Balancing act: Germany wrestles with decarbonizing, manufacturing ambitions

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Sam Humphreys:

Hello. You're listening to EnergyCents, an S&P Global Commodity Insight podcast where we talk all things energy and finance. My name is Sam Humphreys, and I'm here as always with Hill Vaden. Hey, Hill. How's it going?

Hill Vaden:

It's going all right. It's a Friday.

Sam Humphreys:

It is a Friday. We love Fridays. I can actually hear my children in the background, as it's probably close to dinner time, and I haven't cooked anything.

Hill Vaden:

Oh.

Sam Humphreys:

So...

Hill Vaden:

So, they're chewing on your slippers?

Sam Humphreys:

It's probably, they've raided-

I mean, I wouldn't put it past them. They are probably raiding the biscuit tin quite hard because I have not left that in a sensible place. It's just out on the table. We'll see what happens there.

Hill Vaden:

Yeah.

Sam Humphreys:

But anyway, we're talking to Daniel Muir this week, who is a power and renewables expert on Germany and the power mix that is there and it's goals towards a carbon-neutral, net-zero goal and moving away from coal. Is there anything you think listeners should be watching out for?

Hill Vaden:

I guess the big thing was we got him to interject the word Dunkelflaute.

Sam Humphreys:

The best word ever.

Hill Vaden:

I think which means dark calm or the equivalent of dark calm for those periods when the sun doesn't shine and the wind doesn't blow. That was kind of a... If you're playing bingo and you've got Dunkelflaute. I don't know if I'm pronouncing that right [inaudible 00:01:30]-

Sam Humphreys:

Dunkelflaute.

Hill Vaden:

... but that will come up.

Sam Humphreys:

Yeah.

Hill Vaden:

Yes. The talk of just Germany is such a manufacturing hotspot historically in Europe and how it's balancing its manufacturing ambition with ambitions to decarbonize its power sector and remain cost competitive. And you've got coal leaving the system by 2038 on path to a net-zero target in 2045. Nuclear is not necessarily coming back into the equation.

It sounds like gas may, and obviously there's a lot of low cost or low marginal cost of solar, and things like that are good from an emissions perspective and perhaps good from a power buyers' perspective. So, just a lot to unpack, and it's a great look at Germany, which is obviously in the news all the time right now.

Sam Humphreys:

It is.

Hill Vaden:

How about you?

Sam Humphreys:

Yeah, again, pretty much what you've said, and there's an election coming up in February as well, which could see certain shifts that might be worth watching out for. But there's a lot to unpack there, and Daniel does a much better job of explaining things than I do, so I think we should probably hand off.

Hill Vaden:

All right.

Sam Humphreys:

All right. Thanks for joining us. Hello to Hill and Daniel. How are you doing?

Hill Vaden:

Doing all right.

Daniel Muir:

I'm very good. Thank you.

Sam Humphreys:

Excellent. Glad to hear it. We're recording now on the 6th of December. Just before we started recording we were talking about a Christmas present wish list, and Daniel, I think there was a certain book on yours that you might want to get. It's vaguely relevant to what we're going to be talking about today, which is Germany. I believe it's Angela Merkel's book. Have I said that right? I never get the pronunciation right.

Daniel Muir:

Yeah, you're right.

Sam Humphreys:

Ah, sweet.

Daniel Muir:

I'm looking forward to reading her words, 700 glorious pages.

Sam Humphreys:

It's a lot of pages.

Hill Vaden:

Do you have any books on your list, Sam?

Sam Humphreys:

There's a Philip Pullman book. He wrote The Golden Compass and the Spyglass series. And it's been supposed to have come out about three years ago, and I'm still hoping it'll be out in time for Christmas. But no, what about you?

Hill Vaden:

I've got, I guess, some history books.

Sam Humphreys:

Oh, history books.

Hill Vaden:

Less exciting than The Golden Compass, but as you know, I've been reading lots of books on 1960s history this year and boring my kids with senseless trivia.

Sam Humphreys:

Well, I've liked the trivia because you've brought it into a few of these podcasts of us. That is not what we're talking about today. We are talking about Germany and its power mix. And one notable thing that I think, from looking at European power, is greenhouse gas emissions, and Germany is probably one of the largest GHG emission countries in the European Union. So, we want to dive into a bit of the power mix to understand why and what the outlooks are. Daniel, do you want to just set us up with, how does Germany power its nation?

