Global Energy Forum
Breakthrough Energy Technologies and Their Disruptive Market and Geopolitical Impacts
Part I: Keynote Remarks By:
State Secretary, Federal Ministry for Economic Affairs and Energy,
Federal Republic of Germany
Dr. Fatih Birol,
International Energy Agency
Part II: Panel Discussion
Dr. Robert Armstrong,
Massachusetts Institute of Technology Energy Initiative
Executive Vice President, Southern Company;
Chief Executive Officer, Mississippi Power Co
Director, Carbon Solutions,
Dr. Carole Nakhle,
Director, Crystol Energy;
Nonresident Scholar, Carnegie Middle East Center
President and CEO,
H.E. Suhail Mohamed Faraj Al Mazrouei,
Minister of Energy,
United Arab Emirates
Location: Al Maryah Ballroom, Four Seasons, Al Maryah Island, Abu Dhabi, United Arab Emirates
Time: 5:15 p.m. Local
Date: Friday, January 13, 2017
Superior Transcriptions LLC
KAREL BECKMAN: Good afternoon everybody. I hope you can all hear me. It’s a great honor for me to moderate this last session at this great event.
I think it was the most popular session, I think, in terms of the number of panelists that we have, and we have many more who wanted to be on the panel, but we could only accommodate seven.
My name is Karel Beckman, by the way. I’m editor of Energy Post. It’s a website. You can check it out on the Internet. And we write about all aspects of energy, nuclear, oil and gas, renewables. And that’s good for us because I think that’s the way the world is moving.
Here not so long ago, you had oil and gas people in one room, a ballroom somewhere, you had the nuclear people somewhere, and the renewables people somewhere in the basement, and they were not talking to each other. Well, no more. Everybody is talking to each other now, and I think this event is a demonstration of that.
And this interconnected energy world is, in turn, a part of broader societal developments. And I look at it when I try to, you know, figure out where the energy world is going. I look at it in this way. I think there are three drivers, and it’s policies, markets and technologies. Those are the three main drivers of our energy world.
And today at this session, we’ll be speaking about how technologies, breakthrough technologies will affect or are affecting, disrupting even, markets and policies, in fact maybe disrupting even our world order, because, after all, as you know, this world was built on fossil fuels. Fossil fuels have been the basis of our economy and of our society since the Industrial Revolution.
And we are now embarked on a project called decarbonization, and that’s basically ‒ it’s unprecedented. And I think you probably realize this, but not everybody in the world does. I think outside of this room people don’t realize it.
OK, so I will turn to the panel. What we have, first, we have two keynote speakers who will be speaking briefly. I know it’s the last session and I will invite them to the stage one by one, and then we will have a great panel of five specialists with very different backgrounds.
I would like to invite first Rainer Baake, if you could come to the stage. And Rainer Baake, he is currently state secretary at the Federal Ministry of Economic Affairs and Energy in Germany. In the past, he was state secretary at the Ministry of Environment. And he is known, more or less, as Mr. Energiewende because he was involved in key decisions in Germany, the nuclear phase-out and the renewable energy act.
And actually, if you could come on the stage, I looked you up on Google and I saw you ‒ I looked up your CV and I saw you also worked as a community organizer in Chicago.
RAINER BAAKE: A long time ago.
MR. BECKMAN: Is that a ‒ was that a ‒ it’s not a joke. So did you ever run into somebody called Barack Obama at the time?
MR. BAAKE: No, but he came when I left.
MR. BECKMAN: He came when you left. I think, if I’m going to advise my children, you know, to have a career, I’ll say you have to start as a community worker in Chicago. (Laughs.) OK, I’ll give the floor to you now.
And I will give you, of course, the chance to ask some questions later.
Mr. Baake. (Applause.)
MR. BAAKE: Yeah, thank you very much, Karel.
