Energy Transition Investment: Returns, Reform, and Real Impact

Jonathan (00:02)
I’ve got maybe a slightly controversial view on this, which is it’s not anybody else’s job to subsidise. Like it’s not up to investors with, you know, pension fund money, et cetera, to subsidise returns in our space. Our job as investors is to find compelling risk-adjusted returns

which deliver on sustainability factors, pricing all of those risks over the long term and deliver, yeah, superior risk adjusted returns. I’m not expecting any favours from investors to go, well, because you’re doing a good thing, we’ll reduce our return hurdles and no one who wants to scale this sector seriously could ever think like that in my view.

Adam Sroka (00:53)
Hello and welcome back to the Hypercube Podcast. I’m joined today by Jonathan Hick from Triple Point. Jonathan, would you like to introduce yourself for the audience?

Jonathan (01:03)
Adam, my name is Jonathan Hick. I am Head of Energy at Triple Point. Triple Point is a purpose-driven investment management business based in London, looking to mobilise capital as part of solving societal problems. And in my team, the energy team, we obviously are trying to tackle probably the biggest problem that there is, which is climate change, a really big global challenge. And we’ve been investing in the energy transition here in the UK for 4-5 years now.

Adam Sroka (01:27)
Amazing. Yeah, and what a 4 to 5 years because you hear some of the really interesting things you’re up to at Triple Point. I guess before we get into the weeds of that a little bit, I’d love to just know like Head of Energy is a big title. How do you get into energy investment management?

Jonathan (01:43)
Sure. So I was one of those people who started my career during the financial crisis of 2008. So I showed my age there. that was definitely an interesting time, as I’m sure you can remember, to join the working world. And really some really deep and difficult questions were being asked about capital and investment. And is it all this really bad thing that’s not really doing anything positive for the world? Is it just…

Adam Sroka (01:53)
Yep.

Jonathan (02:11)
socialising risk and privatising profits, all that sort of thing. It was really important to me to demonstrate that investment and mobilising capital could be a force for good and could be used to tackle societal problems. I set up a social enterprise, for example, when I was in my teenage years. And so as I transitioned to the working world and built up experience making investments, initially in broader M&A and then focusing on infrastructure and then latterly on energy, I really wanted to be intentional about where I

and how I use my investment expertise. And so for me, mobilising investment into the energy transition, which is clearly tackling a demonstrable problem, has something that’s always been close to my heart since the of my career. And that’s, guess, how I end up where I am today.

Adam Sroka (02:54)
And so Triple Point is an interesting vehicle. Feels like the best kind of place from the outside anyway. One of the best places you could be to do that sort of stuff. For those that are less familiar with Triple Point, could you lean into a little bit of what your drivers are, some of the fun things you’re doing, what makes Triple Point tick?

Jonathan (03:13)
Sure, so Triple Point is a B Corp first and foremost, you know what that is, it’s a business that really prioritises sustainability and purpose in all that we do. And we seek to do that, obviously in the way that we manage our business as Triple Point, but more in terms of the capital we seek to mobilise. So outside of energy, we mobilise capital from high net worth institutional and government counterparties. And we put that to work to not just decarbonise the economy, but also to do affordable social housing, for example.

We have mobilised money to tackle the chronic underfunding of SMEs here in the UK. So everything we do is trying to mobilise capital for a wider purpose. We’re really lucky in that we’re able to mobilise very meaningful amounts of capital to put into a very wide range of different societal problems. ⁓

In energy, we’ve got quite a unique approach, as I’m sure we’ll come onto investing across the whole of this energy spectrum, across both debt and equity. But Triple Point itself is a really exciting place to be, not just because of the capital we mobilise, but the way we invest that. I’d make about Triple Point is that we’re a very innovative business. And so that means we’re not just a traditional fund manager that wants to put some money into a business and be…

cash to check in in 5 to 10 years time. We’re really about growing businesses, about innovating and working closely with entrepreneurs to tackle the societal issues that they’re facing. So I think that’s a big part of our approach is that innovative way to both partner with businesses and to finance them.

Adam Sroka (04:43)
So much to unpick in that snippet there. I was going to get into investment stuff, but it looks like that’s not even the most difficult thing you do because congratulations on B Corp status. That’s no mean feat in and of itself. Having looked at that, that’s a real commitment and amazing to see an organisation like Triple Point do that. Not straightforward. You mentioned, pain close to my heart, the underfunding of SMEs and…

Jonathan (04:58)
Yeah.

