EP215 · Economy · first published 2023-10-11
The second wave of renewable energy | Jussi Lilja, Toni Perätalo | Negotiator 215
NOTE: this episode was made in commercial collaboration with Korkia, and both guests work for the company. This article separates the episode's structural observations from the fund marketing and marks which is which. Jussi Lilja and Toni Perätalo join Sami Miettinen in October 2023. The parts that hold up are the chicken-and-egg argument about power prices and investment, the point that a project's durable value lies in the grid connection rather than the land, agri-PV — solar panels raised above farmland — and the answer to the question of whether wind power's golden age is over. The transcript is auto-captioning, which is disclosed.
The second wave of renewable energy | Jussi Lilja, Toni Perätalo | Negotiator 215
Summary: NOTE: this episode was made in commercial collaboration with Korkia, and both guests work for the company. This article separates the episode’s structural observations from the fund marketing and marks which is which. Jussi Lilja and Toni Perätalo join Sami Miettinen in October 2023. The parts that hold up are the chicken-and-egg argument about power prices and investment, the point that a project’s durable value lies in the grid connection rather than the land, agri-PV — solar panels raised above farmland — and the answer to the question of whether wind power’s golden age is over. The transcript is auto-captioning, which is disclosed.
Commercial collaboration — read this first
This episode was made in commercial collaboration with Korkia. The publisher states so in the YouTube description, and it is the single most important fact in this article.
What that means in practice:
- Both guests work for Korkia. Jussi Lilja is on the channel for the second time (previously in episode 151); Toni Perätalo moved across from property into renewable energy.
- The episode presents the company’s funds, including a newly launched one. That is not a hidden message but the episode’s open purpose.
- This article is written so as to separate the two. Structural observations and checkable figures are foregrounded; the fund-specific passages are marked as such and treated briefly. Nothing here recommends any investment product.
Two further disclosures:
- There is no publisher caption track, so this article is based on YouTube auto-captioning. No verbatim quotation is used.
- The episode has two guests and no speaker labels. Views are written mostly without a name; a name appears only where the episode’s own chapter list identifies the speaker. In practice the guests are from the same company and present a unified view, so the distinction matters less here than in most two-guest episodes.
The recording is 11 October 2023.
1. The episode’s best argument: chicken or egg
The episode opens with a critical question, to its credit, because the question is genuine. Sami raises a YLE article arguing that the golden age of wind power construction is over: the bulk of demand has been met and new investment is frozen.
The guests’ answer is structural rather than defensive, and it is the most valuable passage in the episode:
Low prices are the mechanism by which low prices get fixed.
The reasoning runs like this. Adding renewable generation pushes the price of electricity down. Cheap power attracts electricity-intensive industry — data centres, hydrogen plants, electrified steel production. New industry raises demand, demand raises price, and generation investment pays again.
The direction matters, and it runs against the usual way of talking: cheap electricity comes first, then the investment. Not the other way round. Which means a temporary overcapacity is not a sign of a misjudgement but an intermediate stage — if and only if the industry actually arrives.
That is a conditional claim, and the condition is worth keeping visible. If electricity-intensive industry does not locate in Finland, cheap power simply stays cheap power and the correction never comes. The episode does not explore that scenario, which is unsurprising given the nature of the collaboration. A reader should keep it in mind.
A side observation that survives being lifted out: Finland’s grid is strong and simple — one system price everywhere. That is a competitive advantage rarely mentioned, and it also means there is no congestion arbitrage to exploit here the way there is in, say, Germany.
2. Solar won, and the figures show it
The clearest numbers in the episode concern the relative development of the technologies. These are the guests’ figures, not separately verified in this article:
- Twice as much solar was installed worldwide last year as all other renewables combined.
- Panel prices are roughly a tenth of what they were ten years ago.
- Battery storage is growing at about 25 per cent a year on average.
Solar is therefore the general winner. Finland is nonetheless comparatively strong in onshore wind, because the natural conditions suit it. Both are mature technologies in the episode’s account — development continues, but no breakthrough is expected.
On batteries the episode says one thing useful to know: at industrial scale essentially everything is still lithium. There are small changes in the chemistry, but alternative chemistries have not yet displaced lithium in large installations. This is cited from the guests’ own experts.
And one observation that matters more than it sounds: in some markets a battery is not an add-on but a precondition. Without storage the project cannot be connected to the grid on sensible terms. That moves the battery in the investment case from a cost line to an entry ticket.
3. Power prices: spikes gone, level higher
The episode’s price picture has three parts and should be read whole, because the parts point in different directions:
- The 2022 price spikes are gone.