Excellencies, ladies and gentlemen, a little bit more than a year ago in Paris, we all, the world community, agreed on a treaty on climate. We all agreed that we have to do everything possible to limit the increase of global temperatures to two degrees. And about two months ago, this treaty of Paris went into effect.
Now, I believe that one of the major reasons why it was possible after so many unsuccessful attempts to reach this really important global deal was that scientists around the world had told us that we only have a budget of less than 1,000 gigatons of CO2 and if you would exceed emissions beyond these 1,000 gigatons of CO2 we would run into a dangerous climate change on this planet.
So I understand the agreement of Paris to reduce the annual global emissions as soon as possible, thereby stretch the budget and then, in the course of the century, move on to a decarbonized world economy. And it was agreed upon in Paris that the industrialized countries will take the lead.
So what does this decarbonization mean? I think the challenge becomes clear if we look at what do we know is still in the ground in form of oil, coal and gas and what do we believe is still in the ground. And the figures that I know, it’s about an amount of 15,000 gigatons of CO2. So to fulfill the Paris Agreement means that we have to leave at least 14,000 of the 15,000 gigatons of CO2 in the ground. That’s decarbonization. Sounds like a big challenge.
We in Germany try to look at it as a great opportunity, as an opportunity to modernize our economy. Our government in December decided on a long-term strategy reaching up to 2015. And chapter two of this long-term strategy says we want to use this decarbonization as an instrument to completely modernize our economy. That means, on the one hand, we want to prevent stranded investments because investments into fossil structure that have a lifespan beyond 2050 run into the risk of stranded investment. But even more important, we want to put an emphasis on energy efficiency, energy efficiency first and, in Germany, on renewables because we have a history now of about a decade-and-a-half of a very successful expansion of these renewables. Pretty expensive at the beginning, but the costs have come down. And in Germany at least, you can produce electricity from windmills, new windmills and new solar panels below the costs of conventional generation.
So what does that mean? Energy efficiency, I said, is key. And there has to be a very clear priority on this issue. It, you know, sounds obvious. On the one hand, we have been able, in the last years, to decouple economic growth from energy consumption. The economic growth has been positive in Germany. At the same time, in total numbers, not in specific number, in total numbers the energy consumption has decreased. We have to move on this issue in all fields, in the power sector, in the housing sector, of course, also the mobility sector. I think that has to be a very clear priority.
The second priority is that we have to use renewable energies directly in all sectors as much as possible. For example, use solar heating in the solar sector or biofuels in the mobility sector. But the potential is limited. At the end, this decarbonization strategy will require electrification, electrification of the mobility sector and electrification also of highly insulated houses that use renewable energies directly, but the rest of the energy will come from the power sector. That means the power sector is key.
And, of course, all this does not make sense if we do not produce power with CO2-free renewable energies. Otherwise, we will just move the emissions from the exhaust pipe of a car to the chimney of a coal generator. So this transformation of the power sector is absolutely key.
We started in the year 2000 with a share of renewables of around 6 percent, almost all of that was hydro at that time, and we are now at one-third of our power production that comes from renewable energies. And we have clear targets for the next, 10, 20, 30, 35 years how we transform our power system away from conventional generation over to renewables, and since that in Germany is mainly wind and solar, because these are the technologies that prevailed in this technological race, that has to be going in accordance with a reinvention of our power system because of the special features of wind and solar producing electricity according to weather conditions and fluctuating very strongly.
So what we need and we have decided on that is a new market design, is a grid expansion. And we have the luxury of being a country right in the center of Europe, which makes everything easier because we can do this all in the framework of an internal power market in Europe.
So these are my introductory remarks. I think I stuck to the six minutes that you gave me. And if there are questions that are left after this very broad description of what we do in Germany, I would be happy to take them. Thank you very much for your attention. (Applause.
