theCUBE + NYSE Wired: Powering Tomorrow | Gordon Bennett, ICE

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More from theCUBE + NYSE Wired: Powering Tomorrow

play_circle_outline ICE Marketplace and Hedging Amid Volatility, Physical Constraints, Renewables' Intermittency, and Geopolitical Gas Shocks

play_circle_outline US Energy Independence vs Europe’s Import Reliance: Grid Rewiring, Long-Term Capital and Hedging Challenges

play_circle_outline Changing customer profile: big tech and data centers increasingly hedging electricity costs.

play_circle_outline ICE as data and technology business: machine-readable data and analytics for clients.

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Gordon Bennett, ICE

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(INTRO)

Gemma Allen

>> Studio here at the New York Stock Exchange. I'm Gemma Allen, co-host of NYSE Wired's Powering Tomorrow. And right now we're going to talk about how AI might be the technology story of the decade and certainly this year. But underneath it is a very old problem, and that is power. Data centers need more of it. Grids are under pressure and the economics of energy are changing incredibly fast. ICE sits right in the middle of that market, and Gordon Bennett is helping the companies that produce, buy, and trade energy manage that risk. Gordon, welcome to NYSE Wired.

Gordon Bennett

>> Thanks. Thanks very much for having me.

Gemma Allen

>> So let's start with an easy question.

Gordon Bennett

>> Yes.

Gemma Allen

>> Are we entering a moment where electricity might be the most important commodity on this planet?

Gordon Bennett

>> Well, we're certainly entering a moment where electricity is top of everyone's mind, right? Because of AI and arguably compute and artificial intelligence. The limiting factor is electricity. So it's definitely front of mind. The thing to bear in mind around electricity is it's a secondary form of energy. So you need to— it's converted from something else. So you go further down the line, it's either natural gas or coal, oil, wind, solar. So ultimately the whole energy space is top of mind because that's what makes electricity.

Gemma Allen

>> You didn't mention nuclear there, but we maybe will or won't get into that.

Gordon Bennett

>> Yeah, nuclear too.

Gemma Allen

>> Absolutely. It's certainly a growing concept, right?

Gordon Bennett

>> But not in the UK because we can't build them.

Gemma Allen

>> Absolutely not. And we know why. But okay, so let's talk a little about the world of ICE. Where do you operate in? It's obviously a huge incumbent in the market. We sit here at an ICE exchange at the NYSE.

Gordon Bennett

>> Yeah.

Gemma Allen

>> You've been in this business though since 2015, talking about energy every day. We're obviously at a very interesting inflection point now because of those reasons you've said, right? Like the world of data centers and this next frontier of tech. But talk a little bit about what's happening from the market dynamics that you see and hear and discuss Monday to Friday. Help us understand where the rubber meets the road in terms of the narrative and the hype.

Gordon Bennett

>> Yeah, well, I think one thing to bear in mind in terms of energy commodity markets versus financial assets is that moving molecules and electrons around have to obey the laws of physics. So there's lots of physical constraints. So commodity markets are inherently volatile. And so that puts ICE in the perfect position because we are a marketplace for energy and our role is to price risk and transfer it. So the demand for hedging arguably has never been higher. Because the range of outcomes has never been wider. So you've got more and more renewables coming online. They're intermittent. It's what's called non-dispatchable in the business. So you don't have control when the wind blows and the sun shines. So matching the supply and demand of electricity is difficult if you're just relying on renewables. So then it needs to be supported by dispatchable power like natural gas. Nuclear and so forth. So you've got a wide range of outcomes because you don't know when the wind is going to blow and the sun's going to shine. And then at the moment, we're living in quite a sort of heightened geopolitical situation. So supply chains get disrupted and that's impacting the transportation of molecules. And we're effectively going through a second real crisis in natural gas molecules. One was 4 or 5 years ago with Russia-Ukraine. Now we've got the Gulf crisis. So there's a lot of people who maybe didn't think they were exposed to high energy prices 5 or 6 years ago. And now they know they are. And so again, that increases the demand for hedging.

