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- [00:00]
A
I'm your host, Ed Porter, and welcome back to Transmission. Two thirds of industrial energy demand is heat, not electricity. A significant share of that falls in the medium temperature range. The frying, drying and applying that runs through paper mills, breweries, food plants and chemical facilities. Most of it still runs on gas. In Germany, where natural gas dominates industrial process heat, that dependence is acute. There's an alternative. Thermal storage converts electricity into heat during low price windows, stores it and dispatches it when the factory needs it, cutting the gas bill substantially. My guest today, Alex Robertson, CEO of Energyness, joins me to talk us through the technology and why the grid is the thing standing in the way. If you're looking at projects in Germany, Moto Energy's solar and battery forecasts are live. Or you can ask Ko, our AI analysts, any questions that might arise from this conversation. Link below. Let's jump in. Hello, Alex, and welcome to Transmission.
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B
Hi, Ed, it's great to be here.
- [01:16]
A
Our pleasure to host you and very excited to get into thermal storage today. What is one thing that everyone gets wrong about? Thermal storage?
- [01:25]
B
Yeah, thermal storage. Thermal energy storage. I think probably the biggest thing that would help people understand it better is if they thought of it more or less like normal battery electric storage. It's got so much in common, but it's cheaper and better.
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A
Okay, cheaper and better. That's a great, a great start. And you mean it's got so much in common in that it's kind of like, what are the characteristics that make it so similar to battery energy storage?
- [01:48]
B
Well, okay, let's start with the big difference. Um, we turn energy, electricity into heat, and then store it as heat and then deliver it to our customer as heat. We never go back to electricity. So it's, it's one way in that regard. So a traditional electric electrochemical battery, obviously you go from electricity to your electrochemical reaction, lithium ion reaction, and then back to electricity. So we don't do that. And I think for a lot of people, the kind of one way nature of it makes people think, well, this is a very different beast. But actually, the way the electricity markets work, it functions 90% the same on the market as battery electric storage does. But you have a bunch of benefits. We can dig into them if you like.
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A
Okay, well, the thing I really like. Right. Is that whenever you hear about any kind of technology, you should kind of think about the energy side of it. And if somebody tells you that there's, you know, 10 stages of it being converted from one thing into another thing into another thing, like every time you make that conversion, you're going to lose energy in that process. There's going to be an efficiency. And so you kind of automatically get quite skeptical. But as you're saying, so it's sort of from electricity into heat and then heat gets delivered as heat. Well, there's kind of fewer steps in that, which to me already feels like an advantage versus sort of other sort of techs coming out. But let's then just talk about how the thermal battery actually works. And I know today you've bought a prop as well, which I love. So maybe you want to start off describing the system itself and then let's talk about the prop.
- [03:20]
B
Yeah, okay. The system takes electricity from the grid, converts that electricity into hot oil, pumps this hot oil into one of two different places. It either goes to a block of concrete and makes the block of concrete hot, that's the battery, or it goes to, to a heat exchanger with the client. And we deliver then the client either hot oil or steam or hot air or however they particularly want their heat. They can have it how they like. So you've got, you've got three elements to the system. You've got the electric heater, you've got the concrete block of storage and you've got the heat exchange interface with the client. And the client for us would be an industrial heat consumer before we will come back to the technology. But I think we've got to probably start with understanding, understanding who the client is for us. And that would be industry. So a common misconception about industry or just kind of not known fact is that at least two thirds of industrial energy demand is actually heat. So if you go to a paper factory, they'll have a, you know, some electricity demand for running some machines and running their computers and lights and so on. But the vast majority will be gas that they're burning to dry the paper. And that's true in, you know, cooking, you know, in industrial, you know, cooking, food preparation, food and beverage, making, brewing beer, you know, making spirits, chemical processes all over the place. There's huge amounts of heat being used
- [04:50]
A
and it's not all exactly the same. Right. So you have low grade heat, high grade heat. Obviously some, some parts of that sort of spectrum are much harder to produce than others. So where, where do you sort of see your solution fitting in?
