Hello, good morning. Welcome to this Veolia Deep Dive. Today's event will be dedicated to energy, and more specifically, to how Veolia is harnessing local energy to meet the challenges of decarbonization and self-sufficiency for its clients. Perhaps we can have a quick look at this morning's program, if I can have the slide on screen. There it is. As you can see, we will start with an overview of the global energy landscape. Then we'll see what exactly is energy by Veolia, how it is embedded across all Veolia's activities. We'll have a closer look at the company's energy offers and business models. Then we'll focus on the U.K. and Northern Europe region, and of course, we'll have a dedicated time to answer all your questions.
Now, please do bear in mind that we have, of course, some presentations for you today, but we would also like for you to see and experience certain of Veolia's solutions. There is, for example, a demo of Hubgrade. Hubgrade is Veolia's intelligent energy management system. The demo is right over there. I think some of you had a chance to have a look at it. Feel free to go ahead and experience Hubgrade when we break later on for lunch or for refreshments. And also bear in mind that this afternoon, we hope you will join us for an on-site visit of Landmann Way. And if by any chance you need a detailed program of this full day, the program is available on, you know, those big screens, the totem poles that are over there in the refreshment area.
Again, welcome to you all, whether you be here, physically with us today or whether you be joining us remotely, online. That's just about it for housekeeping. Let's get started. Please join me in welcoming Veolia's Chief Executive Officer, Estelle Brachlianoff. Good morning, Estelle. So this is the first of a series of events that Veolia will be organizing throughout 2024. What are you hoping to share with these deep dives, and why are you starting with energy?
Before I answer your question, Hélie, I just wanted to welcome everyone. I'm very happy that it's a very full room today, and thanks for all of you who've made the trip to London. And welcome as well to those who are, you know, listening to us live distantly. So why this deep dive was your question. I guess first, a deep dive on energy because it's core business for Veolia. We'll see later on, but more than EUR 10 billion turnover, 25% of what we do roughly overall. We have a super unique positioning, which with a lot already that we do, an ability to become the leader of our market, which is local decarbonizing energy.
As well as a high potential and high ambition. So there will be a word which I may pronounce a lot today, which is acceleration. So this ambition I wanted to share with you and explain why, as well as probably a little bit on impression that it's an activity from Veolia, which is undervalued compared to its potential and what we do already. So that's why we decided to start with a deep dive on energy.
Well, thank you so much. I'll leave you to share your vision of the energy market and Veolia's positioning in it.
Thank you, Hélie. So I will start with a few numbers, if you allow me to. So for some of you, those numbers will seem obvious or maybe not. Just to pick a few, starting with Europe, and starting with, geopolitics in a way. In Europe, we are dependent from the import of fossil fuel. 56% of our energy demand comes from importing fossil fuel. That's why strategic autonomy and resilience in the geopolitical world, as we know it today, is a key paramount factor. The second one is, of course, that we are going from a very centralized system of energy production to a very decentralized system, progressively, with more and more renewables, and with more and more solar and wind comes more intermittent.
Intermittent means there is a big, big drive into needing some flexible assets, and we'll discuss about that later on in the presentation as well. The third element, of course, is about carbon. You know everybody, so it's not only in Europe, it's in the world, has a target to reduce that trajectory of CO2, - 50%, if I mention the European number, by the end of the decade, roughly. So of course, decarbonization is absolutely critical in everybody's agenda, from our customers, as cities through to countries. Probably a figure which is a bit less known is when everybody talks about energy, we think power, and you know, the energy mix to produce power and the various debates you can have about that.
Of course, it's a relevant one, but people tend to forget that 50% of the energy is consumed in the way of heat. So it's to heat your home, to heat actually industries, and that's a very important factor as well of the energy landscape. So that was for a few figures. So you might wonder, what is Veolia's market? I mentioned the fact that it's local, decarbonizing energy, and of course, as you can imagine, we'll deep dive into what it means really in a minute. But we're talking here about a EUR 500 billion market worldwide. Fast-growing, as we'll see in a minute, with basically three sub-segments or three sub-markets, if you want.
The first one is bioenergy, which is produced typically from what other people don't want: non-recyclable waste, wasted heat, wasted water, wasted biomass, and you name it. To it, you would add a component of what we call ancillary services, of the flexibility, which I alluded to a minute ago, which comes with the renewables being more and more present in the energy mix of the various countries. The second part of this market is distributing local energy, so it's typically district heating, district cooling networks, which are very much more efficient than individual heating. And, you know, and we'll, again, deep dive in a minute about what it is. The third one is energy efficiency.
So typically, we're talking about how do we help a building like that one to have exactly the same number of people coming every day, but consume typically 15%-20% less energy to have exactly the same outcome? So be more energy efficient without changing the insulation of the building, just by managing it differently. So this is what Veolia's market is about. This is what I call local decarbonizing energy. So EUR 500 billion market with those three segments. Another way of looking at it is to talk gigawatts, because in a way, billion of euro is nice, but we're talking here about the capacity of production of energy and so on and so forth. This market corresponds to an untapped reservoir of 400 GW in Europe only. That's absolutely massive. How did I compute this number? How did we compute this number?
It's partially simply, you know, the untapped reservoir of wasted heat, wasted water, non-recyclable waste, biomass that can produce bioenergy. It's as well the leakage in the distribution network that you can reduce if you manage better those distribution network. So in a way, wasted heat, which you can avoid wasting. And the third one is wasted electricity and wasted heat that you have in a building like that one or in industrial sites, that you can avoid wasting or even recoup the wasted heat and combine it to something else for another customer. So 400 GW of a massive reservoir of energy. That's what Veolia is tapping into. That's exactly what we're targeting to more and more tap into this reservoir. So I've just mentioned the fact that it's a massive one.
So let me, let me give you some comparison points. Again, this is only the European reservoir. You can multiply by 4 or 5 to have the worldwide equivalent, if you want. So 400 GW corresponds to the overall energy demand of the entire country, like Italy. All the industries, the building, everybody in Italy, this is what 400 GW is about. Another way of looking at it is to say, we would be able to reduce by 30% the dependency on importing fossil fuel in Europe if you were to tap into this 400 GW. That ticks a super important box, which is resilience and strategic autonomy, which is more and more paramount.
I don't have to make a long story about why life has changed in the last two years with the war in Ukraine and even more recently in the Middle East. Strategic autonomy is paramount, not only for countries, but for cities, for industries, and they come to see us with those type of demands. In CO2, that's another way. It's 420 million tons of CO2, which can be avoided this way. Any way you look at it, a massive, untapped reservoir that we can tap into, and this is what Veolia is doing, and this is what we want to accelerate in doing. I alluded to the fact that it was a fast-growing market. Just to give you a feel about that, let's talk customer for a minute.
As you know, for Veolia, our customers are cities, are industries, typically. They come to see us with usually three questions: I want my carbon footprint to be reduced. First question: How can you help me? That's a classical one I'm sure you would expect. The other one, and I don't know if you had that in mind, but it's very much more important today: I want some security of supply. I want to be certain about my supply chain of providing energy for the next 10, 15 years. I don't want to have a risk that there is an interruption in it, to it, or that the price will go through the roof because something happened in the world. So I want to have a secured, affordable... and green source of energy?
That's the type of question we get from the customer: how do I do it? We even had cities coming to see us and say, "Veolia, can you help me be more self-sufficient?" So we're not yet at 100% of self-sufficiency in a city, but we are getting through more and more, you know, be self-sufficient. And of course, I mentioned the word affordable. Each time you do energy efficiency, of course, it is a big tick box into the affordability as well. And everything I've just said is a very, very secured price, affordable for 10, 15 years, and this is a big, big merit of the solution. In terms of the market and the rhythm and the pace of the market, just a few figures again.
In terms of bioenergy production, so biomass, biogas, energy from non-recyclable waste, and so on and so forth. It's roughly in the world, 10% of the energy mix, which is bioenergy today. And the best calculation, and we have—you have the reference in footnotes in those slides, is that it will double by the end of the decade to 20% of the energy mix. So it won't replace all the other discussion about centralized energy, but from 10% to 20%, it's a massive growth, and it's very significant in the mix. The second thing is, same applies for district heating. In Europe, where we, we have the figure, we expect it to go from 13% to 20% of the energy mix and energy as in heat on that front.
In energy efficiency of buildings, if I go on with quoting figures, if Europe is aiming at - 50% of CO2, half of it will come from the energy mix, the other half from, you know, being more efficient, of which half of it will come from insulation, the other half, basically 25% from exactly what we're talking here. So playing with the consumption or reducing the consumption with exactly the same outcome and energy efficiency of buildings. So a very fast-growing market with very much more demands, crystallizing. So I said, Veolia market is about local decarbonizing energy. So let me deep dive into every single of this world and maybe what it is, and at times it's easier to say what it is not, that we don't do. So local energy.
So we're talking here about energy as a scale of a city, energy as a scale of an industrial site. That's what Veolia does. What we don't do is centralize energy. You know, we're not in, I don't know, like a, a wind turbine in the middle of the North Sea to provide electricity for an entire country. That's not what Veolia does. So really, at the scale of a city, at the scale of an industrial park, that's what we do. Decarbonizing. So I haven't said decarbonize. Of course, we're happy to have energy, which is already green, if you want. But what we do is not only green, it's greening. It's help our customer to have the trajectory go down. So it's decarbonizing, which is as important as just something which is already where it should be eventually.
We do it, as you can imagine, by replacing various type of fuel or by limiting the CO2 trajectory, by being more energy efficient. Both count for that. Energy, for us, means power, heat, compressed air, because, you know, industries need compressed air in their process very often. It's all type of energy that we're talking here. What we don't do, I said, centralize, this is not what we do. B2C, we're not here to try and convince in your home to have us as a provider, whatever. We don't distribute directly to yourself as an individual. Works or installation. When there is a little bit of works into our contract, we tend to subcontract it, and it's usually very limited, say 10%, 20% max of what we do.
