Insider's Guide to Energy

Episode 36 What will power markets look like in 2030?

September 06, 2021 Chris Sass Season 1 Episode 36
Insider's Guide to Energy
Episode 36 What will power markets look like in 2030?
Show Notes Transcript

Chris and Will are joined by Pietro Rabassi from Nord Pool.  Pietro shares their vision for Power trading in 2030.

  • The 3 + 3 (6) current trends: European power markets​ in 2030
  • Integration/connecting of power markets: why and what benefits for market participants?
  • Competition between NEMOs: what benefits for market participants?

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 | Timestamp | Speaker | Transcript

 | 09:19.44 | chrissass |  Welcome to another edition of insider's guide to energy I'm your host chris sasse and this week I have the pleasure of introducing you the audience to 1 of our newest team members will stevenson well welcome to the team.
| 09:36.13 | Will | Hey great to be here. Yeah, just chris.
| 09:41.62 | chrissass | So will I think it makes sense for us to start by introducing you to our audience I know you have been working with you now for a couple months behind the scenes but maybe just a little commercial whose will in what do you do.
| 09:55.58 | Will | Yeah, sure. So I've been I've been in the team. Yeah, as you say for a month or 2 now I've been working as a producer so far for the soon to soon-to- be released sister podcast stories and insiders guide to energy stories. Um, which we're really excited for um and ah yeah I'm ah I'm an energy market analyst based in Oxford and I work mostly in power markets actually um in the irish market. So personally I'm hugely excited for this conversation.
| 10:20.30 | chrissass | Um, and more.
| 10:33.83 | Will | Um, I think that our guest today um is going to share some some really fascinating insights and aside of the industry that I don't get to see too much of um I focus a lot on kind of the way that power markets operate without actually thinking about the people operating the power markets. Um, so. Ah, that'll be something I'm looking forward to today. Um, so it might be a great time to bring pietro in um, hey and and welcome to the show.
| 11:03.96 | Pietro Rabassi | Welcome Everyone I.
| 11:06.86 | chrissass | Well bit thanks for joining us today as will said, we're both super excited to have you on the show and to hear what you have to say I know when we had a call a few weeks ago and in prep for this show that will and I got off the phone and jumped on a zoom call and we were.
| 11:07.23 | Will | Yeah, um.
| 11:25.39 | chrissass | Going through all the things you'd said and we're really anticipating great things today. So we've set the bar incredibly high for you. So we we you know know you're going to achieve it. But I think before we go into the details of the the content. And think our audience get to know who who's presenting to them today. So maybe a little background of who you are and and what you do.
| 11:44.20 | Pietro Rabassi | Yes, so thank you guys? Ah for inviting me I Thanks for setting the the bar very high I Hope you will not be disappointed. Um, so my name is Pete raassi. Um.
| 11:50.27 | chrissass | Um.
| 11:57.13 | Pietro Rabassi | I've been at norpool for about 5 years since 2000 16 and I am the director of Central europe but norpool means that I'm in charge of the business and the p and l so the results in profits of this region. Ah at norpool central europe means. Austria belgium france germany luxembour netherlands poland which means basically basically the markets which are the markets where nopool has is a new entrant since 2018. We've been there. Ah since 2006 in Germany only with some small presents. Um, thanks to. Cable. We had between germany and denmark they've been operating when it comes to myself I was born into an italian greek family close to austria and Slovenia so I grew up with italian and greek as mother tongues german as a first foreign language. And I also during my life have been learning english and french so I truly feel a european citizen and then you're very happy to be in this industry because it's it's a great ah place to feel at home at least for me. Um I am an engineer by Background. Um. I studied it in italian in france and I did my post-grad business and government studies in the us and I have a background in both business and policymaking related to the energy and power industry which I find frankly fascinating I think it's a unique place where we have. Ah, the same time then combination of business societal and public policy challenges and technology challenges in the same place. So. It's great to be here.
| 13:35.13 | chrissass | Well thank you for joining us So you mentioned Nordpool is where you work I think it's a name that our audience is probably familiar with but maybe just a little bit about what Nordpool do does will help folks with a future conversation. We're about to have.
