WEBVTT
00:00.125 --> 00:02.000
Welcome to the Power Bites podcast,
00:02.000 --> 00:05.750
brought to you by Caterpillar
Electric Power with your host John Thomas.
00:05.812 --> 00:09.187
Each month we deliver
the latest insights, trends and cutting
00:09.187 --> 00:12.437
edge tools to keep you ahead
in the dynamic energy industry.
00:12.625 --> 00:15.937
Whether you're streamlining operations,
embracing new technologies,
00:15.937 --> 00:19.062
or staying informed,
Power Bites is your go to source.
00:19.125 --> 00:20.312
Join us as we explore
00:20.312 --> 00:23.562
innovations shaping the future
and the resources you need to succeed.
00:23.562 --> 00:26.562
Welcome to Power Bites,
where energy meets innovation.
00:28.625 --> 00:28.875
Well.
00:28.875 --> 00:29.625
Welcome listeners
00:29.625 --> 00:33.875
on this episode of the Power Bytes
podcast, we're going to be talking about
00:33.875 --> 00:38.312
the energy landscape in Europe
and what is really kind of pushing
00:38.312 --> 00:43.437
organizations that area of the world
to rethink risk or mitigate risk.
00:43.625 --> 00:47.750
today we are joined
by Tobias Wedemier and Tobias.
00:47.750 --> 00:48.687
How are you today?
00:48.687 --> 00:50.875
Hey John, I'm doing great.
00:50.875 --> 00:52.375
Thank you for having me here.
00:52.375 --> 00:55.250
as we get started here, just tell us
a little bit about your background.
00:55.250 --> 00:56.437
A little bit about yourself?
00:56.437 --> 00:58.250
I am leading the business development
00:58.250 --> 01:02.250
for caterpillar power
division across Europe and Asia.
01:02.250 --> 01:08.750
I have multiple job roles from R&D
in service, project management,
01:08.750 --> 01:11.875
product manager, since about four years
01:11.875 --> 01:15.437
I'm in sales
and now in business development.
01:15.625 --> 01:17.500
I'm caterpillar about one decade.
01:17.500 --> 01:20.125
Tobias, for our listeners,
where are you located?
01:20.125 --> 01:21.812
Where is your offices located
01:21.812 --> 01:26.187
So I'm located in the facility
in south of Germany.
01:26.375 --> 01:29.625
It's where we have production, R&D
01:29.625 --> 01:33.250
and service for our gas product lines.
01:33.250 --> 01:38.312
The CG 132, CG one, 70 B and CG 260 units.
01:38.312 --> 01:43.062
So these are gen
sets from 400 kW up to 4.5MW.
01:43.062 --> 01:44.625
Well, once again, thanks for joining us.
01:44.625 --> 01:45.687
I'm excited to kind of talk
01:45.687 --> 01:49.437
a little bit today
about the energy landscape in Europe.
01:49.500 --> 01:53.562
Could you tell us a little bit about what
are some of the key issues in Europe's
01:53.562 --> 01:55.187
electricity landscape today
01:55.187 --> 01:59.125
that are fundamentally different
compared to just a few years ago?
01:59.125 --> 02:02.312
I would say a few years ago,
the electricity production
02:02.312 --> 02:05.562
landscape in Europe
was mostly conventional power plants.
02:05.750 --> 02:09.250
there was just a little bit
tiny or variable renewables
02:09.250 --> 02:10.875
being served into the grid.
02:10.875 --> 02:14.625
in 2024 or 2025, we nearly
02:15.375 --> 02:19.687
50% renewable
electricity penetration into the grid.
02:19.687 --> 02:23.437
And this has changed a lot how we see
02:23.500 --> 02:27.062
electricity in how we see power in Europe.
02:27.062 --> 02:29.937
And you can say that
there are about four trends.
02:29.937 --> 02:31.937
I touched on the variable renewables.
02:31.937 --> 02:36.812
That's a trend of the changing power
generation, which is having a huge impact.
02:36.937 --> 02:40.625
also on the power consumer side,
we see three
02:40.625 --> 02:43.937
different trends
and they are just picking up right now.
02:43.937 --> 02:47.125
So one is the electrification
or the transportation.
02:47.125 --> 02:51.687
then we have the electrification
of the heating sector, which is picking
02:51.937 --> 02:56.500
quite faster now than the activity
because of the governmental subsidies
02:56.500 --> 03:02.062
of heat pumps for private households,
and also the goal of the district heating,
03:02.062 --> 03:06.062
to be decarbonized until 2045.
03:06.062 --> 03:09.125
So just to give you
an understanding of the size,
03:09.187 --> 03:13.250
the German district
heating needs to decarbonize
03:15.125 --> 03:18.125
terawatt hours per year until
03:18.312 --> 03:19.937
These are huge numbers.
03:19.937 --> 03:24.437
the third trend is the data center trend,
which is not at the beginning.
03:24.437 --> 03:26.812
So we are right in the middle of that
right now.
03:26.812 --> 03:31.000
We can see that the urban areas
where most of the data centers are located
03:31.062 --> 03:34.750
have soaking up all the grid capacity
which was available,
03:34.750 --> 03:36.687
and we are getting more and more grid
congestion.
03:36.687 --> 03:42.062
So in the main capital cities
like Paris, London, Dublin, Frankfurt,
03:42.125 --> 03:45.562
Milano, we are facing a lot of permits
03:45.562 --> 03:49.312
pending to get disease on grid.
03:49.875 --> 03:53.750
because of the grid congestion,
there is delay in those permits
03:54.000 --> 03:59.750
and we are facing more and more island
mode requests for those data centers.
03:59.875 --> 04:03.187
you kind of described a challenge
there in the data center space
04:03.250 --> 04:04.500
if I'm hearing you correctly. Right.
04:04.500 --> 04:06.562
is very similar
to what we're seeing in North America.
04:06.562 --> 04:10.312
it's taking more time to get
those data centers tied to the grid.
04:10.312 --> 04:12.000
And so therefore a lot of them are going
04:12.000 --> 04:15.500
into what we would call island
mode, as you said, which they're off grid.
04:15.562 --> 04:16.875
They're not connected to the grid.
04:16.875 --> 04:18.750
So they're actually functioning
without grid power.
04:18.750 --> 04:22.187
But as you think of those other
three trends that you mentioned,
04:22.187 --> 04:24.812
what are some of the challenges
of those trends?
04:24.812 --> 04:29.687
Basically, it's that they all work
together into the wrong direction.
04:29.687 --> 04:34.875
So if we see the demand
of electric vehicles or the electricity
04:34.875 --> 04:38.875
demands of heat pump for district heating,
or for private households,
04:38.875 --> 04:44.437
they all require the same huge
amount of peak electricity during times
04:44.437 --> 04:50.500
when the production trend of the variable
renewables is at its lowest production.
04:50.500 --> 04:52.937
one example the summertime is all day.
04:52.937 --> 04:56.312
You have a lot of PV production,
and then in the evening
04:56.312 --> 04:59.312
when people come home,
they start charging the electric vehicle,
04:59.312 --> 05:03.250
they are starting the air conditioning
then the sun is down.
05:03.250 --> 05:07.312
So you can do a daily shift there
with battery systems, for example.
05:07.312 --> 05:11.937
A much bigger problem is that when you
look at the winter time, the winter time,
05:12.000 --> 05:17.187
you have lower PV production, much lower,
like only one quarter or one tenth.
05:17.187 --> 05:20.937
Sometimes you have dark doldrums
where you have 2 or 3 weeks,
05:21.000 --> 05:24.000
very little wind or very little PV,
05:24.312 --> 05:28.000
then you still need to heat up your home
district.
05:28.000 --> 05:32.312
Heating needs to run, you still need
to charge your electric vehicle
05:32.625 --> 05:37.625
of course have the regular energy demand,
which we have seen the last few decades.
05:38.125 --> 05:40.125
then prices are skyrocketing.
05:40.125 --> 05:44.562
So these effects are fundamentally
changing the way
05:44.750 --> 05:46.562
electricity is priced in Europe.
05:46.562 --> 05:51.562
While in the past you had more steady,
predictable pricing all over the years,
05:51.562 --> 05:55.125
and in the next years to come,
we see that the price
05:55.187 --> 05:58.437
volatility is increasing drastically.
05:58.437 --> 06:02.562
So like 10 to 20% of the hours
of the year,
06:02.562 --> 06:06.625
you can have the cost of 5,070%
for the complete
06:06.875 --> 06:09.875
So we see that there
the prices are sparking.