MR. BECKMAN: Thank you. Maybe I can ask you one question. You said you were talking about the electrification of the mobility system. Well, people who have been on the German highways know that’s going to be quite a challenge. And doing all this with solar and wind, on certain days of the year solar and wind produce very little power. How are you going to ‒ how do you ‒ how will you manage that in particular since you also decided on a nuclear phase-out, which a lot of people, I think I speak for many people in this room probably, don’t really understand why you do these two things at the same time.
MR. BAAKE: Yeah. Well, you see, in spite of the nuclear phase-out, we are one of the few countries on this planet who have been able to reduce greenhouse gas emissions substantially. In 1990, the base year, until today it’s about 27 percent minus reduction of greenhouse emissions. And we have targets for 2020, minus 40 percent, 55 percent minus 2030 and so on. And we are committed to decarbonize our economy in the next decades.
So I said the power sector indeed is key and the technologies that work in my countries, it’s mainly going to be wind and solar, but there are other countries in Europe that have other resources. For example, the countries in the north that have a lot of hydro or the countries in the south, in the Alps, that also have a lot of hydro.
And when I said the internal European market makes it easier, then that is exactly what I am talking about. It’s interconnecting fluctuating production from windmills and for solar panels in Germany with hydro in Norway, in Sweden, in Switzerland, in Austria and so on.
At some point, of course, we will also have to talk about new storage technologies. And I think that in this transition period gas will play a major role. If we also reduce our greenhouse gas emissions, especially from the coal sector, lignite and hard coal, then gas is a very important, rich technology. At the beginning it will be natural gas, but somewhere down the line it’s probably going to be increasing shares of synthetic gas. So you use extra power that you have from wind and from solar and turn it into methane, and that is something that you can easy store in our gas system and somewhere down the line use it for producing electricity in those times when the wind isn’t blowing and the sun isn’t shining.
What is absolutely important is that we do this in an economic, efficient way. And right now these technologies are pretty expensive. So the market design that our parliament decided on last year says we want the market forces to look for the most cost-efficient options. And indeed, we need flexible generation, we need flexible demand, we need trading electricity and, at some point, also storage. And the market should look for the most cost-efficient solutions at the proper time.
And the new technologies, new storage technologies I just talked about, we figure are only going to pay when we have a penetration of renewables of 70 and 80 percent. And that’s still some years down the line. In the meantime, we have cheaper options.
MR. BECKMAN: OK, the vision is clear. Any urgent questions? I can maybe allow one question at this point. Does anybody have an urgent question for Baake? Nobody? I can’t believe it.
Fatih, maybe you have a question. (Laughter.)
FATIH BIROL: (Off mic.)
MR. BECKMAN: OK. Then thank you very much.
MR. BAAKE: You’re welcome.
MR. BECKMAN: I think you’ve convinced everybody. (Applause.)
So I would like to welcome now Fatih Birol. I’m not going to waste your time by introducing him to this audience. I think that’s not necessary.
And I hope you can give your vision on the theme of this session.
MR. BIROL: So you didn’t look at Google for me so to find something, something which is spicy? (Laughter.)
MR. BECKMAN: No, no. The only one I didn’t look up on Google was you.
MR. BIROL: No, no, but to want something spicy, OK, like Mr. Baake’s community work.
OK. Now, thank you very much once again for inviting me here. I think you must be slowly getting bored of me today, a couple of speeches.
I would like to make in the next six minutes four observations. Number one, about price and its implications. Now, as Mr. Baake rightly mentioned, Paris was a historical success. It was a major milestone for all of us, but also for the energy sector to show a direction. But it is not an agreement, in my view, when I’ll get to numbers, which changed the flow of the things. So I don’t want us to be relaxed after having the Paris Agreement and I want to give Karel two numbers. Because after Paris, what do you expect? You expect the incentives to say carbon will be stronger and the dirty things should be punished.
But when I look at the numbers, number one, before Paris, European, you ratted out about Europe, European carbon prices were 9 euros per ton before the Paris Agreement. We have the historic agreement, Paris, which fights against climate change. Today, processed carbon prices are $5 per ton. Nobody would expect it would be much stronger given the market’s signal.
