FREEING ENERGY

Podcast 066: Michael Liebreich Part Two – What are the biggest opportunities in our clean energy future?

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In part two of this special interview, global renewable energy leader Michael Liebreich breaks down the core elements driving the shift to a net-zero economy and how public policy and finance influence the rate of change. Plus, Liebreich shares insights on startups and what shapes his investment strategies.

Here are a few of the insights from Michael…

“So there are lots of opportunities. My style is to try to think through what will the energy system look like in 2030, 2040, 2050, and then work back to see where the gaps are and who are the smart people working on those.”


“Will there still be utilities? Absolutely, yes. Because peer to peer just doesn’t work. This is not like the newspapers went away and you ended up with Twitter. You can’t do that in electricity because there’s these things called wires that run between the producer and the user of power, even if it’s a prosumer.”  


“[We believe in] doing good while doing well. It’s not just about making the money. It’s also about accelerating this trend to net zero transportation, energy, and also other areas, agriculture is coming through and clean minerals.”


You can also listen to this podcast and others in our series on these platforms:

Bill Nussey and Dr. Jemma Green during the recording of the podcast

Useful Links

Liebreich Associates

Michael Liebreich Twitter: @MLiebreich

Freeing Energy Article: “Bloomberg New Energy Finance Founder and Chairman Michael Liebreich shares his views on nuclear, solar, and the politics of energy”

Transcript

Bill:

So let’s talk a little bit about local energy and a few topics there. When you look at some of these distributed generation local energy, there’s places like Hawaii, Germany, where half of the solar is owned by citizens. You look at Australia where there’s actually more local energy produced in the large scale solar projects. This is a meaningful portion of renewable generation, and it’s not that case in many other places. And it’s not just about sunniness, although that helps, but Germany is not the most sunny place, and it still works there. What do you think these locations have done to adopt and embrace these small-scale systems so much more aggressively than virtually everybody else?

Michael:

It’s a great question, because there’s a number of things. I look at it as a kind of combination lock of what has to work. There’s some basic economics or the solution has to work, but you also need the right policy environment and you need finance to be available, and you need some human behaviors. There’s lots of places where they got one or two, but they never got the whole thing to align. And those places that you talk about, it has aligned. I think if you look at Germany, obviously that was where sort of modern, this kind of surge of distributed solar really took off. And they did it, how can I put it? They didn’t really align that much. They just threw money at it to start.

Bill:

Threw money at it yes. You can make a lot of money putting solar on your roof there you could.

Michael:

You could and initially those feed-in tariffs were 50, 60 cents per kilowatt hour. So 500, $600 per megawatt hour. Just to put that in perspective, if you’re building a gas fired plant with gas at the current prices in the U.S., you’re probably be talking about $60. People were paying 10 times as much as the market would require for the electricity. So that would be the German case. But Australia, it’s just about a small number of enlightened policy decisions so that… Not penalizing people, not forcing people, “Okay, you buy your own, you put your own solar on your roof. You said that you’ve done that now you’ve still pay for Vogel.” If you force people to continue to pay for everybody else’s electricity when they’ve invested in their own, then that’s a bit of a showstopper.

Michael:

So there’s number of things that can go wrong from a policy perspective. And in fact, they did this in Italy. They said that they were going to tax people on the solar that they produced on their own roof. And it’s like, well, hang on a second. You don’t expect people to pay VAT on the tomatoes they grow in their garden, a value added tax or sales tax. So why would you do that? So there’s lots of ways that policy can interfere and slow these things down. But I think the solution became cheaper and the policy was aligned. The finance in a place like Australia, there’s enormous, people have got savings. Not the same barriers there as they might be in some other countries. I just think that’s going to become the norm rather than the exception.