Daniel Muir:

Sure. I suppose starting with the emissions point, you're right to point out that, absolutely, I think in terms of the G20, it's certainly well embedded in the top 10 terms of overall emissions. Certainly if we're looking at absolute terms, but I mean, I guess, say, we were to look at relative GDP terms, I guess we're being a bit nicer too. And it sits a little bit below the EU average.

The reason that has been is because, well, one, as I guess Europe's largest power demand market, a lot of its generation mix has historically been built up of fossil fuels, most notably coal and lignite, nuclear for some time, and gas being embedded as well. And then, of course, you had the residual, say, renewables mix, wind and solar.

But what has been on a bit of a journey over the past 10 years as much of, I guess, certainly Europe looks to decarbonize, you have seen what was initially a steady decline in coal and lignite space in the German energy mix has in recent years really accelerated even during, I suppose, a period where gas-fired power production has been super, super expensive following the Ukrainian and Russian war, started back in early 2022.

And what we've seen certainly over the last year, as we've got out of the worst of the energy crisis, is large, large, large amounts of coal and lignite start to come off of the German system. And at the same time, this huge ramp up in renewables, that Germany was an early mover in wind production, wind power, and more recently, huge amounts of solar capacity coming into the system and displacing lots of that coal, particularly at the start of this year where I think we have had now about 10 gigawatts of hard coal and lignite come off the system.

So, in a market that once had, though even just looking back a few years ago, had some, I think about 35 gigawatts of lignite and coal, you're looking at that dropping now. Within a couple of years, it's pretty much halving in terms of what does exist in the system. And we see that filtering through to the emissions produced in Germany as it declines. And I think, if memory serves, our forecast for German emissions is to deplete, I think, as one of the, in fact, fastest in the G7, I guess, relative to where it was if I'm, say, comparing that with Italy or even the United Kingdom.

Hill Vaden:

Can you talk a little bit more about the coal and gas in Germany? I understand that Germany, of course, is a big manufacturer or traditionally a big manufacturer in Europe. Had built up a lot of that manufacturing, I suppose, one on the domestic coal that you've already talked about, but two on the gas imports from Russia. Can you talk a little bit about how that looks today and how things are trending?

Daniel Muir:

Sure. Sticking, I guess, with the question of coal, a lot of the closures that we have been seeing, I suppose, have been from the smaller scale type coal and lignite plants that were, once upon a time, powering these industrial production of operations. I think the most recent one, I believe, was a lignite piece. I think it was a paper and pulp mill. A lot of organizations transitioning their mix away.

One of those big replacements was, of course, gas. And gas, for a long time, cheap imports from Russia either via Eastern Europe or directly via the Nord Stream pipeline really was giving Germany quite a competitive advantage in terms of its industrial output, obviously the heartbeat of German power demand. I guess the typical makeup over the last few years, industrial power demand makes up about 40-45%, I believe it is, of German power demand, so a really big chunk.

What has happened since the energy crisis begun has been really quite a profound economic impact, I suppose, if I was to compare it to something, very much like what the financial crisis did for the UK market, in that it's a hit to the heart of Germany's economy. And now, of course, it's faced with huge, huge challenges going forward in terms of, what does industry look like when, at some point, hopefully the war in Russia and Ukraine calms down? If in fact industry does recover to where maybe it could have been expected to recover to, is it any longer competitive with particularly North America and Asia's? Which I suppose has been the other profound challenge facing the German economy, of which cheap gas for such a long time was afforded to it. No longer, those days seem to be behind us for some time.

Sam Humphreys:

Just for background, where did the replacement gas come from? Was that gas replaced, or did production take a significant downtime in industry? Can you just illustrate that a little bit for us?

Daniel Muir:

Very much the latter. What we've seen is industrial demand and I guess broader economic demand is just, I guess you'd say, created. I think last year we saw it, overall, power demand drop to pretty much as low as we'd ever seen, and this year looks set to beat even that. And because, again, if you can't get those cheap or cheaper, relatively cheap resources, then the industry has to make its decision. And its decision is, "Okay, we just simply can't produce these sort of prices."

And the gas, no, it wasn't possible to straightaway replace it. You've had steady replacements of parts of it, particularly from LNG. Germany has very quickly built out and continues to build out LNG facilities. But then, of course, you're really substituting one import for another import, and that depends very much on the supply picture elsewhere, particularly in the United States.

