Lazard is firming it's study
I finally got around to the much talked-about Lazard study. It's interesting for sure, but this podcast with George Bilicic from Lazard who heads up the work on the study was even more interesting.
Yes, he did touch on the "firming" calcs they did in this year's study, and he said some important things about modelling and resolution, but I'll avoid that discussion here. Mostly I found his comments on the "meta details" of the study intriguing and worth exploring.
Firstly, he made a point about how they don't charge for the study, and don't explicitly use it for marketing either (but it does help the brand). And how it takes a ton of time, but is also a "hobby". He spoke about how people from Iraq to Luxemburg consume the study and ask for presentations on it. Now, I only know about Lazard because of the "LCOE study", having first encountered it in my early career when the corporate finance department was trying to benchmark a plant that we (engineering) were trying to build. I'm going to hazard a guess that many, many people have come to know and respect Lazard's work primarily due to this study (and look forward to it). I've actually heard of a case where this Lazard study has become load-bearing in decision making processes. The key take-away for me here is how useful a "loss-leader" piece of work can be if you get the focus area right ("plug the gap and they will come").
Bilic went on to make several other points about consulting and decarbonisation, including that consulting firms are often not able to "go deep." I've seen this from the other side too, where CEO wants not just a decarb strategy, but a decarb ops model, and the two needs to be well integrated. He made another point was about how they're positioning Lazard to provide integrated advise on the geo-politics of the energy transition (where they see a gap), and all I could think was - "about time."
Speaking about geo-politics, Nigeria's new president is ending fuel subsidies. I mean, this gives new meaning to the political idea of "tough decisions in the first 100 days." Predictably, the reaction has been rough and angry, as retail fuel prices reportedly almost doubled in Abuja. If Mr Tinubu's administration is able to hold the line on this socio-politically, it's going to be interesting to watch the evolution of the energy space in the petro-state.
Other than the oil sector, which I'll talk about another time, the electricity space will probably see dramatic changes. Already, BNEF is predicting massive increases in PV deployment.
Here's something that caught my eye: apparently the country has over 50GW of private generators not grid connected! (for comparison Eskom's demand yesterday was ~30GW in SA). Now, assuming most of that is high-capacity factor gensets, what's going to be really interesting to watch is how the battery storage market evolves in Nigeria. It's going to be a fun test of technical integration too.
Essentially what we have here is a number of large behind-the-meter gensets that are suddenly much more expensive to run. On an LCOE basis, PV is suddenly much cheaper, but PV's intermittency (feature, not bug remember) is going to change the shape of energy services right - people are used to consistent power. Is there even any precedent for this type of energy adjustment anywhere in the world even? Large population, large off-grid high-capacity factor gensets suddenly more expensive, new political administration trying to balance a petro-state's books?
If, and it's a big if, the subsidy money goes into more productive spaces (say, grid expansion) perhaps the short-term pain will prove worth it. Tough call either way. Godspeed to the amazing people of Nigeria.