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B
Yeah, so you've got, you've got a range, you've got kind of space heating which is, you know, sub 100 degrees territory. And that's the, that is the domain of the heat pump. And then at the other extreme, you've got the very high temperature heat which is extremely difficult to, to electrify. Difficult to electrify. Maybe not extremely difficult, but difficult which is making cement or steel, you know, electric steel furnaces and so on. In the middle you've got this huge demand of what we call medium temperature heat, which is typically delivered in the form of steam. And that's, I say, yeah, frying, drying and applying. So cooking stuff all, you know, 200 degrees Celsius, classic kind of cooking temperature ovens, frying your oven, chips and so on. Drying stuff. There's an immense amount of drying that goes on. Like paper being the biggest application. But everyone's trying stuff, you know, and then applying and using chemical, chemical processes. So this is medium temperature heat. You're typically too hot for a heat pump. Heat pumps are moving up into the bottom end of that territory.
- [06:07]
A
I was gonna say we see that kind of, we see that growth from heat pumps. Heat pump from five years ago is not the same as the heat pump today. They are kind of eating into that.
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B
They are. So they're coming up from the bottom. But you know, the thing with heat is the higher the heat, the harder it is to deal with. And so, you know, doing anything with heat at a thousand degrees is quite a challenge. You need to use very specialist materials. You have all kinds of materials, do all kinds of funny things. When you heat them to a thousand degrees, you've got to be very careful. So we're operating in a range. Our products, you know, our sweet spot is between 150 degrees and I would say 300 degrees is kind of our sweet sweet spot. And, and that's, that's the range where pretty hard to do it with a heat pump, if at all. But it's still very cost competitive to do it to do, to store energy as heat.
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A
Okay, right.
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B
So the customer wants, they want heat and they're currently, they use a gas boiler. Most customers would use. Yeah, we're mainly in the German market and the, the main heat source for German industry is gas boilers. Gas boilers are great that, you know, they, you can fix your gas price for two or three years if you like. You can, you can get a big, nice, big grid connection to the gas network. You know, 20 megawatt gas link, no problem at all. Gas boilers, not very expensive. Turn it on and off when you like. It's a great solution. Problem is it's increasingly expensive and obviously it's not compatible with the net zero future. So yeah, we're going into German Factories and augmenting their gas boilers with our solution, our power to heat solution. So what they want is heat. So why do you need the storage? Is the next question. And the kind of starting point of understanding is that on average gas is a lot cheaper than electricity. Even now, even with the Straits of Hormuz crisis that's going on in the Middle east, gas is still cheaper per unit of energy, on average. But we're not interested in the average. Where we use storage to decouple the thermal demand of the client from the market price of electricity. And when you do that, when you buy electricity only when it's cheap, then suddenly you can come in well below the cost of gas. And that's what we're doing.
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A
Okay. And the way that, so it's quite, it's quite interesting. Right, so you're, because you have storage on site, you're sort of shifting in time to try and get low cost electricity from a cheaper period and then make that more competitive with gas by avoiding those high priced periods. The heat pump example, like they get around this in a different way. They use the electricity to borrow heat from elsewhere, which is kind of how they compete. So, yeah, so we're essentially trying to say that if you're just going to run like an immersion heater, so just like straightforward electricity to heat, that's going to be expensive. But if you try different ways of getting heat, either by shifting through time or by borrowing heat from elsewhere, then you can be a bit sort of canny about this.
- [09:04]
B
Yes.
- [09:04]
A
And you can find solutions where they, where they lower costs. So before we kind of go into the sort of economics and technical side, I know you've brought a prop and I love a prop, so I'd love to, I'd love to sort of see what we've got.
- [09:16]
B
Right. So I think you have to ask the question. Yeah. Why thermal storage? You know why? You know, and I ask this question all the time, you know, why, why do the storage, why not use a battery, a traditional electrochemical battery for this? And so I brought an example here. This is a piece of our concrete. We use a special formulation of concrete.