Adam Sroka (05:12)
like raising and funding and driving smaller businesses. So Bootstrap startup founder here. I always saw it as very opaque actually, and I’m not like a complete moron, but I don’t understand. I felt it was always going to take me far too long to really understand options around fundraising and things like that versus just getting to work and building things. And even still, we’re going some now and that

journey, that level of expertise and skills that you actually need to do this effectively is something that I think a lot of people miss when they’re talking about partners and organisations like Triple Point, right? That they could work alongside you. You’re not just a bank account to extract money from. There’s actually a partnership there, is that fair to say?

Jonathan (06:04)
Yeah, it absolutely is across all of our strategies. So, I mean, a really good example, though it’s not my area of the business, is our venture team who work with founders to work on scalable, impactful, early stage businesses. And they really do have a partnering approach to add value and have a really strong approach around the ecosystem that people are part of. I was at an amazing event last week, actually, with one of our lending strategies. And we were talking about this point that you’ve made around SMEs and the lack of financing. What an important

part of the ecosystem Triple Point is, focusing particularly on the S of the SME to help them grow. And that was an amazing event I went to with hundreds of the people that we funded and the advisors that we work with to really demonstrate what a key part of the sort of financing infrastructure, the financing world that Triple Point is. So we really do try to put our capital into those areas that need it, but then provide the support. And we always talk about ourselves as a relationship investor,

to be there in the good times and the bad and to provide flexible, affordable finance to help people get to where they want to get to. That’s been the genesis of Triple Point for the 20 years it’s been around. That’s the core of what we’ve been doing for such a long time. Energy is obviously, I’m biased, the most exciting part of our strategy and what we do, but it’s been a core principle of the way the firm has been run and managed for a couple of decades now.

Adam Sroka (07:21)
Yeah, no, totally agree. And I think like, that’s why I put my business in the energy space, right? It is really exciting. There’s this massive wave of technological change coming, like the way markets are happening. Everything’s kind of on the move and it’s going to take a lot of expertise, skills, businesses and capital to make all that happen. I guess compared to like SMEs and tech startups, the time horizon that you think about must be quite a bit different when it’s looking at

financing large infrastructure projects. guess, how do you go about assessing risk? What do investors want to see? Can you unravel some of that for us, please.

Jonathan (07:59)
Yeah, it’s a really interesting time to be investing in infrastructure and energy infrastructure specifically. There’s been quite a lot of change. If we maybe start with the returns piece, what do investors want to see? We’re in a difficult spot right now as a sector, I think in many ways, because of two factors. So first of all, people’s expectations around returns have increased materially. That’s, I guess, mostly a function of increasing base rates.

I remember for many years investing in this space in my career and people spoke about subsidies. They talked about FIT and ROC and other subsidies to fund renewable generation in the UK and more broadly. But what no one ever spoke about enough was to subsidy effectively, not a legally binding subsidy, but the effective subsidy we were getting for a close to zero base rate. And so people were buying renewable energy projects at a 4% return. Today, a gilt, you could buy for 5%. You could buy government debt at 5%, but people refuse to go and buy energy projects

for less and so to me, it really speaks to, okay, we need to be making our investments deliver sensible commercial levels of return. And when you see, BP is obviously quite famous at the moment pulling out of its energy transition funding, you’ve seen others do the same. I’ve got maybe a slightly controversial view on this, which is it’s not anybody else’s job to subsidise. Like it’s not up to investors with, you know, pension fund money, et cetera, to subsidise returns in our space. Our job as investors is to find compelling risk-adjusted returns

which deliver on sustainability factors, pricing all of those risks over the long term and deliver, yeah, superior risk adjusted returns. I’m not expecting any favours from investors to go, well, because you’re doing a good thing, we’ll reduce our return hurdles and no one who wants to scale this sector seriously could ever think like that in my view.

