VIDEO TRANSCRIPT:

Hey, welcome everyone to this HFS videocast. I'm Josh Matthews. I'm our practice leader for sustainability, energy and utilities, and I'm very lucky today to be joined by Masoud from Publicis Sapient. Masoud.

Thank you, Josh. Hi, everybody. I'm Masood Haak with Publis Sapient. I'm the global practice lead for our energy supply and trading and based in Houston in the U.S.

Hey, fantastic. Well, thanks again for joining me. And we're going to talk a lot about clean energy today. And quite frankly, clean energy is confusing. So you've got fantastic economics for wind, solar and other clean energy. The best number from the IEA, 2 trillion clean energy versus 1 trillion fossil fuels last year. But you might not think that if you listen to politics, certainly in the US, certainly coming from the oil and gas industry rolling back their investments. But alongside a lot of that rhetoric are a lot of firms accelerating, whether it's based on economics, whether it's based on getting the remaining subsidies, which are still there. You have nuclear and battery technology moving forward very, very quickly. And in so many parts of the world, you still have so much political and business support. for the energy transition. So what I wanted to ask from you is almost from what you're seeing at various levels with the clients that Publicis Sapient works with, how are they managing to navigate the transitions that they know are happening across sustainability, the energy transition, artificial intelligence, new pools of talent they're trying to access, and how are they doing that across the now, the three to five year and from a risk management point of view, the 10 year. and beyond.

As you mentioned, there is a lot of political rhetoric around this, which is very confusing. But when you peel that back, there are a few different forces that are at play. There is the demand in power and energy that's increasing in general. Some of it is driven by new data centers. In the U.S., there's the new regulation with the new administration, which... A lot of people are not completely clear how that changes from the previous administration. And then there's also the perception and in terms of both what kind of energy I'm getting, so more social perception, affordability, reliability and things like that, right? If I look at the policy, what has actually happened is some of the Biden era, the Inflation Reduction Act. The tax credits for both production and investments are actually continuing for the next couple of years. And at the same time, what the new legislation has done is enabled more tax credits for batteries and nuclear technologies. So they're actually picking technologies, you know, certain technologies where in the previous administration, it was technology neutral, right? So When we look at some of our clients, particularly on the power generation side, they're actually continuing their investments into generation capacity, a lot of which is wind and solar. There's battery, now they're considering nuclear, and obviously the gas powered. Gas powered plant as well. The other interesting dynamic here is the supply chain. So gas powered plants, for example, have... A backlog of, I believe, about seven years, which is plus the expiration of the tax credits. So people are, in fact, continuing to invest in wind and solar and looking at nuclear.

This is something we focus on a lot at HFS is this idea of transition planning and whether that's behind the scenes at businesses, whether it's voluntary disclosures or whether it's publicly. publicly disclosed and regulated transition plans are you finding with the energy and utility firms you work with where are their transition plans do you feel like they have i assume they they know the direction the energy transition is going in they might not know what the time frame necessarily is but they know where we're going to have to end up and they know very clearly where we are now even if it's confusing so like how to what extent do you feel that they have that journey mapped out at different levels.

With a lot of these companies, the journey isn't very clearly mapped out in the sense that we need to be at a certain percentage of renewable by a certain date. What they're trying to do is a couple of things. One is even outside of the federal regulation, the various states, especially the populated states, have their own regulations that the companies need to meet. um in california new york uh the new england area for example right and um the the second thing is because the demand is increasing um one of the things these companies are trying to figure out is how to best meet that demand without the prices going through the roof right so um and as as they you know bring more production capacity power generation capacity online many of which are renewables, many of which are leveraging batteries, for example. So naturally, the percent of renewable in the portfolio does continue to increase. And these companies continue to benefit from the tax credits as well, both for production and investment. So right now, the way I see it is... You know, what is the full throttle ahead in terms of increasing generation capacity without getting caught up in the backlog of some of the traditional car generation? at the same time making sure that you're meeting the demand you're meeting the state regulations and you're you're you're constructing or building as fast as you can

And I know that a lot of folks listening and watching will want to know so many folks within the engine utility space who really are sort of hanging on and trying to think that they can make that positive impact from the inside and be part of that transition. To always going to ask whether this is one company or one client example specifically or a partnership or a specific set within the industry. What do you think is the best example that gives the most hope to the energy transition now that you've seen?