Facility management is not what we do as well, or just operating with manhours, you know, on the site, and then we are paid. We are on the opposite side, we are paid to help our customer reduce their energy consumption. We're not here just to operate stuff, whatever the energy result is. So we are in energy contracts. Another way of looking at it, I won't describe it in much detail, but this is to look at the value chain of energy. The central part is what we do. On the right and the left-hand side on gray, it's what we don't do, so centralized and B2C.
On the bottom of this slide, you will see the various details of the various element of the value chain of what we actually do, from purchasing on behalf of our customer, to distributing, to be more energy efficient and the performance contract, as in energy performance. This is what we do. So I said it's already a core business, and we are quite uniquely positioned in the energy. So for people who wonder, "Okay, what Veolia does in energy, actually? What is it specific, what is it unique that they bring to this market?" I'm absolutely convinced that we are already very good. We have very skilled team everywhere, and hopefully, you will see that by yourself today. But we have the ability to become the leader of this market, the local decarbonizing energy, and the ambition.
So first things first, it's a core business for us, so it's not a minor something on the side. Already more than EUR 10 billion and 25% of what we do. When we play, we play big, as in, in every single market we are, we are in the top three players. So just to give you an idea, we are number two in district heating in Europe. We are number one in the Middle East in energy efficiency, and I could multiply the example like that. So when we go, we go to be in the top players. Very importantly, we have a lot of synergies with all the activities in Veolia. In a way, there is energy in our energy segments, of course, but there is energy into the water segments, there is energy into the waste segments.
And a lot of the value we create is not only in being super good at what we do in the energy, but actually to bundling things together to offer unique solution to our customer by bundling our various type of activities together. That makes us, as you can imagine, very uniquely positioned. In terms of footprint, we obviously are very much more European than purely worldwide on the energy, although we have activities in Asia, in the US, in South America, or in the Middle East. But we have a portfolio of customer and geography, which is a wonderful way to leverage and to be able to sell energy or to cross-sell energy services to an existing base of customer.
I pronounce the word solution, which is very important, but as you know, the mindset, the DNA of Veolia, is really to: Customer, you have a problem, we have the solution. As opposed to sell specific technology or sell specific stuff, it's really to have a tailor-made solution to our customer's needs. That makes us, again, very uniquely positioned. When you have customer to say, "Okay, I want something with a security of supply, which is greening my trajectory, what can you do for me?" Then we bundle things together to offer unique solution to our customer. I mentioned that it was already big for Veolia and a core business. So a few figures, and they will be described later on by Claude in more details.
43 billion turnover for Veolia, 25% is energy, and you will have the detail of what is behind the 25%. 25% is energy, and again, this is energy as in reported energy segments, plus some energy which is in the waste segments, and some energy which is in the water segments. This is the overall, which makes the EUR 10.5 billion. So, that's why you will see sometimes a bit of difference on figures on purely reporting, as opposed to, you know, like bundling things together, which we can put in one category or the other, depending on, you know, the way we look at it. Of course, I'm mentioning 2022 figures because, I will let you discover our 2023 figures in a few weeks' time.
A good split between bioenergy production and ancillary services, more than EUR 1 billion already. District heating and cooling networks, roughly half of it, half of the energy business. And energy efficiency, which is a very, very big part, you know, more than EUR 3 billion already. Good growth, more than 5%, even if you exclude the ups and downs of energy price. On this matter, as you know, energy prices are roughly pass-through for us, so we're not exposed to commodity price. That's why, in a way, revenue is one criteria, but I'd rather the gigawatts and these type of indicators to present to you the business. So, faster growing and roughly double the growth of the rate, typical rate of the overall Veolia. So it's a fast-growing business for us.
I said I have, we have a lot of ambition for this business, so let me explain you that. Veolia, as you know, leader in ecological transformation, what our business is about is to help our customer decarbonize, this is what energy plays into it, depollute, and regenerate resource. And as you can imagine, when you talk about decarbonization and even the Scope 4, which is how do we help our customer to reduce their trajectory? The energy business is super key for this component of our ambition. I said 400 GW of untapped reservoir lying under, almost under our, our feet today. That's what I want to tap into. That's my ambition. That's the ambition of Veolia. We have a unique positioning to be here. We're already very good, but we will be even going faster and quicker.
So acceleration is really something we are launching and I want to announce today. Target, +50% by the end of the decade of production of bioenergy for Veolia, up to 8 GW. Ancillary services and flexibility, again, +50% to 3 GW of flexible flexibility to the market. In terms of district heating, we are number two today. I aim at being number one by the end of the decade. Energy efficiency same applies. Number one in Europe and in the Middle East by the end of the decade. And the money is ready to support this growth, and as Claude will describe in a minute, you don't necessarily always need a lot of money because some activities are very low CapEx as well.
So when you look at it, very big ambition in acceleration, compared to what we've been doing in the past.... That's, that's big. When you look at, when you look at the numbers, and you multiply by what it correspond in terms of, equivalent of, other sources of energy. But we can even do more than that. I have the ambition, not, a commitment, but a, a target, which is not to do + 50%, but plus to do + 100%, so double our activity by the end of the decade. What are we lacking to do that? It's not money. We have it, and we can find it, you know, with other partners. It's actually, unlocking all the blockage in all the systems of getting permit and planning, and to get momentum and pace in our countries.
Just to give you an idea, it takes four years to get the authorization to put solar panel on a landfill, on a closed landfill. So, if those four years were to come back to one or two, then it's not + 50% I'm able to do, it's + 100%, and we can double that. So we do already a lot. I have a lot of ambition today on accelerating massively, and we even can aim at higher. But we have to mobilize and, in a way, to fight, to convince that we need to get momentum and to get pace, and to go quicker into delivering this type of, of energy, because we're talking about an untapped reservoir of local decarbonizing energy lying under our feet. So what are we waiting for? I'm not waiting.
We're acting, and we can even do quicker. So thank you very much, and, I guess it's time for Claude to deep dive into the deep dive of every single of the three sub-segments I've just alluded to a minute ago.
Claude Laruelle, Group CFO, please, joining us on stage absolutely to detail each of these, energy offers and their business models. The floor is yours, Claude.
Thank you, Hélie, and thank you, Estelle. And as Estelle said, we have split our energy business into three parts. The first one is bioenergy, renewables, power grid support, and flexibility. It represents 10% of our EUR 10.5 billion energy business, and it generates around EUR 200 million of EBITDA. It has a higher EBITDA margin than the rest of our energy business because it has a lot of value embedded in those fast-growing and very specific service offerings. It is, in our reporting, it is incorporated in our value segment, and we have isolated this part to show the value that it creates. The second one is a district heating and cooling networks. That is well known.
It is our main energy business that is mostly in Central and Eastern Europe, and as Estelle said and explained, and I will show you that later, it will strongly decarbonize by 2030. It is generating almost EUR 6 billion of revenue with 0.7 billion of EBITDA. The last one is an energy efficiency business for building and for industrial clients. It is a typical service business, and we have combined here our building energy efficiency segment and the part of our on-site service business for industrial clients related to energy. It represents a revenue of EUR 3.5 billion and an EBITDA of EUR 200 million, with a typical margin of a service business with lighter capital needs.
So let's now review each segment in detail, and we start by the first segment, representing EUR 1.1 billion of revenue: bioenergy and renewable production. This is where the three businesses of Veolia, Estelle explained that very well, can make really the difference. We are using a lot of different streams in order to produce low to zero carbon renewable energy. It is all locally sourced, which means that it's contributing to the reduction of energy imported from abroad.
As a business model, we are using byproducts at the interface of our various businesses, and we are seeking long-term contract to sell our production to our clients. Let's talk about the various streams you are using. The first one is waste coming from our facilities, either from sorting facilities or from wastewater. It has a significant value component to produce heat, electricity, or biogas with no exposure to energy prices. If you can help me, Hélie, and to be more concrete, I will show you a jar of RDF.
This is my cue. Hold on a second.
Thank you, Hélie. This is a fraction of the waste that is not recyclable. When using this product, instead of fossil fuel, we can reduce the CO2 emission by 60%, and the price per ton depends on the calorific value that is embedded in the product, which means that we have turned this into a fuel. That was a waste, now it's a fuel. Another source of value is the landfill gas, biomethane coming from the decomposition of organic material. As part of our effort to fight global warming, we are, as you know, we are investing in our landfills in order to increase the methane production generated from waste. We can also, we can also use local biomass or waste heat or cold.
You will have later a good demonstration of what we do and what we are currently doing with the recovery of wasted energy, which is also a very strong reservoir. It is already a sizable business, with an installed capacity of 5.3 GW, and typical competitors for us are Ameresco or Albioma. It is a high-value business because we know how to transform waste, for example, into a valuable product. And like in all our energy businesses, we secure our margin with our hedging policy. As I told you, it's a fast-growing market because we have a lot of demand for decarbonization. Estelle explained that very well from our municipal and industrial clients. And the growing demand is to gain more visibility on low-carbon energy prices with long-term contracts.
EU is also pushing for much more biogas production in order to reduce the carbon footprint of the distributed natural gas in Europe. The goal is to double the production by 2030. Our ambition is therefore to increase the production of bioenergy and to significantly increase our biomethane production in order to grow the installed capacity of this segment by 50% to 8 GW in 2030. On the slide, here you have the four different example of the differentiation of Veolia using its different segments of activity to produce low-carbon energy. If I take the example of France, on the right-hand side, with what we are currently developing as projects, our French business will be self-sufficient of green energy by 2030.
Which means that developing, for example, solar panels on closed landfills, will enable us to propose self-produced green energy to our customers in our water business. Another one strongly helping the planet to get greener is a project that we are currently developing in Brazil, in São Paulo site, to produce 35 GWh of green energy that can be used by a local industrial customer. By doing this, we kill two birds with one stone. We strongly reduce the carbon emission of the site that we own, and we help the customer decarbonize. Now, moving to electrical flexibility and ancillary services. This is a very interesting business, as the development of renewables is already creating a lot of volatility, not only on price, but also on the production itself. The typical example is a very cold and sunny weather in the middle of the winter with no wind.