| 13:49.69 | Pietro Rabassi | Yeah, so ah, norpool um has been basically the first um international power market in the world which was founded in 9090 3 in Norway hence also the a nopool. But that has been expanding over the years into different countries. We established the first international dayhead market in 9096 then the first intraday market ninety ninety nine that later became the target model at the european. Level and which are today as well. The models in place. Um, we operate a physical power markets meaning day ahead and in today with auctions and continuous markets and our motto is ah basically to lower by barriers to trade physical power. Both smaller and larger market participants because we really want to have the power markets as transparent and as large as possible and how we achieve that we try to be as easy to use as we can and as price competitive as we can. We operate in 16 countries so far directly all the Nordic caultic countries in great britain and c markets I mentioned earlier and we do consulting work on establishing marketplaces all over the world. The last 1 or the next 1 will be georgia. Will be established the georgian market and norpool is has an important role but we are still a small company. We have about 1 hundred and forty employees. Although they're international with twenty five nationalities and offices across europe. I am personally based in brussels after having spent some time in Paris in Belin for norpool and since 2000 and 20 we are. We've been part of a much bigger group which is the your next group which detains the control of the company which is a pan-european exchange group.
| 15:55.12 | chrissass | So you're with a multinational company across europe I guess and some of the things we talked about Beforehand are based on that right? So trends and things you're seeing across power markets across europe is.
| 16:06.98 | Pietro Rabassi | M.
| 16:10.82 | chrissass | I think what's keeping you awake at night are some of the things you want to share are the audience today. But maybe it makes sense to to tell us what you what? you're seeing I mean going where're from there.
| 16:17.87 | Pietro Rabassi | Sure um I think um I mentioned the the fact that this industry is is is exciting but frankly speaking I I think it's it's more than that. There's not a single day where we don't see any any anything new happening and what we can see. I would say it's its trends around 3 plus 3 aspects the first 3 are directly related to the increase of renewables we have more and more trading close delivery. We have more and more api trading with automation and or a use of. All goes and we have also more and more ah cost cutting exercises and been cost consciousness. Um, and then the other 3 aspects I would like to also point which are indirectly so to say linked to these are um, the distant. Decentralized markets flexibility markets that we've been seeing starting to happen in this industry. Um, some new pricing systems in the both retail and wholesale markets and also the rise of any changing role. Of of Market participants. So these are kind of the 3 plus 3 aspects and and trends I would like to to speak about.
| 17:45.92 | Will | Yeah, great. Thanks! Um, so how do you see? I mean that's quite a few um points of to talk about. But if you could sort of lend a few words to talk about where you see those going you know over the next 10 years and potentially further on if that's where nord pool's thinking is at um. I think that'll be really helpful.
| 18:08.23 | Pietro Rabassi | Yeah, yeah, yeah, so I think that um, let's let's put ourselves in 2030. How how do you think the markets will look like is often a question which is which is raised well um I think an underlying. Ah. Trend. We've been seeing is the raise of renewables in across europe. Um, we see the renewables aiming to reach about sixty percent of production by 2030 according to the eu targets. Um, half of it by intermittent renewables which is a massive change versus the early 2000 we were at less than fifteen percent so it's it's fourfold and 1 of them kind of leading ah drivers has been also germany where the renewables. Today are at more than forty percent production aimed to ah reach by 203065 percent and by 205080 percent. So this is a massive increase and has some consequences. So First of all I spoke about. Need to trade close to delivery and why does that happen? well because weather forecasts become more and more reliableable. Ah, the more you move closer to delivery and if you have intermittent renewables in the mix wind and a photovoltake whose predictions. Ah, become more reliable the more you move closerive delivery and you want to avoid being imbalanced because it's costly to bembalanced in many of the markets you have to trade out your imbalance your imbalances before you the Interday gate closure and we've been seeing that happening for the past few years. Um, and for instance ah nowadays in many of the markets like germany for instance, the last hour trading is is is more than forty percent of the whole entry timeframe which is a massive change for from. You know, maybe ten percent of a few years ago um then the second trained. Um, we have more and more apis in the industry which means the use of automation and or allgos why is that because. Said that you want to avoid being imbalanced because it can be costly so avoid errors and also um markets are becoming more and more complex.
| 20:50.70 | Pietro Rabassi | Um, some of our ah listeners here. Ah trade in the industry and they know that we have different granlarities inmb balance settlement periods in in europe we have fifteen minutes in certain countries thirteen other ones 16 other ones we have different auctions different timings. Continuous markets. So humans cannot. Cope with that complexity anymore and that is another trend I've been seeing that in the in the past few years I would say since two thousand thirteen fourteen happening and even at northpool we see now more than fifty percent of our training, especially inly happening.