06:10.125 --> 06:14.125
on the other hand
you can even have times of really low
06:14.187 --> 06:17.125
electricity prices where you feed
06:17.125 --> 06:20.562
basically from the national grid
from renewable cheap production
06:20.625 --> 06:24.375
to your energy demand,
and then you really pay very little.
06:24.687 --> 06:26.562
isn't worthwhile
to produce your own energy
06:26.562 --> 06:29.187
because you get so cheap energy
from the grid.
06:29.187 --> 06:34.562
mentioned a couple times there, Tobias,
that there were energy cost challenges.
06:34.562 --> 06:38.312
for the folks that might be unaware
in Europe from other parts of the world,
06:38.312 --> 06:42.312
what are some of the primary drivers
in your mind that is driving
06:42.312 --> 06:48.312
energy costs today in of course
the cost of the fossil fuels is rising
06:48.500 --> 06:53.250
Then the variable renewables
are producing really cheap electricity.
06:53.250 --> 06:57.750
But the infrastructure
and the flexibility is not there.
06:57.750 --> 06:58.875
So the cost.
06:58.875 --> 07:04.687
Basically the base taxation of utilities
for increasing the flexibility
07:04.687 --> 07:05.500
and increasing
07:05.500 --> 07:10.062
the infrastructure is driving up the costs
by quite a significant margin.
07:10.375 --> 07:14.375
then the governments all over
Europe are now, right now
07:14.375 --> 07:18.187
planning and got green
light from the European Union
07:18.187 --> 07:23.062
to establish new subsidies
is to back up the variable renewables.
07:23.062 --> 07:26.750
So just as an example to to illustrate
that and make it a little bit
07:26.750 --> 07:30.937
more tangible
when we are going towards 80, 90,
07:30.937 --> 07:36.250
100% of the electricity in Europe
generated by renewable energies,
07:36.312 --> 07:41.500
especially variable renewable energies,
we need to have a backup for those
07:41.625 --> 07:43.375
in case of a dark Dora.
07:43.375 --> 07:47.250
A dark Dora in Europe happens every year
quite often.
07:47.250 --> 07:51.125
Some are two years long, and studies
show that every second year
07:51.125 --> 07:52.312
they are three weeks long.
07:52.312 --> 07:55.312
So in this time we would need a reserve
of basically
07:55.312 --> 07:59.125
50 to 100 terawatt hours of electricity.
07:59.125 --> 08:01.000
How much backup do we have right now?
08:01.000 --> 08:03.437
It's about a few percentage of
08:03.437 --> 08:07.437
So we are talking about a tennis ball,
which we have right now in our hand,
08:07.437 --> 08:12.375
but we are really looking for a basketball
to solve the problem, to play the game.
08:12.437 --> 08:15.437
and when you say backup energy,
for those that aren't familiar,
08:15.500 --> 08:17.000
you're backing up renewables.
08:17.000 --> 08:20.437
You're talking about backing them up
with maybe traditional gen sets
08:20.437 --> 08:24.312
that are dependent on fossil
fuels like gas, natural gas or diesel.
08:24.312 --> 08:24.937
Correct.
08:24.937 --> 08:25.937
That's one option.
08:25.937 --> 08:28.437
So we have different kind of backups.
08:28.437 --> 08:33.250
The daily backup is probably mostly driven
by battery systems.
08:33.250 --> 08:34.625
They can do the daily shift.
08:34.625 --> 08:37.062
They are expensive in deployment.
08:37.062 --> 08:41.062
They don't produce electricity,
but they can make the daily shifts
08:41.062 --> 08:46.000
between like high verbal renewable times
and low variable neutral times.
08:46.062 --> 08:50.437
Talking about gas fired
power plants in general, like gas sets
08:50.437 --> 08:55.937
or gas turbines, they become basically one
and only technical solution
08:55.937 --> 09:00.125
for seasonal backup, like dark doldrums,
which I talk about.
09:00.187 --> 09:04.625
You have to imagine the capacity
which you need to save is seasonal
09:05.000 --> 09:08.750
in batteries would be equivalent
to 700 million
09:08.750 --> 09:12.687
to 1.4 billion electric cars in Europe.
09:12.687 --> 09:16.875
Right now,
we have 300 million cars in Europe, and I
09:17.437 --> 09:21.062
think every European citizen would agree
that we don't want to have
09:21.062 --> 09:24.687
3 to 4 times as many cars in Europe
than we have right now.
09:24.937 --> 09:29.000
so we can see that
the electrical storage is not there.
09:29.000 --> 09:32.375
Same is true for the hydro pump storage.
09:32.500 --> 09:32.750
Yeah.
09:32.750 --> 09:35.812
We will need to flood the Alps
basically with
09:36.125 --> 09:42.000
So the only technical feasible solution
would flexible gas fired power plants.
09:42.062 --> 09:44.687
they don't have to run
only on natural gas.
09:44.687 --> 09:49.625
They can run on biomethane
which is CO2, mostly CO2 neutral.
09:49.687 --> 09:52.625
They will be running on hydrogen as well.
09:52.625 --> 09:57.687
So they can also participate
to help our customers be more sustainable.
09:57.750 --> 10:02.125
you've really alluded to customers
attempting to reduce their emissions
10:02.125 --> 10:05.875
or meet their environmental goals
or sustainability goals.
10:05.875 --> 10:08.375
And you've kind of alluded to that
through the discussions
10:08.375 --> 10:12.125
on, electrification of transportation
and the use of heat pumps
10:12.187 --> 10:17.187
as you're talking to customers
that are attempting to really attack
10:17.750 --> 10:20.937
kind of that emissions or sustainability,
head on.
10:21.000 --> 10:24.125
Can you give us some examples of what
some of your customers
10:24.125 --> 10:27.750
are doing to achieve goals
in that area in Europe?
10:28.000 --> 10:32.375
These four trends
which I was touching on right before, are
10:32.937 --> 10:35.875
mainly driven to decarbonize
10:35.875 --> 10:38.937
the transportation and the district
heating sector, for example.
10:38.937 --> 10:43.812
And we have a really nice example
from a district heating company,
10:43.875 --> 10:48.000
which is also a customer,
where a good way to solve this.
10:48.125 --> 10:51.937
So they were not only thinking
of replacing
10:51.937 --> 10:57.750
their current natural resource,
fuel fired district heating assets
10:57.750 --> 11:02.750
with electrical heat pumps
to become more sustainable.
11:02.750 --> 11:07.437
But they also combined it
to be more flexible in the future
11:07.437 --> 11:13.000
with CHP power plants from
So the concept is that you have
11:13.062 --> 11:17.125
for the growth of the heat,
which you are serving into the district,
11:17.125 --> 11:22.750
heating the, heat pump, which is very
and running in the springtime,
11:22.750 --> 11:27.062
summertime and autumn time
when it has a high cop factor.
11:27.125 --> 11:30.937
A cop factor
means that you can serve one kilowatt
11:30.937 --> 11:33.937
hour of electricity
and get a certain amount.
11:33.937 --> 11:38.375
Usually it's 4
or 5 kilowatt of heating out of it.
11:38.437 --> 11:42.000
So this works really nice in spring,
autumn and summertime.
11:42.187 --> 11:46.375
then in the wintertime
when the environmental temperature becomes
11:46.375 --> 11:50.375
really low, the cop factor of the heat
pump goes
11:50.437 --> 11:54.812
also down to 1.2 or even 1.15.
11:54.875 --> 11:58.312
So you nearly have a 1 to 2 or ratio.
11:58.312 --> 12:01.312
How we are trading
all the electricity to the heat.
12:01.437 --> 12:05.125
what we just discussed is that during
these dark gold rooms in the winter time,
12:05.187 --> 12:07.000
electricity becomes really expensive.
12:07.000 --> 12:11.562
It accounts for like the vast majority
of the money spent all over the year.
12:11.562 --> 12:15.937
So here
our power plants come in very handy
12:15.937 --> 12:20.750
because with the CHP power plant,
you can produce heat for the district
12:20.750 --> 12:24.500
heating while also producing
a lot of electricity on your own
12:24.500 --> 12:30.187
cost of the gas, which is not rising that
much during those dark, tolerant times.
12:30.187 --> 12:33.750
So you're covering up
for the high expenses of the heat pump.
12:33.750 --> 12:36.875
With the CHP power plant,
you're covering up
12:36.875 --> 12:40.625
for the low carb factor
during low ambient temperatures.