Hill Vaden:

Coal, in many ways, in many countries is advantaged because it's domestically available. Is there any conversation around, just with the focus of so many countries today on energy security, is the coal and lignite getting more of a look, or is that conversation behind us? And I guess, also, as part of that answer, can you describe the difference in coal and lignite? I know they're derivatives of one another, but I don't know... I'm unclear on-

Sam Humphreys:

Neither do I.

Hill Vaden:

... exactly how lignite is.

Daniel Muir:

Yeah. Let's split the two then. Obviously, both are what you'd consider highly emitting forms of fuel input. Lignite or brown coal, that's the sort of coal... It's sort of a lesser efficiency in terms of its grading. You'll typically find it more in the domestic market. For example, lignite mining particularly in Eastern Germany. Hard coal on the other hand, or anthracite, this, I suppose, is the higher grade coal, but also has, again, a very high emissions factor attached to it.

The conversation has been, how does Germany try and maintain some form of competitiveness while also phasing out something which has made up such a large part of Germany's supply mix. That tackles that question.

With regards to have the conversation shifted as security becomes more of, I suppose, a thought in a lot of European minds? I'd say no. In Germany, there is a legally mandated end date for coal and lignite. That's 2038. And while the potential new government, which I imagine we'll come onto later, has indicated that it will not force any closures without sufficient replacements, so ergo the security aspect, it's not intending on moving or changing those closure dates. So, the trajectory in terms of the final final deadline is still certain.

There have been ambitions from the current gov to pull it forward as far as 2030. I think we can safely say that that's not going to happen. Very, very, very unlikely, even though some companies had pointed to some roadmap of doing so. But generally what we would expect to see is you creep a few years into 2030, and that coal and ignite really does start to phase out quite, quite quickly, certainly towards the middle of the next decade. This decade it's still here to stay for a little bit longer, anyway.

Sam Humphreys:

Let's talk about what's going to replace the coal. We can talk about renewables as well, but nuclear comes up quite a lot when I look at Germany. Correct me if I'm wrong, I think there are some old plants that have the potential to be restarted. But can you fill us in there on what is the country's attitude towards nuclear power? Because we see that over in the likes of France, and the UK are establishing a new nuclear plant as well. So, is that a potential for the power generation to kind of cling into?

Daniel Muir:

Yes, let's go straight to nuclear because this recently has been getting a lot of tongue-swagging, particularly given, again, touching on what could form. The new government has indicated some research into whether these previous plants could be revived, as it were.

I guess to give some background context, once upon a time, Germany had some mid-twenties, 23 gigawatts of nuclear capacity going way back to the mid 1990s to the early 2000s. Of course, post-Chernobyl, nuclear plants weren't particularly in vogue and none were really being built in large swathes, and that capacity declined and declined. Then in 2011, in the wake of the Fukushima disaster, the previous administration, under Angela Merkel, brought into legislation the phase out of all nuclear capacity, which was then completed under the recent government as of April last year when the last three plants were closed.

Now, what the current discussion is, or at least popping up, could any of the plants that phased out post-2015 be revived in some way? Now, the short answer is no. The reason is not so much political will, although that will likely come into the discussion given that in Germany governments are formed of coalition, and the makeup of German political parties will likely mean that the next government involves a couple of elements from the current coalition. And of those two, neither of them are particularly pro-nuclear or pro-build-out of nuclear. That is a discussion there.

The other aspects that make it highly unlikely that these nuclear plants could be brought back in, one is technical. A lot of the plants have been at least granted approval or there's a permit to start decommissioning. A number of them have already begun decommissioning and are at different phases of that. Obviously, with that comes things like layoff of staff. These obviously would need replacing. Becomes quite difficult. The companies that operated these plants have also moved very, very far away from, I guess, the nuclear scene. A number of them have distanced themselves since the suggestion could they be brought back online.

And then, of course, there's the commercial realities. In Germany you have such a huge amount now of renewables on the system. Now, these nuclear plants, they were built in the 1990s. If you want to bring them back online, they have to operate around that huge hole in the middle, for example, that is solar. Since the ones that went offline in 2003, since they went offline, I think you have about an extra 30 gigawatts of solar, so a huge amount of zero-marginal-cost production. So, asking very old technology to do something very new, i.e., flex around solar, it's very difficult.

You see it happening in France, but France has, I suppose the limitations in the sense that all that solar from Germany and the Netherlands has to come through cables, so it's not going to receive all of it. Whereas, in Germany, you've got the whole way of what would be by, say, 2025 the earliest when maybe one of those... or at least the earliest assumption I've seen of one of those nuclear plants coming back online. It has to be able to flex around almost 100 gigawatts of solar, which would be on the German system by then. It becomes very, very difficult.