| 21:26.77 | chrissass | So is there is is there a risk hope with the algo trading like in the stock market to things where where the things start spiraling out of control from the market perspective where the market has to freeze or have pauses where we've seen that at least in the New York Stock exchange and other places.
| 21:27.80 | Pietro Rabassi | From Apis now. Yeah.
| 21:45.93 | chrissass | Has that happened yet in energy and is that going to happen in energy.
| 21:49.79 | Pietro Rabassi | It's a very good question and it's very good at the pointing to the stock industry because that change happened you know in the early 2000 our modern company uronex has lived that 1520 years ago so whereas the energy industry is living it today and the good thing is that we can take good lessons learned from from the stock markets that we do have in the in the larger in the larger family so to say at northpool but at the same time. Do see um, increasing need of ah for ah for lower latency better performance and is something that we keep constantly an eye on and we keep improving because that is definitely a need for the future. Yes, yes I agree.
| 22:41.16 | Will | So why is it? Do you think that that our markets um have been ah slower to this kind of algorithmic revolution. Why why did the stock exchange get there quicker than power markets. Did.
| 22:43.61 | Pietro Rabassi | So yeah.
| 22:59.60 | Pietro Rabassi | I Think 1 of the reasons possibly the most important 1 is that the fundamental is is is is very different here. We are talking especially in the physical power Markets. We're talking of a commodity which is behind which needs to be delivered to the Grid. We have some physicality behind which makes ah um, the type of of trading the behavior train very different from the 1 of you know Stock market or even financial power markets. Um, so. I Think that at least the main. Ah the major difference that has resulted in a late so to say transition to api trading and possibly to some behavior which is not exactly going to be. The same as the ones in the in the in the stock markets.
| 23:55.45 | chrissass | So 1 1 of the things you said going back to your first point is that you're moving closer to the markets as well. So renewables and intermittent power. So you also I think allude to or maybe and previous conversation that. This is becoming more of an international Market. So it seems like that's both 2 sides of the same coin 1 is hey let's get closer to everything is, but then let's also enable trading for greater distances is that perception accurate from what you presented.
| 24:30.99 | Pietro Rabassi | Yes, yes, yes in a sense because um, so the first trend I mentioned close during closer to delivery is the need is is so to say a um, a timing need. Whereas the second trend is is a geographical 1 that you alluded to um, the markets are becoming more and more as we say in our Jargon integrated both day ahead and Intraday um, and the main rationale behind is that um you. As as as a as a country as a um country needs to rely on a certain ah production and generation-instilled capacity. You don't have to be self-sufficient all the time you can rely on your neighbors and that is the beauty of being part of europe. Um, and a european integration project for both day ahead and intra today where thanks to crossbora capacities markets have been connected along the years I mentioned nineteen ninety 6 for the first international day ahead market and ninety ninety nine for the first intraday power market. And the the latest edition we've had was for day ahead in June this year of four countries of central eastern europe czech republic slovakia hungary and Romania so in day ahead today. Yeah, if there is cross border capacity. Basically you can trade between finland down to greece or down to italy or down to portugal and in the inter it's a similar setup. We've added the centralrist and european countries later last year the next edition will be also italy and greece and it will be a similar setup where a trade can if there is coursepora capacity in this real- time continuous market betrayed between finland down to portugal or down to greece.
| 26:37.56 | chrissass | So like I guess I'm I'm wondering on capacity regionally is is there enough variant in that geography that capacity is there. So let's say heat waves hiss hitting and and everyone wants to air condition or if it's cold spell and there's more power.
| 26:39.36 | Will | That's yeah.
| 26:56.17 | chrissass | Is that geography big enough to kind of meet the capacity in real time for individual areas. I mean our country plans basically saying Okay, we're counting on our neighbors but you know with with the weather I mean Europe's not that big right? So is is there enough variability between the region. The capacity is there.
| 27:17.19 | Pietro Rabassi | Yeah, it's a very good point I think there are 2 aspects here to be taken into consideration. The other 1 is so the first 1 is the yeah what I mentioned so the connectivity between countries across europe. Second 1 is also the fact that there are definitely some mechanisms in place in the balancing Market. Basically after intertra the energy market. Um, which can happen real time. There are some what 1 calls the reserve mechanisms primary secondary and tertiary. I'm not an expert those are run by the tsos for the different countries and they are also being coordinating more and more at european level so we see that trend also in those reserve markets that basically are there to avoid. Outages in the grid.