Number two, before Paris, coal, which is the highest emissions among all the fuels we have, coal prices were $48 an average, and today they are $90, doubled.
Why I am giving these two numbers, carbon prices in Europe and the coal prices worldwide, is that, of course, that are other reasons why we see these prices, but Paris alone is not enough to change the market realities. Markets need to buy-in and see that Paris is going to change the government decisions; therefore, the investment trends and so on. This is number-one point I wanted to make.
Number two, we are seeing an extremely positive trend in the case of renewable energies. Cost is coming down, that’s very good news. As I said this morning, renewable capacity additions are much higher than everything else put together. But I see we have two challenges now in front of us. The first phase of the renewable story finished, in my view, with a big successes; namely, costs coming down and in the electricity generation we are seeing renewables to be a number-one technology. But electricity generation is a part of the entire energy spectrum.
So we have to see in the second chapter of the renewable story, in addition to electricity generation, we have to see renewable penetration in heat, heating at home, industry heating, as well as transportation sector. Today, the transportation is 99.2 percent oil products. This is one challenge.
The second challenge for renewables is we have to learn to deal with the renewable production, the mismatch between renewable production and the peak electricity demand. In India, a country which has one of the most ambitious solar programs, the peak electricity demand takes place after the sunset. So we have to find this way. And I see this as the second phase of the renewable story.
The first phase finished successful, the cost is coming down, penetration of electricity sector, and now penetration to heat and transport. And within the electricity sector, we have to find ways how to integrate in the electrical system renewables, knowing the mismatch between the, in many cases, renewable production and the peak demand.
Third, efficiency, electrification and utilization, these three things together. Now, we are all talking about the electricity consumption, but when you look at the numbers, until last three years, global electricity demand increased very systematically, on average about 3 percent per year. In the last three years, it slowed down considerably, even though the economic growth was, more or less, the same like before. Last year it was 1 percent, the year before 1.4 percent. This is, we believe, among others, mainly as a result of the efficiency policies we are seeing on the demand side in China, Europe, the United States, Japan, all the champion of it. So therefore, we have to pay attention to the efficiency, the market impact of the efficiency policies which is important in terms of the utilities building new power plants.
In the same context, we see that the utilization combined into different systems across our daily life, homes, power plants, transportation, may lead to, if this process continues in a stronger way, may lead to much stronger electrification in the next years to come. So the share of electricity in the energy mix may increase if the utilization process continues with this space. And we see many examples of that. Of course, the utilization brings itself several challenges, including the security risks.
My final point is the ‒ we’re talking about breakthrough technologies. Breakthroughs don’t happen by themselves. There is a need, when we look at the numbers, an urgent need of acceleration of the research, development and deployment activities worldwide. There is a major clash between our growing desire to have much stronger technologies, new technologies and declining public spending R&D.
We have been following around this spending across the world and what we are seeing is that there was a big gap between the IEA countries, so-called Europeans, Japan, U.S., those countries and the emerging countries. But this gap, very interesting, this gap is narrowing very fast. Last year, China R&D in expenditure which is the portion of R&D investment to GDP, reached the European levels ‒ China. And with the current trends, with a very modest, careful expectation, before 2020 China will be the country which puts the largest amount of money, R&D money, into the R&D to GDP ratio in the world, were it to be the champion. So therefore, if we want to see breakthrough technologies to come in the market, to penetrate the markets, there is a need to accelerate the R&D efforts as well, especially in the public spending sector.
So these are some remarks, Karel, I wanted to share with you. Thank you.
MR. BECKMAN: Thank you very much. Can we have some applause for ‒ (applause) ‒ I just ‒ I’m just so curious about one thing. What marks would you give Reiner Baake for his energy policy, from one to 10?