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A
Okay.
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B
This is, we call it. Yeah, you can touch it.
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A
Yeah, well, thank you. But just making sure the people, people who are listening to this know what I've got. So I've got in my hand, I've got a sort of, it's like a, a cylinder the size of a mug and it just looks like a regular, a regular bit of concrete. If I'm honest with H. HL2B written on.
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B
Oh, don't read that out.
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A
Yeah, yeah, sorry. Top secret.
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B
Top secret. I mean it isn't. What is it too far? It's a, it's a very, it's a concrete that's been optimized for thermal conductivity. The, its ability to transport heat and to some degree for thermal capacity, its ability to store heat. The storing is the easy bit. Anything big and heavy, bricks, stones, sand, all that stuff stores heat very well. But the conductivity is the challenge. And the way you improve the conductivity is you have, you minimize the amount of air bubbles that are on concrete. So normal construction concrete is actually very porous. And you also choose an aggregate that is, has a good thermal conductivity, which is the stones that go into the concrete. So that's.
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A
Okay. So there's less air in this block of concrete than, than a regular block that you would see somewhere else.
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B
Okay. And it uses a, a special quartzite, a, A, a quartz based aggregate that
- [10:47]
A
is, which is the stone I can kind of see in it. Yeah.
- [10:50]
B
And we get that in Germany and that happens to have good thermal properties. Conductivity.
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A
Well, there's a nice story in there. Right, so you, is your supply chain for manufacturing this is it all very much sort of within Germany for German industry.
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B
It's very, it's boringly European.
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A
Okay.
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B
It's all, it's all. It's mainly Germany. There's a. We, we have one factory that we use in Eastern Europe and one supplier, a few other suppliers around Europe. But it's entirely European, it's entirely local. It's, it's, it's very basic ingredients we're using. So I mean this is, this is what brings us to the comparison with these, the, these, yeah. Batteries. So I brought along 20 batteries. Not a bad bit of estimating at sight. Ed. Yeah, there are 18 batteries there. And the link I'm showing you here is that the, the energy storage capacity of this block of concrete heated in the temperature range that we heat it is equivalent to these 18 batteries.
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A
Okay, that's interesting.
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B
So then you can ask yourself which one of those do you think is cheaper?
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A
Yeah, well, I mean, I assume that that is just a regulation block of concrete. So it's got to be the concrete.
- [11:53]
B
It is indeed the concrete. Which, which one of those do you think is manufactured in Europe?
- [11:57]
A
It is. Well, I know the answer to this because I've been listening along to this episode, so I know it's the, the concrete block.
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B
And which one of those has no. Kind of difficult to Procure materials like lithium and so on. Well, you don't me maybe you don't
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A
know that about the concrete, but I
- [12:10]
B
assure you it's relatively stable.
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A
I was going to say I don't know about the concrete. I would say B. Yes, I mean definitely correct for sort of your nickel manganese cobalt batteries from three to five years ago. I think less so with lithium ion phosphate at the lfp. That's more used today as we go into sort of sodium ion in the future potentially again. But this is the nature of competition, right? You're providing one solution to get electricity into heat. The other types of competition out there in terms of battery storage is all at the same time. At the same time as you're working out how to make your concrete block have fewer air bubbles and have a better conductivity. The battery industry is working on exactly the same stuff. That's the wonderful nature of competition.
- [12:52]
B
It is. And I'm sure you'll ask me later. Actually this is not about me bad talking electrochemical batteries because they're also a miracle basically what's been achieved there. And they're an essential part of the grid ecosystem. So I've got nothing against electrochemical batteries. The final advantage I would say about thermal over this, the electrochemical alternative is the degradation topic. And you know, I think the, the degradation of electrochemical batteries has improved a lot and is much better understood and much more, much more, much easier to model. Nevertheless, the concrete has precisely the same thermal capacity after 25 years of cycling as it does on day one.