So I think people in particular for equity investments in our space are looking for double digit returns. When you look at listed investment trusts operating in our sector who have a sort of single digit kind of

Project IRR cost of capital, you’ll see them trade at a 30% discount. That’s the implied cost of equity, I think, which is sort of a low teens number. And even in debt, you still need to be getting pretty attractive rates of return. And I was looking this morning, before we came on, you can buy investment grade bonds, for like getting a return of 5 or 6. So does a solar farm with 50 years of risk and will it be sunny in Scotland? What will power prices do? And all regulatory stuff do?

like it’s just not an interesting risk adjusted return. So we’ve got to do more as a sector to lean into risk and therefore get the compensatory returns that are needed by the ultimate people who fund infrastructure at large. So that’s how we think about returns and not on look risk. We obviously assess risk on a very granular basis. I could go into lots of detail, but I think more interestingly, I think the relevant point that sits across whatever we do is that we look to really understand value drivers. When you sit down and value a solar farm,

you put in a 40 year assessment for what the power price will be. You’ll be lucky if that’s right, 4 months ahead, live in 40 years, right? You know, your capex cost fine, you should have that nailed down, but there’s a of long-term assumptions where you’re taking their assumptions, right? And no one can plan many, many decades out. So I think you just almost have to kind of go to that value-based, you know, what are the drivers here? What could be flexed in a good scenario, a downside scenario, accepting that, you know, it’s quite hard to be accurate in 39 years time.

But actually, if you understand the fundamentals of value, you accept that each driver will look a bit different to what you expect, but you understand that ultimately they contribute to a compelling value proposition. So that’s the way we understand we really think about risk is the key drivers of risk, key drivers of value, and guess the broad parameters and ranges with which those risks and value can sit on.

Adam Sroka (11:42)
It’s interesting because there are parallels with the decision-making process that I go through here. And it’s like, what do we invest in? What do we do? And there are things that immediately might not seem obvious, the same, like if you understand where the value comes from in the medium and the long term or the ulterior motives, the peripheral benefits, then actually there are quite a few more levers you need to pull on and dials you need to check before making any given decision. But ultimately understanding what’s in your control,

what your next best alternatives are, I guess makes a real difference. Talking about long-term solar projects and things like that, I think makes total sense that it’s becoming harder, actually, especially with the regulatory changes, the way pricing is happening and things like that. But you’ve mentioned before that storage is actually quite an interesting focus and we certainly see a hell of a lot of interest in that space. There’s capital

kind of crowding in and trying to make its way into that domain. There’s new players in the market. Why do you think it’s such an important piece of the puzzle?

Jonathan (12:49)
So maybe I’ll take a step back and talk about how we invest across the transition and I can zoom into storage. Triple Point is a funder of energy transition across the UK and increasingly into Europe. we fund, we’re technology agnostic, so we’ll fund any sensible proven technology. And quite uniquely, we will fund that through debt and equity. And that is a really different perspective, I think, from most other organisations. We position ourselves across the cap structure and across energy transition to be a funding partner for the long term to the people who are…

the bleeding edge and the frontline of climate change. So whether they want senior debt or junior debt or equity or whatever it might be, we pride ourselves on being flexible, using our understanding of the energy sector and being able to tailor a capital solution. So within that, storage is clearly a really important part as a renewable enabling technology, given the intermittency of renewables and the impact on frequency on the grid that having a high renewable load achieves. And obviously, as we ramp up renewables towards 2030, we need more storage.

We need that, yes, to sort of manage frequency fluctuations. We need that, I think in particular, to manage some of the price cannibalisation that you see in core technologies, particularly solar. On a day like today, it’s very, very sunny and the whole fleet’s at full power and that means a lower capture price. And so how do you think about maybe having a two to three hour duration battery on site to shift it back to when the prices will be much higher in a few hours time at 4 or 5 o’clock at peak pricing, right? So it has a value creation

play alongside renewables through co-location. It has a system impact in terms of frequency fluctuation and managing intermittency. And of course, what it’s all about as well is knocking gas off the merit order and trying to displace things like gas peakers in balancing mechanism, for example, or OCGTs or CCGTs. So crucial part of energy transition. One of the UK, I would say the battery market in the UK is quite well progressed, is doing pretty well compared to others. I think we’ve really been

pioneers, a lot of credit goes to Ofgem and NESO and some of the early investors in that. So it’s a really important part of picture. The next stage for me is long duration storage, right? And really making sure we can back up days at a time. I think today, you know, A few weeks ago they announced the long duration storage cap and floor process. So that’s going to be crucial for me, I think, giving a personal view, given how much we’re relying on wind going forwards.

We can’t just be managing a few hours here and there. We really do need long duration storage through pumped and through a range of technologies, including lithium, but vanadium and others to provide that ultimate shift of transition. I think in combination with other base load technologies as well. So it’s the critical piece we need to get right, particularly over the long duration piece.

Adam Sroka (15:28)
Just an opinion, are there any flavours of projects that you think are particularly attractive or that are missing, there’s not enough of in the market from your scan of things?