So, the question then moves to, does Germany look at, for example, small modular reactors? Now, that's maybe a little bit more of a question. We see Italy discussing that more frequently. I think Germany and Italy may be in a race with each other, which one goes first on nuclear. I would expect Italy. So, yeah, overall it looks very unlikely that Germany will certainly be restarting nuclear.

Hill Vaden:

So, it's unlikely to restart nuclear. Coal is leaving the mix. The low-cost gas from Russia is no longer part of the discussion. Germany has built its reputation globally as this great manufacturer, particularly around automobiles. Some of those automobiles are having challenges today from electric vehicles from China. Can you talk a little bit about the future? What are some of the conversation within Germany from a power perspective and from a manufacturing perspective?

I suppose the good news if you're manufacturing, if your goal is to reduce emissions, you can do that in a couple ways. One, you can use low-carbon or zero-carbon electricity, or two, you can reduce economic activity. It sounds like both are happening now, but I'm not sure that reducing economic activity is exactly what everybody is looking for.

Daniel Muir:

It's not ideal, but it's just as much a challenge of how you stop that from happening. I mean, I think, from our own, so S&P obviously conducts various interviews with companies around purchasing managers indexes. I'm pretty sure the manufacturing industry in particular has been in recession for, I think, every month for the best part of two years, so stopping that is difficult.

To your point on gas and even though all the cheap Russian gas is gone, that doesn't look like it's going to stop Germany moving towards gas plants. Which are very much what it is looking at, what the current administration and likely the next administration will continue to look at, more as a form of introducing flexibility in the German system, which currently it does not have.

Germany has either a lot of old former baseload technology, which is now being asked to try to be flexible, or a lot of new variable technology, wind and solar. Which you'll always get the question of, what happens when they're not available? As we had a couple of weeks ago even, when we had one of their more severe Dunkelflautes, as they call periods of...

Hill Vaden:

Yes, that was the word I was waiting for.

Sam Humphreys:

Sorry, what word was that again?

Daniel Muir:

Dunkelflaute. It's always a very popular term-

Sam Humphreys:

Wonderful.

Daniel Muir:

... whenever it gets to winter. There is an opposite, I've forgotten the name of it now, which is when there's abundant wind and solar. Typically, you get that in April. But what you do get in say November, December, January, you get those rare dark, cold, windless days, usually not all three at once or at least one will usually be more severe than the others. So, if I think of say the beast from the east, it was really cold. It was quite windy, whereas, a few weeks ago, there was practically no wind at all, but it wasn't that cold. Still waiting for the perfect one, although it will be very expensive, I imagine, when it happens.

To your point on where Germany's future energy supply looks, gas is certainly the in vogue topic at the moment. Now, how does this, I guess, play into the economic competitiveness of Germany? Now, I don't see this as a German-specific problem or the Europe-specific problem, which has been of course, how does it fix its problems in manufacturing? Can it be competitive with Asia, with North America?

I say North America has done a tremendous job of picking up industry from Europe over the last few years, and now one of the obvious things it's doing is it's legislating its way out of this. CBAM comes into force full in just over a year's time now, but the question is, can you actually legislate growth? That becomes quite tricky. So, what is the carrot? What is the incentive to industry now?

Most likely, you would have to think that countries like Germany have to look towards things like partnerships rather than try and, I say, do things on their own. We, just a few weeks ago, had the news that say Volkswagen introducing a swathe of job cuts, minimized operations. Why? Because they now face that pressure from electric vehicles in particularly Chinese vehicles. I thought there was a great irony that in the recent Euro Football Championship that Germany hosted back in June, I think the main automotive sponsor was BYD.

Hill Vaden:

Oh, really?

Daniel Muir:

We're seeing one of the big Chinese companies.

Sam Humphreys:

Didn't spot that.

Daniel Muir:

I think the EU recently slapped a 13% tariff, which was quite a small tariff relative to other car companies they slapped tariffs on. So, do countries like Germany have to start looking at, "Okay, we can be OEMs for maybe a certain part of the manufacturing process, but are we going to hold that position as being an automotive giant?" when they're far behind now in the electric vehicle race.

The battery race is a complete other story. We obviously had north fault going under just in the last few weeks, as well. So, the manufacturing aspect.