| 28:13.75 | Will | Yeah, so I can see how how um ever increasing. Um you know integration of markets across greater geographies would be useful for a kind of latency of supply in in a case where it's sunny in the gb but but not Sunny. You know in Eastern europe perhaps um but is there a natural stopping point for the integration of markets. Um, you know or is the ideal future case in your opinion a kind of worldwide power market is that the ideal optimum.
| 28:48.44 | Pietro Rabassi | Um, well in Theory. Yes, but then there are different arguments that come into place I would think of 2 at least 1 is the um, the technical ah background so grades. Um, do not run for instance with the same technology with the same voltage across europe and there is also not necessarily the same model of of markets. Sorry across the world. So um, there is that. First challenge and some countries are not connected also with neighboring countries of course that can that can be changed and there is the other aspect which is also political. And we know that this is a very policy and politics driven industry. So sometimes decisions are taken. Also, you know from that angle and I would say that within europe and within the european union. Ah. Those decisions can be taken more easily but then outside of it. it's it's it's more challenging.
| 30:07.57 | Will | Yeah, yeah, um.
| 30:08.77 | chrissass | So maybe it makes sense to you started saying there's 3 bucks to oh well, you want to ask go? well.
| 30:15.55 | Will | Um, no I was just going to ask them. You know it. It seems and it it piqued my interest the idea of kind of the Eu being ah an easy coordination space for these things. Um I Wondered. It seems to me at least and maybe this is because I kind of focus on European power markets and not really any of the others but it seems to me that Europe is is further ahead than um, most of the rest of the world If not all of the rest of the world in terms of kind of international um integration of of power markets and and power flows. You have ah an opinion on on why that might be.
| 30:55.84 | Pietro Rabassi | I think um, yeah I agree with you that we are definitely ahead in a certain sense in the in the international cross-border integration I think um, there are different reasons and. Couple of them are related to the the history of the of the constant and the ah geographical also proximity. So the first 1 um I think the european union is also a project. Ah, which has you know which was initiated a few decades ago and the energy ah policy and the integration of markets is also 1 of the axes and that is part of the european project. Um so I would say that there is definitely a. Political willingness behind and but then there is also um, a business and he had come to the second point business and technical argument. So the fact that um countries are you know, um, are connected with each other. And we have seen a model which I mentioned launched by norpool ninety ninety six already been experimented and happening internationally with Norway and sweden um gave the idea that integrating markets cross border. Was possible early enough and that was the first time it happened and and it happened europe so I think it's it's a real success story for for us.
| 32:37.28 | Will | So it's a.
| 32:43.35 | chrissass | So I I get the geopolitics of it I understand the value you talked about at in the cable or the the multinational nature and the upside of that. But you'd started this conversation by saying you have 3 plus 3 points right? So we we started with a couple of them and I think we derailed you by getting interested in the conversation I would like to go back and just go back to the initial premise you had and make sure that we don't miss some of those points because I know we talked Beforehand. It was pretty exciting to meet it here. Here kind of how you broke it down. So I think we've covered 2 of the points a bit does it make sense maybe to go back onto that you you up for that.
| 33:23.61 | Pietro Rabassi | Sure? yes, definitely? Um, so the third point I was wanted to mention about the direct consequences of of the of having more and more renewables in the in the mix is um. Basically the cost aspect of things and this was mentioned interestingly enough also in 1 of the previous episodes in episode 12 if remember correctly on digitalization where the colleague spoke about cost cutting pressure. And this is something that we've been seeing in the history for the past few years and probably if we look at 2030 you know we will have to be all the time cost consciousious and and and be be kind of really attentive to costs and why is that? Well. Renewables drive down prices in specifically the wholesale market and if you are a business you want to keep Margins stable or try increase them. So what do you do you have to cut costs right? so. Um, that is something which is happening um has been happening and will be happening in the future. So these are the 3 directly stming out of ah renewables and then the 3 other ones you wanted to mention which are somewhat indirectly related. Um, are the decentralized and flexibility grids. Um, and we have been seeing initiatives happening in this in this sphere across europe we as North founded a company ah called nodes we are now part of a couple of initiatives called. 1 net gopax where basically um, the the aim here is to um, create markets at the level which is different from the the traditional markets traditional markets are set at tso so level transmission system operator. And here we look at dso level distribution system operator. Why is that well because we because we have more and more renewables batteries electrical vehicles. We have more and more decentralized generation. Um, and we want to avoid. Ah, bringing all those congestions to the grid at the traditional market level and solve them before they come there so there are different solutions. Of course 1 can think of this market 1 can think also of building more more grid connections. But we all know about the.
