 Now the extension of the transmission grids has taken off. But as you can see, on this graphic, this is a little difficult to see. We have to curtail a lot of the energy that is produced by renewables and that's of course some of the shame and it's also expensive because you then have to use other electricity to provide for the demand. And if you just discard the electricity that you cannot transport from you, you're in your best sense. And it has, as you can see, increased significantly since 2013. Now, but the other thing is the light rule. And this is all containment, but the colors are the different energy source as well. So the blue is all wind and then the gray is solar and biomass. And the different color of the blue is different wind sources offshore and combination of both. Exactly. So this is the one challenge that we have in the grids, the transmission. But we also have a challenge in our distribution grids. You know, the distribution grid is the low voltage grid that was built to provide then the customer, industrial customers and customers with electricity. That is what it was built for. But now we are also using it to collect electricity from these central energy sources like PV, like wind. And it was not built for that purpose. So it's distribution grid and now becomes a collecting grid. And in some places like, for example, here in Eastern Germany, the electricity that is collected by the grid, the amount is much greater than the one that is consumed because there are not so many people living here. And at the same time, there are large areas that are available, for example, for PV trucks or something like that. And the intake can be more than 100 times higher than the supply for the customers. And that is why the distribution grids need to be heavily upgraded. And this is also something that especially our company deals with at the moment as a distribution grid operator to make sure that the system stays reliable and resilient. Now, talking about markets, how is this all orchestrated? You saw that we have a large diversity of electricity sources. We have a complicated grid. We have a supply and demand in different places and so on. And of course, we need smart markets to orchestrate all of this system. We are in a liberalized system. Since 1998, we liberalized the system on two levels. So the one level is generation, electricity generation, is a generator of electricity. You sell your electricity to a wholesale market. And the other liberalized part is retail business. So if you want to buy electricity for your home, you get a contract. But you can choose your provider. Your provider then has to buy the electricity from the wholesale market, bundle it for you, and supply you with electricity to your home. And we have a very fragmented retail market. We have a lot of players who do only retail and only work with the wholesale market and to provide them with electricity. And so you have a large choice and these players are compete with each other. So only the transmission grids and the distribution grids keep being regulated because we call it a natural monopoly. You do obviously, you do not want to bid several grids and then every customer has to decide which grid to use. That wouldn't make sense. So this is there regulated and the regulation also ensures that all customers are supplied with an electric grid, no matter if it is super economic to do it or not. So, but how does the wholesale market work? I don't know if you know this picture. This is schematic, a married order. That means you can see here the cost of the different energy or electricity sources. And these electricity sources are ordered by cost and it is the marginal cost that you see here. So that means how much does it cost to produce an additional unit of electricity? That is then of course correlated to the prices of the fuel. So the most costly fuel would then have the highest marginal costs and of course hydro and wind and solar do not need fuels and then they are from here. And if you want to meet a certain demand, then you can see here, for example, this demand, then we will yield this price, which is based on the marginal cost of the price setting unit, which is in this case a gas-fired coal plant. And if a demand drops and the marginal cost and then it goes to a coal-fired coal plant, in this case, then the market price will drop as well. It is very important to understand that Germany has only one price zone. So that means all over the country the wholesale electricity price is the same. The market, somebody is shaking his head because in California it's completely different. You have the opposite side. In Germany, the market does not take into account the structure of the electricity grid. It is as though the connection between the different places would be perfect, like imagining a huge copper plate or something like that. And after the price is set, then the grid operators have to take into account the structure of the grid afterwards, which we call re-dispatch. So that means if there is some supply in the north and some demand in the south, and it is not possible to match them with a normal market price, then the grid operator has to say, OK, please reduce the electricity production in the north and increase it in the south by this and that power plant. And we will remunerate you for doing. So that is how it's done at the moment. And of course, there are discussions to change it. It worked well in the past, but now the re-dispatch process has increased significantly because the electricity generation is far away from the centers of consumption. Yes, please. What are the main forces preventing Germany from moving to LMP markets? From? LMP, like a more granular market. Why is it taking so long? That's basically a political discussion. So in Germany, and what you want, which is probably difficult to understand, you want to have a kind of a uniformity of the centers of living throughout the country. So although that might be a bit artificial, it is important for us to say, OK, we