It means that, high demand on one side of energy and almost no production from the wind farms. It is already a fast-growing business with low CapEx and high ROCE, where we can produce two things, two main services. The first one is to support the grid to, in order to produce more when the demand is, higher. In this case, we are paid a fixed fee for the capacity which is reserved, and a variable fee when it is cold. It represents already EUR 240 million of revenue, and the flexible capacity is today 2 GW. The second one is flexibility of the demand. The goal is to reduce or shift the energy consumption on a very short notice. We are talking about few minutes and sometimes even shorter.
So to reduce this of specific industrial sites in order to lower the electricity demand during peaks. What we do, we install a box that we can control in the premises of our customers, and we can remotely shut down some equipment in order to secure the reduction of power consumption of the site. It has also a lot of value for the grid, and the business model is to share the value that is created between the customer and Veolia. We often have questions about synergies between our different activities, and this is a very good example of synergies, as this flexibility business started with the installed base of our water assets in France. We are able to reduce the power consumption very quickly, especially in our wastewater treatment facilities.
We have already connected 10,000 sites, and we continue to connect more sites every day across Europe. It represents EUR 60 million of revenue in 2022, and as will be almost double the revenue in 2024. Typical competitors are Limejump and Energy Pool. Regarding the speed of renewable development and the need for supporting the grid in many countries, the demand on flexibility is very high. Our ambition is therefore to increase our flexible capacity by 50% by 2030, with a capacity of 3 GW, by using our differentiator factors, our own asset in water, waste and energy, and the large industrial customer base that we serve. On this slide, on the next slide, you have a couple of examples of our activities to continue on what we do with flexibility.
On the left-hand side, we have 50 MW of connected capacity in France that we can reduce or shift to help RTE manage a high peak demand. Now, Hélie, I think we are going to the field to get more information.
Absolutely, Claude. We're going to offer you some real-world examples, a look at how Veolia is harnessing heat and cold recovery on the ground. Joining us remotely is Jakub Patalas, VP and Chief Operating Officer for Veolia Energy Poznań in Poland. Hello, Jakub, can you hear us?
Hello, everyone. Yes, of course.
Lovely. Perhaps for those of us who are not completely familiar, what are Veolia's activities in Poznań?
Well, first of all, Veolia Poznań has been operating for over 20 years. We own CHP plant in Poznań, with a thermal capacity of 930 MW, and a heating network with a length of approximately 600 km, which supplies heat to over 60% of residents of Poznań and surrounding communities. In Veolia, we put a particular emphasis on partnerships, especially with local government and other business entities. We strongly believe that implementation of innovative green projects with local partners will have a significant impact and improvement of quality of life for residents, and will be a crucial step towards achieving sustainability in Poznań.
Okay, thank you for the mission statement. Jakub, what project did you wish to specifically highlight for us today?
Well, today I will tell you about a project which relates to energy efficiency, as well as reducing our impact on the environment, that we are implementing here together with our strategic partner, Volkswagen. A project that use alternative energy sources to reduce resource energy consumption. But first, a few words of explanation: the Volkswagen plant in Poznań, which is the largest plant in Europe, producing cylinder heads used in cars, is one of the biggest industrial clients with whom we are, have been cooperating continuously since 2007, supplying heat to their foundries. The project is based on two tailor-made solutions, based on the idea of closed-loop economy, implemented to recover heat from running compressors, as well as from gases extracted from the furnaces of aluminum foundry.
With this solution, about 4 MW of heat is returned to distributing network, which makes it possible to supply 6,500 apartments. What's more, greenhouse gas emissions are also reduced. In this way, CO2 reduction is around 3,500 tons per year.
Can you give us an idea of the benefits and perhaps share what the market potential could be in this activity?
Well, first of all, for Volkswagen, this is a way to reduce the impact on its activities and on the environment and remain competitive in the market. In turn, Veolia greens its district heating network and increases its efficiency through this cooperation. The waste heat recovery project from industrial processes of Volkswagen plant is therefore a perfect example of partnership between two companies for the benefit of community and the planet. Summing it up, this is cooperation model that shows that waste heat has a huge potential. Today, it's one of the most promising sources of energy, which are currently simply wasting, but thanks to already known technologies, it can be reused.
A big thank you to you, Jakub. Thank you for being with us this morning. Jakub, who will stay, available if you have some questions, at the end of this presentation. I'm now going to turn to Franck Arlen, who is Deputy Country Director for Veolia, Spain. Franck, who is live from Barcelona. Yes, there you are, Franck. Hello, good morning. Can you hear us properly?
Yes.
Lovely. I'll let you give us a quick overview of your energy activities in Spain and present the project that you wish to showcase this morning.
Okay. First, of course, good morning from Barcelona, Hélie, and good morning to everybody. In Spain, energy is a key area. We are making progress, mainly in three activities, as mentioned by Estelle and Claude: energy efficiency, management of heating and cooling networks, and green energy production. All these elements drive our decarbonization strategy in Spain. So far, we are at the facilities of Ecoenergies, Veolia subsidiary. We are located in South Barcelona, and from here, we manage the heat and cold network. We have here behind me the port, the business park, which is called Barcelona Franca, and the new residential area, La Marina. This is a very strategic location for our project of cold recovery.
Well, tell us more about this project of cold recovery that is really becoming a reality where you are.
So yeah, of course. Behind me at the port, we can see the Enagás regasification terminal. Enagás is the company managing the Spanish natural gas network. Natural gas arrives here by boat in liquid form to around -160 degrees. To return to its natural gas state, it needs to pass through seawater exchangers and then be reheated to around 0 degrees. This process releases energy that is currently wasted in the sea. Our proposal with Enagás is to recover this energy and to provide it to our local clients: a negative cold energy, around -20, to the food industry, and a positive cold energy, +5, to buildings.
Just to give you an idea about the volumes, first, we have several steps with Enagás, and I'm only gonna speak about the first one, which is- which will be commercialized this summer. The first step does represent around 133 GWh per year of cold energy, which is something like 32,000 tons per year of avoided CO2 emission, and the consumption of 88,000 flats. For sure, we have planned with Enagás a second step that will allow us to double all of these quantities, but this is another story. First, the full commercialization of the initial step. Just about to speak about the city, because Barcelona is a very important player in this project. Barcelona is a reference in different activities of the ecological transformation.
Case in point, when it comes to water, Barcelona is using around 25% of reused water. And when it comes to energy, Barcelona keeps pushing in this sustainable path, becoming the first city in the world using this cold recovery technology. It is absolutely essential to have these types of initiatives, and Veolia is very proud to be part of this example of public-private collaboration.
Thank you, Franck. You've shared some very significant figures with us. This looks like a big undertaking, so I'm gonna ask you really very simply, how easy is this to do, and how did you manage to achieve this?
Well, it has been a long and fascinating journey, but, well, we have worked hard to have everyone and everybody line up to invest in such innovative solutions. Among other things, we have the total support of the Barcelona City. This is fundamental. They are represented in our board of directors, and that definitely helps a lot. Moreover, having a partner like Enagás helps, too. It has reinforced our capacity to convince and to create this local ecosystem. In Spain alone, we have five more ports like this one, and to tell you the truth, we are working with Enagás on extending this model to other ports.
All right. Perhaps rapidly, Franck, what is the potential for other territories? Can this be duplicated elsewhere?
Well, first, this is definitely an innovation, as you know, and that could be perfectly replicated. In today's world, we can't afford to lose any available calories. There are over 150 similar terminals worldwide, and the forecast for 2035 are to double the LNG consumption. One third of these terminals have sufficient urban density to consider developing cold network. To make this cold recovery real, we need three things: of course, a regasification terminal, then a cold energy consumption, and a strong local involvement. And we can also imagine that future regulations will penalize all energy losses related to industrial processes, such as the regasification process. It is our duty to invent and then duplicate new solutions to recover lost energy. We need to keep walking this pathway along with our clients and our partners, but it is a fascinating journey.
A big thank you for your time as well, Franck. Please stay on hand in case we might have any questions for you. And, Claude, I'm going to pass on over to you again for the second energy offering of Veolia, which is district heating and cooling networks, I believe.
So yes, let's talk about the second one, which is the largest business segment with local loops of energy, mostly our district heating business to supply very efficient heat and power to local authorities. Most of the activities, but not all of it, is located in Central Europe, with four main countries: Poland, Hungary, Germany, and Czech Republic. The main driver for growth is really the decarbonization of its activity using alternative fuel to exit the coal in Europe. That will, that will generate for Veolia, as you know, a strong reduction of CO2 emissions. In terms of business model, we own its, we own our heating networks and cogeneration plants forever, and we invest in developing, in the development of the networks, but also in the coal transition.
In this regulated business, the model and the fuel supply is secured, and we do not take energy price risk because heat prices are set at the beginning of each heating seasons with updated prices. Regarding the electricity that we produce with cogeneration, Veolia is implementing its hedging policy to secure its margin. This business is highly efficient, thanks to heat and power cogeneration that has an efficiency of more than 80%. It's also efficient because district heating networks that we operate are very efficient, and it's driving new connections and new customers. For example, we own and operate the largest district network in Europe. It's in Warsaw, where we achieved 90% of distribution network efficiency. It's remarkable.
This business is an essential service business and has a key role to play in the decarbonization of the city, as heating, it represents two-thirds of the energy needs of connected residential customers. Decarbonization is much easier to implement when you have a heating network in place, as you only need to decarbonize a handful of sites for a large city. This is exactly what we are doing in Braunschweig, in Germany. We are number two in Europe, with more than 600 networks operated by Veolia, and typical competitors are Dalkia or Coriance in France, and PGE in Poland. This business has also a lot of traction for three main reasons. First, as I said, it's very efficient. It's a very efficient solution, which is cheaper than individual installation. It has, therefore, a natural, organic growth, which mean that we are adding new customers every year.