- [13:36]
A
And do you not get a sorry to ask a GCSE geography question here, but does that not. You remember the other like freeze, thaw weathering and sort of onion skin from those days when you sort of, if you heat up stuff and then cool it down and heat it up and cool it down. Yes, exactly. Like the, the sort of material engineer in me says, right, cracks start to form, cracks start to propagate. Surely that's a problem.
- [13:59]
B
I mean that, that is the, one of the key kind of design considerations in how we design our concrete battery is to manage, prevent, I would say prevent cracking, but actually a certain amount of cracking is completely acceptable. Prevent and manage cracking. Okay. And the thermal expansion. So you're exactly right. And that, that is what you know, that is our probably are on the, on the tech side of the concrete part of our secret sauce about how we, how we manage that.
- [14:23]
A
Okay, well I won't ask too many questions about it because, you know, I don't want to give away the answer. Don't want to. Don't want to give away the answers. Okay, so let's scale up, right? So we've got this sort of mug sized block of concrete. Let's say we're going to the frying, drying and applying, which I do hope is the name of this episode. We should, we shall see, we shall see. But let's say you go to a sort of a standard client and then maybe they' sort of a need for a standard industrial load of heat. Yeah. What, what is the sort of scale up size of that mug s piece of concrete? Is it as big as say this table? Is it as big as a, a double decker bus? You know, where, where does, where does this lead?
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B
So our, our battery module is based on, roughly based on the proportions of a standard 20 foot shipping container.
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A
Okay.
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B
And that has a storage capacity of about 2 megawatt hours. And then we stack them three high. So you get 6 megawatt hours in the stack and then you put as many of them next to each other as you like. So our biggest project, which is a 40 megawatt hour battery that has that one that has 24 modules, it's a bit more than 40 megawatt hour capacity. And yeah, you just stack them up and put them next to each other. So the battery itself is, you can get a sense of the scale for that. It's pretty energy dense. And the thing that makes it, it's not, that makes it particularly dense is that you're putting these things, you build these, these modules, you know, literally next to each other. There's no, there's no space in between them. So you get like a, you know, single massive block of concrete. You get hot. And then we encase that block in thick insulation. So about 40cm of insulation and then a weatherproof housing and that's the battery. Okay. And that you can heat it up. We store up to almost 400 degrees Celsius. And it has remarkably low thermal losses because yes, it's well insulated. There's no, we're very careful to have. There's no air. Like it's all we use loose. It's insulated with, you know, what look like traditional, you know, rockwall insulation sheets that you might recognize from your home. A bit more specialist for these higher temperatures. And then we fill every gap with what we call loose fill insulation. So there's no airflow in there and that thing will sit comfortably and lose around 2% of its storage capacity per day.
- [16:38]
A
Okay.
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B
Very, very efficient.
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A
I was going to ask that question, which is, is this a solution for optimizing sort of heat load within day or do you think, do you think sort of across weeks or across months maybe? What's the typical use case?
- [16:55]
B
Yeah, well we cycle at least once a day and because that's what the market, the energy markets basically pay for the. So our typical battery size for your listeners who are familiar with this world would be a four hour battery. So the megawatt rating is four times the, so the megawatt hour rating is four times the megawatt rating. We have a much lower, the cost of additional modules is pretty marginal. So there's no reason, you know, we could do an eight hour battery without a huge increase in cost. That's one of the favorable things about the technology. But the truth is that the market doesn't pay for it. The additional revenue that you get from the energy markets from the 8 hour battery at least we don't see in Germany. We don't see much of a marginal revenue there. So it is, our technology is currently focused on daily cycling just like a normal, best, a normal battery, electrochemical battery on the grid would do. There are other people in the thermal storage space offering longer term batteries and you know that there is something, there's something because the storage medium is so cheap, you know, you know, going to, you know, longer storage durations is, is, it definitely lends itself to thermal storage, but I still haven't seen a case for it yet.