do not say we do not give an advantage to northern Germany just because there are renewable energy sources. We would like to have it in a socialized way so that everybody sees the center. The re-dispatch process, for example, then is a grid cost that will also be distributed over the customers of the grid zone. And another thing is that the industry is basically in the south. If you introduce different price zones, then the industry in the south would have higher electricity prices. And you don't want that. You want also to protect your industry from higher electricity prices. So if it is a variable location, does it vary by time of day? Yes, yes, yes. It works like this. And the availability of electricity sources varies. For example, if you have a lot of PV, then you would see a shift of the merit order. And of course, if the demand stays the same, you see that the price will drop. OK, so is that the primary mechanism for everybody uses to shift demand over different courses of the day? And say there's a high supply and a low demand. So PV is highest in the middle of the day. So the demand is often lowest. So you shift that by charging more prices. Well, yes and no. And more noes like yes. Because this is not the price that the end customer see. That's the whole same price. And only, let's say, huge operators, industrial operators would take this into account. Or for example, factories that run their own power plants are steel manufacturers or people like that. They can react to a high crisis. But not, let's say, the customers that use electricity just like that. Because we do not yet have this connection between the retail prices and the wholesale market prices. There is no direct mechanism. But for industrial customers, yes. They can change their production. And here you can, for example, see, if you imagine this to be a huge industrial complex, they could say, OK, how do I match my demand and the products that are available on the wholesale market. And the products are actually mostly they are traded as futures and forwards and on different timescales. So you have different kinds of products. You can have long term contracts to ensure, let's say, a minimum of supply. Then you have both base load and peak load products. You have individual hours set as contracts. And now you have also 15 minute contracts. And these are traded in advance. So the closer you get, the shorter timescales get. And before the crisis, you could trade, let's say, year contracts for the third year in advance. So you could now have a contract for three years to be provided with electricity on a certain level throughout the year 2025, for example. Now, markets have become more difficult, more focused on the short term, because the risk for long term trade is too high. And also, it's so high that actually some companies, even large companies, cannot afford the risk deposit anymore. So you will get a margin call if you try to do that. And they just don't have the money to trade on that time in advance anymore. Closer you get, the smaller the products get. And then you also have intraday trading, where it really is a contract by contract. And but this clear mechanism, as beautiful as it is here, is mostly a day mechanism of this clear and significant. So just one word about carbon pricing, because it also affects the electricity price. So we have a carbon pricing mechanism in Europe when you have a facility like a coal-fired power plant, you have to purchase certificates for every ton of CO2 that you emit. And you can also sell these certificates again. So that means if you can buy them and sell them, that there's a price for them. You could also trade them. And there's price development. And there's a cap of certificates. So there's a certain amount of certificates that will be issued and not more. That means in the electricity sector, you can automatically steer the CO2 level that is, or the amount of CO2 that is emitted in Europe, simply because the number of certificates is limited. And this cap of CO2 certificates also ensures then a certain kind of scarcity and then a certain price. So that didn't work for some time where the prices were very low. There were too many certificates in the market. And it went to like five euros per ton, which is not so much if you have a feeling for that, and has now run up to 90 euros per ton. And now I think it's about 60. But how does this affect the merit of it? If you, for example, take a look at lignite, lignite is much more CO2 intensive than for example, natural gas. So per kilowatt hour that you produce with lignite, you would produce much more CO2 than you would produce with natural gas. That also means that you need more CO2 certificates for your lignite fire power plant. And that would increase the marginal cost of the plant. So and in the end, if the CO2 price is sufficient, then there will be a few switch. So that the merit order changes and you have a switch between, between for example, gas and half coal. So that the marginal cost overall, marginal cost for half coal might be even higher than for gas. And then if a certain demand is met, then hopefully a little less coal is consumed than a gas. So that's the basic mechanism, how the CO2 pricing will affect also the production of electricity and then reduce the overall CO2 emissions. Now there is something that we need to balance supply and demand. The pricing mechanism that I just showed you as a little course. So it cannot make up for let's say the changes in demand and electricity supply on a level of seconds, you know? If I go to a switch and switch off the light, then immediately basically as some power plant needs to produce more electricity and that cannot be done by a whole same market. And that's why we have something that we call balancing power. I don't know if the same term is used here. It sometimes has or it's sometimes called reserve power or something like that, but you need it everywhere. And I don't want to go into details, reserve or in balancing power markets are also a