Gemma Allen

>> And when we think about this world that you live in, right, volatility is part and parcel of the game, right? It's not new, it's not unique. But we know that who is taking on that volatility is, like you said, changing pretty dramatically this week. There's a news story that perhaps, maybe or maybe not, the Trump administration may embargo diesel, right? Like the exporting of diesel. What does that do? Help us understand, like, how that impacts your business, your world. Does it bring new customers, new opportunities into the fold? Does it create a level of panic or hysteria? help us understand how it actually plays out in the markets.

Gordon Bennett

>> what it does, it brings in another level of uncertainty in terms of the supply of a molecule, the interruption of the supply can come in many forms, whether it's a weather event or a geopolitical event. So again, it just highlights the physical constraints of moving molecules and electrons around. And so, you know, if you're an investor or you're building something and you need a loan, you need finance to build it, you want to be able to smooth your earnings. Right? Because if you can smooth your earnings, whether that's your costs and your revenue, you get access to more forms of capital and cheaper forms of capital. So if things are needing to be built, hedging tools are extremely important to lower the cost of investment.

Gemma Allen

>> And you're based in Europe, in London.

Gordon Bennett

>> Yeah.

Gemma Allen

>> ICE is a very, very global company with categories that can operate in different spaces. Talk a little bit about the global remit of this, right? We only think here in the US. I can say this, I'm sure, being honest about the US, right? The world, as you know, where we have somewhat of tunnel vision sometimes. But talk about what you're seeing, what's happening globally. How do these categories, these opportunities vary market to market?

Gordon Bennett

>> Well, the US is very lucky because it has energy independence, right? So the US is effectively an exporter of molecules, which is a very strong position to be in, whereas the UK and Europe are importers, right? They do not have energy independence. So therefore your exposure to outside events is far, far higher. Arguably, there are very few countries in the world that are able to sort of fuel themselves and feed themselves. And those countries are, from a globally competitive perspective, in very strong positions. The talk in Europe is how natural gas prices are so high. I know the, the industrialists are going, I can't operate my factory because energy prices are high. Now that's not a function of the market not working. That's just what happens if you're an importer. If you have more demand than supply and you need to import your energy, then your prices are going to be higher. So the US, from an industrial competitiveness point of view, is in a very strong position. Everyone else is scrambling for molecules and electrons, and they're trying to go, how do I reduce my exposure to international prices? And some of that is based on, okay, I'm going to build a lot of renewables. But renewables have their own problems in terms of its intermittency. And to build grids at scale that deliver electrons over molecules, it doesn't happen overnight. that's the other key thing about energy. It's infrastructure, right? It's big infrastructure and needs dollars to be built. And we're going through a point in time where we're having to effectively rewire our entire energy system. So it's an exciting time to be in. But there's big opportunities, but there's also big challenges. And I think ICE plays a significant role in allowing people to price and transfer risk to allow the investment, the dollars to be raised to build stuff.

Gemma Allen

>> And talk about the new ways in which ICE is continuing to do that. Right. I'm sure that the customer profile has changed somewhat since 2015 too, in terms of who carries the weight of that risk. Who wakes up every day and thinks, okay, we know we're going to need $500 million in energy costs next year. How are we going to ensure that we don't get hammered on the economics of that? Right. Because the world of technology, every company is a tech company now. Yeah. What are you seeing from the perspective of the decision maker, buyer, customer profile? How is that changing and how is that impacting the traditional world of Wall Street or traditional finance, per se?