Jonathan (15:41)
I’d love to see more long duration, but I know the government would too. I mean, everyone does. Lithium is working for sure at 1 to 2 hour now, increasingly 3 hour duration. We need to get that up clearly and it can deliver. We really need to see a long duration storage given the energy mix here in the UK. I think it’d be really important to see more long duration going forward. There’s a lot of battery energy storage out there. Grid reform,

maybe we’ll talk about in terms of regulatory stuff that’s going on at the moment. There’s a lot of grid reform going on and I expect battery energy storage to be impacted the most by that in terms of people’s pipelines. We’ve got way more storage in the pipeline than we’ll need between now and 2035 under almost any scenario. So a lot of that isn’t needed. So how can we repurpose those connections to do something that is more useful and particularly that’s long duration, then maybe that’s an interesting play. But yeah, for me,

I’d love to see more long duration. I would love also, this is a niche point, to see the market properly pricing and reflecting co-located solar and storage in particular. I don’t think people necessarily are clear on how to value that. And I don’t think therefore it’s getting priced properly. But on a day like today with the significant cannibalisation of pricing, by the way, Europe over last week where it was significantly hotter, you have record negative pricing across much of the continent. That’s not earning anyone a return.

So we need that battery storage to provide that. So co-located, long duration, let’s see more of that. ⁓ Lots of 2, 3 hour duration out there, that’s fine, but we’ve got enough.

Adam Sroka (17:13)
And what about other markets then, you’ve hinted at Europe? If you were a baby battery or energy asset developer today, where would you be casting your eye?

Jonathan (17:22)
Yeah, I mean, so a lot of them have already been for some years in Germany and Italy. We are coming into those areas. They’re very, very different revenue models, actually, one far more sort of core infrastructure like, one very merchant. I think if I was, you know, properly starting out, even probably looking at places like Romania, like properly the next wave, you know, Poland is progressing already well. But again, there’s a lot of people who’ve been in Poland for some time. So I would be looking at those kind of places where if you have the right local partner,

you can do pretty well. And we’re seeing very established investors move into those areas within storage. I think also those areas have quite deep power markets. There is lots of attractive pricing to be earned in, say, Scandinavia, but those markets, we expect, will saturate quite quickly. So I’d be really interested in maybe Greece as well. Some of those deep power markets with high renewables and where there’s been a little less

appetite shown thus far. For me the big wave of the next 18 months you’re going to see a lot of very big sites come out of planning and you’re going to see a lot of very big sites go into construction and you see a very large funding requirement and for people like ourselves that’s really interesting. Italy as well I think as they now have the auction processes kicking off will be able to really scale its battery fleet and that’ll be really exciting. So yeah very exciting time on the continent for batteries.

Adam Sroka (18:41)
As an investor, how deeply do you need to understand the different regulatory requirements and rulings and stuff in each of these additional markets? And how do you keep abreast of it all when picking where to go next?

Jonathan (18:58)
Sure, well the answer is you pick where to go next, right? So you don’t sort of go, you know, we wanted to go into Europe, Europe’s a big place. So we’re picking, particularly for us, Germany and Italy as the next steps, getting comfortable with them and then progressing from there. We’ve done a few in Ireland as well, to be fair. So I guess the answer is by casting your net, not wide, but very, very narrowly focused on really knowing two deep markets particularly well that we’re interested in and be disciplined in the way that we understand those markets and price risk.

and finding the right partners to go into those markets with. We’ve got a lot of relationships here in the UK of developers who’ve gone into those countries and territories, partnering with them, going on a journey with them. And that’s how we like to do business anyway, to be honest with you. So that’s a big part of it for how we get comfortable with the local risks. I think the other point, which I probably haven’t mentioned thus far, is we’re quite unique in that we are very happy to fund the development, construction, or operating stage. And so the risks that you take are very different at development stage, where you’ve got a slightly different set of planning

approaches, particularly in Germany, and obviously your grid rules. There’s many, many transmission operators, for example, in Germany. So, you know, understanding how all of that works is also a critical part of how we assess risks.

Adam Sroka (20:10)
Then closer to home, are there regulatory changes or things with the continent we could learn that would unlock more private investment into energy transition?