As we will see, we are also using the heat coming from waste of energy plants, waste-to-energy plants, sorry, that is usually dispersed in the atmosphere, and we are filling with this heat our district heating networks. This is clearly very synergetic with the other business of Veolia. And, on top of that, EU is also pushing and has a lot of ambition in order to grow the market share of district heating by 50% by 2030. Second, when we decarbonize our facility, we increase the power generation capacity, which mean that the new facility is designed to produce more than the previous one. And third, there is also a demand for more efficiency of the operation.
As we are best in class in our performance, we have started, for example, to deploy digital twin solution, which is a digital representation of the district heating system with AI solution calibrated on the basis of historical data. It helps us improve the heat demand in the system and increase the performance almost in real time. We see a growing demand for outsourcing of this type of operation, and as you will see later, the fifth generation network of Saclay, which is very interesting, is a very good example. Our ambition is to become number one in district heating network in Europe by 2030. Let's see where we are on our coal exit plan in Europe, because it's a question that we quite often have.
As you know, we have a massive commitment of EUR 1.6 billion investment in order to fully exit coal in Europe by 2030. We have already made a lot of progress, with more than EUR 500 million invested by the end of 2023. And as you can see, it is creating value for the planet, but also value for the Veolia shareholders. We have already erased 500,000 tons of CO2 in Prerov, in Czech Republic, and in Braunschweig, in Germany, and we are, as we speak, commissioning the Kolin project using biomass in Czech Republic. And those projects have a typical double-digit internal rate of return, well above our WACC. You can see two other flagship projects of our district heating business in Central Europe that we acquired in 2020, in Prague and in Budapest.
They are both doing very well, and we have already increased the efficiency of the operation by using our best practices, and they have outperformed their business plans and are both delivering double-digit internal rate of return . Hélie, I think it's time again to go back to the field.
Absolutely. Thank you, Claude. Feel free to have a seat as we welcome Jean-François Nogrette, Senior Executive VP for Veolia France and Special Waste in Europe. Jean-François, hello. I hope you hear us correctly.
Hello, Hélie. It's perfect, thank you.
Lovely. So you're here live to present one of Veolia's most innovative, heat and cold networks. It's in Paris-Saclay. Tell us more.
Good morning, everyone. Since the beginning of 2023, Veolia has been operating the only fifth-generation district heating and cooling system in France, which is one of the most innovative grids in Europe. It's located here in Paris-Saclay Campus, which is a hub for science and technology, world-class hub. But beyond innovation, the campus is committed to sustainable development, so it has launched this innovative grid with the goal to set the new standards in the field.
What exactly is a fifth-generation network? How does it work, for those who might be uncertain about the term?
So basically, a 5G DHC is all about maximizing energy efficiency for a cluster of buildings. It enables, it allows each building, here is data centers, laboratory, but as well, supermarkets, residency, et cetera, are able to collaborate, maximizing energy efficiency. In a sense, it allows each building, it transform each building into an energy producer rather than just a consumer. Physically, it's a pipe, a network of pipes, that is distributing energy at low temperature in each building, and the design of the piping is able to recover wasted energy in each building. For instance, the supercomputer here in Saclay, now we, we are able to capture the dissipated energy and to repurpose it into the grid. Globally, the system is able to integrate all kind of energy.
Basically, it integrate, of course, the all, the original existing energies into the building, electricity and gas, along with green energy production here, which is linked to geothermal energy coming from the groundwater. Behind the system, there is a brain, the digital monitoring system, that allows all the flexibility. It's a very great system that enable all the flexibility and is driven by demand. On top of that, we have all the operators that are critical to the efficiency of the system. So in 2023, we saved 10,000 tons of CO2 emissions, and we are managing now the system with more than 50% of renewable energy plus waste heat. Currently, we have connected 600,000 square meters to 25 km of pipes, and we are on track to double this capacity by 2028.
Okay, that was a very impressive level of description. I almost understood everything. Thank you, Jean-François. What I'm getting is that this is really the best-in-class energy mix that Veolia offers today. Is there any chance that you can replicate this elsewhere? What's the potential for growth?
So the potential for the 5G DHC is very promising. First, we need a cluster of building, which is not unique, obviously, and we identified many potential in France already. Plus, there is a perfect match between 5G DHC with local green production of energy. And third, we have now, more and more, with Hubgrade, our digital system, which is more and more collaborative between the buildings. So in a nutshell, a 5G DHC is a way to have more collaboration between the buildings. It will be a game changer in terms of energy efficiency.
Merci, Jean-François. Thank you for being with us this morning.
Thank you.
Last but not least, Claude, I'm going to hand over to you once more. Veolia offers energy efficiency services for buildings and industries. I'll let you develop.
Yes, the last energy segment is energy services to buildings and industries, as you just said, and the main geographies for Veolia are Italy, Spain, Benelux, and the Middle East. For building energy services, the key drivers for growth are energy savings and higher energy prices that are pushing our customers to seek to reduce their energy bills. The business model is really a service one, where we don't own the assets, and we supply heat or cold for tertiary buildings or hospitals. We operate assets with few investments. The typical duration of our contract is five to eight years, but can be longer, like 20 years, in case of public-private partnerships, when we have upgrade investment as a start.
In this business, we don't take the commodity risk at the energy, as we sell or the energy to a customer that we sell is fully pass-through. The typical offer we make is a 15%-20% energy savings that also help our customers to reduce their carbon footprint. For example, we operate a lot of shopping malls and airport in the Middle East, and also many hospitals in Italy. We have put a lot of digital into this business with real-time monitoring and central management with our Hubgrade service center. Regarding energy services for industries, the key drivers is a production of local and renewable energy in order to help them reduce their exposure to coal or natural gas and ensure the competitiveness of their stream, of their steam and electricity supply.
This business is low capital intensive with a high ROCE, which is typical of a pure service business. Typical competitors are, for example, Getec or Dalkia. This business model has several growth drivers. The first one is decarbonization through energy efficiency. First, in buildings, it can represent up to 40%, and for industrial clients, up to 15%. With the increase in energy prices, we have also seen more demand for energy savings by our customers with limited CapEx investment. Key differentiators are really our operational excellence, with upgrade management now using AI, and our capacity to offer a wide range of solution using greening energy production capability from our different activities, as I explained in the first energy segment. Our ambition is to become number one in Europe and in the Middle East by 2030.
On this slide, you have a lot of innovative example of what Veolia can offer to industrial or tertiary clients. Let's take an example outside Europe, in Brazil. In November last year, we have commissioned a 160 MW biomass plant for Braskem, one of the largest chemical producers in Brazil, in order to give the, to this customer, visibility on steam price in the long run, and to massively decarbonize the site production by more than 90%. It represents the equivalent of almost 150,000 tons of CO₂ reduction. It is typical, again, of value creation for the customer and for the planet. It guarantees a power price on one side, and it reduces the carbon footprint on the other side. Hélie , I guess, it's time also to go back to the field.
Indeed, we head to Dubai for the final live of this morning to illustrate this energy efficiency solution with Renaud Capris, CEO of Enova by Veolia. Hello, Renaud, can you hear us?
Yes, I can hear you. Hello.
Perfect.
Morning.
Good morning to you. You are with us to talk about a joint venture with a local hospitality leader. Tell us more.
Yes. So, Enova is a joint venture established in 2002 between Veolia and Majid Al Futtaim. Majid Al Futtaim is an [audio distortion] company, leader in this market. They own and operate shopping malls, hotels, retail, and are by far the leader in the region, established in 1992. Those principles at that time was to join the forces for best in class in energy efficiency and environment. It was simple, so in 2002, Enova was just providing services, Majid Al Futtaim. Now, we have also expanded our services out of Majid Al Futtaim portfolio. We are all over the region, GCC region, Egypt, and Turkey. We serve more than 400 clients with 6,000 engineers and technicians. So we partner as Veolia Corp, so that portfolio of people as well. And our core business is energy efficiency.
Right. I don't... You're not hearing properly? Yeah, right. I was about to give you the indication that he's talking about a JV with Majid Al Futtaim, in case you hadn't heard it properly. We have a little bit of technical problems with you, Renaud. I don't know if, be it on our end or your end, we can try and work a little bit on the sound, but let's continue this discussion. Practically, can you tell us, Renaud, what exactly is the solution that is offered by Enova?
Can you hear me better now?
I think we hear you a little bit better. Please, go on.
Okay. Okay, I go on. So we are now in our Hubgrade monitoring center. So this is platform to monitor our clients. So let's say, let's speak about our business there. So we have both, we have two business. Either the client is keen to invest last year, energy consumption, 40%, for example. Then we deploy energy, retail energy, and then we implement energy conservation. This is one model. Second model is just to use our platform without investment, just using our digital solution, artificial intelligence and algorithm. So we connect with the sensor from client, we monitor, we continue to monitor parameters, adjust the setting on the permission Hubgrade, and in that case, we are able to review by 10% without doing. But we call the Hubgrade at this time.
Renaud, I really apologize, but we hear you. We're hearing you with a lot of difficulty, so I'm gonna suggest that we stop here. I'm really sorry, 'cause I know that you made yourself available for us. Perhaps we can reconnect with you by phone. Have a look over there, the technical team, see if there's any way that we can join him on the phone, maybe a little bit later on, so we can hear you properly. It makes no sense if we're talking to you and we can't hear the explanations that you're giving us. So again, apologies, and we hope to be with you again later on this morning, Renaud. Right.
I hope that these real-world examples of Veolia's impact in the energy sector spoke to you nonetheless, even for the examples that you didn't hear completely correctly. Estelle, so now we have a better understanding globally of the energy market. You've presented your solutions. Perhaps you can tell us about your ambitions?
Before that, you know, I guess it's a bit frustrating we haven't heard properly Renaud, because the second part of his presentation was an AI real-life example, how with AI, you can have a 5% reduction on top of already what we've done in terms of energy consumption. So that's the summary of it. Hopefully, we'll try to post the live on the internet, you know, like, the explanation, because I can tell you it's quite impressive. AI, real life, to help reducing the impact on the planet. I think that's, that's what it could be helpful for.
