we're seeing huge differences and and we're seeing a huge um change and interest towards ppas in general all over the world. So we have been contacted um a lot recently by um asian companies and asian countries. Um, saying you know we're we're really looking at the ppas now as a mechanism to like for corporates to access renewable energy directly from generation. Um like the market is still not very developed. But how can we help it. You know how can we develop it. Um, and and I'm talking about quite a lot of asian countries and latin american countries as well. Um, within within europe there are regions like you know germany um became a very transactable. Country or or country where a lot of transactions happen very very quickly and there is a lot of demand in Poland because the the mechanism is there at some ppas and as other countries and other markets open up then obviously demand is going to be there some like quite a lot of of our clients have um. International operations so they operate all over the world and so basically they're just waiting for some markets to open up so they can basic execute vpas. Um, but also something interesting is the the mechanism the the mechanism to do it so a lot of our clients are looking. Or they have a lot of demand in 1 european country and little demand in others right? So it'll be almost impossible to sign ppas in in the in the countries where they don't have enough volume. So basically 1 mechanism that we're looking at that ah to to be able to enable that is. Ah, virtual ppa where you can basically have excess power in the country where you have the most volume and to cover the rest of your european operations. Um, and then the certificates can be matched against the the volume in each region. And so yeah, it's it's it's a very very exciting time It's a very exciting market. Um, it has been quite old school in the past and now it's evolving and becoming quite. You know, quite cool at the moment so we were very happy to be part of this transition.
| 44:46.62 | Johan | Well, we we think it's cool just to follow up on on this. You mentioned the virtual ppa in terms of corporates. Do you see that there is um. Need is always the need but would you say that? Ah, there is no kind of borders in terms of the way you procure the Pps as a corporate or are you a nationalist thinking right? I want to make sure that the production of the energy that I'm buying I E the investment is in a local energy provider or. Is it the same thing that you can actually do with the virtual 1 and and and procure the energy from um, another country I hear slightly different when when I speak to a lot of people around this and this says no a it needs to be a local ppa or no it could be a cross Border ppa.
| 45:36.72 | Juan Pablo | Yeah, the the the so virtual ppas are the prevailing and structure in the Us and the reason for that is because they have submarkets. So Basically you you can access those submarkets and it's just a. Contract for different right? So you buy on 1 side and sell on the other and it's ah you you base the transaction on ah on a specific market. Um in Europe is a little bit trickier. Um, especially because of the Accountesy system right? So um, in the Us they typically use gap.
| 46:02.22 | Johan | Yeah.
| 46:14.74 | Juan Pablo | Which um, which is a lot more flexible and and they allow for derivative trading. Um in Europe I If R S is a lot more restrictive. Um in in that respect so they doesn't allow for derivative trading So you need to have. Ah, more complex system to cop with it. Um, That's why a lot of companies are put off by that complexity and but if you're ah if you are a us based company I think the mechanism gets a little bit Easier. Um. So So so that's something that needs to evolve here in Europe like basically the the mechanism to sign virtual upa is to be resisted.
| 46:58.49 | chrissass | So 1 thing I think is relevant but maybe not are there incentives I mean you talked about Germany and and ppas and kind of the growth there is there incentive considerations to what you do are there regional governments incentives coming going. That that help drive this market.
| 47:19.61 | Juan Pablo | Um, that's super good question. There. There has traditionally been some incentives on the supply side. Um, so basically subsidies and in Germany is a great example so they've had a really good um like Subsidy regime where. Was very very difficult to to achieve that kind of prices and for the for the corporates so they were very very comfortable with with um with that subsidy scheme. Um now those subsidies coming to an end. So basically there's a lot of flexibility albeit prices are quite high in Germany. There's a lot flexibility in terms of term because there's a lot of wind and solar farms coming to the end of their tenure. Um, but we we believe as a company and and I really truly believe that there must be or there should be more incentives on the buyside. Um, so basically like why do you have to pay climate change levy or that tax for a portion of a ppa if you know if you're directly directly contributing to like again to net zero right. Why of that portion that you sign the vpa you still get tax for climate change levy and that's something like if if the government can take that tax out for Ppa. It would be a great incentive for corporates. Um, also things like I don't know carbon tax would. Definitely help and and we're we're we're actually seeing um governments pushing for ppas in some countries like for example in in Spain. Um, if you are a high energy consuming company. You are obliged by law to sign ten percent of your volume at least through a ppa. Um, so so you you kind of have to have to send a vpa and percent percent of your consumption.