Hill Vaden:

It's Sweden, though. Right?

Daniel Muir:

It is Sweden, but it points, I suppose, to a broader European problem-

Hill Vaden:

Sure.

Daniel Muir:

... of, how prepared is it to actually take on these new challenges? Where is it going to pick new winners from? And Germany, it's still a very developed economy. It does have other industries that can do very well. It does have some finance industry. It's got a very advanced munitions industry. Can you maintain that mantle of being a top five-ish economy without a large manufacturing sector? That becomes, I suppose, quite difficult, and that has big implications certainly for things like power demand.

And if power demand doesn't necessarily improve or go up quite significantly, that becomes a challenge of, how do you encourage people to invest in power producing technology if that technology maybe isn't going to receive the returns that it maybe once would have, say, if Germany was to return to being a 60-gigawatt a year kind of economy? So, still not quite the size of Texas.

Hill Vaden:

Nothing is.

Sam Humphreys:

One question, so we've seen in the US the likes of Microsoft and Amazon investing and partnering with nuclear facilities as well as data centers. Is there scope there for investment from manufacturing companies to invest in solar or wind? Or is there another power. I forget, excuse my ignorance, if the geothermal is a big thing. I know it is in Croatia, which is not too far away, but is there a big geothermal aspect that could be tapped into from a general perspective?

Daniel Muir:

No.

Sam Humphreys:

Oh, okay. There we go. That's nice and easy.

Daniel Muir:

It's nice and easy. The others, you're right. Let's say big data, data companies, data centers, they're certainly the vogue topic right now, and the reason, I suppose, being is because they are actually being built now. The other vogue topic for quite a long while has been... not a long while, a reasonable amount of time has been hydrogen. But hydrogen is a bit further down, I guess, the time curve, whereas, data centers, we've seen lots of them being built in Ireland and lots of applications here and there. It is interesting to see them signing agreements like the one they did in... Was it the three Mile Islander?

Hill Vaden:

Mm-hmm.

Daniel Muir:

Where they signed a, what was that, about $100 PPA. So, it seems quite expensive, but it's interesting that data centers seem to be a little less cost sensitive in that respect. Whereas, for a manufacturer, buying or I suppose securing power even from wind and solar at that sort of price wouldn't be particularly competitive. I think what is the benchmark is seen at around $60, or something in that region, as competitive.

Hill Vaden:

Think it is.

Daniel Muir:

It would be quite a large gap to fill. It would have to be looking for something far cheaper than that. But I mean, there is certainly a lot of activity in PPAs, and we do have a particular team that specializes in those. And I'm sure Spain and Germany are very hot markets for these sorts of things, for PPAs and other forms, so it would be interesting to see, I guess, if they do develop in things like nuclear. But that won't be a German question, I guess.

Hill Vaden:

Sam introduced AI, and I'm going to now give you a prompt and treat you as if you are one of the AI applications. You are a German manufacturer with an understanding and appreciation for the cost of energy in your operations. What do you do to solve to increase your competitiveness if signing $100 PPAs takes you out of the money?

Daniel Muir:

That is a great question. I'm sure there's lots of manufacturers.

Hill Vaden:

Copilot is lot faster in its response.

Sam Humphreys:

Yeah.

Daniel Muir:

It is. Sometimes thought maybe if Copilot answered like that, that'd make me think that it's thinking as hard.

Hill Vaden:

I'd feel so much better, yeah, if Copilot said, "That's a great question. Let me think." Otherwise, it makes me think my question is always stupid.

Daniel Muir:

To reinforce us. No, the question for European manufacturing will be that base input, what is the cost of the fuel? How quickly can it see returns? In terms of the investment cost that, say, perhaps pays for renewable energies, when does it start to see that reflect in the bills that they have to pay?

Because right now in the power space, gas is still the marginal price setter for most technologies, including in the manufacturing space, and that is profoundly uncompetitive, again, relative to the regions that I cited earlier in Asia and North America. That then becomes an issue for government thought leaders and whatnot of how you design a system that can bring that underlying cost down. Because outside of, say, maybe France, maybe the Nordics, certainly the Nordics where you've obviously got lots of hydro availability so you can secure things relatively cheaply, for the rest of Europe it's not quite like that.

And for any incoming government that works on, realistically, quite a short timeframe, you've got maybe four years before people go back to the polls, and they go, "Okay, we're still not happy. Why is our manufacturing sector still not back in its glory days of the mid 2010s?" or whatnot. And because, in those four years, it's very difficult to build out lots of infrastructure very quickly. Permitting times take years. Planning takes years.