Talking about, about our ambition, and let me wrap up a little bit, a few of the key elements, you know, that we've seen this morning so far. First things first, Veolia is really positioned, and uniquely positioned, in a market which is local decarbonizing energy, which is a market of EUR 500 billion. So a very, very large one. I guess, from bioenergy, ancillary services, district heating and cooling network, through to energy efficiency of building and industries.
That's what we do. EUR 500 billion market, fast growing, and in a way, I'd rather to talk in gigawatt, as you understood, 400 GW of untapped reservoir here waiting to be tapped into. The customer demand is high through decarbonization and security of supply, including, you know, in a geopolitical context like the one we see. And Veolia is the perfect missing link between the centralized and the B2C, really in the middle, and uniquely placed because we can bundle together the various activities we have to offer a unique solution to our customer to tackle a lot of their challenges at the same time, and as Claude said, to kill two birds with just one stone. That's exactly what we do in Veolia, in this local decarbonizing energy.
Big ambition, +50% by the end of the decade of production of bioenergy, +50% of production of ancillary services capacity, so up to 8 GW and up to 3 GW. That's a very, very big acceleration compared to what we've done already. Acceleration, I said from the introduction, is a key word today. All that, I guess, wouldn't count if I was not ready to put our money where our mouth is. But I am. We are ready to put our money where our mouth is. We already invest around EUR 2 billion equivalent by the end of the decade, on the equivalent actual rate. I want—I'm ready to go from EUR 2 billion to EUR 4 billion by the end of the decade to grow this business.
So a really big acceleration of money from Veolia, ready to be deployed on all the best project, which could have the best impact, the more leverage. Why do I say leverage? Because when Veolia invests money, and as I said, sometimes you don't need specific investment, but sometimes you do. Actually, we usually have a lot of partners and co-investors ready and happy and knocking on our door to co-invest with us. So EUR 1 for Veolia can make another EUR 1, EUR 2, EUR 3 of investment. So we have a larger impact than only the money we put, because our unique positioning is really the value added we bring, the, the project we build together to tap into this untapped reservoir. That's our value added.
So very big ambition, very big acceleration, and I guess a very big impact altogether for our customer, for the planet, as well as for the security of supply, and the strategic autonomy. So each time I'm like, you know, "How is it possible that we're not going faster?" And we are, in Veolia, going faster into tapping into this resource. It's a great one, ticking a lot of boxes. Again, green, affordable and secure, because local. So really, really ticks a lot of boxes. Good ambition, ready to put money, and put our money where our mouth is. And you know what? We could even do more. We could even do more if... If what? And I'm always asked the question, okay: What would be if we were to not only go from here to here, but to there?
Actually, the answer is alignment of stars and unlock the potential of the reservoir. And unlock, because you have a lot of locks, so a lot of blockage already, and you've understood that the procedure to get the authorization and the pace is really the critical one. So in a way, I'm showing to you this reservoir and saying, "You know what? Let's mobilize to go quicker and to tap into that." 30% in Europe of the imported fossil fuel could be replaced by this reservoir we have just here. So let's go quicker, and let's fight, in a way, together. Let's mobilize, would be a better word, to have this authorization delay to go quicker, so we can even aim higher into this reservoir. Thank you very much.
Thank you so much, Estelle. Thank you. Yes, I think we can give her some applause for her energy and her implication. We are going to have a specific region, regional focus w ith Gavin Graveson, who is Senior Executive VP for Veolia Northern Europe. Before we invite you on stage, Gavin, perhaps you can tell us, Estelle, why you chose London for this deep dive? We haven't brushed the topic, actually.
Yeah, a few people have asked me, you know, over the last few minutes, you know, "Why London after all, Estelle?" I guess, you know, to answer to that one, maybe it's a little bit close to my heart, London, it's fair to say. Always a pleasure to be in this wonderful city. But actually, in a way, that was a way to show you energy in a business which is not necessarily known as the largest energy business we have in Veolia. You know, we are very good in waste, typically in the U.K. We are number one, by far, of the waste market and recycling and so on and so forth. But in a business unit like that one, you will see from now until this afternoon that we do a lot of energy.
Energy from the non-recyclable waste, energy from wastewater, energy from solar panel on landfill, energy from, flexibility and all the rest of it, even district heating. So I guess, that was a way to show in real life the synergies between our various business in a location like that one.
That's very clear. Thank you so much. Come and have a seat, Estelle. Gavin, I hand over the microphone to you.
Well, good morning, ladies and gentlemen, and thank you, Estelle. And I'm glad you've come to London, 'cause the market is changing. What the government has seen, they've issued their energy security strategy. It's important what they see. We need to move away now to 95% of our electricity generated by low carbon, but also secure, stop importing, and it suits us. That's what we do. So we're in that, and that is by 2030. That's quick, that's fast. That's a lot of changes for us, and it's good. But also, our biggest emitters on our heat, 'cause we have historically here, gas boilers, small gas boilers, is our biggest emitter of CO2. So again, the strategy is about increasing district heating from 3%-20%.
So we have good leads, we have good passion there, where it's decentralized, low carbon electricity, changing our heat network, electrification of our fleet and moving forward. So what we do, we've already started to do that today, and I'll show what our ambition is, where the government, like has given us EUR 25 million funding to help us. It shows where we're changing away from an old business to a new. But let me show you some examples. So we do, as Claude mentioned before, take waste, non-recyclable, and we burn it. We burn 2.4 million tons, but we also generate 1.4 TWh, seven days a week, every week of the year. And our energy team here, dedicated, sell that on the market in an advanced three-year strategy.
So we understand what's gonna happen and maximize that to have the ability to provide a consistent and proper low-carbon electricity there. But when we do that, our old landfill business is declining, and we realized that, and we knew that. But as the landfills close, they are great asset base, and what we're doing now is converting them to solar farms. We've just opened, in the south, the third largest solar farm in the UK, on one of our landfills. And this landfill is still open, so when it closes, we'll have more capacity to do that. So we see using our assets to change the market and deliver those solutions our clients want. So whether it's doing energy from waste, solar on our landfills.
But when I go to waste treatment, water treatment, we see one plant here, and we used to import power to manage the water treatment. We realized, by using our in-house expertise at energy efficiency, we could reduce that demand. But also, by using our biogas team, we could produce more biogas by treating the sludges better and agitating them. So from being an importer, we now export power from this site. So it's changed. The locals understand now this is a power generation from the sewer sludge. So it's all about, from our clients, not just maximizing low carbon, but also minimizing and helping them through that journey. Whether it's virtual power plants we learn or flexibility we learn from our colleagues in Northern Europe, but also government is a target to decarbonize the fleets.
So in London, we run 100 electric vehicles, and hopefully, you'll come this afternoon to see them, our biggest site. Well, we have 54 vehicles running out of there, low noise, low emissions. But it's not just that, they are fed from the waste they collect. So the waste they collect goes to one of our energy from waste plants, where we burn it, create heat and power. We put a private wire in there, and we charge these vehicles. And we do the charging ourselves, 'cause the management of the batteries is key, and they go out every day. But what we found out, they came back, and they had so much power left in them. And we're now the first in the world to do this, depower them at 4:00 P.M. till 6:00 P.M. So the grid has peak demands.
Industry is still going at 4:00 P.M., homes are gearing up to 6:00 P.M. So the peak there. So what we've done now is connected the vehicles back into the grid and taken the power out of them. One vehicle will look after 100 homes at that peak demand between 4:00 P.M. and 6:00 P.M., and therefore, we discharge back into the grid, then charge at night when there's lower demand and the pricing is cheaper. So the clients see us being able to use their waste to power their vehicles, but add value back at the right flexibility as the market is changing... And when we come to that, the heat network, we have three heat networks today, a EUR 25 million fund. We're gonna start digging up London again, unfortunately, and putting another 3,000 homes connected to it.
And the demand is there, whether it's public buildings or industry, they see the benefits of the district heating network, the CO2 reduction, we're going to do that. And the demand is constant, and it's increasing because people want security, they want district heating. And we've seen that where we have a scheme in Sheffield our oldest . The demand was maximized out. We had as much as we could handle, and we realized we had to improve. So we put and we learned. We put some AI technology in, and we looked at the history because this is 50 km of pipes underground, and it's going there. You can't change it in 10 minutes, not like electric heater, you have to predict. So we looked at the demand in the past. We looked at the weather, tied into the weather forecast.
We looked at what's going on in the universities, when the working and the classes are, and we can see the peak in demand. And what we didn't want to do is push heat to clients who didn't need it. By the ability of doing that and changing the flows, because with 50 km, you cannot change it, you have to change it the night before and get ready for the demand in the morning, the peak demands. So it's, the balance is changing. A lot more peaks, and that's why we try and maximize it at the right times and work with the clients to save CO2 but also have the ability to connect to more properties at those demands. The peak in the morning, 6 till 10, then it goes quiet, sometimes 4 till 8.
So we manage that with the clients, the weather forecast and what they need. But also on industry. Some in industry have seen the vision, and this one site here, the developer has developed 155 acres, brand-new greenfield site, just for food and beverage manufacturing. And what they've asked us to do, and we have done, we've put in there a whole connected, low-carbon, heat and cooling network. So you're in the food and beverage, you come to this brand-new site. We provide the heating when you process and make the food. We also provide the refrigeration for them. So they see it connected on this site, future-proofed, saving 30,000 tons of CO2. So people are seeing the advance and the changes, how we have to invest, and it's what we like to do with our clients: local, decentralized heat, cooling, and a vision.
But when we come to energy efficiency, so we try and obviously maximize our power. We also try to educate and help our clients. We also try to reduce it. So we have a lot of hospitals here that need work on, and the government are funding that. We're working on seven major hospitals at the moment. I'll concentrate on one in Eastbourne. So the easy thing is reclad the building, put new double glazing in, new lighting, and this, we did this with a hospital that's full. You know, it's still operating, but also what they wanted to do is reduce CO2. So we put air heat pumps in, water heat pumps in, but where they park the cars, we put a 1,000 MW solar car park above the cars. You drive your cars in now, there's solar panels above.