| 49:18.65 | chrissass | So has it this week the eu commission had some policies come out. How does this impact what your day job is is there anything interesting from what they're talking about with their carbon and all the other.
| 49:18.92 | Johan | Um, so it.
| 49:34.87 | chrissass | Um, programs that that you use just brought out.
| 49:36.11 | Juan Pablo | Yeah, we've we've had some conversation in you know with the eu about their ambition to do similar things that happening in Spain across across other countries and and that's absolutely fantastic I think. I mean they those? um that needs to be fleshed out a little bit more but it's trending in the right direction and we're very very excited about that.
| 50:03.60 | Johan | I think it's I haven't read through the the entire thing but I was I was on the same boat here as as chris were in terms of the incentives maybe ppa is is down in the fine details and the devils are always in the details. But ah. I think it's it's an interesting concept but I come back to to to the point where the main driver especially for the smaller ones and and and with the the volatility and the flexibility that isn't on energy market. Where would you see the do can you can you predict when does. When do you see the corpus really taking off especially outside of the the top ten percent but do you see it now or do you see is there a breaking point here. Is it 2022 when when we will actually see that the big conversion or is it further down the road.
| 50:55.23 | Juan Pablo | Um I think it'll be it. It is really dependent on on on the companies but more and more companies are setting targets the targets tend to be either 202055 or 2050. Um, so it really like I think those are. Those are going to be um, driving points in in in the near term medium term long term. Um, but yeah we we we do see ah a very positive trend with with corporates. Um this this deal a lot of complexity. Within the vv market that needs to be tackled and before the vast majority of of corporates even consider doing that and also legislation needs to change like I don't know there needs to be more stringent around offsets and. That kind of stuff because it's very easy for a corporate to just buy offsets and they think like it's that like they're being supply 100 percent real energy or they're contributing towards net zero and and that's it that they're like okay that's it that was easy just by offsets and offsets. Can be very very cheap. So great. Um, so there needs to be a lot more education around ppas. They need to be simplified a lot more um and getting more and more companies feel feeling comfortable with the concept. Um, it's it's is something that were. Working really really hard to to do um and we think technology plays a very strong part in these because you know when the concept and when the structure gets simplified then it entices more companies to to feel comfortable with it understand what. The requirements are and understand the contract understand you know, etc. So it' and and the more and more companies do it the other the companies will follow because and that's another trend that we're seeing and a lot of energy bias like getting caught by the boards going like why is these guys our competitors signing so any ppas. And why we're not like we should be saying for a few years
| 53:10.37 | chrissass | So we're we're getting close to time here. But yeah know I think I'd like to know what do you think? I mean it it sounds at times you're a little bit pessimistic. You're you're saying there's a lot of things that need to change but yet you started a company. You're a founder. And and you've got a vision of what's coming next? So what is the near future hold. What? what are you optimistic about in the next twelve months taking place how how is this market going to shape up and change I mean obviously we talked briefly about germany and and I've heard a lot of negative connotation there because of the. The the the ending a subsidy type of thing and then and changing the market a little bit in germany you're you're bullish about Ppas. You're bullish about updated or refactor ppa should I say what should I look forward to in the next twelve months.