Gordon Bennett

>> So I think that the big thing that's changing is big tech. Probably 3, 4 years ago, maybe even less than that, energy was important to them. But in terms of the overall cost of their business, it's still relatively low. So maybe they didn't have to think so much about risk managing the cost of it because it was small, low single-digit percentage of overall cost, high margin, high cash-generating businesses. Suddenly you have to— all these data centers are being built and their energy consumption is going up. And so the higher percentage of your cost base, the more you need to think about Do I need to start being more thoughtful about how I risk manage it? what I think as far as ICE is concerned, it's really a wholesale— from an energy perspective, it's a wholesale marketplace, right? It's the big energy companies. It's the banks. And they sort of intermediate end customers. But I would say there's probably more and more people giving calls to organizations who know how to optimize moving molecules and electrons around and managing energy price risk because suddenly the cost is going up in these businesses. And it's an important part of the liquidity ecosystem is that when someone wants to hedge, it's producer and consumer. But for them to transact their needs and wants have to happen at the same time for them to transact. So what happens in the most liquid benchmark contracts is you've got a set of intermediaries. They're like professional valuation agents who can price risk better than other people. And so they will match up the needs and wants of consumers and producers and they allow for the risk transfer.

Gemma Allen

>> How is data and the world of data and I guess the position that you're in from the competitive perspective of how that is both changing your day-to-day and your kind of service offering to clients?

Gordon Bennett

>> Well, the exchange is collecting millions, billions of data points. So the exchange creates a huge amount of data. Then you've got the data that's outside of the transaction data. So yeah, you're right, ICE is this, it's a data and technology business. And just like there's never been more demand for risk management services on the traditional exchange business, everyone wants to consume more data, but they need to sort of consume it in a way that allows them to interrogate it efficiently. So ICE spends, invests a lot of money in allowing people to access data directly and then use their models to interrogate the data. So the machine-readable data is a key component of the ICE portfolio.

Gemma Allen

>> So I'm going to ask you a little spicier question here as we wrap things up, right?

Gordon Bennett

>> Yeah.

Gemma Allen

>> We talk a lot in this show about data centers, AI factories, AI infrastructure, compute. Compute is essentially a bottleneck that's fundamentally based on energy, right? So those two things are very, very closely aligned. This Powering Tomorrow, we talk to a lot of folks that are thinking about new forms or reimagined forms of energy like nuclear. I alluded to that at the beginning, like clean energy, solar, wind. What are your thoughts from the perspective of how you think that this may or may not play out? If we were in a world where we had nuclear at scale, nuclear in a box, or some of the startups that we have someone on today from MIT.

Gordon Bennett

>> Oh really? That would then create modular reactors.

Gemma Allen

>> Yeah. And everything from fission to fusion, creating a compression of 40x compression on steam reactors. Folks are building some really interestingthings in the space, right? Which if those were to come to fruition, would essentially solve for some of the energy challenges of the compute challenge. Yeah. So what are your thoughts on— I'm not asking you directly about the AI bubble or this world of AI, but I'm asking you a little bit indirectlyon how— where do you see this market headed 10 years from now from the perspective of tech economics?

Gordon Bennett

>> So how I would answer that is I don't care what your superpower is. It's not being able to predict the future. No one can predict the future when it comes down to investing and building energy infrastructure. I think it's the same as when you're building a stock portfolio, you take a portfolio approach, right? So we're going to need everything. The demand for energy is going to grow. So you need all the solutions that you can get your hands on. And the honest answer is we don't know what it's going to look like in 10 years, especially with AI, right? The opportunities of what perhaps AI can solve for. We don't know if some of these things that will be available will be economical in 10 years. But energy ultimately is infrastructure, right? So it's high cost of investment, it's long-term investment, and you're building projects that have long payback periods. So a portfolio approach is critical. And actually from an international point of view, there's been all sorts of discussions around energy transition. It's always mentioned in the singular. It doesn't exist in the singular. Hundreds of energy transitions, and it basically comes down to your natural endowment as a country. So in Scandinavia, they've managed to decarbonize their businesses because they've got a lot of hydropower, and then they've built wind. If you've got renewable energy that is not intermittent, that's a great place to be in. And then going back to earlier, energy independence is going to be critical. So parts of the world that have energy independence are going to be in the best place in terms of whatever is built in 10 years' time.

Gemma Allen

>> We boil it all down, I guess, in the perspective of basic economics. It really does come down to that, right? A level of self-sufficiency is more important than ever before. Well, Gordon Bennett, thank you so much for joining us on NYSE Wired.