This is saving the client GBP 200,000 per year. It's saving them 23,000 tons of CO2. It's making it local. It's using their asset to insulate, advance it, but using the power of the sun and the heat to help them on that journey. And they understand that, and that's why we're accelerating on our decarbonization of the hospitals. But that is a summary of where we are, of working with our clients on all aspects. So the market has changed. They need to go to this 95% low energy, low carbon electricity. They need to expand the district heating. So whether it's industry, public buildings, we work with them. On the transportation side, we advance on that side and hopefully have time to come and see that actually working today. Thank you very much for your time.
Thank you, Gavin. Please join us. Come and have a seat with us. Full transparency, we have been debating whether we go back to Dubai or not, and we have chosen not to, just in case we have the same technical difficulties, but they will be preparing a detailed video that's gonna be available shortly for you on the Veolia website. Right. We are going to be opening to your questions in just a little bit. You know the drill, very simple. You raise your hand in the room, we bring a microphone over to you. I'd just like to give the indication to those of you who are following us remotely online, that you are also invited to send over your questions.
Just check for the Q&A tab that is on the website, and I can see that some of you have already found it, so it's wonderful. Before we move on to the Q&A session and to place Veolia's strategy in the context of the broader context of the domestic market, perhaps to understand where we're heading to in the next two or three years in terms of regulations, among other themes. I'm going to welcome our guest speaker. Her name is Caroline Bragg. She is the I nterim CEO of the Association for Decentralized Energy. Hello and welcome.
Thank you so much, and good morning, everyone. I'd like to round off this morning's presentations with a little bit of a look at the domestic market here in the GB and what we can expect for the energy system and decarbonized energy in the next few years. First, I think let's take a step back and look at where we are today. There is no doubt that the approach that we've taken over the last few decades to energy in this country needs to change.
We are in a situation at the minute where the Electricity System Operator , the controlling mind of our electricity system, has gone from redispatching about 5% of our wholesale market and generation, to more up to about 65% at some points of the year at the moment. It is doing that with no end in sight if the current arrangements stay as they are, and without the tools that it needs to do that properly. The second thing that we have seen is the approach to network infrastructure, investment, and build-out is creating unintended consequences that both frustrate, where we need to be deploying faster with much more pace in the areas that we need it, particularly, for example, in the North Sea. But it's also creating vicious cycles of increasing demand and pressure on the application process in areas that we don't.
Finally, if we look to our buildings and our offices, we are in a situation at the minute where the markets we have for heat decarbonization and energy efficiency are not driving the rate and the pace of decarbonization that we need. That means over the last three years, we have paid over the odds during this time of crisis than we should have done, and it means that our climate change ambitions risk being frustrated, both at the end of the 2020s and into the 2030s. What's being done about it? The response that we are taking, both in terms of government and industry such as Veolia, is moving to a profoundly more regional system than we have at the moment, and we see that in terms of governance, infrastructure, and markets.
If we look first at governance, this year, we will have the introduction of a Future System Operator , and for the very first time, Regional Energy Strategic Planners and a significant role for local authorities in strategic energy planning. We will also have a dedicated market facilitator to bring forward local electricity markets. Let's look at infrastructure. We are also seeing the fragmentation of a homogenous national gas grid into much more regional approaches to heat decarbonization. We've talked a little bit about that already. The heat network market in the U.K. is planned to go from 2%-3% of where it is right now, to 20% by 2050.
An enormous increase in, in what we see so far, and we're seeing that elsewhere as well, in the hydrogen networks that we are building in the northeast and the northwest, as well as what we will do on electricity. And thirdly, let's talk about markets. In GB, we have some of the highest levels of contracted for and tendered local electricity flexibility anywhere in the world. More than that, we are already responding to the level of constraint that we see on our electricity system with new markets, and in particular, the local constraints markets that we see being trialed at the minute by the Electricity System Operator in Piclo, in the South of Scotland. Finally, we are in the process of an enormous overhaul in our electricity market arrangements.
Whether that's through the wholesale market, whether that's through local markets, or even network charges, there is absolutely no way that we can emerge into the new system that we need without markets that are far more specific to place than they are at the minute. So it all feels a bit of a change, but as we've seen today, the size of the potential in GB is enormous. We have a situation where we could be meeting 95 TWh, about 20% of domestic heating demand, if not more, through the vast reservoir that Estelle has already talked about. The U.K. government itself thinks that 90% of that 95 TWh could be met with domestic sources of heat, whether that's ambient heat, heat from industry, from data centers that we currently completely ignore.
More than that, if you look at the Electricity System Operator , we could be accessing up to 13 GW, purely from the latent flexibility that exist in the way that we are going to use energy at household, business, and industrial level. Thirdly, we know that industrial decarbonization is one of the biggest challenges that we face, not only in the energy sector, but more broadly for our climate change ambitions. The way in which we can look at dispersed sites and their local potential for decarbonization, means we can make a real dent in millions of tons of CO2. Finally, I just wanted to give a few remarks on what we do to not only continue the progress that we've made and that you've heard about today, but as we've talked about, how we accelerate that, how we go far further.
From my perspective, on industrial energy, we've seen huge steps forward, particularly with the first track clusters for hydrogen being announced. But we need a much bigger vision and one that takes into account what we can really do in dispersed sites and their local potential for decarbonization. Secondly, as we've talked about already, we've already seen connections reform. We are going to be connecting new generation quicker in the years to come, but that needs to go deeper, and it needs to think much more radically about what we are doing at the distribution side. And thirdly, we need an ongoing focus on industrial energy efficiency and highly efficient combined heat and power. On building decarbonization, as I've said, there is absolutely no way that the U.K. meets its Sixth Carbon Budget, in particular, in the early 2030s, without massively further strides in building decarbonization.
What we have seen over the last couple of months, which we very strongly welcome, is some of the regulations that will drive that progress in heat network zoning and in investment in heat decarbonization more broadly. But we need to make sure that we get the detail of that right, and it is driving investment from multinationals, from big GB players, into our cities and towns. Secondly, we need to go further and to move from commitments into implementation of the commitments that the government has already made, to make sure that investment in heat decarbonization is markedly more attractive for investment than investments in gas.
And finally, we need to keep going with the approach that we take to energy efficiency, towards much stronger markets, a stronger market signal at local level for the benefits that energy efficiency can bring to a decarbonized generation system. And then finally, if I may, to leave you with a kind of broader picture of where we need to get to. Flexibility needs to keep pace with the renewable generation deployment that we are planning over the next few decades. And the only way that we do that is that the new electricity system market arrangements we are putting in place now are really bold about unleashing markets for flexibility and reducing our reliance on gas.
Secondly, in all of this, the Future System Operator and its local offshoots are going to be sat in the center of a system that is far more strategically planned than the system that we have today. In its transformation from what it is today, the Electricity System Operator, to the Future System Operator, we need an organization that is fundamentally IT-led and is driving forward public accountability for the decisions that it makes. And finally, we've talked so much about networks and the infrastructure that we need for decarbonization. We need to be really bold about no longer thinking about networks in their silos, of hydrogen, of heat, of electricity, of gas. We need a system where companies such as Veolia can invest in networks that incentivize efficiency and resilience across them, so that we're pulling on our different network infrastructures for the benefit of the whole.
Finally, I think it would be remiss, particularly in GB, not to think, as we close today, about the stakes that are involved in this. We've seen over the last three years, the vulnerability of our current system and the consequences of a lack of ambition in the next decade. The stakes could not be higher to move towards a domestic, unflinchingly efficient and smart use of domestic sources of heat. Thank you very much.
Thank you so much, Caroline Bragg, our guest speaker today. Right, we now open the floor to your questions. Perhaps we can start by a question right here. We'll get to you right after this question. I see your hand raised. Go ahead.
Hello, good morning. Alexandre Roncier, Bank of America. A question maybe broadly on targets, and maybe we need to wait a few weeks for that. But do you have ambition about top line, some growth? You need to outpace the industry. And, and equally, I mean, it's a big market. You've got big ambitions. Can we talk perhaps a little bit about margin? Do you think you're going out there to grab market share? Do you think you're gonna have expansion in terms of, of margin? And perhaps more, I would say broadly, I mean, we saw a lot of pipes in Saclay. So can you talk perhaps about capital intensity for those businesses? Are you still gonna have a capital light approach? Are you gonna keep ownership, of your assets? And what does that mean in terms of contract renewals, and such? Thank you.
I will start, and maybe, Claude, you will complement.
Right.
I guess, top line growth, yes, we are, we're ambitioning top line growth. Basically, we're talking here +50% by the end of the decade. Roughly, we're talking high single-digit type of growth. Of course, with ups and minuses, depending on the years, excluding the energy price, because, as you know, it's, it's pass through. So in a way, that's exactly the reason why we don't set ourselves an objective in turnover, because if the energy price is up or down, it doesn't change the dynamic for us in terms of margin. And in a way, I care more about the number of gigawatts we will deploy, rather than just the revenue, which can be up and down, depending on the energy price. That's just to give you an idea.
Second thing is, are we here to grab market share and sacrifice our margin? The answer is no. We want both, and we will have both, as we've demonstrated in the past. That's something super important. I would say margin and ROCE are critical, so it's really the two together. So it's profitable and good return growth that we're looking for, and I would say not only looking for, but we have already in this portfolio, as we've shown today. But maybe, Claude, you want to expand?
In capital intensity, to further discuss with you, Alexandre, and answer your question, you know that Estelle explained that we are ready to invest more, but we will keep our discipline in terms of internal rate of return. As I explained, we are ready to invest in very good projects, and we have very good projects on the financial side and on the carbon reduction side as well. So it's really the combination of the two. We have also different business models. Some are more capital intensive, some are less capital intensive because they are services, and we can also, as explained, said, leverage the money of partners.