12:40.625 --> 12:45.062
And then, the CHP pays off
much faster than heat
12:45.375 --> 12:48.187
the financial roadmap
becomes much more attractive.
12:48.187 --> 12:52.437
Just to give you a rough understanding,
a heat pump has payback period between 3
12:52.437 --> 12:54.250
and 10 years, always
12:54.250 --> 12:58.125
depending on the heat revenue,
on the cost of the electricity and so on.
12:58.125 --> 13:02.500
And CHP power plant
has normally in Germany payback
13:02.500 --> 13:05.187
period between and 4 years.
13:05.187 --> 13:07.375
You can free up more cash flow.
13:07.375 --> 13:11.687
then when we look now from the short term
future to the mid-term future,
13:11.687 --> 13:15.562
you can also run this
CHP power plan with biomethane
13:15.625 --> 13:19.187
to make it more sustainable
to have less CO2 emissions
13:19.187 --> 13:22.437
and also mix in hydrogen if you like to.
13:22.437 --> 13:28.187
And during all over the year,
you can participate in ancillary services
13:28.187 --> 13:32.250
in the support market and actually have
additional revenue streams.
13:32.250 --> 13:37.562
So what our customer is doing
is not only, Making his heat production
13:37.562 --> 13:41.750
more flexible, he is also adding
additional revenue streams
13:41.750 --> 13:47.312
like energy as a service to his portfolio
with those CHP power plants.
13:47.312 --> 13:50.437
And last but not it's important
13:50.437 --> 13:54.625
to also decouple the production
the heat production.
13:54.625 --> 14:00.250
So he did this with a large heat storage
so we can run the CHP power plant,
14:00.250 --> 14:04.750
for example, for high spot market prices
or for ancillary services,
14:04.812 --> 14:06.125
earn a lot of money.
14:06.125 --> 14:08.375
Sometimes peak prices of up to
14:09.937 --> 14:10.812
per megawatt
14:10.812 --> 14:15.500
And while the heat demand is
maybe not that much during those times,
14:15.500 --> 14:19.375
he can store the generated heat
in the heat storage and the advantage
14:19.375 --> 14:22.687
of the heat storage
compared to an electrical battery
14:22.687 --> 14:26.812
system storage is that it's much,
much cheaper from a CapEx standpoint,
14:26.812 --> 14:31.312
So they can use the combined heat
and power or CHP
14:31.687 --> 14:37.125
gen set to produce the electricity
when they need it, but take that excess
14:37.125 --> 14:38.812
heat off of the product and store it
14:38.812 --> 14:42.562
until they need it, instead of assuming
they had to use it at the same time.
14:42.625 --> 14:45.312
that's a super cool approach to that.
14:45.312 --> 14:49.000
but you mentioned energy as a service way
that a customer
14:49.000 --> 14:53.375
could make some financial gain off of this
type of a solution.
14:53.562 --> 14:57.500
Give us an example of what you mean
when you say energy as a service.
14:57.562 --> 15:02.625
You can buy energy as a service
from a provider.
15:02.687 --> 15:03.250
Yeah.
15:03.250 --> 15:07.000
you are not only looking
at the pure energy
15:07.000 --> 15:11.562
which you need to produce
to sell it in the market
15:11.562 --> 15:18.187
or to provide your own energy needs,
but you also provide
15:18.187 --> 15:23.625
services related to energy,
which is stabilizing the grid,
15:24.187 --> 15:27.125
backing up renewable energy
in the capacity
15:27.125 --> 15:30.250
market, and really help
15:30.312 --> 15:34.875
the electrical infrastructure
to sustain in the future.
15:34.875 --> 15:39.250
So one of the things that I mentioned
at the opening of the episode today,
15:39.250 --> 15:45.250
Tobias is de-risking or kind of managing,
mitigating, eliminating risk.
15:45.500 --> 15:48.250
did some research
and we are hearing a lot about that
15:48.250 --> 15:51.687
kind of concept
in the European energy market.
15:51.687 --> 15:56.625
So can you tell when we hear that, what
kinds of things are they referring to?
15:56.812 --> 16:00.687
we have a very stable grid
and high availability
16:00.687 --> 16:04.000
of the grid, natural gas grid
as well as the electrical grid.
16:04.000 --> 16:07.750
So it's not about having energy,
16:07.750 --> 16:12.187
it's more about de-risking the cost
16:12.437 --> 16:17.812
and also about,
solving the problem of congestion grid.
16:17.937 --> 16:21.187
If you want to expand
the production of the company,
16:21.187 --> 16:24.500
your business,
and you need more energy for your company.
16:24.500 --> 16:27.875
So looking at the cost,
You can have different ways
16:27.875 --> 16:32.375
you can have daily trade offs
or the cost swings of electricity.
16:32.562 --> 16:37.312
you can also have,
seasonal de-risking of your energy demand
16:37.312 --> 16:40.500
or the energy production which you are
committing to your customers.
16:40.500 --> 16:42.750
If you're for a utility.
16:42.750 --> 16:46.000
this example,
which I just mentioned from the utility,
16:46.000 --> 16:49.562
which is not only deploying a heat pump,
but also.
16:49.937 --> 16:53.562
CHP power plant,
this is basically a good example
16:53.562 --> 16:57.250
for de-risking seasonal the winter time.
16:57.250 --> 17:01.062
Another example would be from a food
17:01.062 --> 17:04.250
industry customer, which we had who.
17:04.437 --> 17:07.437
Is looking to to produce steam
for his food
17:07.437 --> 17:10.625
production running the CHP.
17:10.687 --> 17:13.375
The last ten, 20 years worked out fine.
17:13.375 --> 17:18.875
But then he recognized that
the dark curve, which is lowering
17:18.875 --> 17:24.187
the prices during the day, is
basically decreasing the electricity price
17:24.187 --> 17:28.187
he can get selling the electricity proofs
from the CHP so much
17:28.187 --> 17:31.875
that it's not worthwhile
to sell to run the CHP anymore.
17:32.062 --> 17:36.562
So what he did
was reducing the size of the CHP,
17:37.125 --> 17:41.437
installing battery system
to decouple as well as the district
17:41.437 --> 17:44.875
heating example before
to decouple this time steam production
17:44.875 --> 17:49.812
and electricity production
and save with battery systems.
17:49.812 --> 17:53.625
The electricity produced
during the steam production
17:53.687 --> 17:57.437
to store them and wait basically
17:57.437 --> 18:02.312
for the daily two times of high
electricity prices and serve them
18:02.312 --> 18:06.312
then to the national grid
and sell them basically to the grid.
18:06.312 --> 18:09.437
So in this case, he de-risk the daily
18:09.437 --> 18:13.812
risk of fluctuation of electricity prices.
18:13.812 --> 18:19.625
And also what goes very in handy is that
he can charge as batteries as well.
18:19.687 --> 18:22.000
The electric requires become negative.
18:22.000 --> 18:25.125
is there a different approach
if it's a seasonal cost
18:25.125 --> 18:28.187
challenge or seasonal cost
difference is the approach similar?
18:28.562 --> 18:33.000
So the seasonal de-risking
is the most difficult
18:33.312 --> 18:37.687
Because when you deploy either
storages of heat or less
18:38.437 --> 18:42.937
and you don't use them that much, but
you use only them a few times per year,
18:43.250 --> 18:48.687
the CapEx becomes so much dominating
that it's not worthwhile doing it.
18:48.687 --> 18:55.000
So to back up seasonal de-risking,
you need large storage of fuels,
18:55.000 --> 18:58.250
which is basically there
with our natural gas grid in Europe.
18:58.500 --> 19:02.187
And you need flexible, cost effective
19:02.375 --> 19:06.000
power generation, for example,
with the gas fired power plants,
19:06.000 --> 19:10.312
which we have right now,
there is not a good alternative to that.
19:10.375 --> 19:13.625
you've given us some great examples
of some customers that have employed
19:13.625 --> 19:16.562
a couple of different approaches
and how that's worked out for them.
19:16.562 --> 19:18.375
So that was really good to hear.
19:18.375 --> 19:22.437
We would all love to say that every time
that we try to do something,
19:22.437 --> 19:26.187
it goes to plan,
but it doesn't usually work that way.
19:26.250 --> 19:26.625
Right.
19:26.625 --> 19:28.687
tell us about how where you've seen
19:28.687 --> 19:32.875
some customers kind of underestimate
the risk and fall short.
19:32.875 --> 19:36.875
And what was the impact on that, on them
or on their business?