Bill:

Fantastic. So we talked about solar, let’s talk about local batteries, but particularly the notion that we’re going to have parked in our garage an enormous battery. And this is something we call V2G, or some of us call V2H, vehicle to grid or vehicle to home. And I think this was a nerdy, isolated idea for a lot of people, until Ford announced their F-150 lightening. And they heralded the fact that you could use your car to power your house for up to three days during an outage. So now all the worlds of buzz about this idea. Is this a niche? Is this going to be mainstream? Are cars going to be part of our home grids? What do you think?

Michael:

So I used to be very skeptical about V2G, vehicle to grid. And the reason was at the time for a decent electric car, the battery would cost, let’s say for the sake of argument, $40,000, it was really expensive. And you could do a thousand cycles. So each cycle was costing you 40 bucks. And so now you could use that car to power your house, and you could save yourself a couple of bucks by doing 40 bucks worth of damage to your battery. So this was just a non-starter, it’s just stupid. It was not going to happen. And I was very skeptical. Fast-forward to now, that battery might only cost you 10,000 bucks and it might do 10,000 cycles. So now suddenly you’re doing a bucks worth of damage and your utility might be paying you two bucks not to draw from the grid for whatever reason, because it’s not sunny, because it’s not windy or whatever.

Michael:

So now suddenly it all looks much, much more interesting. So I think that battery technology, and another way to put this is the million mile battery that they talk about. If you take 10,000 cycles of a EV battery, and you think about what that means, that means that that electric is going to drive a million miles, potentially. Yeah, of course, there’s always some guy somewhere who’s managed to get a million miles out of his car and it’s always a he, it’s very rarely, and women don’t seem to waste their time on these sorts of games. They’ve got far more important things to do with their time. But yeah, there are cars that go a million miles. And by the way, in the developing world, you will see, the global south, you will see cars that go around the clock and so on.

Michael:

But the question is when your battery starts to last a million miles and cars tend to last 100,000, 200,000, what gives? What are we going to do? We could have cars made to last 5, 6, 7 times as long. We could do that. They don’t have to fall apart. They can keep going. You could take the battery out and you could use it for something else providing, you could put it in a rack and keep the grid going, providing resilience. Or you could cycle it more quickly. Instead of doing a million miles, you could use it to power your house. So while it’s still in the car, you could use more of those cycles. So I’ve now become much more of a fan of vehicle to grid.

Michael:

And only partly because I’d quite like one of those Ford F-150 Lightenings. I think one of the main reasons I might not get one is I also like the Rivian. And I also like what Volvo and Mercedes are about to launch on an unsuspecting world. But I do think vehicle to grid is going to be a thing, it’s going to be more than a niche. By the way, I think it’s much more interesting for the F-150 crowd is to say, take it on a camping trip and run your air conditioning in your whatever, your motor home or power your neighbor’s motor home, do whatever, because you have got a mobile power station there. But why would you use it to power your home? There’s just cheaper and better ways of doing that still, it’s called a grid.

Bill:

Well said. What do the electric utilities look like in say, 20 years? Go way out on all these changes, distributed generation happens. Do they look any different? They play the same roles? Are they still monopolies? What do you think?

Michael:

So I’m very lucky with that question because I’ve actually seen the future and actually had the future on Cleaning Up and he’s called Greg Jackson, and you should get him on to Freeing Energy because he runs a utility called Octopus Energy in the UK, which has grown very rapidly to a couple of million homes. I have no doubt it’s more than that now. What he’s also done is licensed his tech stack to a bunch of other utilities, one in Australia, one in Japan, one in Germany, and Greg has come at this as a tech provider, as a tech person, not as an energy person.

Michael:

So he tells this extraordinary, it’s not really an anecdote, but he uses this extraordinary data point of saying that your average utility in the UK sells two things, electricity and natural gas, and has about a 15% administrative cost and Amazon, which sells, I don’t know, I think it’s something like 30 million SKU’s and delivers them in umpteen different ways from Amazon Prime all the way through to whatever, and handles all the logistics. And they have a 2%, or less than 2% administrative overhead. And so, I think it’s just such a refreshing way of thinking about what the utility is, because if you start with utilities the way they are today, and you try and flex them, you probably don’t get there.