MR. BIROL: Ten over 10.
MR. BECKMAN: Ten over 10? OK, what ‒
MR. BIROL: A member country, so ‒
MR. BECKMAN: Yeah. (Laughs.) What more can I say?
MR. BIROL: No, I think Germany, look, let’s be honest, if we see today the renewable costs coming down, countries like Germany, who had the idea, who pursue the idea, who might have suffered under the higher renewable prices, made a lot of work. And Rainer and his colleagues played a critical role there.
MR. BECKMAN: Yeah. But you also said, this morning, for example, about nuclear energy, that that’s probably indispensable.
MR. BIROL: In Germany you mean?
MR. BECKMAN: No, in the world. (Laughter.)
MR. BIROL: No, it just depends on the country.
MR. BECKMAN: Yeah.
MR. BIROL: It depends on the country. If you think that a country, if the people want to have nuclear, they should have nuclear power because nuclear power is one of the options which can reduce the climate change or the emissions causing climate change substantially. It is definitely one of the technologies which can be very helpful. In addition to efficiency, renewables, natural gas, replacing coal and other things.
MR. BECKMAN: Right. Thank you very much.
Are there any very urgent questions that anybody wants to ask?
Well, thank you, Fatih.
MR. BIROL: Thank you.
MR. BECKMAN: Now I would like to invite our panelists ‒ (applause) ‒ to the stage.
Let’s see what I ‒ what else I came up with on Google. You will soon find out.
I would like to start with Dr. Armstrong. Robert Armstrong, he’s the head of the MIT Energy Initiative. I don’t know if you ever looked at it. It’s ‒ it has as a mission low or no-carbon solutions. And they have no less than eight low-carbon energy centers. We’re just talking about research. And they focus on CCS, electric power system, biosciences, storage, solar and nuclear fusion. So I’m sure that Robert has a very broad view of things. He himself is also a chemical engineer of great distinction.
In fact, you’re also a coauthor of a book called “Game Changers: Energy on the Move.” So I think you are the ideal person to talk to us about what you see as the game changers for now.
ROBERT ARMSTRONG: Good, thank you very much. So it’s a pleasure to be here and have a chance to talk to you about game-changing technologies. I thought to tell you two stories during my five minutes here, and I tried to pick stories that I think won’t overlap with what I’m guessing others will talk about on the panel.
Certainly, game-changing technologies cover a pretty broad spectrum, everywhere from generation through end use. Two I’ve picked here, one deals with efficiency and the other deals with generation.
For the efficiency example, what I’d like to use is one where we exploit modern material science as a vehicle to modify the surfaces of materials without changing their basic mechanical properties. And the application area I’ll give is to thermal power plants, I picked that because 85 percent of the world’s electricity is made with thermal power plants, so it is a largescale ‒ has a largescale potential application, and specifically look at what happens on the back end of every one of these power plants.
The back end of the power plant, there’s a condenser. The job of the condenser is to take the residual steam coming out of the last stage of the turbines and condense that all the way to water so that it can be put back into the process to make more steam and drive the turbine. Generally in the condenser, the water, at least often, the water condenses as a film, so you get this thin liquid layer of water covering the condenser’s surface. The problem with that is that that film causes resistance to heat transfer and in fact reduces the efficiency of the condenser.
We’ve developed at MIT a group in mechanical engineering and chemical engineering and developed a way through chemical vapor deposition to coat the surfaces of these condensers and put a very durable coating on such as to force what’s called dropwise condensation, so water condenses on the surface, like water would bead up on a Teflon surface. The benefit of that is that you still get heat transfer, very efficient heat transfer, from the metal surface to the steam that remains in the vapor phase. And the improvement in heat transfer rate is a factor of seven, so an enormous improvement in heat transfer rate.