19:37.187 --> 19:39.812
what I have seen is that
19:41.125 --> 19:43.000
few of the companies,
19:43.000 --> 19:46.562
they didn't adapt that much
to the new energy landscape,
19:47.062 --> 19:49.562
and they were planning
19:49.562 --> 19:52.750
like companies to 10 or 20 years ago,
19:53.187 --> 19:56.062
I would say they were more one dimensional
19:56.062 --> 19:59.062
by solving their own energy problem,
19:59.750 --> 20:03.500
trying to secure energy futures
20:03.500 --> 20:06.500
for long term, paying additional money.
20:06.750 --> 20:11.750
And this way they cannot participate
in the low electricity times.
20:11.750 --> 20:13.875
So they were planning for a long term.
20:13.875 --> 20:17.500
In the future,
if you install a new energy asset, it can,
20:17.625 --> 20:20.937
like PV can operate for 2025 years.
20:21.312 --> 20:24.625
Power plants can operate for 20 years.
20:24.625 --> 20:30.000
but then you are depending on this one
single asset and you are depending on
20:30.000 --> 20:33.000
all the constraints which comes in
20:33.187 --> 20:37.187
And those customers who are more flexible,
20:37.562 --> 20:40.687
who have different energy
producing assets,
20:40.875 --> 20:45.687
can we act much faster and easier
for that and compensate that a lot?
20:45.687 --> 20:49.625
to I'm going to shift gears just a little
bit and ask you some questions about,
20:49.687 --> 20:53.125
you know, how our regulations permitting
20:53.562 --> 20:58.437
local grid rules, how did those vary
across Europe and how are they impacting
20:58.750 --> 21:02.812
what customers are doing to kind of solve
their energy problems?
21:03.125 --> 21:08.312
the framework for the European record
is pretty much the same in every country.
21:08.312 --> 21:13.312
They can adapt it to their own needs,
which some countries do.
21:13.312 --> 21:18.437
So we have one
common grid code with different
21:19.625 --> 21:20.625
requirements.
21:20.625 --> 21:23.187
Within this record
21:23.187 --> 21:25.875
we have about the same spark spread.
21:25.875 --> 21:30.250
So spark spread is basically
the difference between the gas price
21:30.250 --> 21:34.000
and the electricity price in your market.
21:34.000 --> 21:38.250
So the bigger the difference is,
the more profitable become
21:38.375 --> 21:42.312
gas fired power plants,
and the smaller is,
21:42.375 --> 21:45.562
the less profitable gas fired
power plants.
21:47.062 --> 21:50.062
What what really differs is
21:50.312 --> 21:53.312
the governmental subsidies.
21:53.562 --> 21:56.562
And these are either
21:56.937 --> 22:01.125
pushing some some specific technologies
22:01.500 --> 22:06.687
and put other technologies
in a disadvantage or they run out.
22:06.750 --> 22:12.375
So in some instances
it's not sustainable anymore.
22:12.375 --> 22:16.187
Financial sustainable
to to run those assets anymore.
22:17.312 --> 22:22.000
So it becomes much more difficult
for those companies
22:22.000 --> 22:27.687
to have a profitable production
or operation of their company.
22:27.750 --> 22:30.500
what role
do you believe the utilities could play?
22:30.500 --> 22:33.875
What could they do for
what are they doing.
22:34.000 --> 22:35.687
You know, when it comes to helping reduce
22:35.687 --> 22:39.812
that risk of energy costs
and the congestion on the grid?
22:39.875 --> 22:44.750
I think the utilities are
or should be at the forefront of this
22:44.812 --> 22:47.750
reducing de-risking of the energy sector,
22:47.750 --> 22:51.062
helping the large energy
22:51.062 --> 22:55.062
consumer in companies in their region
to prepare for the future.
22:55.062 --> 23:01.187
They can either do this by doing PBA's,
they can speed up the process.
23:01.187 --> 23:05.187
They can provide reliable energy
for those companies.
23:05.187 --> 23:10.625
And I think they have a key role
for Europe to really solve
23:10.625 --> 23:12.375
this energy challenge.
23:12.375 --> 23:14.500
So as you think about everything
that we've talked
23:14.500 --> 23:18.062
today, if you were sitting down
and talking to a customer
23:18.375 --> 23:21.812
who was bringing
some of these challenges to your desk.
23:21.812 --> 23:23.187
how would you consult with them?
23:23.187 --> 23:27.125
What would you recommend to them
as they look at
23:27.187 --> 23:30.687
what they should be doing for their energy
strategy in the years to come?
23:30.687 --> 23:34.312
there isn't a one fit all answer to that.
23:34.312 --> 23:37.687
So you really need to understand
the energy need is a thermal
23:37.750 --> 23:39.562
or is a seasonal.
23:39.562 --> 23:42.625
Is a constant,
is it flexible and all that stuff.
23:42.625 --> 23:47.750
But most of the
time it boils down to that
23:49.000 --> 23:49.437
you need
23:49.437 --> 23:53.562
either a competent partner
to help you solve it.
23:53.562 --> 23:57.500
Because most of our customers
Energy is not their core business.
23:57.875 --> 24:02.000
It's a necessary need or a challenge
they need to solve.
24:02.437 --> 24:05.062
So they need expertise to understand it
24:05.062 --> 24:08.125
and also to understand
all the possibilities.
24:08.125 --> 24:12.250
caterpillar is constantly developing
new products, new technologies
24:12.250 --> 24:16.000
to solve
the energy needs of our customers.
24:16.000 --> 24:19.000
So they need to
24:19.250 --> 24:22.250
basically get help, get consulting.
24:22.437 --> 24:25.000
We can help there.
We are happy to do that.
24:25.000 --> 24:28.562
And then in the end, it boils down
24:28.562 --> 24:32.875
to not put all your eggs into one basket
24:33.875 --> 24:36.500
and hope that it was the right choice.
24:36.500 --> 24:41.500
But to diversify and be flexible
because I mean,
24:41.562 --> 24:47.500
who knew how the world would look like
in 2026, five years ago, or ten years ago?
24:47.500 --> 24:51.187
And we don't know it will look like
in five years or in ten years.
24:51.187 --> 24:52.625
But the investments,
24:52.625 --> 24:56.750
what you are doing now,
they got last for the next 10 or 20 years.
24:56.875 --> 24:59.875
And it's always good to be flexible
25:00.000 --> 25:03.562
and we are providing
some really nice products for that.
25:03.562 --> 25:09.187
I mentioned before that, for example,
our CHP or try generation power plants
25:09.250 --> 25:13.125
can operate with different fuels
renewable fuels as well.
25:13.437 --> 25:16.562
So you don't have only the fast payback,
25:16.562 --> 25:19.875
but also the long term sustainability.
25:20.312 --> 25:25.250
And then you can combine
those technologies with storage systems.
25:25.250 --> 25:30.312
If it's a heat storage, which we have
talked about, or the electricity storage
25:30.312 --> 25:35.062
to make it more flexible
and decouple your energy production.
25:35.062 --> 25:37.375
And then of course, we talk about grid
code.
25:37.375 --> 25:41.000
It's very important
to have those assets grid connected.
25:41.000 --> 25:44.687
So you can have additional revenue streams
25:44.875 --> 25:51.000
as energy as a service for good stability
capacity market and celery services.
25:51.000 --> 25:55.000
And then that be basically
a revenue streams
25:55.000 --> 25:58.062
on top of your base
case of your energy need.
25:58.062 --> 26:00.187
Why you deploy those assets.
26:00.187 --> 26:04.750
I love that concept because then you know,
you're getting your initial investment
26:04.750 --> 26:07.687
in the energy assets
that you need to meet your immediate need,
26:07.687 --> 26:11.687
but you can find a way to employ them
to actually generate
26:11.687 --> 26:15.062
some revenue, ultimately reducing
your energy costs over time.
26:15.125 --> 26:17.500
Well, Tobias,
thank you for this conversation.
26:17.500 --> 26:19.000
hopefully our listeners have enjoyed
26:19.000 --> 26:22.812
your expertise
and learning about landscape Europe today.
26:22.812 --> 26:24.875
So thank you again for your time.
26:24.875 --> 26:28.375
I want to also say to our listeners,
thanks for listening.
26:28.375 --> 26:30.812
We hope you hear us again soon.
26:30.812 --> 26:32.937
Thanks for tuning in to the Power Bites
podcast.
26:32.937 --> 26:34.000
If you enjoyed the show,
26:34.000 --> 26:37.812
head on over to Cat.com and check out
Electric Power for more exciting content.
26:37.875 --> 26:39.562
Let's power tomorrow together!