very difficult thing to comprehend and will take a lot of time to explain everything. But you can imagine that if it is made to balance out these short-term differences between supply and demand, you would expect the demand for balancing power to increase if you introduce more renewable energy sources because they are volatile and they will unbalance the system to some degree, yeah, on a short, temporary notice. But as you can see here in the demand for balancing power, it has actually decreased in recent years in Germany. And how was that achieved? There were three things that come into play there. The first was a zonal integration where we worked between the different balancing zones also with together with our neighboring countries. The second was improved weather forecasts. So if you know exactly how much your renewable electricity will produce tomorrow or in the next hour or so, then also you can factor that into the whole same market and then you will need less balancing power. And the third one is increased activity on the intraday market. So the traders were very focused on short-term trading and got better and better in exchanging electricity on short notice. And this also helped balancing out the system, but this of course cannot go on forever. This is already very optimized, but at that time we seem to be winning the rates at least for balancing power. Now, switching to the retail market, switching to the retail market. So that's the side of the customer. That's a different thing because as an electricity customer you obviously do not want to buy, let's say hourly contracts or 15-minute contracts or so. You just want to go to the switch on the wall and switch it on and you have a package so that you do not have to care for the procurement of the electricity. And that's why the customer electricity prices look completely different. Here you can see that in recent years the electricity price for the end customer in Germany was about 30 cents per kilowatt hour, which is pretty much in the international, if you compare it to international price. And here you have all kinds of components in there with nice words like paragraph 19, strong, net, and gate, for one who learns German among you that is a very interesting word. And I don't want to explain in detail what it is. It has something to do with protecting energy and intensive industry. But the point is that you mostly have, for example, subsidies for renewables and the green bars, then you have, you have grid Levi that takes into account the costs of the grids per kilowatt hour. And then the bar, the lowest bar, the dark blue one, that is the one that is governed by the wholesale market. So you see in recent years, the part that was actually done in a competitive way, so that actually was governed by markets, that was pretty small here. And the rest of it was just more or less regulated. You also see taxes here. So we have a value added tax also on electricity. And that means also that you pay a tax for the Levi's. You even pay a tax for another tax, the electricity tax. That is a bit absurd. And I'm also something politicians are working on right now to reduce that tax load because the electricity crisis are so high at the moment. And they also abolished the green bar and the subsidies for renewable energy, which is now, which now comes from taxes from the state. So, but this has heavily increased since the crisis. If you now want to have a new contract in Germany for electricity, it costs around 70 cents, 70 cents. So there's more than doubled because this bar has increased so significantly and that it shifted all of the prices upwards. That leads me over to the current crisis. This is the price development in Germany. And as you can see, prices have really spiked recently. And if you take a look at electricity, it was always around 50 euros per megawatt hour in the last years and has now come up to something like 400 in some occasions, even 2,000 euros per megawatt. So it's roughly increased by a factor of 10. And the main reason is the high gas prices with lacking supply from Russia. We see a scarcity on the gas market, which has caused the prices also to spike also about by a factor of 10, but also be very spiky and volatile. And that also then in turn affects the electricity price. But that was not the only problem that we had on the electricity markets. We had outages of nuclear power in France, which then also affects the German electricity market. We had problems with coal supply. We have had problems with hot river water that you cannot then use for cooling and so on and so on. And all came up together and created this scarcity on the electricity market. Now, the problem is that this crisis hits us at a very bad time. As I said before, we had problems where we had problems in the past with investments and to renew but into good expansion and so on. That means that we now have to increase our investment significantly. We have to speed it up. So our government says roughly by a factor of three in everything, we have to build it three times faster than before. And that's, I guess that's roughly right. So it works with the studies that I know that you have to increase the speed with which you expand renewables for example, by a factor of three. And you see here in that graphic the huge offtake that we need in the investments into renewables to achieve our CO2 reduction targets and which for example is 65% of greenhouse gas reductions until 2030 and a greenhouse gas neutrality until 2045. So this of course doesn't just happen like that. It needs to be then supported with instruments from the regulator and our government came up with a long paper, 600 pages about measures how to speed up the carbonization. And an important thing among these measures is to facilitate the feasibility of renewable projects. As I said before, the problem is not that the money is not there or that there are not enough auctions by the state. It's mostly that we cannot implement the projects. And to speed this up and the regulator