Jonathan (20:20)
I think when you think about regulation, I guess there’s two biggies here in the UK right now. One is grid connection reform, which is very, very live and a very big deal for every developer we speak to, it’s top of their focus area. I think I’m a big supporter of the need to rationalise the connection queue. I think we all know the stories of, you know, zombie projects, the queue being too big and needing to cut down

the grid, that does create investment uncertainty. And at a time when we need to be building out the infrastructure for 2030 in line with government policy, we really do need to have more clarity ASAP on what connection dates various projects have and the fund going forward. So I don’t think the UK is necessarily behind the continent on this. I understand there may be similar grid reforms going on in other jurisdictions going forwards. And what you’re already seeing is there’s a wave of renewable and battery projects have come onto various different grids, including in Italy and Germany,

a very long connection queue and everyone trying to grapple with. We’ve got way over supply compared to what we’ll need on demand. How do we rationalise that whilst protecting investment certainty? So it’s a biggie across all European grids. And then the final one is REMA, which again, very well discussed in terms of are we going to move, it’s even made it to the national press. So when an energy policy makes international press, something’s going on. Zonal versus the current model, does it make a difference? And you’ve got Octopus saying, yes, it makes a big difference, and Centrica saying

Yes, it makes big difference. Don’t change to Zonal. There’s lots of different views. I don’t necessarily think people are holding back investment just yet. know what some people are, but that is going to become quite material. So we need clarity on those things. You want government policy clarity in terms of which way those two things are going to go. And then you can price the risk and move forwards.

The uncertainty on two fundamental pieces, which effectively is when can I connect my project and what’s my revenue going to be? Those are pretty material to project economics and I would encourage people to try to resolve those ASAP. On the flip side, meant to be a record CFD auction this year, so that’s really positive. All of this is good stuff the government should be asking. Totally sensible, it takes a while to figure out. The sooner we figure it out, the better.

Adam Sroka (22:28)
I just think the REMA zonal nodal chat is just great pub chat. Everyone can just have a really strong opinion, but no one’s got a clue. It reminds me of the good old days where just the loudest person wins. I’m keen to see how that plays out. Definitely going to create a lot of interesting stuff to do.

Jonathan (22:34)
I’m sorry.

Yeah. Yeah. Yeah.

Yeah.

Yeah, it will create a lot of people to sort of rethink their models. It depends how many zones there are and all that good stuff. Personally, do I really think that people are going to start moving en masse to new geographies incentivised solely by an energy price? I find it hard because ultimately what makes decisions is transport infrastructure, social capital. There’s a whole bunch of other things that go into things, not just an energy price.

It will be interesting, but people need to be, I think, really careful between what seems a really interesting solution on paper and actually how people behave in reality. We all know the many stories of economics professors modelling out things that make sense, but actually human beings don’t necessarily behave according to economic theory and what is the right solution in the context of people not behaving like an economic model. If we get this wrong, it will be a major impact on achievability of net zero. So it’s got to be something that we really go after and stick with.

Adam Sroka (23:45)
I think people often forget the timescales of the change. It’s not going to be like, right, that’s us now, all changed and everything’s different and the world’s better. It’s going to take years for… It’s like the chat in the US about building factories, right? Well, by the way, it’s going to take you a decade. Actually, I think you’ll find that it will be industries like data centres that are just purely driven by energy prices that…

Jonathan (24:01)
Yeah

Adam Sroka (24:12)
There’s a massive demand. They need to put them somewhere. They’ll be the first to benefit and then we might see other industries and social stuff pop up along the way.

Jonathan (24:21)
I think the length of time is the key piece though, right? It’s sort of if we announce this, okay, there’s a journey and a pathway to let’s say zonal, right? How long does that take to your point? You know, what you don’t want, which is kind of what we’ve got on grid reform is, people sort of holding back investment, waiting to see how it’ll play out. We need that money in the next 3 years, it takes 2 years, let’s say, to build some serious infrastructure. So we’ve got 2 to 3 years to provide an investable basis. But if you work backwards to having a solar farm online by 2030,

People need that clarity in the next 12 months across everything. If people are still holding back to go, will it be zonal? Will it be staying as it is? Are we then going to do TNUoS changes and DoRS changes and other pricing changes absent of doing zonal? Well, that’s fine. But that’s another couple of years. And every year it goes by, you’re asking people to make investment decisions absent of clarity. And so they hold back and they wait. And then we get to 2027, 2028 and we go, we’re never going to get there now. So I just think…

Whatever it is, it won’t be perfect, but let’s just do it, move on, and do what we can to get to net zero by 2030.