00:00.125 --> 00:02.000
Welcome to the Power Bites podcast,
00:02.000 --> 00:05.750
brought to you by Caterpillar
Electric Power with your host John Thomas.
00:05.812 --> 00:09.187
Each month we deliver
the latest insights, trends and cutting
00:09.187 --> 00:12.437
edge tools to keep you ahead
in the dynamic energy industry.
00:12.625 --> 00:15.937
Whether you're streamlining operations,
embracing new technologies,
00:15.937 --> 00:19.062
or staying informed,
Power Bites is your go to source.
00:19.125 --> 00:20.312
Join us as we explore
00:20.312 --> 00:23.562
innovations shaping the future
and the resources you need to succeed.
00:23.562 --> 00:26.562
Welcome to Power Bites,
where energy meets innovation.
00:28.625 --> 00:28.875
Well.
00:28.875 --> 00:29.625
Welcome listeners
00:29.625 --> 00:33.875
on this episode of the Power Bytes
podcast, we're going to be talking about
00:33.875 --> 00:38.312
the energy landscape in Europe
and what is really kind of pushing
00:38.312 --> 00:43.437
organizations that area of the world
to rethink risk or mitigate risk.
00:43.625 --> 00:47.750
today we are joined
by Tobias Wedemier and Tobias.
00:47.750 --> 00:48.687
How are you today?
00:48.687 --> 00:50.875
Hey John, I'm doing great.
00:50.875 --> 00:52.375
Thank you for having me here.
00:52.375 --> 00:55.250
as we get started here, just tell us
a little bit about your background.
00:55.250 --> 00:56.437
A little bit about yourself?
00:56.437 --> 00:58.250
I am leading the business development
00:58.250 --> 01:02.250
for caterpillar power
division across Europe and Asia.
01:02.250 --> 01:08.750
I have multiple job roles from R&D
in service, project management,
01:08.750 --> 01:11.875
product manager, since about four years
01:11.875 --> 01:15.437
I'm in sales
and now in business development.
01:15.625 --> 01:17.500
I'm caterpillar about one decade.
01:17.500 --> 01:20.125
Tobias, for our listeners,
where are you located?
01:20.125 --> 01:21.812
Where is your offices located
01:21.812 --> 01:26.187
So I'm located in the facility
in south of Germany.
01:26.375 --> 01:29.625
It's where we have production, R&D
01:29.625 --> 01:33.250
and service for our gas product lines.
01:33.250 --> 01:38.312
The CG 132, CG one, 70 B and CG 260 units.
01:38.312 --> 01:43.062
So these are gen
sets from 400 kW up to 4.5MW.
01:43.062 --> 01:44.625
Well, once again, thanks for joining us.
01:44.625 --> 01:45.687
I'm excited to kind of talk
01:45.687 --> 01:49.437
a little bit today
about the energy landscape in Europe.
01:49.500 --> 01:53.562
Could you tell us a little bit about what
are some of the key issues in Europe's
01:53.562 --> 01:55.187
electricity landscape today
01:55.187 --> 01:59.125
that are fundamentally different
compared to just a few years ago?
01:59.125 --> 02:02.312
I would say a few years ago,
the electricity production
02:02.312 --> 02:05.562
landscape in Europe
was mostly conventional power plants.
02:05.750 --> 02:09.250
there was just a little bit
tiny or variable renewables
02:09.250 --> 02:10.875
being served into the grid.
02:10.875 --> 02:14.625
in 2024 or 2025, we nearly
02:15.375 --> 02:19.687
50% renewable
electricity penetration into the grid.
02:19.687 --> 02:23.437
And this has changed a lot how we see
02:23.500 --> 02:27.062
electricity in how we see power in Europe.
02:27.062 --> 02:29.937
And you can say that
there are about four trends.
02:29.937 --> 02:31.937
I touched on the variable renewables.
02:31.937 --> 02:36.812
That's a trend of the changing power
generation, which is having a huge impact.
02:36.937 --> 02:40.625
also on the power consumer side,
we see three
02:40.625 --> 02:43.937
different trends
and they are just picking up right now.
02:43.937 --> 02:47.125
So one is the electrification
or the transportation.
02:47.125 --> 02:51.687
then we have the electrification
of the heating sector, which is picking
02:51.937 --> 02:56.500
quite faster now than the activity
because of the governmental subsidies
02:56.500 --> 03:02.062
of heat pumps for private households,
and also the goal of the district heating,
03:02.062 --> 03:06.062
to be decarbonized until 2045.
03:06.062 --> 03:09.125
So just to give you
an understanding of the size,
03:09.187 --> 03:13.250
the German district
heating needs to decarbonize
03:15.125 --> 03:18.125
terawatt hours per year until
03:18.312 --> 03:19.937
These are huge numbers.
03:19.937 --> 03:24.437
the third trend is the data center trend,
which is not at the beginning.
03:24.437 --> 03:26.812
So we are right in the middle of that
right now.
03:26.812 --> 03:31.000
We can see that the urban areas
where most of the data centers are located
03:31.062 --> 03:34.750
have soaking up all the grid capacity
which was available,
03:34.750 --> 03:36.687
and we are getting more and more grid
congestion.
03:36.687 --> 03:42.062
So in the main capital cities
like Paris, London, Dublin, Frankfurt,
03:42.125 --> 03:45.562
Milano, we are facing a lot of permits
03:45.562 --> 03:49.312
pending to get disease on grid.
03:49.875 --> 03:53.750
because of the grid congestion,
there is delay in those permits
03:54.000 --> 03:59.750
and we are facing more and more island
mode requests for those data centers.
03:59.875 --> 04:03.187
you kind of described a challenge
there in the data center space
04:03.250 --> 04:04.500
if I'm hearing you correctly. Right.
04:04.500 --> 04:06.562
is very similar
to what we're seeing in North America.
04:06.562 --> 04:10.312
it's taking more time to get
those data centers tied to the grid.
04:10.312 --> 04:12.000
And so therefore a lot of them are going
04:12.000 --> 04:15.500
into what we would call island
mode, as you said, which they're off grid.
04:15.562 --> 04:16.875
They're not connected to the grid.
04:16.875 --> 04:18.750
So they're actually functioning
without grid power.
04:18.750 --> 04:22.187
But as you think of those other
three trends that you mentioned,
04:22.187 --> 04:24.812
what are some of the challenges
of those trends?
04:24.812 --> 04:29.687
Basically, it's that they all work
together into the wrong direction.
04:29.687 --> 04:34.875
So if we see the demand
of electric vehicles or the electricity
04:34.875 --> 04:38.875
demands of heat pump for district heating,
or for private households,
04:38.875 --> 04:44.437
they all require the same huge
amount of peak electricity during times
04:44.437 --> 04:50.500
when the production trend of the variable
renewables is at its lowest production.
04:50.500 --> 04:52.937
one example the summertime is all day.
04:52.937 --> 04:56.312
You have a lot of PV production,
and then in the evening
04:56.312 --> 04:59.312
when people come home,
they start charging the electric vehicle,
04:59.312 --> 05:03.250
they are starting the air conditioning
then the sun is down.
05:03.250 --> 05:07.312
So you can do a daily shift there
with battery systems, for example.
05:07.312 --> 05:11.937
A much bigger problem is that when you
look at the winter time, the winter time,
05:12.000 --> 05:17.187
you have lower PV production, much lower,
like only one quarter or one tenth.
05:17.187 --> 05:20.937
Sometimes you have dark doldrums
where you have 2 or 3 weeks,
05:21.000 --> 05:24.000
very little wind or very little PV,
05:24.312 --> 05:28.000
then you still need to heat up your home
district.
05:28.000 --> 05:32.312
Heating needs to run, you still need
to charge your electric vehicle
05:32.625 --> 05:37.625
of course have the regular energy demand,
which we have seen the last few decades.
05:38.125 --> 05:40.125
then prices are skyrocketing.
05:40.125 --> 05:44.562
So these effects are fundamentally
changing the way
05:44.750 --> 05:46.562
electricity is priced in Europe.
05:46.562 --> 05:51.562
While in the past you had more steady,
predictable pricing all over the years,
05:51.562 --> 05:55.125
and in the next years to come,
we see that the price
05:55.187 --> 05:58.437
volatility is increasing drastically.
05:58.437 --> 06:02.562
So like 10 to 20% of the hours
of the year,
06:02.562 --> 06:06.625
you can have the cost of 5,070%
for the complete
06:06.875 --> 06:09.875
So we see that there
the prices are sparking.