| 53:59.30 | Juan Pablo | So founders within the sustainability. Clean, Tech climate Tech areas are always going to be pessimistic simply because you can see that things are not going fast enough. And it could be various factors. It could be like like things are trending towards the right direction in terms of investment and like focusing on you know, investment in in sustainable companies. Um investment in renewables, etc, etc. Everything is trending in the right direction. It's It's just not training your right direction fast enough so that you know frustration is always going to be like literally part of your day-to-day as a clean to climatemb tech sustainable entrepreneur and but there's always like the reason we're doing this is because you know there always hope. And you know I'm really looking forward to a more sustainable future. Um, where evs are you know, widely? um, adopted everywhere renewable energy as Well. I'm not saying that the the change needs to happen tomorrow because. You know we still rely on Fossil Fuels now. Um, but it needs to be ah, an accelerated transition where we don't rely on Fossil Fuels in the future. Um, and and things like that like things like like carbon tax would help so the government needs to act quicker as well. Um, you know the perception of like there's always going to be a lot of um, controversy everywhere about like the the batteries in in evs where they come from or the like the solar panels where do they go or like you know. How many birds the the wind turbines are going to kill in the lifetime or whatever you know, but we need to look at where the problem is now what is causing the the highest problems and the highest. Um, yeah, so problems in general and what are the best. Solutions available in the market and we need to accelerate so accelerate those solutions like as soon as possible.
| 56:16.60 | chrissass | So what am I going to see in the next twelve months how you didn't give me a prediction I um I want you to whip out your crystal wall and tell me. Yeah, absolutely.
| 56:22.90 | Juan Pablo | From from our perspective from a company perspective. So um, the a further simplification of ppas and access so and a way that you can buy blocks of power through the platform and execute that through the platform without having to commit to a 10 year like Complex vpa.
| 56:41.99 | chrissass | Cool johan any final thoughts to ask every last question
| 56:44.97 | Johan | Some final thoughts. Maybe I think it's really interesting I think that when new technology can support a transition and simplify even better I'm especially looking forward to see the the corporate drivers around this because that's crucial. Investment for the new bills for the for for the ah for the producers is 1 thing that could be legislated and in in a number of different ways. But at the end of the day. This is also a customer market and what will be driving and what will be the benefits for the corporates will be crucial. Right now as we discussed. The sustainability is a main driver will that continue when we go down from the big top tech. Also when it's more business Driven. We'll see but this is where I really look forward to in the next twelve months to see where we're heading in terms of the corporate buying of the ppas.
| 57:40.49 | Juan Pablo | Absolutely, That's what keeps us going.
| 57:44.75 | chrissass | Well fantastic I've enjoyed the conversation. Hopefully you enjoyed sharing with our audience your your thoughts and and vision for the market could go. We've we've enjoyed hearing about it I hope that it goes the way that you you want because. You know new projects need to get funded and and making funding easier certainly accelerates the pace of of having new projects come to fruition I Too Look forward to the point where where the your customers are doing this not just because they're passionate leader but because the economics work and when the economics work.
| 58:17.97 | Juan Pablo | Um, yes.
| 58:20.75 | chrissass | Then it becomes wide scale and and and it becomes easy and and that's what I'm looking forward to.
| 58:24.54 | Juan Pablo | Yeah,, that's absolutely correct and the the good news is that economics are starting to look more positive. Um, and yeah, it's the the future is definitely looking very very bright from our perspective despite the negativity. And that we all go through at some point. But yeah, it's it's It's a very bright future. Um, and and very excited about it.
| 58:50.65 | chrissass | Well thank you so much for sharing with us for our audience. Once again, you've been spent another hour of your life listening to insider's guide to energy I hope you're the wiser for it. You now know something to be dangerous about ppas if you haven't already Subscribed. We ask you to subscribe. If you haven't seen the Youtube videos watching the making of the show I'd encourage you to do that and subscribe to that channel as well. Once again, we'll see you next week
| 59:16.94 | Juan Pablo | Thank you guys.
| 59:19.26 | Johan | Thanks, But that was interesting.