Adam Sroka (25:23)
Yeah, no, I agree. Because you’ve got to factor in election cycles and all this kind of stuff as well. Like, who knows what Nigel Farage wants to do when he gets in and all that stuff. No. Yeah, god, we’ll be off to Germany by then.

Jonathan (25:31)
Don’t want to think about that.

Yeah

Adam Sroka (25:37)
I guess changing gears a little bit, what are your views on other investors or other capital seeking more impact driven stuff, like following suit with kind of the way Triple Point operates and what you invest in?

Jonathan (25:50)
It’s interesting because often I get asked a question about Trump and the backlash against ESG investing that’s been very recent since he came into power. And there was an article in the FT, I think, last week, which was really interesting around this and against the backlash against ESG. And again, I confess, with a slightly controversial view, similar to what I said earlier, which is, these investment managers have fiduciary duties to maximise investment returns, albeit over the long run and albeit pricing all risks.

Transitional, physical, et cetera. But nonetheless, a scenario where we go, well, you need to be doing this funding the energy transition, yeah, and then the returns aren’t great, but it’s just the right thing to do, is absolutely not an unreasonable argument. It’s just not how a lot of things really work. So you can definitely challenge that and debate whether that should be the case. I’m happy to let other people more eloquent than me make strong philosophical arguments. But back in the real world, my job is to make

investing in energy transition as compelling and as interesting as possible to people with different costs of capital. And so that’s what we’re trying to do is to just rise to the challenge and make this stuff interesting. And you make it interesting by investing at the right stage of a project’s life. And you make it interesting by understanding the risk sufficiently to take that risk and therefore be compensated with an attractive return. So for me, I think I wouldn’t say I’ve observed here in the UK and EU material

push back against ESG or impact driven. I think there is a growing appetite still, You can’t ignore the fact that there’s been record outflows from ESG funds over the past 6 to 12 months if not longer, that’s a fact. And in reality, that’s a lot of it due to performance. It’s not because people I think have got less interested, it’s just because performance hasn’t been good enough. But I don’t think we should be, I don’t think the solution to that is berating investors for not accepting below market performance. It’s to rise to the challenge.

And again, see my point, if you could buy a Coca-Cola bond or an investment grade bond for 6, why would you buy a solar farm at 7 or 8? And shouting at people to then do it anyway isn’t gonna get us there. The job is to take them on the journey to make a solar farm more investable through funding creation strategies, investing at the right stage, and doing that sort of thing to make it a compelling risk-adjusted return. Putting solar with storage, building up a sort of IPP style platform with different rates of return. There’s a lot of exciting returns in our space, and we just have to, I guess,

Adam Sroka (27:50)
Exactly.

Jonathan (28:09)
bring that to bear for investors who are receptive to these strategies, but are rightly saying, I’m not going to do it without a compelling risk adjusted return over the long run.

Adam Sroka (28:17)
I wholeheartedly agree, right? You’ve spoken to almost our raison d’etre. The money will, as soon as we make it the most profitable option for investment of all time, the money will flood in and it will just happen overnight. Not overnight, but…

I just think the reason Hypercube was put together was totally like, well, actually, can I take technology skills, AI and data, software, and layer in half a percent, 1% more efficiency, make it slightly more optimal to move that needle as a different lens on bearing skills and resources on the challenge? No, I totally agree that like it or not, they have to be the optimal

investment first and then, yeah, it’s nice if it does this other stuff as well. But by being in the space and doing the work, you make the whole better.

Jonathan (29:11)
I agree. In many ways, what’s been the challenge is it’s almost been too successful because everyone piled into this stuff, particularly around COVID and everyone just piled into end-year infrastructure trusts who were trading to use investment trusts as your language at a 40% premium to net asset value. There was a lot of hope factor, a lot of over-excitement in my view. What that did was it drove up asset prices, it reduced returns and made it harder to invest. And what you saw was a bit of a boom followed by a bit of a burst from investment,

certainly get investment trusts going from very high premiums to very high discounts. And you saw that in pricing as well kind of change a little bit. I think it’s a more normal market now. We’ve got a more normal base rate by long-term historic standards. You’ve got less of a hype flooding in because it’s just a sort of positive thing to do. I’ve spent a lot more time talking about the power side of the sector.

The really big carbon footprint is in transport and it’s in building decarb. And those have an industry and those three are 70-80% of the carbon footprint. And so the next wave of energy transition, which we are really focused on at Triple Point, is looking into transport, looking into buildings in particular and working out how to decarbonise those because the emissions footprint exceeds that of the power sector. And to be honest we’re well on the way on the power sector. We’ve made a lot of progress. Still got lots to do.