06:10.125 --> 06:14.125
on the other hand
you can even have times of really low
06:14.187 --> 06:17.125
electricity prices where you feed
06:17.125 --> 06:20.562
basically from the national grid
from renewable cheap production
06:20.625 --> 06:24.375
to your energy demand,
and then you really pay very little.
06:24.687 --> 06:26.562
isn't worthwhile
to produce your own energy
06:26.562 --> 06:29.187
because you get so cheap energy
from the grid.
06:29.187 --> 06:34.562
mentioned a couple times there, Tobias,
that there were energy cost challenges.
06:34.562 --> 06:38.312
for the folks that might be unaware
in Europe from other parts of the world,
06:38.312 --> 06:42.312
what are some of the primary drivers
in your mind that is driving
06:42.312 --> 06:48.312
energy costs today in of course
the cost of the fossil fuels is rising
06:48.500 --> 06:53.250
Then the variable renewables
are producing really cheap electricity.
06:53.250 --> 06:57.750
But the infrastructure
and the flexibility is not there.
06:57.750 --> 06:58.875
So the cost.
06:58.875 --> 07:04.687
Basically the base taxation of utilities
for increasing the flexibility
07:04.687 --> 07:05.500
and increasing
07:05.500 --> 07:10.062
the infrastructure is driving up the costs
by quite a significant margin.
07:10.375 --> 07:14.375
then the governments all over
Europe are now, right now
07:14.375 --> 07:18.187
planning and got green
light from the European Union
07:18.187 --> 07:23.062
to establish new subsidies
is to back up the variable renewables.
07:23.062 --> 07:26.750
So just as an example to to illustrate
that and make it a little bit
07:26.750 --> 07:30.937
more tangible
when we are going towards 80, 90,
07:30.937 --> 07:36.250
100% of the electricity in Europe
generated by renewable energies,
07:36.312 --> 07:41.500
especially variable renewable energies,
we need to have a backup for those
07:41.625 --> 07:43.375
in case of a dark Dora.
07:43.375 --> 07:47.250
A dark Dora in Europe happens every year
quite often.
07:47.250 --> 07:51.125
Some are two years long, and studies
show that every second year
07:51.125 --> 07:52.312
they are three weeks long.
07:52.312 --> 07:55.312
So in this time we would need a reserve
of basically
07:55.312 --> 07:59.125
50 to 100 terawatt hours of electricity.
07:59.125 --> 08:01.000
How much backup do we have right now?
08:01.000 --> 08:03.437
It's about a few percentage of
08:03.437 --> 08:07.437
So we are talking about a tennis ball,
which we have right now in our hand,
08:07.437 --> 08:12.375
but we are really looking for a basketball
to solve the problem, to play the game.
08:12.437 --> 08:15.437
and when you say backup energy,
for those that aren't familiar,
08:15.500 --> 08:17.000
you're backing up renewables.
08:17.000 --> 08:20.437
You're talking about backing them up
with maybe traditional gen sets
08:20.437 --> 08:24.312
that are dependent on fossil
fuels like gas, natural gas or diesel.
08:24.312 --> 08:24.937
Correct.
08:24.937 --> 08:25.937
That's one option.
08:25.937 --> 08:28.437
So we have different kind of backups.
08:28.437 --> 08:33.250
The daily backup is probably mostly driven
by battery systems.
08:33.250 --> 08:34.625
They can do the daily shift.
08:34.625 --> 08:37.062
They are expensive in deployment.
08:37.062 --> 08:41.062
They don't produce electricity,
but they can make the daily shifts
08:41.062 --> 08:46.000
between like high verbal renewable times
and low variable neutral times.
08:46.062 --> 08:50.437
Talking about gas fired
power plants in general, like gas sets
08:50.437 --> 08:55.937
or gas turbines, they become basically one
and only technical solution
08:55.937 --> 09:00.125
for seasonal backup, like dark doldrums,
which I talk about.
09:00.187 --> 09:04.625
You have to imagine the capacity
which you need to save is seasonal
09:05.000 --> 09:08.750
in batteries would be equivalent
to 700 million
09:08.750 --> 09:12.687
to 1.4 billion electric cars in Europe.
09:12.687 --> 09:16.875
Right now,
we have 300 million cars in Europe, and I
09:17.437 --> 09:21.062
think every European citizen would agree
that we don't want to have
09:21.062 --> 09:24.687
3 to 4 times as many cars in Europe
than we have right now.
09:24.937 --> 09:29.000
so we can see that
the electrical storage is not there.
09:29.000 --> 09:32.375
Same is true for the hydro pump storage.
09:32.500 --> 09:32.750
Yeah.
09:32.750 --> 09:35.812
We will need to flood the Alps
basically with
09:36.125 --> 09:42.000
So the only technical feasible solution
would flexible gas fired power plants.
09:42.062 --> 09:44.687
they don't have to run
only on natural gas.
09:44.687 --> 09:49.625
They can run on biomethane
which is CO2, mostly CO2 neutral.
09:49.687 --> 09:52.625
They will be running on hydrogen as well.
09:52.625 --> 09:57.687
So they can also participate
to help our customers be more sustainable.
09:57.750 --> 10:02.125
you've really alluded to customers
attempting to reduce their emissions
10:02.125 --> 10:05.875
or meet their environmental goals
or sustainability goals.
10:05.875 --> 10:08.375
And you've kind of alluded to that
through the discussions
10:08.375 --> 10:12.125
on, electrification of transportation
and the use of heat pumps
10:12.187 --> 10:17.187
as you're talking to customers
that are attempting to really attack
10:17.750 --> 10:20.937
kind of that emissions or sustainability,
head on.
10:21.000 --> 10:24.125
Can you give us some examples of what
some of your customers
10:24.125 --> 10:27.750
are doing to achieve goals
in that area in Europe?
10:28.000 --> 10:32.375
These four trends
which I was touching on right before, are
10:32.937 --> 10:35.875
mainly driven to decarbonize
10:35.875 --> 10:38.937
the transportation and the district
heating sector, for example.
10:38.937 --> 10:43.812
And we have a really nice example
from a district heating company,
10:43.875 --> 10:48.000
which is also a customer,
where a good way to solve this.
10:48.125 --> 10:51.937
So they were not only thinking
of replacing
10:51.937 --> 10:57.750
their current natural resource,
fuel fired district heating assets
10:57.750 --> 11:02.750
with electrical heat pumps
to become more sustainable.
11:02.750 --> 11:07.437
But they also combined it
to be more flexible in the future
11:07.437 --> 11:13.000
with CHP power plants from
So the concept is that you have
11:13.062 --> 11:17.125
for the growth of the heat,
which you are serving into the district,
11:17.125 --> 11:22.750
heating the, heat pump, which is very
and running in the springtime,
11:22.750 --> 11:27.062
summertime and autumn time
when it has a high cop factor.
11:27.125 --> 11:30.937
A cop factor
means that you can serve one kilowatt
11:30.937 --> 11:33.937
hour of electricity
and get a certain amount.
11:33.937 --> 11:38.375
Usually it's 4
or 5 kilowatt of heating out of it.
11:38.437 --> 11:42.000
So this works really nice in spring,
autumn and summertime.
11:42.187 --> 11:46.375
then in the wintertime
when the environmental temperature becomes
11:46.375 --> 11:50.375
really low, the cop factor of the heat
pump goes
11:50.437 --> 11:54.812
also down to 1.2 or even 1.15.
11:54.875 --> 11:58.312
So you nearly have a 1 to 2 or ratio.
11:58.312 --> 12:01.312
How we are trading
all the electricity to the heat.
12:01.437 --> 12:05.125
what we just discussed is that during
these dark gold rooms in the winter time,
12:05.187 --> 12:07.000
electricity becomes really expensive.
12:07.000 --> 12:11.562
It accounts for like the vast majority
of the money spent all over the year.
12:11.562 --> 12:15.937
So here
our power plants come in very handy
12:15.937 --> 12:20.750
because with the CHP power plant,
you can produce heat for the district
12:20.750 --> 12:24.500
heating while also producing
a lot of electricity on your own
12:24.500 --> 12:30.187
cost of the gas, which is not rising that
much during those dark, tolerant times.
12:30.187 --> 12:33.750
So you're covering up
for the high expenses of the heat pump.
12:33.750 --> 12:36.875
With the CHP power plant,
you're covering up
12:36.875 --> 12:40.625
for the low carb factor
during low ambient temperatures.