| 36:09.37 | Pietro Rabassi | Ah, the Nimby effect nobody wants to have them in their in the backyard they can be very costly and also there is a third solution which is splitting price zones but that is a very political argument which is quite touchy in certain countries. So. By introducing this decentralized market. We try to Solve. We would try to solve these issues of of congestion beef kind of early enough as an alternative to the 2 other 1 other solutions I mentioned and then yeah.
| 36:41.00 | chrissass | So I mean just to make sure I understand this at the risk of just you know, being ignorant here and and and going along and not understand when you're saying these these nodes and you're so you're solving the problem before it hits the Market. And these like micro-grids that you're setting up or what what specifically you mean a node is.
| 37:01.26 | Pietro Rabassi | Yeah, so um, here, let's not possibly confuse the the zonal pricing model that we have in europe with the nodal pricing model that we have in the us here we are talking of a somewhat. In-bet between solution where we do keep the zoomal pricing model. But yes, we do have ah um, a market which is similar to the existing 1 in terms of how it works then the the geographical scope that 1 looks at. Ah, is is first of all smaller so we took of of a dso level type of of ah geographical areas but also a different voltage level. Um, so basically it's It's a complementary type of market to the existing ones and here comes the challenge of how to integrate these new markets with the existing ones. Is there going to be basically a connection in the Intraday market for instance we don't know yet that has been.
| 38:13.44 | chrissass | Started Thanks for trying to help me.
| 38:16.20 | Pietro Rabassi | Tested investigated sure you want me to just say a couple of words on the 2 other ones I wanted to mention to other trends. Um, so the second 1 which is indirectly related to having more and more renewables in the grid is. Um, is the fact that we see we have seen in the in the already in the retail power industry. Um a kind of concept of flat fee pricing and we we see more and more of that also in the wholesale market and here I like the analogy. Of the with the telecom industry your ah colleague johann has been working there and he heard in previous episodes that he mentioned analogies with that and he it's a very good 1 because if you remember um some time ago fifteen or 10 years ago we would pay by use. In in in foams whereas today I think nobody does anymore we have packages with you know with amount that 1 can use of data or calls and I think a similar thing will happen also in the by 2030 so to say in the energy industry where. Um, also wholesale markets 1 has that type of approach and the last point is the never ending so to say change of the nature of existing ah players in the power market. Have to be as a power of change always attentive ah to the needs of existing ones but also to cater for the new type of market participants which you know ah come to the come to to to being and for instance, ah. Um, the so-called direct marketers of renewables many years ago. Didn't even exist and because we have more and more renewables in the grid solutions such as virtual power plants created by these market participants. Become you know a real trend and real fashion industry and we really have to cater we as a power market operator for the needs of ah market participants to the best extent we can because without them we would not be here.
| 40:44.67 | Will | Yeah, thanks for that 6 um, 6 very interesting trends to be watching over the next nine years I suppose and Beyond and 1 1 thing that I wanted to pick up on there which I thought was quite interesting was on on the trend to towards flat fee pricing. And the idea that you might pay a kind of fixed fee for for an allowance. Um, 1 thing 1 of the most difficult things with operating power systems is that there's this kind of lack of price responsiveness of of demand and I think it makes it very difficult to to operate these systems because. You know people aren't disincentivized to turn on their tellies. As soon as they get home from work and you know turn on all the lights and and and all those other things you do at peak times. Um, it probably makes it very difficult to to operate so many markets all at once when when you have. Kind of no price responsiveness and there are all these constraints I wonders if you might talk to how you include constraints in your role as a kind of market operator and how you account for those because they they must be really significant to the to the way that you do your job really.