The net effect of that on the overall efficiency of the power plant is about 1 or 2 percent, which sounds like a small number until you multiply that by the total amount of power we produce with these thermal power plants globally. So there’s a big opportunity with a very simple efficiency improvement that could be made that could have huge impacts, not only in the short term, but in the long term for power generation that has intrinsically low-carbon emissions.
Second example I wanted to pick is at the other end of the spectrum. I thought I’d give an example from nuclear fusion, right? Now, I know you’re sitting there thinking, oh, fusion is the energy source of the future, always has been and always will be. And I’m going to ask you to put that thought on hold and give me a moment to tell you about some new ideas in fusion. This one I’m going to give is by a group at MIT in the Plasma Science and Fusion Center. They did a lot of work on the tokamak design that’s used in the ITER program. But I might add, there are at least four startups around the world pursuing fusion technology, so there are a number of groups trying out new ideas in fusion.
Now, right now the fusion project underway, ITER, is a very large multinational project. It is slated for a first heat test in 2027. And as I understand it, I think the first power test is 2036. So it’s not quite 35 years out there, but if schedules don’t slip, 20-something years into the future.
Now, the idea at MIT takes advantage of some new materials, specifically superconducting tapes that have become available after the ITER technology design locked in. And the benefit of these tapes is that you can get much higher magnetic field strengths with these superconducting tapes. Magnetic field strength is very important because the fusion power scales like the fourth power of the increase in magnetic field intensity in the magnetic coils.
So within this particular superconductor, a little less than a factor of two increase in the magnetic field strength and the magnetic coils, you can get an order of magnitude decrease in the volume of the fusion reactor at the same reactor power. Now, that ripples through the entire design of the system and enables you to go smaller, a factor of 10 smaller. It allows you to do it much sooner. The work at MIT is on a schedule for a magnet test in three years, a heat test in five years, and full-power test in 10 years, and much cheaper, from 40 billion (dollars) down to something less than a hundred million to do these tests, guess is around 60 (million dollars), 60 million (dollars).
So I think it’s worth trying ideas like that. If it works, this would be a huge game changer in the energy field to have a nuclear technology available that’s waste free and could provide the needed baseload kinds of power we need, not just for nighttime, but for seasonal needs with renewable intermittency.
MR. BECKMAN: Well, thank you. Do you think it’s conceivable that in a few decades from now we will all be obsolete here, all this talk about energy and nuclear fusion will supply us with all the energy we need?
MR. ARMSTRONG: Probably not.
MR. BECKMAN: Probably not, OK, that’s maybe some really ‒ (laughs) ‒ just one short question because you also work on storage at MIT. I know this is a big issue for everybody in this sector. Can you say something about do you see a breakthrough in energy storage on the horizon?
MR. ARMSTRONG: There are lots of different storage technologies coming down the road. One that’s being actually demoed here in Masdar, at Masdar Institute, is a concentrated solar power technology which uses a volumetric receiver, a tank, to receive solar radiation that’s directed by a set of mirrors. That’s thermal storage. It’s very efficient. Roundtrip efficiency is better than 97 percent. The beauty of that system, it’s intrinsically integrated into the design of the CSP.
On the electricity side, there is some interesting ideas that have spun out now as startups. One is Ambri that came out of MIT. Ambri, if you want to remember it, is Cambridge without the front of it and the last couple of letters on the end. The founders say it’s in the heart of Cambridge. And the idea in Ambri is it’s a liquid-metal battery technology. It’s a very heavy set of materials, so you wouldn’t use this for mobile transportation, but for grid storage it could be quite useful.
And the idea here is to basically produce something like an aluminum smelter that can be run reversibly. So you take very large amounts of current and put back very large amounts of current. And that’s in prototype or, yeah, prototype manufacturing stage now.
MR. BECKMAN: OK. Well, thank you.
I would like to turn now to Carole Nakhle. She is nonresident senior fellow at the Carnegie Middle East Center, is an energy economist and independent consultant.