will change let's say the environment in which we can build these projects, giving them more priority over the interests. And also the volumes that will come up and tenders will obviously also be increased. There will be land assigned to these projects so that they can actually be implemented. Yes, but where does this all go? So until 2030, it's pretty clear what we have to do although it will be very difficult to achieve. This is an overview about all the things that we have to do until 2030 and then 2045. And for 2030, it's mostly about introducing electric vehicles, introducing heat pumps to buildings to electrify heat supply and to expand renewable generation very fast. At the same time, we have to keep up with the grid. So at EON, we will probably have in the end twice as much distribution grids as before. I mean, not an area but in investments. And so also this needs to be ramped up very fast. It all needs to be synchronized where the different parts of the energy system will not work together anymore. And that is mostly the challenge with that. And also you need until 2030 additional backup capacity. And this particular study said about 40 gigawatts of gas-fired power plants, which is just a huge amount. It's a huge amount. So this amount of gas-fired power plants or fossil generation has never been built before in that time. And as you can imagine, few people are now willing to invest into a gas-fired power plants with the gas market being so tense at the moment. So that is a huge challenge. And then the question remains what we do afterwards to achieve carbon neutrality. That is difficult to say. So for 2030, I mean, it's more or less clear what we have to do. It's just the question, how we do it. But after that, it's also the question of what we do. How do you achieve carbon neutrality if you have already, I agree, of renewables in your system? At some point, building more and more renewables becomes much more expensive because you have to carry the integration costs of renewables. You have to build a flexible demand. You have to build new storage. You have to extensively build new grids and so on. So if you exceed about 80% of renewables, then it becomes very difficult in the energy system. And the question is whether to go, for example, more to an import of renewable energy carriers or the domestic production, where you go into biomass or where you go more into hydrogen, where you be very energy efficient or where you, again, use more imports. It's not 100% clear what direction we will be going into. And that's why I believe it is very important to start now exploring the technologies that we will need to go to 100% renewable or at least carbon neutrality. These can be all kinds of options. Could also be negative emissions that we introduce into the system. But that leaves a lot of room for research and it is not so clear how this will be exactly done in the future. So thank you very much. That was it. I hope it was more clear. It's not so easy to describe the whole energy system in like 50 minutes. And if you are confused to some point, then that's just normal. But please, if you have any questions, then go ahead. I wrote down a few questions. One was, you mentioned that they only have one price for the whole grid. Like, do people take advantage of that? Like, is there a way to like, do some kind of like funny market behavior or something? Not at the moment. So what you, because it is basically not rewarded if you do something like that. If you, for example, restrict or reduce your energy production, then basically you have to pay it yourself because most of the electricity is marketed in advance. And if you just reduce that, then you have to buy the electricity from the market and sell it again and then you lose yourself. So that is not possible at the moment or let's say it would be difficult at the moment. But once you introduce mechanisms that would reward a behavior that is beneficial for the grid, then that would be a danger that needs to be regulated. For example, somebody could reduce or let's say could produce shortage in the grid and then at the same time offer the solution for that with flexibility. And that is something that we call in-deck gaming which needs to be avoided if we introduce new market mechanisms that would then be beneficial for the grid. I was also wondering, like this, don't we import a lot of electricity from other countries because prices are so high, right? So like, do you think they could? The electricity prices in Europe are interlinked. Right, how are they? It depends very much on the country. It works like this, you have interconnectors between the different countries and as long as these interconnectors are not fully loaded, the prices remain the same. But if you have a higher demand in one country and the interconnectors are basically full, then the price in this country will increase and it will remain on the same level on the other country because the interconnectors cannot provide more exchange. And that is why we see, let's say in Northern Europe we do not have high electricity price because they mainly rely on hydropower but the high electricity prices are then in the middle of Europe and France and Germany and so on. Cool, cool. And I guess my last question is, if we put more like removals on the grid in Germany or you mentioned that like, if they like tell them to turn off because there's too much in one area, they get paid like a tax, a levy or something like afterwards because they didn't use it. Yeah, sometimes if you, for example, there's too much renewable electricity available and the grid can't transport it away, you would say, there you have to shut down that plant and I will give you money as though you had produced the electricity. So if people like keep building solar and stuff in the same location, won't it like increase the price? Again, please. So I have a misunderstanding, but like if it's like made like a copper plate network and so everyone makes solar in like the same areas where it's sunny