The way I'm seeing it is it's quite a few companies and interestingly, it's not just power generation, it's also on the oil and gas side. Folks are looking at carbon capture, they're looking at biofuels because those are also incentivized in the new legislation. particularly carbon capture but coming back to power generation the the two prominent examples are Nextera and RWE. RWE obviously is a German company but has a large US presence and they're building out their portfolio and Nextera is already the largest renewable power generation company and they also have a lot of conventional in nuclear assets but what is actually happening is you know in the US just recently allowed new give give the permits to start new construction and each of the ISOs and the various states are now you know putting out bids to you know for companies to inviting bids for companies to to start construction. The first one is MISO, which a few weeks ago announced that they will accept the first 70 bids for power generation construction. And, you know, given the backlog of the traditional or the gas turbine power plants and given the timeline it takes to build nuclear nuclear A lot of it is in fact going to be renewable energy, right? And obviously they'll also do some conventional because the idea is to meet the demand and to meet the reliability and price regulations from the states. The flip side of not doing that is a lot of these companies like the... the Googles and Microsofts and Amazons of the world, they'll start building their own energy supply, right? So they will then, you know, buy gas, buy, you know, whatever power generation capacity they have. And that creates a, you know, very interesting dynamic. Now, will they still do that? Maybe. But what we're seeing is with these power generation companies, they're trying to figure out how do they manage the costs, how do they manage the state regulations, how do they manage the demand and make sure that their internal operational cost isn't going up and they're still benefiting from the tax credits.

Well, at risk of hyping up one company too often, other energy companies are available, but no NextEra I've used as an example for some time. They definitely stand out in, I'm going to say, the three to five years ago where they disclosed their transition plan for pretty much the entirety of the energy transition, or certainly the decarbonisation. point of it in working on the transition for 40, 45 years. So we'd highly encourage anyone out there to go and check out NextEra's transition plan. But as more time goes on, you're starting to see more examples, especially in the financial sector, saying this is our transition plan. This is how it links into power generation, into oil and gas. The Science-Based Targets Initiative has just released their new power generation standard as well. So these... these regulations back on the table in the uk voluntary standards regulation in law like it's coming down the line we know where it's heading and again all power to the companies who are trying to get ahead and to you and publicist sapient to try and try and help them as best as best as possible but i will finish it on one last question is there anything you You feel that I should have asked or that we should have covered today.

So I think we covered a pretty broad base in terms of You know, one thing I would add, and it could have been a question, but I'll add it anyway, which is really, you know, the challenge of getting your conventional and renewable both serving the demand needs and what I'm getting at is there does need to be an integration between the traditional IT technology and the operational technologies, which is actually operating the assets. And as you know, the renewable powers are not necessarily dispatchable. Meaning power generation happens when the sun is shining or the wind is blowing. And so how do they manage that, you know, by having the conventional generation in parallel. But what we're seeing increasingly with this new legislation from the current administration, it'll help is... bigger investments in battery technology so that you're not you know that so that the renewable assets do become dispatchable right so so having that you know it's not just about you know generating and dispatching and billing but it's also integrating with the new technologies such that you're actually you know meeting the demand curve in the way that the consumers and the companies need

Yes, we'll save digital grids for the next time. But no, if anyone ever asks me within the energy transition to focus on, I always tend to go to some form of battery technology in some part of that problem. I hope on the investment and the technology side, we are at the start of that exponential phase, but there's a lot more work to do. We've solved quite a lot on the technology side. solar wind to make it more efficient install it upgrade the great but the battery technology side anyone out there is looking for a place to throw their innovation their resources uh you could you could do a lot worse but thank you again Masoud it's an absolute pleasure talking to you as always hopefully next time in person

Thank you, Josh.

Relevant Links

• Navigating the Clean Energy Transition: Demand, Policy and the Rise of Batteries
• Utilities, Renewables, Batteries and Digital Integration
• Electricity demand is rising again, and this time the growth curve looks different.
• Why U.S. Energy Transition Planning Has Become a State-by-State Operating Challenge
• Power generators and energy retailers are entering a more demanding market than the one they were built to serve.
• Énergie en Europe : la prochaine vague de croissance se jouera à l’intersection du réseau, du client et du numérique (Europe)
• México ante la nueva competencia energética: de vender electricidad a diseñar experiencias, flexibilidad y confianza (LATAM)
• FAQ (FAQ)
• 10 Things Buyers Should Know About Publicis Sapient’s Work in Energy and Utilities (LIST)