12:40.625 --> 12:45.062
And then, the CHP pays off
much faster than heat
12:45.375 --> 12:48.187
the financial roadmap
becomes much more attractive.
12:48.187 --> 12:52.437
Just to give you a rough understanding,
a heat pump has payback period between 3
12:52.437 --> 12:54.250
and 10 years, always
12:54.250 --> 12:58.125
depending on the heat revenue,
on the cost of the electricity and so on.
12:58.125 --> 13:02.500
And CHP power plant
has normally in Germany payback
13:02.500 --> 13:05.187
period between and 4 years.
13:05.187 --> 13:07.375
You can free up more cash flow.
13:07.375 --> 13:11.687
then when we look now from the short term
future to the mid-term future,
13:11.687 --> 13:15.562
you can also run this
CHP power plan with biomethane
13:15.625 --> 13:19.187
to make it more sustainable
to have less CO2 emissions
13:19.187 --> 13:22.437
and also mix in hydrogen if you like to.
13:22.437 --> 13:28.187
And during all over the year,
you can participate in ancillary services
13:28.187 --> 13:32.250
in the support market and actually have
additional revenue streams.
13:32.250 --> 13:37.562
So what our customer is doing
is not only, Making his heat production
13:37.562 --> 13:41.750
more flexible, he is also adding
additional revenue streams
13:41.750 --> 13:47.312
like energy as a service to his portfolio
with those CHP power plants.
13:47.312 --> 13:50.437
And last but not it's important
13:50.437 --> 13:54.625
to also decouple the production
the heat production.
13:54.625 --> 14:00.250
So he did this with a large heat storage
so we can run the CHP power plant,
14:00.250 --> 14:04.750
for example, for high spot market prices
or for ancillary services,
14:04.812 --> 14:06.125
earn a lot of money.
14:06.125 --> 14:08.375
Sometimes peak prices of up to
14:09.937 --> 14:10.812
per megawatt
14:10.812 --> 14:15.500
And while the heat demand is
maybe not that much during those times,
14:15.500 --> 14:19.375
he can store the generated heat
in the heat storage and the advantage
14:19.375 --> 14:22.687
of the heat storage
compared to an electrical battery
14:22.687 --> 14:26.812
system storage is that it's much,
much cheaper from a CapEx standpoint,
14:26.812 --> 14:31.312
So they can use the combined heat
and power or CHP
14:31.687 --> 14:37.125
gen set to produce the electricity
when they need it, but take that excess
14:37.125 --> 14:38.812
heat off of the product and store it
14:38.812 --> 14:42.562
until they need it, instead of assuming
they had to use it at the same time.
14:42.625 --> 14:45.312
that's a super cool approach to that.
14:45.312 --> 14:49.000
but you mentioned energy as a service way
that a customer
14:49.000 --> 14:53.375
could make some financial gain off of this
type of a solution.
14:53.562 --> 14:57.500
Give us an example of what you mean
when you say energy as a service.
14:57.562 --> 15:02.625
You can buy energy as a service
from a provider.
15:02.687 --> 15:03.250
Yeah.
15:03.250 --> 15:07.000
you are not only looking
at the pure energy
15:07.000 --> 15:11.562
which you need to produce
to sell it in the market
15:11.562 --> 15:18.187
or to provide your own energy needs,
but you also provide
15:18.187 --> 15:23.625
services related to energy,
which is stabilizing the grid,
15:24.187 --> 15:27.125
backing up renewable energy
in the capacity
15:27.125 --> 15:30.250
market, and really help
15:30.312 --> 15:34.875
the electrical infrastructure
to sustain in the future.
15:34.875 --> 15:39.250
So one of the things that I mentioned
at the opening of the episode today,
15:39.250 --> 15:45.250
Tobias is de-risking or kind of managing,
mitigating, eliminating risk.
15:45.500 --> 15:48.250
did some research
and we are hearing a lot about that
15:48.250 --> 15:51.687
kind of concept
in the European energy market.
15:51.687 --> 15:56.625
So can you tell when we hear that, what
kinds of things are they referring to?
15:56.812 --> 16:00.687
we have a very stable grid
and high availability
16:00.687 --> 16:04.000
of the grid, natural gas grid
as well as the electrical grid.
16:04.000 --> 16:07.750
So it's not about having energy,
16:07.750 --> 16:12.187
it's more about de-risking the cost
16:12.437 --> 16:17.812
and also about,
solving the problem of congestion grid.
16:17.937 --> 16:21.187
If you want to expand
the production of the company,
16:21.187 --> 16:24.500
your business,
and you need more energy for your company.
16:24.500 --> 16:27.875
So looking at the cost,
You can have different ways
16:27.875 --> 16:32.375
you can have daily trade offs
or the cost swings of electricity.
16:32.562 --> 16:37.312
you can also have,
seasonal de-risking of your energy demand
16:37.312 --> 16:40.500
or the energy production which you are
committing to your customers.
16:40.500 --> 16:42.750
If you're for a utility.
16:42.750 --> 16:46.000
this example,
which I just mentioned from the utility,
16:46.000 --> 16:49.562
which is not only deploying a heat pump,
but also.
16:49.937 --> 16:53.562
CHP power plant,
this is basically a good example
16:53.562 --> 16:57.250
for de-risking seasonal the winter time.
16:57.250 --> 17:01.062
Another example would be from a food
17:01.062 --> 17:04.250
industry customer, which we had who.
17:04.437 --> 17:07.437
Is looking to to produce steam
for his food
17:07.437 --> 17:10.625
production running the CHP.
17:10.687 --> 17:13.375
The last ten, 20 years worked out fine.
17:13.375 --> 17:18.875
But then he recognized that
the dark curve, which is lowering
17:18.875 --> 17:24.187
the prices during the day, is
basically decreasing the electricity price
17:24.187 --> 17:28.187
he can get selling the electricity proofs
from the CHP so much
17:28.187 --> 17:31.875
that it's not worthwhile
to sell to run the CHP anymore.
17:32.062 --> 17:36.562
So what he did
was reducing the size of the CHP,
17:37.125 --> 17:41.437
installing battery system
to decouple as well as the district
17:41.437 --> 17:44.875
heating example before
to decouple this time steam production
17:44.875 --> 17:49.812
and electricity production
and save with battery systems.
17:49.812 --> 17:53.625
The electricity produced
during the steam production
17:53.687 --> 17:57.437
to store them and wait basically
17:57.437 --> 18:02.312
for the daily two times of high
electricity prices and serve them
18:02.312 --> 18:06.312
then to the national grid
and sell them basically to the grid.
18:06.312 --> 18:09.437
So in this case, he de-risk the daily
18:09.437 --> 18:13.812
risk of fluctuation of electricity prices.
18:13.812 --> 18:19.625
And also what goes very in handy is that
he can charge as batteries as well.
18:19.687 --> 18:22.000
The electric requires become negative.
18:22.000 --> 18:25.125
is there a different approach
if it's a seasonal cost
18:25.125 --> 18:28.187
challenge or seasonal cost
difference is the approach similar?
18:28.562 --> 18:33.000
So the seasonal de-risking
is the most difficult
18:33.312 --> 18:37.687
Because when you deploy either
storages of heat or less
18:38.437 --> 18:42.937
and you don't use them that much, but
you use only them a few times per year,
18:43.250 --> 18:48.687
the CapEx becomes so much dominating
that it's not worthwhile doing it.
18:48.687 --> 18:55.000
So to back up seasonal de-risking,
you need large storage of fuels,
18:55.000 --> 18:58.250
which is basically there
with our natural gas grid in Europe.
18:58.500 --> 19:02.187
And you need flexible, cost effective
19:02.375 --> 19:06.000
power generation, for example,
with the gas fired power plants,
19:06.000 --> 19:10.312
which we have right now,
there is not a good alternative to that.
19:10.375 --> 19:13.625
you've given us some great examples
of some customers that have employed
19:13.625 --> 19:16.562
a couple of different approaches
and how that's worked out for them.
19:16.562 --> 19:18.375
So that was really good to hear.
19:18.375 --> 19:22.437
We would all love to say that every time
that we try to do something,
19:22.437 --> 19:26.187
it goes to plan,
but it doesn't usually work that way.
19:26.250 --> 19:26.625
Right.
19:26.625 --> 19:28.687
tell us about how where you've seen
19:28.687 --> 19:32.875
some customers kind of underestimate
the risk and fall short.
19:32.875 --> 19:36.875
And what was the impact on that, on them
or on their business?