You worked for Statoil for Eni for the U.K. House of Lords, I saw on the Internet, and you are also the author of two books, one coauthor of a book called “Out of the Energy Labyrinth,” which I think is what we are trying to do here. So maybe you can help us out of that labyrinth. And what is your view on how breakthrough technologies could save the world?
CAROLE NAKHLE: Thank you, Karel.
When I was invited to speak at this session, I panicked at the beginning because I thought I’m not a scientist, I’m not an engineer, I’m an energy economist. So what do I know about disruptive technologies? But then I looked back at it and I thought, how do we define disruptive technology? And we look at the finish and there are several features of disruptive technologies, but at the core of this definition is a technology that changes the status quo of the market. It challenges existing leading players and it really produces drastically, fundamentally different outcomes.
And as such, I was thinking that people when they think about disruptive technologies, they tend to think about renewable energy, and mainly let’s talk about the modern renewable energy. And here I’m talking about solar and wind, not the traditional renewable energy. And I thought, yes, it’s true, but which technology had a much bigger impact on the global energy market as we know it today, and its impact is not over yet, it is yet actually be unfolded in the coming years? And this is where I thought of shale technology, the combination of horizontal drilling and hydraulic fracturing that unlocked a whole mass of resources and reserves in the U.S. and, hopefully, maybe around the world later.
So when I think of shale technology and I look at it, just I make some observations about how it compares with modern renewable energy. I came up with the following observations. First of all, they both emerged around the same time in the last decades, in the early decades. And really after 2008, I think this is when we started to hear about shale technology. And I remember many people dismissed the role of shale technology in the world. And, you know, with papers being published and receiving even prizes, describing it as overhyped, overrated, short-lived, expensive, and it proved us, actually many of us, wrong. Whereas, so they emerged at the same time. But if you look at the shale technology, it remains concentrated in one country, that is the United States. I know other countries are trying to experiment with it, but they are really far behind the United States.
Renewable energy, on the other hand, it is almost everywhere. I heard throughout this conference and everywhere I go about projects in Jordan, projects in Morocco, projects in China, projects here and there all about renewable energy. But then when you look at shale, it’s not only confined into one country, which is a very important aspect, but also it’s not operating in an environment which receives strong government support. After all, it is part of the oil and gas industry. The regulatory burden is quite tough on the shale industry. The fiscal take is quite high compared to other industries. Whereas by comparison, renewable energy receives strong government backing and strong government support, tax credits and subsidies, among others.
However, if you look closely at the numbers ‒ so despite all these constraints that I was talking about for shale compared to renewable energy, if you look closely at the numbers, at the contribution in the global primary energy mix, you see that shale today contributes for both oil and gas more than 5 percent of the global energy supply, whereas renewable energy, that is mainly solar and wind, contributes to less than 3 percent. That is a major difference between something which is widely available, receives government support everywhere around the world, and something which is confined to one specific country. So that’s why I thought about it as really as a truly disruptive technology that changed markets upside down.
Now, what was the impact? Of course, if you look at the oil market impact, we’ve been hearing a lot about the OPEC struggle, you know, since 2008. When the deal happened last year, it was a big thing in the media and all around the world, people talking about shifting OPEC strategy, and we saw the biggest alliance of non-OPEC producers coming along with OPEC in order to do something about the oil market. And at the same time, because of the shale revolution, some kind of price ceiling was set in the market.
And in addition to the impact on the oil markets, so it’s not just confined to the oil market, think about the competitiveness of alternative sources of energy where we usually say, oh, if the oil prices goes higher then this will encourage substitution. And the gas market, I remember, in 2008, 2009, the impact on Europe, the fact that there were a lot of LNG tankers heading to North America and they had to be diverted is when that had big implications on the economies and on the geopolitics for Europe vis-à-vis Russia, for instance.
And think about the North American independence we heard about this morning and how shale is giving perhaps a longer lease life to people like President-elect Trump because it’s going to improve and strengthen the economic independence of the country.