This is what we have done, for example, in a couple of projects in France, where we are combine the project, we have developed the project, and we have found financial partners, and we keep, in fact, the operation of the facility. And by leveraging, leveraging this, we can, the, I would say, put, develop more project with the same amount of money every year.
If we want to elaborate on what Claude said, basically, on the three sub-segments we've discussed, the first and the latter are lower capital-intensive. The network one is a bit more, but Claude showed you some figures of real example in the last three or four years in Braunschweig, in Prerov, in Budapest, and in Prague, where all of them, the IRR was above 10%. So I think that's a demonstration by example of even the higher intensity one, we can create value, and we are.
Figures that are all available in the booklets that you've been distributed, so, grab one if you haven't had one yet. Thank you so much, Estelle and Claude. Let's see if we can take an online question before we come back to the room. I still see you, and I'm getting to you right after this question. Try and distribute the questions a little bit. What is the overall impact of high energy prices? Did you benefit from these high energy prices at all? If so, what do you expect for 2024?
Interesting question. I guess, as I said, energy prices are basically pass-through for the regulator, so no impact on our margin. So they're up, they're down. In a way, we manage. There is a little bit of lag effect at times on tariff, as we explain every quarter on our release of results. I guess over the mid- to long-term, of course, the higher the energy price, the more there is demand for our service, which is energy efficiency and saving energy. So in a way, over the mid- to long-term, it helps. But don't forget that there is another trend, which is decarbonization. So it's not only saving energy because I want to reduce my bill, but because I have to get to less carbon, and there is a double push to our service here.
And shall I say, in a way, we could have a look at the energy price, including CO2 pricing, which in Europe exists and is around EUR 90 per ton. So that's what makes some return on project for our customers to come and see us. So I guess, short term, no impact, roughly. Mid long term, a positive one altogether, because there is more demand for our service in the combined energy and CO2 together price.
Thank you so much, Estelle. Right. Hold on. I will get to all of you. But first, thank you for your patience, sir. Let's have your question, please.
Hi, this is Ahmed from Jefferies. I've got sort of three questions. Just firstly, could you give us some context of the historical track record of the three divisions? So in terms of historical revenue growth, EBITDA growth, you know, what's, what's been achieved organically over the last couple of years. Then secondly, if I just sort of go through sort of your bioenergy and just, if you could just help unpack that a little bit more. So to go to 3 GW, or sorry to go to 8 GW, what sort of CapEx would that require? What sort of, sort of, is the construction time around that? And, you know, how do you source the revenue? Is there a, sort of a payback period do you have in mind, and, and the long-term offtake contracts match that payback period?
Then my final question is actually on the district heating network. Again, the similar sort of question: What is going to number one position in district heating networks means? Is that sort of more customers? Is it more infrastructure? And again, a time period of where that opportunity is. Thank you.
Thank you for your question.
So thank you very much. Altogether, the three different. I wouldn't call them division, I call them sub-segment, but anyhow, the three of them individually do grow. Altogether, the fastest growing are, I would say, probably the bioenergy as well as the energy efficiency. But we've seen reconnection and very growth in the district heating since the war in Ukraine. So in a way, it's difficult to answer in general terms to your question, because it was a slower-growing market, and now it's a faster-growing market, because security of supply has become more paramount in the last two years compared to what it was, as well as security of price over the midterm. Altogether, 5%, CAGR, so growth per year, which is higher than the average of the group. EBITDA, you have them on the slide.
In terms of how to think of bioenergy business plan in a way, which I'm trying to get to your question. Each project is very different, sorry to say that, because the first thing to say, it's usually a by-product. Typically, when you use a wastewater treatment plant to produce biogas, you know, the CapEx increase to put the biogas and the utilization units is limited. Of course, if you had to build the overall wastewater treatment plant, it will be higher. So how do you isolate one for the other, it's at times a little bit difficult because it's built on existing asset we've got. So it's not necessarily a high CapEx, because in a way, the big, the big chunk, the wastewater treatment plant, in my example, is already built, so it doesn't need to be built again.
Same applies with landfill, same applies with energy from waste. So in a way, it's usually an additional CapEx to increase the efficiency and to produce more or to connect to the grid. It's the type of CapEx we're thinking about. Hence my comment on the fact that it was relatively low intensity in CapEx for this type of business model. But again, it's an add-on, built on together with other stuff. Construction time. I'm happy you're asking the question. Too long. That's exactly my call to action or call to fight for momentum in my last remark, in my closing remarks. 4 years to get to put solar panel on a closed landfill. It's 3 years and a half too much for me. And I'm not talking about, you know, changing regulation. A lot of things have to be checked, and this is perfectly normal.
But just to give you an example, we cannot ask to have the connection to the grid in France before we have the planning and the permit. We cannot do the two in parallel. We have to do them one after the other. Actually, I think in the U.K., it's the opposite way around. You cannot get the planning and the permit before you have the authorization of the connection to the grid. Don't know what's worse. But two together are crazy because it means that instead of having everything and having a one single port of entry of all the authorization, and you know what, guys? Try to be quick. We are into sequences and checking boxes and so on and so forth.
I must say, it drives me nuts at times when I compare everything, and honestly, I'm usually asked, "Which is the worst or the best countries in Europe?" We are all not very good, I must say. It's years, the answer. Guess where I'm heading? In the U.S., with the IRA, we are talking months to get the yes, I will get money. I think it's three months to get the yes, you will get support from the government, and in the fourth month, you even have the cash in the bank. So in a way, we have a wonderful, untapped potential under our feet today. We need momentum, we need pace. And it's not like to scrap legislation, it's just to have pace into streamlining all that and be quick, and time is of the essence. I'm absolutely convinced by that.
But you have to... In a way, it's a call for action for all of us in this room, if we're all convinced by that. And I can tell you, I'm constantly keeping the fight, but I'm convinced, and maybe you can convince yourself, around you, I'm sure. District heating, how do we grow district heating, roughly? So, Claude explained it earlier on, but you have a few, a few things which combine, do the growth of the district heating. One is connection to existing district heating. And the people, they look at the difference between the cost or the price of getting your electricity and your heat from the centralized source or from the district heating.
We've seen the last two years, many, many connections, new connections to existing district heating in Europe since the war in Ukraine, let's be honest. Because people realize that, you know what? It goes like that, and suddenly it goes through the roof. Versus district heating, you're secured for 10-15 years. You exactly know what your tariff is gonna be like, which is saving and security. So connection to the grid is the first driver. The second one is extension of the grid, of the network. As in, you know, new buildings, new hospitals, whatever, which you go a little bit of another further mile, and you will see that this afternoon, I think, you know, in a layman way. So when progressively you expand the network, that's another one.
Then you have a third trend, which is privatization. District heating in Europe is 75%, basically, publicly owned, 25% privately owned and operated. It happens that, I guess, the operational performance are exactly the same, not the same, when you talk about Veolia, and we talk about other players. 90% of efficiency of the network in Warsaw is like, wow! The average, I think, is more 72% or 73%, something like that. So we have a leakage, if you want, of heat of a quarter.
So in a way, efficiency in just the way you manage network is a big driver because it's energy savings and money savings, so it's a big driver for growth. So it's the three combined, and at times, you can buy network as well. But again, you know, you have a lot of sources of growth in this business. Sorry, it was a long answer, but three questions in one.
Absolutely. Perhaps we can continue with this question, which is a little bit of an extension to this, coming from online: Do you intend to grow your energy business outside of Europe?
Yes, is the answer, and we are already outside Europe, and with opportunities. Claude mentioned Braskem, for instance, so in South America, we are very much more on the industrial energy part in South America. We are already number one in the energy efficiency in the Middle East. So Enova , you know, example that we've seen, super-fast growing. In Asia, we operate the first district cooling microgrid cooling system in Hong Kong for the last, I don't know, six months to a year or something like that?
Claude, you may remember as well. We have university campuses type of activities in the U.S., so we already are present, and of course, we will develop where our services are needed. Where is it? When you have an intention of being decarbonizing, be more local, and where we can make a difference. Plus, we want to be big when you play. I said, always being the top three in a market is really paramount for us, because it drives then pricing power and the ability to be selecting, to be selective, in our tender, which is something very, very key to drive margins in the end, and not just revenue. Thank you for this answer. Shall we take your question right here, please? And then who else had raised their hand? Here, here, here, and there. Thank you.
Hello, Tancrède Fulop from Morningstar. Thank you for the presentation. I have two questions. The first one, you said before that, 15% of the group's turnover can be seen as cyclical. Could you give us the figure for the energy business, and maybe for the three sub-segments?
And the second question for the networks. I think it's not a regulated asset base model, so you must have some volume exposure. And if you could shed some color on this volume exposure, and if global warming and warmer winter is a risk for this business. Thank you.
So we'll start, but I'm sure Claude will have a lot of. So we didn't say 15%, we said the opposite way around, which is 85% is immune to macro. But it gets to the same answer, but I think it's important. On the 15%, I don't have the precise answer on top of my head, but let me-
Please.
Give you a qualitative answer. Roughly, the district heating, which is the 54% of it, is totally immune. As Claude said earlier in the day, it's an essential service, so whatever happens, you always need to heat your home. You can have a little bit of a half a degree less, if you cannot afford it, blah, blah, blah, which we've seen, and we not even have seen it, but we've implemented, because, you know, energy efficiency goes as well into reducing the consumption individually. So essential service, no exposure to macro or whatever. On the energy efficiency of buildings and industries, so the EUR 3.something billion, I would say the building ones is mainly malls as well as more NHS in the U.K., so hospitals, very immune, really.
The little bit which is less will be the industrial part of that bit, which is limited because it's EUR 750 million out of the EUR 3 billion, so it's limited. And within that, you have industries which are very resilient, say pharma, just to give an example, and some which are a bit less, say, automotive. So it's very limited, even within this spot. So that's the general answer, and maybe Claude has more, but very limited exposure would be the answer. Volume exposure, that's an interesting one. Volume exposure is mainly linked to weather, you're right. And we have ups and downs in weather. But people don't talk about global warming. They talk about, c limate change. Sorry.