19:37.187 --> 19:39.812
what I have seen is that
19:41.125 --> 19:43.000
few of the companies,
19:43.000 --> 19:46.562
they didn't adapt that much
to the new energy landscape,
19:47.062 --> 19:49.562
and they were planning
19:49.562 --> 19:52.750
like companies to 10 or 20 years ago,
19:53.187 --> 19:56.062
I would say they were more one dimensional
19:56.062 --> 19:59.062
by solving their own energy problem,
19:59.750 --> 20:03.500
trying to secure energy futures
20:03.500 --> 20:06.500
for long term, paying additional money.
20:06.750 --> 20:11.750
And this way they cannot participate
in the low electricity times.
20:11.750 --> 20:13.875
So they were planning for a long term.
20:13.875 --> 20:17.500
In the future,
if you install a new energy asset, it can,
20:17.625 --> 20:20.937
like PV can operate for 2025 years.
20:21.312 --> 20:24.625
Power plants can operate for 20 years.
20:24.625 --> 20:30.000
but then you are depending on this one
single asset and you are depending on
20:30.000 --> 20:33.000
all the constraints which comes in
20:33.187 --> 20:37.187
And those customers who are more flexible,
20:37.562 --> 20:40.687
who have different energy
producing assets,
20:40.875 --> 20:45.687
can we act much faster and easier
for that and compensate that a lot?
20:45.687 --> 20:49.625
to I'm going to shift gears just a little
bit and ask you some questions about,
20:49.687 --> 20:53.125
you know, how our regulations permitting
20:53.562 --> 20:58.437
local grid rules, how did those vary
across Europe and how are they impacting
20:58.750 --> 21:02.812
what customers are doing to kind of solve
their energy problems?
21:03.125 --> 21:08.312
the framework for the European record
is pretty much the same in every country.
21:08.312 --> 21:13.312
They can adapt it to their own needs,
which some countries do.
21:13.312 --> 21:18.437
So we have one
common grid code with different
21:19.625 --> 21:20.625
requirements.
21:20.625 --> 21:23.187
Within this record
21:23.187 --> 21:25.875
we have about the same spark spread.
21:25.875 --> 21:30.250
So spark spread is basically
the difference between the gas price
21:30.250 --> 21:34.000
and the electricity price in your market.
21:34.000 --> 21:38.250
So the bigger the difference is,
the more profitable become
21:38.375 --> 21:42.312
gas fired power plants,
and the smaller is,
21:42.375 --> 21:45.562
the less profitable gas fired
power plants.
21:47.062 --> 21:50.062
What what really differs is
21:50.312 --> 21:53.312
the governmental subsidies.
21:53.562 --> 21:56.562
And these are either
21:56.937 --> 22:01.125
pushing some some specific technologies
22:01.500 --> 22:06.687
and put other technologies
in a disadvantage or they run out.
22:06.750 --> 22:12.375
So in some instances
it's not sustainable anymore.
22:12.375 --> 22:16.187
Financial sustainable
to to run those assets anymore.
22:17.312 --> 22:22.000
So it becomes much more difficult
for those companies
22:22.000 --> 22:27.687
to have a profitable production
or operation of their company.
22:27.750 --> 22:30.500
what role
do you believe the utilities could play?
22:30.500 --> 22:33.875
What could they do for
what are they doing.
22:34.000 --> 22:35.687
You know, when it comes to helping reduce
22:35.687 --> 22:39.812
that risk of energy costs
and the congestion on the grid?
22:39.875 --> 22:44.750
I think the utilities are
or should be at the forefront of this
22:44.812 --> 22:47.750
reducing de-risking of the energy sector,
22:47.750 --> 22:51.062
helping the large energy
22:51.062 --> 22:55.062
consumer in companies in their region
to prepare for the future.
22:55.062 --> 23:01.187
They can either do this by doing PBA's,
they can speed up the process.
23:01.187 --> 23:05.187
They can provide reliable energy
for those companies.
23:05.187 --> 23:10.625
And I think they have a key role
for Europe to really solve
23:10.625 --> 23:12.375
this energy challenge.
23:12.375 --> 23:14.500
So as you think about everything
that we've talked
23:14.500 --> 23:18.062
today, if you were sitting down
and talking to a customer
23:18.375 --> 23:21.812
who was bringing
some of these challenges to your desk.
23:21.812 --> 23:23.187
how would you consult with them?
23:23.187 --> 23:27.125
What would you recommend to them
as they look at
23:27.187 --> 23:30.687
what they should be doing for their energy
strategy in the years to come?
23:30.687 --> 23:34.312
there isn't a one fit all answer to that.
23:34.312 --> 23:37.687
So you really need to understand
the energy need is a thermal
23:37.750 --> 23:39.562
or is a seasonal.
23:39.562 --> 23:42.625
Is a constant,
is it flexible and all that stuff.
23:42.625 --> 23:47.750
But most of the
time it boils down to that
23:49.000 --> 23:49.437
you need
23:49.437 --> 23:53.562
either a competent partner
to help you solve it.
23:53.562 --> 23:57.500
Because most of our customers
Energy is not their core business.
23:57.875 --> 24:02.000
It's a necessary need or a challenge
they need to solve.
24:02.437 --> 24:05.062
So they need expertise to understand it
24:05.062 --> 24:08.125
and also to understand
all the possibilities.
24:08.125 --> 24:12.250
caterpillar is constantly developing
new products, new technologies
24:12.250 --> 24:16.000
to solve
the energy needs of our customers.
24:16.000 --> 24:19.000
So they need to
24:19.250 --> 24:22.250
basically get help, get consulting.
24:22.437 --> 24:25.000
We can help there.
We are happy to do that.
24:25.000 --> 24:28.562
And then in the end, it boils down
24:28.562 --> 24:32.875
to not put all your eggs into one basket
24:33.875 --> 24:36.500
and hope that it was the right choice.
24:36.500 --> 24:41.500
But to diversify and be flexible
because I mean,
24:41.562 --> 24:47.500
who knew how the world would look like
in 2026, five years ago, or ten years ago?
24:47.500 --> 24:51.187
And we don't know it will look like
in five years or in ten years.
24:51.187 --> 24:52.625
But the investments,
24:52.625 --> 24:56.750
what you are doing now,
they got last for the next 10 or 20 years.
24:56.875 --> 24:59.875
And it's always good to be flexible
25:00.000 --> 25:03.562
and we are providing
some really nice products for that.
25:03.562 --> 25:09.187
I mentioned before that, for example,
our CHP or try generation power plants
25:09.250 --> 25:13.125
can operate with different fuels
renewable fuels as well.
25:13.437 --> 25:16.562
So you don't have only the fast payback,
25:16.562 --> 25:19.875
but also the long term sustainability.
25:20.312 --> 25:25.250
And then you can combine
those technologies with storage systems.
25:25.250 --> 25:30.312
If it's a heat storage, which we have
talked about, or the electricity storage
25:30.312 --> 25:35.062
to make it more flexible
and decouple your energy production.
25:35.062 --> 25:37.375
And then of course, we talk about grid
code.
25:37.375 --> 25:41.000
It's very important
to have those assets grid connected.
25:41.000 --> 25:44.687
So you can have additional revenue streams
25:44.875 --> 25:51.000
as energy as a service for good stability
capacity market and celery services.
25:51.000 --> 25:55.000
And then that be basically
a revenue streams
25:55.000 --> 25:58.062
on top of your base
case of your energy need.
25:58.062 --> 26:00.187
Why you deploy those assets.
26:00.187 --> 26:04.750
I love that concept because then you know,
you're getting your initial investment
26:04.750 --> 26:07.687
in the energy assets
that you need to meet your immediate need,
26:07.687 --> 26:11.687
but you can find a way to employ them
to actually generate
26:11.687 --> 26:15.062
some revenue, ultimately reducing
your energy costs over time.
26:15.125 --> 26:17.500
Well, Tobias,
thank you for this conversation.
26:17.500 --> 26:19.000
hopefully our listeners have enjoyed
26:19.000 --> 26:22.812
your expertise
and learning about landscape Europe today.
26:22.812 --> 26:24.875
So thank you again for your time.
26:24.875 --> 26:28.375
I want to also say to our listeners,
thanks for listening.
26:28.375 --> 26:30.812
We hope you hear us again soon.
26:30.812 --> 26:32.937
Thanks for tuning in to the Power Bites
podcast.
26:32.937 --> 26:34.000
If you enjoyed the show,
26:34.000 --> 26:37.812
head on over to Cat.com and check out
Electric Power for more exciting content.
26:37.875 --> 26:39.562
Let's power tomorrow together!