| 42:04.00 | Pietro Rabassi | Definitely It's a very good point because ah we 1 of the role that we have in the market is to provide ah prices and price signals. Um, however, how relevant they are very much ah depends on. Um, on how the specifically the retail market is is is constructed and for instance, we've seen wiqwell originally we come from the Nordic area and for instance from norway norway and almost everybody knows about norpool because there even. House ah is is is tagged on the wholesale market prices which have been operated by open for a long time. So um, whereas in other countries. Um. That has not been the case very often. The retailer. The supplier is is is basically um, a little bit um in between the wholesale market and the retail market and there is not such a direct link. However, there is some good news in the sense that as of this year in all the eu countries. Um, there is an obligation that each supplier must provide at least 1 ah pricing package that is related to the wholesale market pricing. So um, that probably will change a little bit the the the the landscape I'm not sure about gb also the uk because it's not part of the eu. You know me better than I do but I can say about the eu that will be also probably changing the. And onscape.
| 43:48.10 | chrissass | So How does the the flat pricing change the supplier to the business model on demand and the company to be profitable and do that is this is this a model That. Improves The bottom line makes it much harder for them to be a profitable business. What does it do to disrupt and and change the industry.
| 44:10.50 | Pietro Rabassi | Yeah I think um here it's it's It's a difficult question to answer. But it's a very good 1 I think that um it definitely gives some to the supplier. Some. Predictability about their you know about their their um revenues and their the needs of of of supply for the upcoming months or or or years depends on the how long the contract is subscribed for. But um I think. I agree that there is a little bit of uncertainty within each of those sort to say the the packages and here the challenge will be definitely to have ah attractive enough packages that can at the same time ah predict the future but also be. Attractive for the customers and the end consumers specifically.
| 45:11.26 | chrissass | So But did the flat pricing come because of the new entrance in the market disrupting or is the market demanding flat pricing or why? Why do you anticipate that happening right in telecommunication it came because there were New market entrance that. That changed the model and disrupted the industry. So Why is power going down this path. What's what's the motivator.
| 45:33.95 | Pietro Rabassi | Yeah, um, there can be also that aspect we have seen that in the retail industry. Yes, um, happening with new entrants coming in but possibly also in the wholesale market which is. Right now opening to to competition. Um in across europe where basically within each of the bidding zones or price zones there is more and more than 1 power exchange operating and we call it now. Nemos the power changes noes the electricity market operators that operate with a concept of shared auto books within 1 area for both. They head in today and hence the liquidity argument so to say which is the conundrum for traders. Is is not there and nimos need to differentiate with any other means which are the typical means of the business.
| 46:36.34 | Will | Yeah, um, ah was thinking of of changing tack a little um now and you mentioned um, Nemo's and it it. It brought up something in my head that I had kind of going into this doing my research ahead of ahead of our conversation is that. And you've talked about how ah multiple nemos nominated electricity market operators can now operate within a single sort of bidding zone. Um, and and that this was a positive for market participants and ah you know perhaps forgive my naivety. Um, but. I kind of wondered what? Um, what is about that competition amongst Market operators um, what is what is it about the kind of role of the market operator. That means that that competition is a good thing for market participants and and is it all market participants that benefit from multiple um Market operators. Operating in it in a single zone.
| 47:39.85 | Pietro Rabassi | Yeah I think it's a very good point because it's a new thing at least in the wholesale power markets. But if we think um, who would be against competition. Um I would not be in any of the. Markets I mean also as a private citizen I think it can only bring benefits because it makes an emus makes us in general more. Ah, you know more prone to to change to think how we can do better Can we be better. Um, with with our services and offering to best best serve our our customers. So I think um that it can be only beneficial to market participants in the wholesale market. But also if those benefits are are. Transmitted also to the consumers even to the end consumers in the end and I think that here there is definitely some some aspects that will have to be seen in the next years that will stem out of this of this competition.
| 48:52.13 | Will | Yeah, So I think maybe taking it a little back to the Fundamentals. Um, so I had the impression that um, kind of power exchanges were not-for-profit organizations and so um, you know where does the kind of. Potential costs saving for consumers and producers come in and you know is there is there a fee on on all transactions within an exchange um on which you know different market operators can compete and to lower prices is that is that the way it works.
| 49:26.37 | Pietro Rabassi | Um, yes, so there is we are not ah we are for profit organizations at least the ones which are called competitive nemos. We have a few countries many countries in europe where there is still a monopoly so there is 1 exchange allowed in that. Specific country only that ah we think should be changing in the next years to have a level playing field across europe but for the ah competitive nes as as northpool is yes, we are a for-profit organization. We'll live out of the um. amount of members that we have and the amount of tarawatt hours traded. Um, so we have both fixed fees and variable fees. But at the same time we as I mentioned in the beginning we want to be decently priced from mental cost of trading perspective. So. Ah, that is our strategy and we want to be competing, not not only on pricing but on many of the other aspects I mean which markets we offer how we package them what products we offer and many other things that are not merely pricing which we are really highly recognized for like ah for instance high quality of service and and so on so forth.