Michael:

Will there still be utilities? Absolutely, yes. Because peer to peer just doesn’t work. This is not like the newspapers went away and you ended up with Twitter. You can’t do that in electricity because there’s these things called wires that run between the producer and the user of power, even if it’s a prosumer. You have somebody like you with solar on your roof, or like me. The utility is going to be aggregating the supply of energy, filling it out by buying electricity from big projects. There’s still going to be distribution grids locally, they’re going to be balanced to the extent possible locally. There’s going to be transmission grids because you won’t be able to fully balance locally, you’ll still need to move large amounts of electricity around to keep the lights on everywhere. And there will still be utilities distributing that. There will still be billing.

Michael:

There will still be all sorts of functions of utilities, but they will be, I mean, there’s this phrase, digital natives, which people try and use about, millennials or people, but the utilities that will survive will be digital native utilities. There’ll be ones who understand how machine learning and sensors and automation just drives right through the stack to reduce its costs, increase its resilience, deliver better services, manage that Ford F-150 Lightning providing power into a campsite somewhere over there and earning some money. You charging your car, being charged electricity on your same tariff, even though you’re at the mall. All of that stuff is enabled by digital technology. A utility is going to look much more like, I don’t know, Facebook or LinkedIn or Snap or something like that, than it’s going to look like PG&E era 1990 or 2000.

Bill:

That’s great. And another set of great quotes there, Michael, thank you. That’s a wonderful vision and it makes a ton of sense. And having come from the digital software world, I’m all in. That’s really what drug me into this industry, was that the lack of digitization and lack of sensing that the electricity industry enjoys today. And then I met solar and totally fell in love. Anyhow, you were an active angel investor. You’re putting together a fund that’s helping advise and direct money. So tell us first about EcoPragma and what you’re doing there.

Michael:

So EcoPragma, the background here is that I see opportunities across the board, everything from a professor with a magic molecule, right up to people trying to do gigawatt scale data centers in the desert. And I have a tiny little checkbook. I was very lucky or maybe a little bit of skill involved, but with new energy finance, I did well, but I’m not talking about Bill Gates scale of money or Jeff Bezos. So I got my little tiny checkbook and I’ve been placing a few beats, but I can’t remotely address the scale, the number of opportunities that I see. And also, I don’t have time, even though I’ve got friends with bigger checkbooks, I can’t put together the finance and I can’t help all of these companies and all these opportunities I see.

Michael:

So I’ve teamed up with a buddy of mine from business school, name’s Henry Lawson. He’s got an incredible background building businesses in digital, actually in marketing communications. He’s also got an engineering background, the same as me, actually Cambridge at pretty much the same time, although we didn’t know each other. And I met him at business school at Harvard. And what we are doing is pooling our collective resources, a little bit of finance but mainly time and our networks, to help companies raise finance and also to growth hack them using my network, using Henry’s knowledge of, actually not just digital, he’s a pilot and he’s got a lot of understanding of airline fuels. He’s actually running air ambulance service as well and so on. So in a few areas, it’s Henry’s network, in many areas, of course, the net zero transition areas, my network, we want to help companies move faster.

Michael:

So we can kind of cheat. We can invest, but we can then cheat by helping these companies to go faster and hopefully to achieve quicker and more successful exits. And of course, doing good while doing well. It’s not just about making the money. It’s also about accelerating this trend to net zero transportation, energy, and also other areas, agriculture is coming through and clean minerals. I mean, we’re going to use a ton of minerals in this transition. Anybody who thinks we’re not is kidding themselves, and they better be extracted and processed cleanly and respecting human rights and so on. So there’s a ton of opportunities and a need for skills and money there. So that’s what we’re trying to do.

Bill:

Well, you kind of answered my next question, but I want to ask it anyway in case it evokes a few more thoughts. So you see an unusually broad set of what’s going on in the market, the new exciting opportunities. What areas excites you the most, for startups?