- [18:10]
A
Okay. And we, I mean we, we have some sort of fascinating trends that we're starting to see coming through in power pricing across Europe. So I know we're talking a lot about Germany here, but I've just come back from Madrid where we were running workshops on power pricing in Madrid and I think there's some great stat that the, the average price for the first quarter of this year or sorry, the second quarter of this year was seven hours at 0 pounds during the middle of the day because there is just so much solar and there's not really anywhere to put it. So effectively you get this kind of great opportunity. So your four hour system today, maybe it'll be eight hour system and someone will just be block shifting that energy to the evening period let's say when it's obviously solar's not running well.
- [18:51]
B
There's, there's a one, there's one other positive difference about the way we operate on the energy markets which I draw your attention to. So traditionally typically industrial customers have relatively constant load. So they, they're running their machinery 24 7. So that means although the battery is theoretically a four hour battery, it's constantly being drained into the factory. Now that, that is not the case for a grid connected, you know, in front of the meter battery, electrochemical battery. So although it's a four hour battery anomaly, we can, we can essentially charge it for six hours because you, you've got a constant flow of power moving out of the battery into the factory. So that, that's actually part of the reason why longer durations are not needed because it's, although it's yeah a four hour battery, it, it really covers the use case of a six hour battery. The other thing, I mean there's, there's, I think there's one of the, one of the strongest. So for the topic of industrial power to heat in general with whatever storage technology or whatever technology you're using has a really important role to play in seasonal, in managing seasonal variation. So the way we run our system is we, we, our customers do not typically decommission their gas boiler. We run, we, we run in parallel with the gas boiler. We would electrify between 50 and I would say 80% of their thermal demand, but they keep their gas boiler there for the last 20%. And the reason they do that, there are two reasons. Firstly, industry is conservative and they want to back up, which I can understand. They want to, you know, they're like a bit skeptical of this electrification world. And now what is this block of
- [20:27]
A
concrete going to be doing?
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B
Yeah, we'll keep our gas boiler that we know and love just you know, just in case. Just in case. So that's fine. But the second, but we're like, well that then if you're going to do that, well let's use that. And that means that for those weeks of the year, typically in the winter when there is, you know, not much wind and not much sun and you get, you know, you know, week long periods of high energy prices. We don't run our system, we just run the gas boiler. So you're getting, you get a seasonal shift, you're doing a pretty much 100 electrification in the summer because you've got lots of good solar plus a lot of wind still. And then in the winter you're dropping to you know, 50 to, to less. I mean in November 2024, back tests showed that you know, our system in Germany would have barely run and that's fine. Like November had like unusually high energy prices and that's fine. Use the gas boiler.
- [21:15]
A
I think for the, for electricity systems it's like A fantastic thing to have something that turns up and is massive demand when there's loads of excess and then doesn't, doesn't come as demand when you get into these sort of cold, dark periods where prices are very high. That's an electricity system perspective. I think the thing that's a little bit harder is I go an energy perspective. I still see the total energy system still cools lots of energy from the gas in that November period. And so I think the electricity system would welcome you in open arms and say this is fantastic. But I say someone thinking about the total energy system would say we still are reliant on gas for that period. But maybe the pragmatist should say, well, actually, is it that bad to run gas for one month in November? If we were running gas for 12 months and we're now running gas for one month, well, the carbon emissions are significantly lower and we've helped the electricity system. Maybe the only hook, the only sort of tricky part is that you still have to make sure that gas system exists for all of the rest of the year. And that does come with cost.