| 50:46.63 | chrissass | So I get that you're for profit that that you're not just doing this to be a nice guy. Um I guess as we get towards the top of our time here and start running low on time I want to see how all these play together so you brought in a number of points and every time you brought a point. Both will and I have jumped and asked questions about each step of the way so you had 3 points plus 3 points. So maybe you can help tie all this together in the vision and and how this drives the and industry going forward. What's what's going to be different. So if the trends that you're predicted really take place. If we have flat pricing we have more automation or ai doing algo trading. We have new entrants. We have all these elements in Place. What does that mean to the industry where where is it going to be different than what we see today. So a year from now we talk or 3 years from now we talk what do you expect to transition. What is this What is this all about.
| 51:44.62 | Pietro Rabassi | Well I think I would say a couple of things um which fall under the umbrella of never boring industry and I Frankly think that with the energy transition. We will be seeing massive changes and that I try to describe at least with those 3 plus 3 trends in our in our industry. Um, but maybe a couple of a couple of things I would like to Add. Um I think that. Ah, with the energy transition. We will have possibly also a massive increase of in demand of electricity. Um, there is there are some studies and here we talk worldwide that if the energy transition goes ahead as planned. In the next fifteen years probably we will have to have 6 to 7 times the currently installed electricity and generation capacity worldwide to cope with the energy transition that is a massive change and um, the. Other thing I wanted to say is that we will have to as a both power market operator but also ah I'm speaking about the grid operators. We will definitely have to accommodate for these changes and also basically the. New challenges that come with all these this aspects I mentioned before the 3 plus plus 3 trends and frankly, it's it's exciting to be a part of this of this of this of this project with this future. Um, we have been ah mentioned that we were found in 97 ah, so found ninety ninety 3 with the first market ninety ninety 6 international 1 and we've been pioneering the markets and we want to be at the forefront of of the changes to be able to best serve the market participants and I don't think we will. We will regret that it will be an exciting journey for the next at least 1015 years with huge changes.
| 54:00.59 | chrissass | So so will as we get to the top of the time here. Do you have any final questions I mean it's exciting to hear about transition I see the change going here. Um what? what final questions or thoughts. Do you want to have will today's episode
| 54:15.21 | Will | Yeah, um, it has has been a fantastic episode. Um I guess 1 thing that um, that I'm kind of interested in hearing your thoughts about just just kind of briefly towards the end is whether you know because there are there are kind of 2 2 main ways that. Electricity can be traded and that's bilaterally. You know 1 you know seller to a buyer but then via exchanges um and my guess would be that you know, ah over time since deregulation of electricity that it would switch more to exchanges. But then there's also this kind of counteracting trend of um power purchase agreements for renewables which is a kind of way of of making perhaps this simplistic but ah, a good way of making renewables projects bankable by providing them kind of a fixed revenue and so. You know, perhaps ah something like a big data center or a supermarket will buy a fixed amount of electricity off them per year and they'll arrange the price beforehand so that it it can be built and is finable which of those is winning out. Yeah, and you know are you seeing an increase in in. Traffic in in the markets in the exchanges or are you seeing people switch back to bilateral kind of trading and away from the markets.
| 55:40.55 | Pietro Rabassi | It's a very good good point I will I think what I can say is what has been happening in the markets that nupool has been operating um in the Nordic markets. Um, the otc is um. Less much less relevant than for instance in continentent europe um, that is for different reasons. 1 of them being the fact that norold really has the as a motto as mentioned the beginning to attract both small. And large market participants but lower in the bars trade. So we want even the smaller and the smallest ones to be able to ah to enter the Market. We have different membership models different pricing models that can attract also the smaller market participants because the larger the market is. And the more reliable the price signal is um so that has been happening in the nordics and we have seen that happening also in in some of the markets that we started operating only a couple of years ago in Central europe in europe where we see the first market participants that came. From being serviced by third -party market market access providers and basically doing ballat trading and otc onto the market because thanks to whirlpool. It has become possible because it's easier to do it and it's less costly. So probably we'll be seeing that. Trend definitely and how ppas will play into the market is still an unowned unknown factor. But I guess probably that the first aspect will win over the second 1.