- The general level has settled clearly above the pre-crisis one.
- The combination is good for an investor: predictability is better and the level is sufficient.
From this comes the episode’s most surprising technical observation, and it is counter-intuitive: forecasting the short end of the price curve is harder than the long end.
The reason is logical once you hear it. Over a short horizon the price is moved by weather, outages and political shocks — all noise. Over a long horizon it follows the generation mix, demand growth and the technology cost curve, which change slowly. The industry does make 30–40 year price forecasts, and project developers and investors largely use the same data — disagreements arise elsewhere.
On derivatives the episode mentions the 2022 collateral crisis: when prices rose sharply, margin requirements on hedging positions grew large enough to push healthy companies into liquidity trouble. This is the same phenomenon Timo Löyttyniemi treated in episode 211 as the first of five near-systemic crises. Hedging itself can be a risk when the collateral mechanism is asymmetric.
4. A power plant is property, but a different kind of property
This is the episode’s most original stretch, and it exists because one of the guests comes from the property side. The comparison is useful in both directions.
The similarity: in both you buy the right to build something in a particular place, and the value is created in the development phase. A power plant can usefully be thought of as a property segment of its own.
The difference that changes everything: a power plant has a defined lifecycle, roughly 40 years, after which it is dismantled. Property does not.
Three things follow, and they are the best material in this episode:
1. Owning the land is usually not worth it. When the plant’s lifecycle is known and it ends, there is no reason to tie up capital in land you have nothing to do with afterwards. Perätalo describes this as a change of mindset he had to make himself coming from property, where the land is the whole point.
2. Decommissioning and recycling are in the model in advance. The cost is provisioned in the calculation, and a significant share of the material can be recycled for money back. The guests concede the open point directly: the regulation 40 years out has to be guessed at.
3. What does not disappear is the grid connection. This is the sharpest single line in the episode, and it is put in the property industry’s own language: location, location, location — except here location means the connection to the transmission grid. The plant is dismantled, the land reverts, but the right to feed power into that point remains.
The practical consequence is the logic of hybrid projects, which the episode describes well: wind needs a lot of surrounding area anyway, so solar panels can be installed inside the same footprint. The production profiles complement each other — when the sun shines the wind may not blow — and the single most expensive component, the grid connection, is shared.
5. Agri-PV: an apartment block over a field
The episode’s most concrete new idea, and one easy to misunderstand, so it is worth reading carefully.
Agri-PV (agri-photovoltaic) means solar panels raised high above farmland so that cultivation continues normally underneath. It is not taking a field out of production.
The benefits the episode names:
- Water loss falls. Shading from the panel reduces evaporation. The guests’ example is Spain, where the temperature is still above 30 degrees in October. In dry and hot regions this is the actual argument, not a side benefit.
- Shade is useful to animals. Used as sheep pasture, grass grows under the panels and the shade is a direct benefit.
- The same land produces two things. The episode uses the image of an apartment block: an agricultural floor below, a solar floor above.
One thing a reader should keep in mind, because the episode does not go there: the economics of agri-PV depend heavily on the climate and the crop. In Spain shading is a benefit; in the north it is a cost, because light is already the scarce resource. The episode’s examples are southern, which is consistent.
6. Electrification, hydrogen, and what Liebreich actually says
The basic rule the episode offers is a good one: electrify everything that can be electrified. The consumer-side examples — solar tiles, home batteries, bidirectional electric cars whose batteries both draw and supply power — are visible, but the episode’s position is that the real shift is on the industrial side.
The role of electric cars as balancing power is assessed with commendable restraint: they bring some flexibility over time but not a significant amount, because the units in question are of an entirely different scale from power plants. In the Nordics balancing still rests on hydro and nuclear, and it is country-specific.
Hydrogen. Here is a passage that calls for care, because the episode refers to Michael Liebreich but leaves out what Liebreich actually argues.
The episode’s own position is moderate and pointed the right way: hydrogen’s potential is large but it lies in the future, in the 2030s, and industry already uses a great deal of hydrogen — it is simply produced from fossil sources. Green hydrogen’s first job is therefore to replace existing grey hydrogen, not to invent new applications.
Liebreich’s best-known contribution on the subject is precisely against the idea of hydrogen as a universal tool. His “hydrogen ladder” ranks applications by how strong the case for hydrogen is in each: industrial feedstock, fertiliser and steelmaking sit near the top, while home heating and passenger cars sit at the bottom, because direct electrification is overwhelmingly more efficient there. Hydrogen is a narrow-application solution, not a Swiss army knife. That fits the episode’s own position better than the figure of speech it uses.