Michael:

So that’s a great question. We all know the trend is towards net zero and it’s accelerating. And I think I personally like things where you follow the second bounce of the ball. I was not a huge fan, I’m still not a huge fan of Tesla, but I am a huge fan of EV charging. So I’m an investor in ChargePoint, which, it’s done it’s spec, very successful trading over two times up on the spec price. I’m still locked in. This is a source of great frustration, but I’ve done very well, but what’s going to happen next is as the economy electrifies and as more transportation electrifies, there’s going to be need for charging in more and more sort of niches, if you like, but large niches, ferries, ports, airports.

Michael:

Following the second bounce of the ball, thinking ahead, I like the services around the shared economy. Things like, I believe that insurance right now is one of the things holding back. Why can’t I just lend my car to the parents of kids in my kid’s class? Well, the answer is really what it comes down to is insurance. So there’s lots of services. So I’d be looking at the services around circularity, around the sharing economy. And then anything to do with data, data management, optimization, I think there are huge opportunities there. Circularity itself, I’ll tell you some of the opportunities that we’re looking at via EcoPragma. Recycling of carbon fiber, recycling of glass fiber, recycling of batteries. You always get this stuff on Twitter where people say, “Oh, this couldn’t possibly work because no batteries are recycled.” It’s like, “Yes, because there haven’t been any batteries to recycle, not at volume.” So there are lots of opportunities.

Michael:

My style is to try to think through what will the energy system look like in 2030, 2040, 2050, and then work back to see where the gaps are and who are the smart people working on those.

Announcer:

Are overlapping laws and regulations hindering the shift to clean local energy? In his soon to be released book Freeing Energy, author, Bill Nussey shares insights into the [inaudible 00:17:15] world of U.S. electricity policy. How it is affecting the transition to clean renewable energy, and some practical steps we can take to increase the pace of the shift to a net zero economy. Here’s one excerpt from Freeing Energy.

Announcer:

To help me dissect the layers of power policy, I reached out to Steve Kalland, the executive director of the North Carolina Clean Energy Technology Center. Steve explained, “The first thing to understand about U.S. electricity policy is that when you include federal agencies, regional programs, state commissions, self-regulating electric cooperatives, and municipal utilities, there are nearly 3000 different regulatory forums that have authority over electricity. Most of which are unique and interact in complex ways. It gets even more complicated if you’re looking at land use and citing issues or air quality issues. At any given location, a distributed energy project is subject to multiple levels of overlapping jurisdictions. And this is certainly navigable, but innovators need to understand what they are dealing with.”

Announcer:

If you’d like to be notified about when Freeing Energy will be available, drop us an email at bookalertatfreeingenergy.com. We’ll be sure to keep you updated. And if you miss part one of this special interview with Michael, jump over to freeingenergy.com and just search for Liebreich. Now back to Bill and Michael Liebreich.

Bill:

If you could wave a magic wand and change just one single thing, but change it entirely, what would that be?

Michael:

Reform campaign finance.

Bill:

That was not an energy answer, but I love it. I love it. And it is an energy answer.

Michael:

It is an energy answer, it is, because it’s distorting. At a time when we need to move fast, we need robust data. I mean I started New Energy Finance, not as a do-gooder, not as an environmentalist, I wanted to make some money, but I also wanted to do it while it’s doing good. But it was the single thing that I knew how to do that could accelerate this shift to a cleaner, lower carbon, higher performing, more just society, more just economy. And it’s not just campaign finance in the U.S. by the way, it’s also corruption anywhere in the world. This is what is holding back the transition more than any other single factor in my view.

Bill:

I don’t know if it made it over to the other side of the ocean, but in the news in the U.S., the bribery scam scandals in Ohio, $60 million of money float into a legislator’s pockets in the goal of continuing coal and nuclear and some very uneconomic things. And it’s opening up week by week and people are going to jail and that’s the most outward and, I think, discomforting example of it’s not even campaign finance, it’s worse than that, money flowing the wrong way.

Michael:

Well exactly. Because the U.S. political system, and by the way, others in the world, they just call it legalized bribery, but that wasn’t even legalized bribery. That was just bribery.