Gordon Bennett

>> Great. Thank you very much.

Gemma Allen

>> I'm Gemma Allen here at theCUBE Studio at the New York Stock Exchange. This is NYSE Wired, Powering Tomorrow. Thanks for watching.

Gordon Bennett, ICE

search

(INTRO)

Gemma Allen

>> Studio here at the New York Stock Exchange. I'm Gemma Allen, co-host of NYSE Wired's Powering Tomorrow. And right now we're going to talk about how AI might be the technology story of the decade and certainly this year. But underneath it is a very old problem, and that is power. Data centers need more of it. Grids are under pressure and the economics of energy are changing incredibly fast. ICE sits right in the middle of that market, and Gordon Bennett is helping the companies that produce, buy, and trade energy manage that risk. Gordon, welcome to NYSE Wired.

Gordon Bennett

>> Thanks. Thanks very much for having me.

Gemma Allen

>> So let's start with an easy question.

Gordon Bennett

>> Yes.

Gemma Allen

>> Are we entering a moment where electricity might be the most important commodity on this planet?

Gordon Bennett

>> Well, we're certainly entering a moment where electricity is top of everyone's mind, right? Because of AI and arguably compute and artificial intelligence. The limiting factor is electricity. So it's definitely front of mind. The thing to bear in mind around electricity is it's a secondary form of energy. So you need to— it's converted from something else. So you go further down the line, it's either natural gas or coal, oil, wind, solar. So ultimately the whole energy space is top of mind because that's what makes electricity.

Gemma Allen

>> You didn't mention nuclear there, but we maybe will or won't get into that.

Gordon Bennett

>> Yeah, nuclear too.

Gemma Allen

>> Absolutely. It's certainly a growing concept, right?

Gordon Bennett

>> But not in the UK because we can't build them.

Gemma Allen

>> Absolutely not. And we know why. But okay, so let's talk a little about the world of ICE. Where do you operate in? It's obviously a huge incumbent in the market. We sit here at an ICE exchange at the NYSE.

Gordon Bennett

>> Yeah.

Gemma Allen

>> You've been in this business though since 2015, talking about energy every day. We're obviously at a very interesting inflection point now because of those reasons you've said, right? Like the world of data centers and this next frontier of tech. But talk a little bit about what's happening from the market dynamics that you see and hear and discuss Monday to Friday. Help us understand where the rubber meets the road in terms of the narrative and the hype.

Gordon Bennett

>> Yeah, well, I think one thing to bear in mind in terms of energy commodity markets versus financial assets is that moving molecules and electrons around have to obey the laws of physics. So there's lots of physical constraints. So commodity markets are inherently volatile. And so that puts ICE in the perfect position because we are a marketplace for energy and our role is to price risk and transfer it. So the demand for hedging arguably has never been higher. Because the range of outcomes has never been wider. So you've got more and more renewables coming online. They're intermittent. It's what's called non-dispatchable in the business. So you don't have control when the wind blows and the sun shines. So matching the supply and demand of electricity is difficult if you're just relying on renewables. So then it needs to be supported by dispatchable power like natural gas. Nuclear and so forth. So you've got a wide range of outcomes because you don't know when the wind is going to blow and the sun's going to shine. And then at the moment, we're living in quite a sort of heightened geopolitical situation. So supply chains get disrupted and that's impacting the transportation of molecules. And we're effectively going through a second real crisis in natural gas molecules. One was 4 or 5 years ago with Russia-Ukraine. Now we've got the Gulf crisis. So there's a lot of people who maybe didn't think they were exposed to high energy prices 5 or 6 years ago. And now they know they are. And so again, that increases the demand for hedging.

Gemma Allen

>> And when we think about this world that you live in, right, volatility is part and parcel of the game, right? It's not new, it's not unique. But we know that who is taking on that volatility is, like you said, changing pretty dramatically this week. There's a news story that perhaps, maybe or maybe not, the Trump administration may embargo diesel, right? Like the exporting of diesel. What does that do? Help us understand, like, how that impacts your business, your world. Does it bring new customers, new opportunities into the fold? Does it create a level of panic or hysteria? help us understand how it actually plays out in the markets.