But actually the really exciting stuff could be those next wave of the transition. The more impact comes from there, the higher returns come from there. That’s where I’m really excited in terms of how we get those returns and how we get to net zero more quickly.

Adam Sroka (30:47)
And that’s really interesting because from where we live, it’s a similar journey of the bits people are trying to tick off. So centralised optimisation control, I’m giving a talk on this in couple of weeks, so it’s very front of mind, but centralised, optimisation control, generation, management, it’s still very complicated, but that’s kind the low hanging fruit versus home energy management systems, EV charging setups, like virtual power plants and

microgrid stuff is harder and there’s a wonkier kind of hardware requirement for it, IoT. But we are seeing more and more projects in that space because that’s where the next layers of returns are going to be. an interesting place to play. And it’s funny that you’re seeing a similar thing, but from a completely different lens to what we are.

Jonathan (31:36)
I think it has to be that way. We’re nowhere near where we need to be on building and industry decarb and transport compared to the power system where we’ve made a lot of progress. What we’re going to do is mobilise capital into those areas. And the challenges are the business models are even more binary. They’re either a lot of risk or they’re very, very low return. So how do you make this acceptable and investable? And that’s what we grapple with is can we partner with people to find investable models that can scale?

So yeah, that’s the next 5 to 10 years, right? Because if I sat here in 5 years, dream, cross your fingers, and we’ve reached the government’s net zero target of 90 or 95% decarbonised power system, what will we be doing? Will we be focusing on the next challenge, right? And the next big goals on the way to net zero. So actually, can we get ahead and start thinking about that now, knowing the investable models to a larger or greater extent on the power sector side, and focusing and taking the learnings from that to decarbonise buildings?

Whether it’s behind the meter factories now, people might start talking about, and people are talking about as much as utility scale, that could be interesting. Behind the meter generation seems to be really, really popular right now. And of course, from a resilience and security perspective, having your own sort of power makes a lot of sense. You’ll know that data centres are particularly keen to kind of have that kind of backup as well, if not primary load. So all of that is super interesting and the way I can see the next 3 to 4 years unfolding.

Adam Sroka (32:59)
If you’re not too busy reshoring all our manufacturing pipelines from the east and trying to follow our friends over the pond’s point of view.

Just being nosy really, have you implemented anything on AI or advanced analytics over at Triple Point? And I guess a follow-up, if I was like a developer, an asset owner operator, and I wanted to just understand a little bit more about like the markets and the financial lens, what sort of data sources are you looking at and using?

Jonathan (33:33)
So we use, and we say, know, I’m not going to pretend we’re exemplar or we’re at the frontier curve here, but we are increasingly adopting AI through two main ways and lots of practices. One is through screening opportunities and doing DD in particular, where there’s standard form documents to review. And that can be really, really beneficial. And the really big one for me is portfolio actually, you know, we have an increasingly large portfolio. How are we getting the data out of that to understand risk better, to maximise returns better and

and using AI machine learning and data to drive that has to be a core part of any investment management business, I think going forwards. More broadly, energy transition is the right benefiting from metadata, right? And, you know, given there’s lots and lots of data points, regular metering, all that kind of good stuff, it’s a sector that lends itself to data in terms of what we invest in. In terms of our own business operations, we think there’s a lot that can be done and particularly focusing on the portfolio side.

Adam Sroka (34:30)
Amazing. I guess final one, like, yeah, 10 years from now, if you were to fast forward, what would you like to see from the energy transition? What kind of impact would you like to have? Like, what does good look like to you?

Jonathan (34:43)
Yeah, so look, in terms of impact, at Triple Point. Look, when we say we do debt, we’re not a bank. And when we say we do equity, there’s much bigger equity investors, likes of your Brookfields, your Macquaries. So what’s our role in the ecosystem? Well, our role in the ecosystem is to go in and take the risks that perhaps others aren’t or aren’t prepared to and to prove that they’re investable and then help others scale up. So to bring that to life, a couple of examples, we were the first people to lend to battery energy storage in the UK on a fully merchant basis. And everyone sort of laughed at us and said that was ridiculous.