| 57:30.10 | chrissass | So I think what I just heard you say is you're bullish on Market growth that that otc at least from your experience probably reduces in the future because you've opened the markets by removing complexity or various entry and. Pretty frankly for most of my experience working in the otc space is cost structure markets tend to be more expensive and that's 1 of the drivers of of keeping things separate. What I didn't pick up in your answer was if you look at the trend towards renewables and kind of. Either getting some of your power locally or doing things even down at the individual you smaller increments right? So a company might have its own solar or might have its own wind farm or have a micro-grid or have some sort of a. Different need to get a percentage of their base load or predictable energy knowing that hey every day the wind blows or the wind does this and and and work in there and then using the spot markets or whatever to make up the gap I would think. Is that part of the equation is that part of the calculus of the change.
| 58:41.31 | Pietro Rabassi | I think so um, when we talk about small and small ah Market participants. It's in the wholesale markets as they are today. It's it's difficult envisage that. Ah, myself who has a solar panel on on the roof of my house um will be trading in the market. But here comes the beauty of the new Market participants that types that I mentioned like the aggregators of renewables whose job is exactly that. Ah, to take ah kind of the the smaller the smallest ah type of of of producers aggregate them and and put them into the Market. Um, so I think that even the smallest ones will be able to access the market directly. Ah, thanks to for instance, aggregators of renewables.
| 59:38.66 | chrissass | So you have any final thoughts then so we've we've had kind of a wild ride here and over the last hour we've we've gone over each of the points you've talked about will and I both had slightly different directions in our questions. But maybe you can summarize and bring things together for our audience as a final thought is to what this means to them. So if if you're in the energy industry. That's generally our demographic of people who listen to the Podcast. What's what's actionable out of the today's conversation so they've spent an hour of their life listening to us kind of pontificate but what can they do different with this information.
| 01:00:19.65 | Pietro Rabassi | Yep I think let me first of all summarize possibly the the trend I mentioned um and then say how they fit in in the and the the 2 axies of future development. So the first 3 I mentioned were more and more ah training closer delivery. Second 1 more api trading possibly with algo trading Second one b cost consciousness fourth 1 more decentralized markets. Fifth 1 flat fee pricing sixth 1 changing a new ah roles of Market participants and. Um I think will be happening in the next 10 years in power markets at least in europe that are characterized by 2 main access development that we did hit um hintu um, the first 1 is the integration. And the connection of power markets for both day ahead and Intraday across europe so meaning that you can trade if there is cross border capacity from Finland down to portugal and and and to other countries. Um, and that is. Beneficial to our listeners because basically um, if you have you know if you if you run a specific generation. You don't have to rely on yourself only but you can rely on your neighbors as well. And and the second axis of development is the competition within the price zones between nemos in the wholesale market and that will be beneficial for market participants because they can be just. Taking the best offer they they can in terms of service in terms of products that they can get and how they are ah packaged and how they are priced from the for nimos operating in that price zone and that is for market participants in the wholesale market and. Um, that will probably benefit also the end consumers in the end.
| 01:02:32.61 | Will | Um, yeah, um.
| 01:02:32.92 | chrissass | Well that that brings it together for me I think it's been a great episode will why don't you give your closing thoughts and then let's close this episode up.
| 01:02:42.31 | Will | Yeah, um, fantastic episodes. Really really enjoyed talking and I hope we can. We can talk again. Um, and you know hope it doesn't take as long as getting to 2030 seeing what the actual Trends play out and and become but certainly I'll be I'll be watching those 6 the 3 plus 3 Um, with a keen eye.
| 01:03:05.11 | Pietro Rabassi | And thank you as well. I say it's been a pleasure to be here. Thank you for inviting me and I might say that I will but be beneficial to some friends and relatives that after so many years still struggle to understand what. My job is and the sector working is so thank you very much.
| 01:03:25.10 | chrissass | But thank you for joining the show. It's been a great show as always you spent another hour listening in the insider's guide to energy where hope we bringing you perspective. You wouldn't find anywhere else and if you're a friend and family member of our guest. Perhaps you know what he does for a living now. If you have yet to subscribe please click the subscribe button please click like and we will see you next week next sunday at midnight when the next episode drops. Well good I think we're there.