- [22:18]
B
That's true. And there will, there is the kind of last user problem. So as, as we, you know, as we get industrial electrification up to higher levels, that last bit of gas, that gas backup becomes more and more expensive and at some point the system flips to 100% electrification. These are tomorrow's problems, you know, like, I wish they were today's problems, but like we have to be. We have to acknowledge the speed at which we're progressing is not fast enough with it. You know, the industry is still addicted to gas. So I'm focused On the, getting the 80 done. And we can do that today below, way below the cost of gas. So we can, you know, we can decarbonize a huge chunk of our energy economy. We can save loads of money and make Europe more competitive and increase flexibility. We can reduce dependence on geopolitical events that we can't control with today's technology and we can do it in the next few years. But so that's what we should focus on. And then, yeah, the last 20% has its, has challenges that will go with it.
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A
I agree. I would love to. I think we've done a really good job of sort of talking about the product, talking about how it works. Then the question people are going to be sort of thinking about at home and, or maybe they're listening or watching, they're thinking, okay, this all sounds great, but how much does it cost and what's my sort of typical payback on this because I've already got a gas boiler and you're telling me I need to build all this extra stuff and I'm going to have this, this additional stuff at my factory. Like what's the incentive?
- [23:48]
B
Yeah, well the system based on back testing, so which means based on looking at historical energy prices in the German market. We're mainly focused on the German market. The system typically cuts our customers gas bill by a half so including then the cost for the electricity and the grid fees associated with it. So the total net savings are around 50% which is massive. And then, but there is a capex cost associated with it and other, other costs. So we, we, we have to hit a five year payback. I mean that is, industry expects a five year payback and that's what we deliver. You know, sometimes a bit less, sometimes a bit more. But you know that, that's where we're roughly at is a five year payback.
- [24:32]
A
Okay, and who's like the ideal customer? Like ideal customer walks through the door. What kind of industry is it? What kind of size? What's a, what's that perfect person.
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B
Everyone needs heat so there's no shortage of customers in that regard. So yeah, they need to have thermal demand in our temperature range is nice. They need to have you know, a decent amount of demand which would be you know, sort of 10 gigawatt hours a year plus. But again that you know, even a relatively small factory will have that.
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A
Of heat.
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B
Of heat.
- [25:00]
A
Yeah, yeah, yeah. We might have indoctrinated all of our listeners to think about gigawatt hours in terms of electricity. But yeah, good to clarify
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B
but the, the real thing, the real thing that I'm looking for is do they have a grid connection or do they have a good prospect of getting a grid connection? That is if you, if you have, if you have thermal demand and you have a grid connection, you are sitting on a gold mine. I mean it's as simple as that. Like anyone you know, we talk to customers and they're like oh yeah, we, we've actually got you know, a 10 megawatt grid connection. We only use three of it but we could probably, we could switch on the other seven and you know, and I'm like you could make so much money with those seven. How can you sit there and not use them?
- [25:39]
A
Yeah. And both aid the system and sort of save yourself money in the costs. It's, it's a big win. One thing we have seen in some grids is that the grid Connections for generation. So maybe from your solar panel or from your wind, whatever, that queue is quite big and it takes quite a long time to get through. Not all grid queues have gone the same way in terms of demand. I think one of the big things that's putting the demand side of grid queues under pressure is data centers. And so a lot of those sort of demand grid queues have really swollen in recent years. Is that something you're seeing? You're seeing it being much harder to get that sort of demand side grid connection?
- [26:18]
B
I think, I mean it can be very tough. The nature of it, it's very black and white. If there is capacity in the grid, at the customer's site, at the factory, then we have a project. If there's any kind of build out required, then we don't have a project. They are not in the business of building, you know, high voltage substations to get additional connections and so on. It's not going to happen. So it is, it's a relatively quick check and it's pretty particularly black and white and we don't pursue the projects where they don't have access to grid. So there is a lot of, you know, it's easy to find a home for 5 megawatts of additional demand or 10 megawatts of additional demand. There's plenty of pockets where that can be found. So I don't think we're competing with the kind of, you know, 100 megawatt plus data center style connections. However, you know, I just, just before I came here I, I got off of call with a German dso, the distribution system system operator, where they've just rejected a grid connection for a beautiful project. A project that is like, you know, we've got a very enthusiastic customer, they're keen to electrify, they've got, it's a good size, a good project, good thermal demand and they can't get a grid connection.