or like make wind in the same areas and sunny and then they tell you, please don't produce because it's like too much oversupply in one area. Then like every consumer has to pay this tax to the government so that they can redistribute it. So won't that increase prices if we add more renewables? Ah, and no, if we're not just, it will only not just reduce the prices as much as they could. So you add additional capacity, but you can't use it. So that doesn't increase the prices directly. It might increase the tax. Yeah, it would increase the tax, but yeah, you're right. If you would just continue doing it like that, straightforward, that's true. Sorry, yeah, you're right. It would increase the tax because you would pay for electricity. That is not used and distributed throughout overall customers and that is what we had in the past, but now there's some restriction to that. And so it is a little less rewarded if you do not produce electricity. So the government saw, okay, that is going to be much too expensive if we do it like in the past. And so they restricted this remuneration that you get if you do not produce. Yeah, yeah, you're right. But that was an expensive thing, you're right. Any other questions? Yes. This is a fairly specific question, but I'm kind of curious what the strategy is for increasing like a solar generation. So I assume there's like large plots of land with utility-sized solar arrays. Is that kind of the idea, typically? Like if this isn't solar built on houses, the commercial building that's like large fields. Solar. Yeah, we have both. And so what is your question? So specifically with my question is that just looking at the last 10 years, the efficiency of solar modules has, increasingly approached the theoretical limit of like 26-ish percent. I'm curious that if, what is, or cost competitive is it making a completely new solar farm or is it to retrofit the older solar farms with newer, more efficient modules? This is a very specific question. Okay. For solar, I believe it would be more beneficial to, in most cases, it would be beneficial to let the solar facility run until it degrades. So it will eventually degrade and lose efficiency and some of the modules won't work anymore. And then there's a point where you can say, okay, for also for rooftop PV, where you could say, okay, your main PV doesn't run as good as in the beginning. So you have to retrofit it to a new one. But what you say is very attractive in the case of repowering wind, wind on shore. Wind on shore. Maybe I have the image there. And because the first wind power plants were very small and not so efficient. And then here, you see that? That's no one. Oh, new one. Oh, okay. Yeah. So that is the picture from the Netherlands actually and from my former company, Indutribelle, I believe. And that's very close to the coast. And these obviously the site is very attractive. And you don't want to waste it with these small wind power plants. If you can build such huge turbines that are much more efficient, they are much more efficient because they are to greater height, of course, also. And on the greater height, there is higher wind speed. And you have a huge diameter, which is able then to collect all of the energy that goes through it. And so that is why this is much, much more important for wind than for solar. Earlier in your slides, you showed like how, thank you for, also thank you for the talk, it's been interesting. You showed how like from 2008, like use of renewables really increased in Germany. And that's, it's like an interesting just position to the US because there was kind of like a bubble where people were really investing in renewables and really interested. And then when the recession hit in 2008, a lot of that died. And so, and you kind of mentioned how Jeremy has some special regulatory things that kind of foster, you know, the start of renewable energies and like add a, how do you say, incentive or help companies or utilities transition renewables. Do you know anything about why it was more successful in Germany than the US? Or is that like a political thing? Or what made Germany so successful as it was? In those days, it was just this feed-in tariff that made, and that made it possible to build so much renewable capacity and the fact between 2009 and 2012. But the thing is it was really expensive, like crazy expensive. We spent like 20 billion each year on these capacities and this PV doesn't produce so much electricity. So the uptake of capacities was great, but the share of electricity production was very low. And so that was very expensive, was just beneficial to foster this technology and now make it available for the entire work by basically on that price level. So only very few countries can afford such a subsidy scheme and also only for a limited period of time. So it was not planned to do it like that. That is why it's not so easy to say, oh, why don't you just do the same thing with immobility and do it in the US, which is a much greater market and then it would be super expensive. But in the end, we have all the tools, we have a lot of experience now with subsidy schemes. Then they have changed a little bit. Mostly they are made to take away the risk from the investor. So an investment into renewables is very risky and you do not know about the markets, you do not know if the investment will pay off or if you can realize the project and so on and these subsidy schemes take to a certain degree away from the investor and also ensure that if electricity price drop again, which they eventually will do that the investment is profitable at all. It would take a little more time to explain how these mechanisms work, but all countries use them, all countries. So it's not just Germany. The tool set is available basically, you just have to pick the right choice for your country. Thank you. I think you're... I think if he will still stay a little bit longer, but other students may have another class to catch. Thank you very much. Well, thank you very much. Thank you.