Bill:

That’s bribery, right, right.

Michael:

And it is absolutely corrosive to those people trying to build legitimate businesses and also to all the folks that want to see a better and cleaner world and to address climate change. And so on.

Bill:

Last question of the day. What do you think in the next five years, what do you think will be the largest change in how we generate, store, and distribute energy?

Michael:

Let me try and answer this the best way I can. You remember the saying by Mahatma Gandhi saying, he said, “First they ignore you, then they laugh at you, then they fight you, then you win.” 20 years ago, modern renewables, so wind, solar, not large hydro plants, but the wind, the solar, small hydro, a bit of biomass, bit of geothermal, was less than 1% of the power mix globally. And if anybody said, “Oh, the solution lies here,” they were just ignored. It wasn’t even worth engaging. Nobody engaged with them. That was the first they ignore you stage. 10 years ago, it reached about two or 3%. And it was just laughable. The idea that there’s two or 3% of electricity, which is only 20% of the global final energy use. The idea that that could make a difference was laughable. And people did get laughed at. Solar evangelists got laughed at.

Michael:

Well, guess what? Now, 2019, it was 11%, today it’s probably 13 or 14%. And where are we? It is disrupting markets. That level of renewable electricity is driving the electricity price to zero. It’s very disruptive. It’s part of, it’s not the whole reason why coal has collapsed in the UK and much of Europe and certainly in the U.S., but it’s a big piece of it. And we’re only at 11, 12, 13% renewable electricity. And are they fighting it? Yeah, because it’s suddenly become absolutely existential for fossil fuel. And look at the rhetoric that’s coming out of places like Saudi Arabia or the fossil dependent countries and companies. They’re fighting, absolutely.

Michael:

What happens next? Your question was, “What do we see in the next five years?” Well I guarantee you, if you look at that curve, that’s gone from 1% to 3%, to 13 to 14% this year, it’s going to keep curving upwards. In five years, it’ll be, I don’t know, I’m going to guess 25% and it’ll be absolutely clear which way it’s going. Is it the full answer to de-carbonization of our entire economy? No, there’s more than that. Is it enough and fast enough to get to net zero by 2050 and keep the world to one and a half degrees of climate change? No, but that’s what the future looks like. An enormous acceleration of clean energy.

Michael:

And at the same time on the demand side, energy efficiency, awareness, money flowing into solutions and hopefully via the EcoPragma platform, money going into not just the solutions that are rolling out in this next five years, but pump priming by five years time. Hopefully we’ll see that the pump has been well primed for the solutions for the next five years. And for the 10 years beyond, because by 2030, we need to have line of sight on a pretty much fully decarbonized global economy. So then from 2030 onwards, you’re rolling stuff out and you’re doing stuff, but you kind of know what it is that will get you all the way there.

Bill:

Thank you. I love it. Thank you very much. Michael, this has been an absolute delight. I’ve learned a lot. Every time I read and particularly wanted to get to talk to you, I learn a ton. This has been fun. I poked our audience that maybe this would be funny too and then you delivered on that. So this has been a wonderful use of time today. They thank you so much for being a part of our podcast and sharing all your insights and perspectives with our audience.

Michael:

Well, Bill, it’s been great fun for me as well. I learned too, you might not know it, but for every question that I get and every way I think about it, it pushes me. And the best bit about it is that I know that most of the answers that we didn’t cover today are going to be in your book. And so I hope I can get hold of a copy of it on this side of the Atlantic. If not, I’ll come and ask you for one.

Announcer:

Thank you for joining us today. You have been listening to the Freeing Energy podcast, personal stories from the clean energy movement. To learn more about the Freeing Energy project, visit our website, freeingenergy.com. Subscribe to the Freeing Energy podcast on Apple Podcast, Spotify, Google Podcast, and anywhere podcasts are found. Make sure more people learn about clean local energy by rating and reviewing the show on Apple Podcasts.

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