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A
And why does the DSO not want the solution?
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B
Well, I don't, I mean, I think, I don't think, I think the DSO probably does want the solution because it solves a lot of the challenges they have. But there are, in this case there were two issues. One was a practical issue about whether there was space, whether there was a free, a free field in the medium voltage switch gear at their distribution substation. We solve that. And the other one was, and this is the big one was, oh well, we would need additional capacity from the TSO and we're not going to get it.
- [28:03]
A
Yes.
- [28:04]
B
And the answer, and this is where we have a system design problem because flexible connection agreements or particularly time based flexibility. So this is a connection agreement whether where you say you, I'm going to, I'm going to have a 10 megawatt grid connection but during times of peak demand I am allowed to disconnect your grid connection. These, there is not a framework for these yet in Germany and they are what we need because during periods of peak demand electricity prices are typically high and we're not using the grid anyway. So our system which charges when the electricity is cheap or charges when there's, when there's a frequency response. So balancing markets need, need, need to reduce the frequency on the grid. This typically doesn't occur when, at six o'clock in the evening when everyone's at home boiling their kettles. So we're completely, you know, we're heavily uncorrelated to the actual constraints of the grid. So the, the reality of this project is probably they don't need to do anything. They have, they have the capacity for our system, that's the painful thing. But they don't have a mechanism to offer us that capacity.
- [29:09]
A
Yeah, and you need, and you also need, you both need the DSO to agree that your system is going to run as they expect. And then you also need the TSO to say ah, we understand what the DSO is saying in terms of how the system's going to run. And so when we then look at our pinch point, the kind of connection between the two. Well, we understand how they're going to interact and this isn't going to break the system. I think we have so many, just Germany aside, we have so many examples of where there is a sort of not slow is the wrong way. But I think people aren't being hugely aggressive on increasing utilization. They're not really worried about increasing utilization on the grid. They're worried about the grid breaking and that's sort of top of their pile.
- [29:50]
B
This needs to be the priority is increasing utilization. Of course grid build out is what we overall we need if we're going to electrify all of our energy demand, which we are, you know, I think more or less everyone agrees that what can be electrified will be electrified. The grid needs to be expanded. But that takes decades. In the short term we need to utilize the grid we have 100% of the time and flexible demand like what we offer is a big solution to that. There's a great scheme in the Netherlands where the TSO has introduced a. The Netherlands has famously like terrible grid queues. I mean you just cannot get. We have so many keen customers in the Netherlands and none of them can get Grid. The TSO came up with this system which is that up to 15% of the time they can disconnect you during peak hours and they tell you the day before. Perfect, like, where do I sign? No problem at all. Remember we have a battery. We don't need to be connected 85% of the time. They could disconnect us 30% of the time, maybe 40% of the time, we wouldn't care. So that system is at the TSO level and is being broken down to the DSO level so the distribution level and will come into effect in the coming months and it is going to unlock industrial power to heat in the Dutch market. Germany's just not there yet. But they need, they need to be, I mean that's, it's a must.
- [31:15]
A
So let's, let's do, let's do two more questions. I think one is of the next five years. What has to be true to make thermal storage a success?
- [31:25]
B
I think we've talked enough about Grid, but that's clearly a big enabler. The next point I would talk about, say we need to really do is we need to find a working solution for heat as a service. Okay, so these are, these are capital intensive investments and they require deep understanding of energy markets to really get the most out of them. If you have an inherently flexible asset, a battery, you need, you need to understand flexibility. And industrial customers often don't have much money to invest or at least the money they have to invest. They should be investing in factories and machines and you know, their core business and they don't, they have very little knowledge of energy markets. I mean that's a big, big barrier to what we're trying to do is that they are many, many people know nothing about flexibility and they don't even know about the how they can take advantage of the day ahead market, let alone the intraday markets and the ancillary services. So this points towards heat as a service where instead of paying for an asset and then employing a trader to trade the flexibility and then making money from it, that way you simply buy the heat and then someone else looks after the capital costs and the, and the trading. Now, I mean this is nothing new. People have been looking at this for a long time. It's just very difficult and it hasn't, nobody's cracked it yet. And otherwise we'd see, you know, you know, huge uptake in thermal storage or, and also battery behind the meter. Battery Electric storage as well. And there's many, many reasons. It's very complicated. It's easy to say and easy to like picture how that might work. But in, in the reality to make that a kind of investable asset, it's non, not at all trivial and we're very, we're, we're very busy working on that and trying to solve that. And I think that will has the potential to really unlock, unlock this.