Gordon Bennett

>> what it does, it brings in another level of uncertainty in terms of the supply of a molecule, the interruption of the supply can come in many forms, whether it's a weather event or a geopolitical event. So again, it just highlights the physical constraints of moving molecules and electrons around. And so, you know, if you're an investor or you're building something and you need a loan, you need finance to build it, you want to be able to smooth your earnings. Right? Because if you can smooth your earnings, whether that's your costs and your revenue, you get access to more forms of capital and cheaper forms of capital. So if things are needing to be built, hedging tools are extremely important to lower the cost of investment.

Gemma Allen

>> And you're based in Europe, in London.

Gordon Bennett

>> Yeah.

Gemma Allen

>> ICE is a very, very global company with categories that can operate in different spaces. Talk a little bit about the global remit of this, right? We only think here in the US. I can say this, I'm sure, being honest about the US, right? The world, as you know, where we have somewhat of tunnel vision sometimes. But talk about what you're seeing, what's happening globally. How do these categories, these opportunities vary market to market?

Gordon Bennett

>> Well, the US is very lucky because it has energy independence, right? So the US is effectively an exporter of molecules, which is a very strong position to be in, whereas the UK and Europe are importers, right? They do not have energy independence. So therefore your exposure to outside events is far, far higher. Arguably, there are very few countries in the world that are able to sort of fuel themselves and feed themselves. And those countries are, from a globally competitive perspective, in very strong positions. The talk in Europe is how natural gas prices are so high. I know the, the industrialists are going, I can't operate my factory because energy prices are high. Now that's not a function of the market not working. That's just what happens if you're an importer. If you have more demand than supply and you need to import your energy, then your prices are going to be higher. So the US, from an industrial competitiveness point of view, is in a very strong position. Everyone else is scrambling for molecules and electrons, and they're trying to go, how do I reduce my exposure to international prices? And some of that is based on, okay, I'm going to build a lot of renewables. But renewables have their own problems in terms of its intermittency. And to build grids at scale that deliver electrons over molecules, it doesn't happen overnight. that's the other key thing about energy. It's infrastructure, right? It's big infrastructure and needs dollars to be built. And we're going through a point in time where we're having to effectively rewire our entire energy system. So it's an exciting time to be in. But there's big opportunities, but there's also big challenges. And I think ICE plays a significant role in allowing people to price and transfer risk to allow the investment, the dollars to be raised to build stuff.

Gemma Allen

>> And talk about the new ways in which ICE is continuing to do that. Right. I'm sure that the customer profile has changed somewhat since 2015 too, in terms of who carries the weight of that risk. Who wakes up every day and thinks, okay, we know we're going to need $500 million in energy costs next year. How are we going to ensure that we don't get hammered on the economics of that? Right. Because the world of technology, every company is a tech company now. Yeah. What are you seeing from the perspective of the decision maker, buyer, customer profile? How is that changing and how is that impacting the traditional world of Wall Street or traditional finance, per se?

Gordon Bennett

>> So I think that the big thing that's changing is big tech. Probably 3, 4 years ago, maybe even less than that, energy was important to them. But in terms of the overall cost of their business, it's still relatively low. So maybe they didn't have to think so much about risk managing the cost of it because it was small, low single-digit percentage of overall cost, high margin, high cash-generating businesses. Suddenly you have to— all these data centers are being built and their energy consumption is going up. And so the higher percentage of your cost base, the more you need to think about Do I need to start being more thoughtful about how I risk manage it? what I think as far as ICE is concerned, it's really a wholesale— from an energy perspective, it's a wholesale marketplace, right? It's the big energy companies. It's the banks. And they sort of intermediate end customers. But I would say there's probably more and more people giving calls to organizations who know how to optimize moving molecules and electrons around and managing energy price risk because suddenly the cost is going up in these businesses. And it's an important part of the liquidity ecosystem is that when someone wants to hedge, it's producer and consumer. But for them to transact their needs and wants have to happen at the same time for them to transact. So what happens in the most liquid benchmark contracts is you've got a set of intermediaries. They're like professional valuation agents who can price risk better than other people. And so they will match up the needs and wants of consumers and producers and they allow for the risk transfer.