And since then, there’s been hundreds of millions of pounds worth of lending done on a merchant basis without a price floor to mobilise capital into it. Debt is, you know, it’s quite a boring topic, but debt is one of the most important things that people don’t talk about in the energy transition because the vast majority of infrastructure spending is through debt, not through equity. And if you don’t have an active debt market for infrastructure assets, you don’t have infrastructure and you won’t have an energy transition. So that’s a good example of where we have catalysed, we hope, other people to come into the sector. And now we’re investing alongside banks into those structures.

We’ve also been one of the first people to lend to developers, for example, and to help scale them up. We announced a deal with Noriker Power a couple of weeks ago, for example, and we’re trying to, again, come up with products, investment products that are relevant to our investors and, you know, things that are really relevant to developers. In terms of what does Triple Point want its impact to be, I hope we look back and we conclude that we were at the forefront of new investment structures, of new ways of doing equity and debt, of being at the bleeding edge and taking the risks that

Maybe others weren’t prepared to do, but we understood we’re prepared to kind of go at the early stage. For my investors that manifests itself in first mover advantage and better returns and for transition and manifests itself hopefully in significant additionality and more stuff getting built. So that’s what I hope our impact is. More widely across the transition, you know, I’ve been this conversation 10 years and people are still banging on about how we do more solar wind and batteries, something’s gone wrong. We really at 2035 have to be talking

about we’ve done the power sector, right? The backbone is now zero. Now we can use electricity from the system to decarbonise buildings, decarbonise transport. We’ve got to move on to those harder to abate areas. We’re gonna have to start talking about hydrogen more whether people like it or not. Let’s not go there, because it’ll be, but seems to the most controversial area, but we do need to decarbonise some heavy goods vehicles and other parts of agriculture. We’re gonna have to go into the hard stuff soon. And that shouldn’t scare anyone because the hard stuff should command all else being equal,

a higher return. and I’ve just spent a lot of this discussion talking about how people need higher returns. So it’s actually quite a nice alignment to go what capital wants and what the transition needs are actually aligned if you have investment managers such as ourselves bringing all of that together. So that’s what I would hope if I was looking back in 10 years what we’d be talking about.

Adam Sroka (37:28)
Amazing insight. Just to reflect once again, we have done so many projects aligned to a few of your points where actually the developer or the owner, all they really want is a clear picture of their debt and obligations and their forward revenues. So they can go and raise more debt to build more projects. And that is such a hard manual, crunchy problem with rainbow-colored spreadsheets and…

like emails and PDFs all over the place. And actually we’re finally in a world where AI and machine learning and tools like that can make sense of that and bring all that together, you can turn it into something structured. Always interesting to speak to other people that speak to lots of other people, because it’s nice to hear that the market’s all coming along quite nicely. It’s been an absolute pleasure chatting with you today, Jonathan. Just one thing I always ask before I let anyone leave, if

People want to find out more about you or Triple Point, or if there’s anything you want to promote or plug, where should we send them?

Jonathan (38:28)
So look, I mean, for us, we are a funder who wants to accelerate the transition first and foremost. We do that through investing debt and equity, you know, across a number of territories in Europe and across the spectrum of the transition. We’re here to try to fund the stuff that other people find too hard. Not speculative stuff, but really robust stuff, at the frontier of the transition. That’s what we’re here to try to do. And we want to speak to people who share that mindset.

In terms of finding out more about us, people can reach out to me on LinkedIn. We have an active LinkedIn channel as Triple Point and social media. There’s a little bit of information about us on the website. I probably need to update the website because we’re too busy doing and not talking about it enough. But yeah, those are the ways you find out more about us. And yeah, we’d be pleased to speak to people who are aligned to what we’re trying to accomplish.

Adam Sroka (39:15)
It’s been great chatting to you today and all the best with what you’re up to and your companies at Triple Point.

Jonathan (39:22)
Thank you.

Adam Sroka (39:25)
Amazing conversation there with Jonathan. I always love talking to people that have a wider view of what’s going on and speak to multiple companies. Triple Point is just an incredible organisation doing some interesting stuff. They’re at the forefront of impact-led investment and taking up an interesting space in the ecosystem of investment in ESG and energy infrastructure. It was funny to hear the

similarities in how we view the challenge stack as it were and how some of the core centralised stuff is there or thereabouts. Actually, we’re starting to see use cases move down into the harder to do things. Jonathan was talking about how there’s a need for hydrogen, no matter if people like it or not, and agriculture, decarbonising other industries, talking about other markets. It’s a jam-packed episode, really, really worth a listen.

Thanks again to Jonathan and Triple Point.