Suddenly, my French word were coming to me. Climate change, because it's not only warm on average. Yes, it is, but it's colder and warmer, but not at the time you intend it to be. In a way, it's what, - 1 or 2 degrees in London today. It was - 20 in Scandinavia. It doesn't mean that climate change is not happening. It means that it's not just warming every single day. You know, the peaks and the minuses are more extreme. So there is no direct impact, therefore, on climate change on the volume, but there will be plus and minuses depending on the season. So that's why we usually isolate it in our figures to say, "Okay, the heating season was very cold or not very cold." That's pretty much it. But maybe you want to expand?
The way it's working with the regulation on district heating, we have a discussion with the regulator on how much we will produce for the next winter. And as I said, the price I set are set with a projection of which is of course specific projection of the next winter, and this this is what is really basing the tariff. So in terms of volumes and what you're talking about, there is no volume exposure. After, we have the risk of the climate of the year. This is the exposure of Veolia. It can be colder and can be warmer for the winter. This is a real exposure on a yearly basis. And this is the way the discussion are handled with our regulator.
Also what is interesting, they have benchmarks, and they look at the benchmarks, and in all the countries we are operating, we are always best-in-class. Which is very important to set the tariff for the next heating season, as you all can understand. Okay.
Thank you so much, Claude, and I'm negotiating for us to take as many questions as possible. Ma'am, perhaps we could hand you the microphone.
Janet Wood from New Power Reports, and also a member of Scottish Power Networks' Independent Net Zero Advisory Council. It's about delivery in the U.K., so maybe it's specifically for Gavin. As we heard from Caroline, we're seeing a new framework set up in the U.K. now for local delivery with regional energy system planners, local energy plans, and distribution system operators in the electricity networks. Is that framework gonna work for a company like Veolia to bring forward these things into delivery? That framework is being set up now, so what would be on your wish list for those organizations as regards their scope, their powers, and so on?
Well, I think, I think the local framework suits us 'cause we're more local and more decentralized. I think it's just really consistency between them all. There's a tendency to be separate and go different ways. We look at a national picture, I think we would like some consistency on that. On the local, the ability maybe to help us deliver quicker, connect quicker, and balance with the flexibility as well. I think it's, we're gonna watch that very closely to see how it develops, but I think it's a slight... Yeah, we, at the moment we see it as a positive coming, 'cause I think we'll be able to react quicker and work with them. We just want it to be, in certain respects, local, but also consistency across the U.K. in all aspects.
But I do understand you have the ability to do your wish list, Gavin, if you want to be more precise with this-
Well, I think-
Later on.
That may be my wish list, is that we welcome it, yes. And the dialogue and debate happening is about, is that can we react to it quickly? Yes. But can we have consistency between the different areas, so it isn't... 'Cause we border across different sectors, and I think that's where the only concern we have.
Right. I've been told that we can take two more questions. Perhaps we take a question from here, and then we'll take your question afterwards. Right. While you're moving on to that side of the room, you're going to hate me for this, it's gonna be three extra questions. I'm gonna take one from online. Okay.
Yes, there's no time.
Yeah?
Yeah.
You have the microphone with you? Okay, you won on that one. Go on.
Rhodri Morgan from City A.M. You've been talking about, obviously, how much you wanna be moving at pace with this strategy and aggressive with it. To what extent does that factor into M&A strategy moving forward? And possibly the rationale for how it fits into that as well, either for or against.
M&A can play a role, but we don't need M&A, as in we have organic growth potential, would be the headline of my answer. So typically, when I said, we have, we are ready to invest EUR 2 billion more by the end of the decade, so from 2 to 4, it includes CapEx, and it includes M&A. So it's really potentially both or one and the other. We are already doing a few tuck-i ns in the energy. We've acquired, for instance, at,
Low multiple
... a good multiple, biogas from wasted organic waste, I guess, in Germany, in the last few months. So we're talking a few dozen million EUR of investment in M&A. We are already doing this size, but it can increase the pace to go for M&A, but we don't need it, as in we already have a lot of projects on organic growth. So it's probably gonna be a combination of the two.
Yes, and if I may add something you have seen that we have done on M&A, the track record of Veolia is very good. I was talking about Prague and Budapest, because when we did the business plan, we looked at the project, and we knew that we could provide a lot of value. So it's also looking at opportunities one by one, and see where we can add value. And when we can add value, because it can be synergies with the other business, or it can be operational efficiencies, whatever, then we can go and move on M&A. So it's, you know, it's really this. So we don't do M&A just to do M&A. We know- We do M&A where we see an opportunity where we can bring a lot of value.
I guess to expand on what you said, still keep a lot of rigor in our investment, because an investment, meaning CapEx or M&A, the two, it's exactly the same rule, at least IRR of WACC +4%, and we have other criteria. But, this one is quite central.
Thank you. All right. I'm sorry, I had already attributed the next question. Do you forgive me? Ma'am, we're listening.
Hi. Véronique Dupont, Agence France-Presse. Two questions about the incineration of non-recyclable. There's a general effort to reduce waste, so how can this activity be sustainable over the long term if there's eventually less waste to burn? And second, it's still incineration, so even if you don't burn, if you don't incinerate the waste, and the fossil fuel is still high, CO2 emitting, so how to decarbonize this? Do you plan on capturing the CO2?
Good question. I guess, waste reduction, and I would say even recycling, and even eco-design, so everything which we are promoting and we are doing, decreases, of course, and it's very good news, what needs to be, potentially, recovered in another way, as in energy. But if you look at, the two go alongside, and I would give the example of Scandinavia, which to me is quite, you know, the paramount example of what you do kind of best in the waste sector. And you almost have no landfill anymore. But for the rest, you have half basically energy production from what's not recyclable, and the other half been recyclable. So we still have room for maneuver, for more recycling and more reduction of waste.
Even when you do that, you still have a place for energy recovery out of it. It's typically when I say non-recyclable or non-recyclable by being positive in terms of impact, because at times you could recycle, but it could consume more energy to recycle than the energy you save by recycling it, in a way, or the CO2 you save by recycling it.
So, I guess the big effort, in my opinion, should go into eco-design, to try to avoid being in a situation where things are so difficult to recycle, that you have to consume a lot of CO2 to get to have the various, you know, layers of some packaging to be removed and peeled one by one, which is the reality of a lot of things you find in your grocery—in your department store. So it really goes alongside. So we still have a lot of potential for energy recovery out of non-recyclable waste, and it's probably less so in the landfill business, in a way, just to my point. Incineration and CO2. Yes and no, as in basically in the waste, it goes into an energy from waste.
You have 60%, which is coming from organic type of content, and 40%, which is not, which means that the 60% emits what we call biogenic CO2. So I don't want to become too technical here, but the biogenic CO2, so the 60%, is neutral, global warming-wise. So in a way, you have 60%, which is good, and 40%, which is, yes, with CO2, again, a bad CO2. It's a bit like cholesterol, sorry for my metaphor, which is a stupid one. You have the good and the bad one. It's. The same applies to CO2. You have the good CO2, which is the biogenic, which is, in a way, accelerating the natural cycle of trees emitting CO2 and then coming back. And then you have the bad CO2, which is the fossil fuel one, typically.
So that's why energy from waste is better CO2-wise than burning fossil fuel. Trying to be, but I would be happy after that, too, if you want to have a little bit of deep dive into that.
If it's immediately understandable, then I think it's a good metaphor. Okay, we're gonna take one final question, and then, unfortunately, we'll have to wrap up. But as Estelle has just noted, we're going to have a lunch break, and you can continue the discussion there. Sir?
Yeah. Thank you for taking my questions. Maybe on the energy efficiency business, because you were saying that you sell energy in that business, I was wondering if you have any volume commitment. Is there any risk that if, for example, you produce less, you would have to buy energy on the market at high prices?
The follow-up, just on the bioenergy part, you were talking about 8 GW and 3 GW by 2030. Just want to know if these two are cumulative, so if it's 8 GW + 3 GW, and how much of that has already been secured, and if we should expect a bit of that to grow in line with the increase in capacity? Thank you.
Energy efficiency, no exposure to what you said, basically.
No.
So it doesn't happen. So we buy the energy on behalf of the customer, and we have a type of penalty or incentive to deliver savings of energy, but we are not in a situation like you said. So contracts are very protective for us. The 8 GW to 3 GW are cumulative, so it's 8 GW of bioenergy + 3 GW of flexibility o n the market. In a way, you cannot add them up. It's really a different type of pocket of industry. And you know, you can make the max with the type of margin we already do. As I said, you know, we're not here to grow and sacrifice the margin. So yes, it will grow the business and the bottom line as well. But maybe, Claude, you want to-
Yes, and what we see, we see a high demand and, yes, a large fraction of that is secured. We have projects, but as Estelle explained, the project, they will take some time to get developed. So some of them, they are now, and they are really, I would say, starting into commissioning, and some of them, they will come later. For example, when we are talking about the capacity of what we can install in landfills in France, that will take time to answer. The pipeline is secured, but the time to develop, we'll have to wait a little bit, Arthur, in order to see that in the P&L of Veolia.
So in a way t he 8s and the 3, there is a list of projects behind which are located in various geographies across the globe, from the Middle East to Australia. We have a few in the U.S., we have in Europe, so it's a sum of existing projects already identified and therefore secured, and I'm sure about. Why not earlier than 2030? Because of the procedures.
Thank you.
Right. Ladies and gentlemen, I'd like to thank you for your attention this morning. If I'm not mistaken, Estelle, Claude, Gavin, you remain available-
Yes, exactly.
to talk with our audience during the upcoming lunch break. It's a lunch buffet and refreshments. I hope you enjoy it. And of course, do remember that we are hoping that you'll join us this afternoon to visit Landmann Way to see the solutions, experiment them, not just hear about them. Thank you so much.