Gemma Allen

>> How is data and the world of data and I guess the position that you're in from the competitive perspective of how that is both changing your day-to-day and your kind of service offering to clients?

Gordon Bennett

>> Well, the exchange is collecting millions, billions of data points. So the exchange creates a huge amount of data. Then you've got the data that's outside of the transaction data. So yeah, you're right, ICE is this, it's a data and technology business. And just like there's never been more demand for risk management services on the traditional exchange business, everyone wants to consume more data, but they need to sort of consume it in a way that allows them to interrogate it efficiently. So ICE spends, invests a lot of money in allowing people to access data directly and then use their models to interrogate the data. So the machine-readable data is a key component of the ICE portfolio.

Gemma Allen

>> So I'm going to ask you a little spicier question here as we wrap things up, right?

Gordon Bennett

>> Yeah.

Gemma Allen

>> We talk a lot in this show about data centers, AI factories, AI infrastructure, compute. Compute is essentially a bottleneck that's fundamentally based on energy, right? So those two things are very, very closely aligned. This Powering Tomorrow, we talk to a lot of folks that are thinking about new forms or reimagined forms of energy like nuclear. I alluded to that at the beginning, like clean energy, solar, wind. What are your thoughts from the perspective of how you think that this may or may not play out? If we were in a world where we had nuclear at scale, nuclear in a box, or some of the startups that we have someone on today from MIT.

Gordon Bennett

>> Oh really? That would then create modular reactors.

Gemma Allen

>> Yeah. And everything from fission to fusion, creating a compression of 40x compression on steam reactors. Folks are building some really interestingthings in the space, right? Which if those were to come to fruition, would essentially solve for some of the energy challenges of the compute challenge. Yeah. So what are your thoughts on— I'm not asking you directly about the AI bubble or this world of AI, but I'm asking you a little bit indirectlyon how— where do you see this market headed 10 years from now from the perspective of tech economics?

Gordon Bennett

>> So how I would answer that is I don't care what your superpower is. It's not being able to predict the future. No one can predict the future when it comes down to investing and building energy infrastructure. I think it's the same as when you're building a stock portfolio, you take a portfolio approach, right? So we're going to need everything. The demand for energy is going to grow. So you need all the solutions that you can get your hands on. And the honest answer is we don't know what it's going to look like in 10 years, especially with AI, right? The opportunities of what perhaps AI can solve for. We don't know if some of these things that will be available will be economical in 10 years. But energy ultimately is infrastructure, right? So it's high cost of investment, it's long-term investment, and you're building projects that have long payback periods. So a portfolio approach is critical. And actually from an international point of view, there's been all sorts of discussions around energy transition. It's always mentioned in the singular. It doesn't exist in the singular. Hundreds of energy transitions, and it basically comes down to your natural endowment as a country. So in Scandinavia, they've managed to decarbonize their businesses because they've got a lot of hydropower, and then they've built wind. If you've got renewable energy that is not intermittent, that's a great place to be in. And then going back to earlier, energy independence is going to be critical. So parts of the world that have energy independence are going to be in the best place in terms of whatever is built in 10 years' time.

Gemma Allen

>> We boil it all down, I guess, in the perspective of basic economics. It really does come down to that, right? A level of self-sufficiency is more important than ever before. Well, Gordon Bennett, thank you so much for joining us on NYSE Wired.

Gordon Bennett

>> Great. Thank you very much.

Gemma Allen

>> I'm Gemma Allen here at theCUBE Studio at the New York Stock Exchange. This is NYSE Wired, Powering Tomorrow. Thanks for watching.