SSAB and Raahe. This is the episode’s most concrete single case and it recurs on the channel: converting the Raahe plant into a large green hydrogen user would address about 7 per cent of Finland’s emissions — the same figure Pekka Haavisto gave two episodes earlier. The guests hope the decision lands in Finland and note drily that the ownership is in Sweden either way.
It is the same observation as the chicken-and-egg argument, at the scale of a single project: Finland does not make this decision. It is the supplier of cheap electricity, not the buyer.
7. Subsidies, protectionism, and what Europe lost
The episode makes a claim that matters and ought to be checkable: renewable energy projects are now commercial activity, and there are no longer many subsidies in the market.
The claim concerns project generation, not the whole value chain, and the episode draws the distinction itself:
- China subsidised manufacturing heavily, and that is how it took the solar panel market. A similar fight is under way in wind.
- Europe has largely lost panel manufacturing to China.
- But installation and maintenance are local work, and there is Finnish expertise there that can be exported.
This is a more honest picture than a flat “no subsidies”, and it should be read that way round: support has moved from generation subsidy to industrial policy, and it shows up in component prices rather than in a project’s income statement.
One thing goes untreated and is worth saying: the US Inflation Reduction Act and the EU’s counter-measures are renewable energy support on a very significant scale, even though they are aimed at a different point in the chain. “No subsidies” is therefore a precise claim about project generation revenue and an imprecise claim about the industry.
8. The fund section — marked separately
These are the episode’s commercial passages. They are summarised here because they explain the episode’s structure, not because they are being recommended.
- The model: the company develops industrial-scale solar, wind and energy storage projects but does not build them. What is produced is a large stack of paper conferring the right to build; the builder and the operator come later and are different parties.
- Scale: around a hundred projects in progress across eight countries besides Finland, including Canada, Spain and Sweden. More markets are said to be coming.
- Structure: the first fund closed at around €70 million; the new fund emphasises batteries and agri-PV alongside solar and wind.
- Ownership: entirely Finnish-owned.
Two structural points from this section generalise, and they are the reason to read it:
SFDR: Article 8 or Article 9. Under the EU’s sustainable finance regulation Article 8 is “light green” and Article 9 “dark green”. The guests chose 8, and the justification is practical: Article 9’s reporting obligations and commitments rule projects out unnecessarily, leaving good opportunities unused. They also note that the numbering was never meant as a ranking, even though the market has turned it into one.
This is an obviously self-serving argument — 8 is a lighter obligation than 9 — and it is nonetheless a substantively correct observation about the incentive effects of the classification. Both can be true at once, and a reader should hold both.
Closed-end structure versus an open fund. The episode refers to the worry about a redemption wave in Finnish special investment funds — a live topic in autumn 2023 for property funds. The argument here is structural and sound: a closed 5+2 year fund cannot be forced into a fire sale by redemptions, because subscriptions and redemptions are not continuously open. The price of that is illiquidity for the investor, and the guests say so directly: treat it as at minimum a five-year investment.
Diversification. The episode’s position is that investing in renewable projects works best spread across dozens of projects, because every country has its own difficulties and a single project’s permitting risk is binary. It is the same logic as Bessenbinder’s finding about stocks in the previous episode, in a different industry.
9. Risks — and what the episode does not ask
Asked about risks, the guests name one: the build-out of demand. No new energy technologies are in sight, so technology risk is limited — the universe is, in their words, fairly real. But whether demand arrives fast enough is open.
Their own answer has two parts and is stronger than a growth trend alone: demand is not only new consumption, but a continuous replacement runs underneath it — fossil capacity is retiring and has to be replaced. They regard growth in transmission capacity as inevitable, because it is against nobody’s interest.
Local opposition is where the guests’ experience departs from the general impression: there is less opposition than people think, and landowners are interested — particularly for peatlands and waste land, which suit a solar project well, even as a conversion from field. The municipality gets tax revenue. They concede honestly, though, that one’s own back yard is a different matter, and say they understand that side too.
And what goes unasked: the effect of interest rates. A renewable energy project is capital-intensive, long-lived and front-loaded — precisely the asset class whose valuation is most sensitive to the rate level. Rising financing costs are mentioned in passing in connection with the downstream equation, but not treated as a risk. At September 2023 rate levels that would have been an obvious question, and its absence is a natural consequence of the commercial collaboration.
Asking it is left to the reader, and that is where this article differs from the episode.