I think the current government has done a reasonably good job of hastening the permitting process to start bringing at least the pipeline of, say, lower cost energy sources, certainly like onshore wind, up because despite Germany's position as a... I guess you would call... Yeah, you'd call them certainly a leader in terms of onshore wind. It was an early starter. It stalled over the last decade. It got to the mid 40s to 50 gigawatts, and then just a big pause. Lots of things couldn't get built.

Now, under the new administration, there's about another 22 gigawatts of wind, but for them to... If you're a manufacturer, you're going, "Can we please realize these sorts of things quicker, or can we find a solution?" That's something that you wouldn't really expect until at least the end of the decade. And by that time, what's left of existing manufacturing? Certainly nothing like what existed pre 2020, 2019.

And that goes back to your question earlier with regards to, what does Europe do in terms of it's making manufacturing competitive? Probably has to start looking at maybe new winners. And for that, that's something very much above my pay grade, I think.

Sam Humphreys:

All right. Well, we always round off with things to watch in the next six months. You've mentioned new administration. What can we be looking out for in Germany over the next six to 12 months, either in terms of manufacturing or power? What are some key things?

Daniel Muir:

The very obvious one is elections. Everyone is tired of elections in 2024, but guess what, we've got more in 2025. We've got, in France, we'll be elections in a few months again, but first and foremost, we have German elections in February, and it's a very mixed looking picture as to the various parties that are there. It's a very hard to unpick picture.

We have an idea of who will lead that government, which is the CDU, Angela Merkel's former party. And then what will it form in terms of a coalition, Germany being a coalition based system? And what is the impact on energy policy? Well, it becomes, to be seen, how much can it water down its existing position? There was already a lot of discussion of embedding more gas within the system, for example, changing financing rules around renewables. These are big uncertainties for certainly companies who have, for a long time, been bidding into these auctions that Germany has for renewables where you get a nice market premium. Only goes one way, so when the price goes up, I keep the profits. When the price goes down, it's covered. That is, I guess, the major thing to look for in the next six months.

And aside from that, we're definitely looking at where does industry sit in 6-12 months time? Can it shoulder persistent high gas costs? You start to think, "Ugh. Okay, this is looking a lot stickier than even at the very start of the energy crisis," where you thought, "Can it shield itself for long enough?" Well, long enough is turning out to be very long, and big names are now starting to say, "Okay, we can't do this anymore." That's going to have implications not just at the next election, but at the election after that.

And if you have noticed, Europe has a lot of other parties coming in from the fringes saying, "Okay, let's push back against various green policies." What does that mean for, I guess, staying the course, as it were, with regards to Germany's net-zero ambitions? Which at the moment, still legislated for 2045. Does that survive another eight years? Well, I'd say the next 12 months could start to really test the resolve of politicians. Particularly, as citizens still feel that bite of when your job is being taken away from you, it starts to make people very angry, shall we say.

Hill Vaden:

So 2038, coal will be down to zero in power generation. But 2045, what is that target?

Daniel Muir:

That is the target for Germany to be net-zero.

Hill Vaden:

To be fully net-zero.

Daniel Muir:

Fully net-zero, and that is, from our perspective, highly challenging would be the diplomatic way of putting it.

Hill Vaden:

Well, all-

Daniel Muir:

Given the next likely leading government is, for example, very unhappy with changes being implemented in things like buildings and heating.

Sam Humphreys:

Yeah, the heat.

Daniel Muir:

There's sort of the harder to transition things. Can you please no longer have your gas or oil burner? You need to start thinking about renewable gases. You need to start thinking about electrification of your heating systems. Well, what do you do? You either support industry to make it really cheap, or you give direct subsidies and hope that people take that up. And that's not always the case because for a lot of people, changing their heating system is most definitely an afterthought. I mean, I've been in my property for three years now, and I don't think it's ever come to going to Esa and going, "You know what? We should rip this out now."

Sam Humphreys:

Yeah, I'm with you on that. All right, well, thank you very much for that, Daniel. That was a really insightful conversation, and we look forward to picking this up again maybe in a year's time.

Daniel Muir:

Cool.

Hill Vaden:

Yeah.

Daniel Muir:

Thank you both.

Hill Vaden:

Thanks, Daniel.

Sam Humphreys:

Thanks very much.