- [33:20]
A
I think some of those things have like an S curve to them. So they start slowly. As they start to get scale, it's more obvious that you could kind of socialize the cost of traders working on optimizing the demand. It becomes more commonplace as a solution. Like sometimes these solutions, they compound in a really nice way equally like not all tech makes it. So there's also that challenge that's there. I think your biggest one is that good connection. If you could get, if you could convince the system, the electricity system operators of the properties of this, I think you would have people who'd be delighted to have that type of load on their system because it's kind of exactly the thing that they're looking for.
- [34:00]
B
I think when you look at the, let's say the system run, we electrify say 60% of the time and typical, typical site. If you look at that 60%, when is it? Well, it's when there's renewables and the dominant generating source so the electricity is cheap and it's when there's too much electricity on the grid. So you have frequency response going on. Those are the, that's when we typically. And also a bit on intraday when, when there's an imbalance between the day ahead and the intraday market. These are, these price signals are working. They are, they are causing us to charge the battery exactly when. Yes, that we should be. So the, the, the energy markets are, they're currently really well structured and the price signal is arriving at the consumer and it works. But one price signal is missing and that is the congestion signal. There is no, you know, Germany has a single pricing zone with a copper plate grid approach, same as the UK I think. So we're not getting the signal which says the grid is congested. Disconnect. There's no mechanism currently for that to reach us. And that's the, in terms of market design, that's the big kind of third lever that needs to be introduced is you've got the wholesale price, you've got the frequency control and now you need the grid capacity signal and that's coming through flexible grid fees.
- [35:15]
A
That's the famous quotes. If you show me the incentive, I'll show you the outcome. Yeah, the Charlie Munger quote, which I, I think is a great, a great example here. Let's move on to a final question. So what is a contrarian view you hold about energy markets?
- [35:30]
B
Well, I think a fundamental contrarian view I hold is the decarbonization of industry needs to cost money. In our area, medium temperature heat is the opposite. This is an opportunity to save huge amounts of money. You can. Gas is cheaper than electricity on average. But if you're not playing the averages game, if you're using storage to get around that, you can save huge amounts of money. And I don't think that's properly understood by people who haven't really dug into it.
- [36:00]
A
So you're saying that there's a standard perception in industry that gas, even though it's sort of higher carbon, is the lowest cost way of doing things. And so therefore we must always go for. If you're just trying to go the cheapest possible route, you should go for gas. But you're saying that there's the bit that's missed. Like with heat pumps, like with thermal storage, you have this option to sort of play the numbers, as it were, and that can get you underneath the cost of gas.
- [36:26]
B
The first person that calls us up normally is the sustainability officer. So the starting point of all of our interactions typically is the sustainability angle and then they see the economic benefits and that's what seals the deal. I'm looking forward to the day when it's the CFO calling me up and saying, our gas prices. After Trump's games in the Middle east, our gas prices have gone up 50% and we want to save some money and then come to Energy Nest and let's talk about it.
- [36:59]
A
There you go. Right time, right place. Well, Alex, people have been clamoring for an episode on thermal storage for some time, so great to have you on. Hope we do more on thermal storage and heat pumps soon. Yeah, you've been a fantastic guest. Thank you very much.
- [37:12]
B
Thanks a lot, Ed.