Funny enough, when I heard ‒ a colleague of mine earlier this afternoon asked me what I was speaking about, I said disruptive technologies. And they said, well, Donald Trump is the biggest disruptive technology. But I think, you know, he will benefit a lot from this disruptive technology.
And also, I look at other countries around the world. As I said, maybe it will not spread to other countries as fast as one would have thought, but if I look at where the biggest share of resources are, they are not in the U.S., they are in China for oil and then in ‒ for gas and Russia for oil. And China is already experimenting. And I think once the genie is out of the bottle, I think China is going to go ahead more in this strategy than into more expensive renewables.
So just to conclude on one thing. As I said earlier, the disruptive power of shale technology is not over yet. I think we are yet to see it unfolding in the coming years as efficiency in drilling, in fracking improves. And if there is one lesson one can learn from this important disruptive technology is that technologies, and this is what experience tells us, it’s not really my invention, technologies that rely on market tend to develop much faster than those that rely on government supports to make them more economically viable.
So this is my take on disruptive technologies.
MR. BECKMAN: OK, thank you. Yeah, sometimes revolutions are under our nose and we don’t see them. But I just ‒ I do have one question. Like Rainer Baake said, Germany, for example, sees gas as a bridge technology. How does gas help us on the road to decarbonization?
MS. NAKHLE: Well, indeed, I mean, for some time now we’ve been talking about gas being the bridge fuel or the transition fuel. And shale gas, after all, it’s natural gas. The difference is that where the resources are and what you do to extract them. So it’s not like shale gas is going to be different to the natural gas that we consume. But yes, as we heard earlier from Dr. Fatih the role about gas becoming increasingly more popular, and here I want to highlight something about China.
I mentioned China. If you look at the numbers in China, coal remains the dominant source of primary energy in China, whereas the penetration of natural gas is still below 10 percent. So if China switches gradually from gas to coal in its power generation, just imagine the carbon emissions savings that China, one country, which is, of course, the most important country when it comes to carbon emissions, is going to mean to the rest of the world.
MR. BECKMAN: OK, thank you.
I would like to turn now to Gardiner Hill. And he is the director of a group called Carbon Solution at BP. Now, I have to ‒ I Googled that and I have to say I couldn’t find it on Google, and even on the BP website it didn’t turn up. So you’re, I think, you’re going to have to have some explaining to do what Carbon Solutions exactly is. And I can tell you that he, Gardiner, is a CCS expert of long years of experience. So I think he will tell us something about what carbon capture and storage can do in our road to decarbonization.
GARDINER HILL: Karel, thank you very much.
Before I start, I would just like to acknowledge the Atlantic Council for holding this outstanding meeting and also to Abu Dhabi for hosting it. And it is a privilege for me to be here today to share with you some thoughts.
So breakthrough technology will clearly help accelerate the clean-energy revolution and the transitions, that lower-carbon energy economy that we recognize we all need. And I would say in fact that transition has already started, so we can’t be complacent. It will take a number of years to happen, but it’s already started. We know that transition will require a portfolio of technologies, so there’s no silver bullet. So this really is an “and,” “and,” and “and” conversation.
So included in this portfolio is natural gas and renewables. We’ve heard a lot about that over the two days of this conference. Both offer low-carbon solutions to fuel and power. And I can tell you that BP is playing its part in addressing climate change by investing in both of these technologies.
But there is another key technology in that portfolio and it’s called CCUS, or carbon capture use and storage, which I think could be a breakthrough energy technology as it potentially can break the paradigm between the link of use of fossil fuels and greenhouse gas emissions.
The potential of this technology has been widely recognized by others, like the IPCC, the IEA and many other authoritative organizations pointing out that is use can contribute to meeting the two-degree temperature rise goal or indeed pursuing the aspiration of well-below a two-degree target, and it could do this at lowest cost.
The role and potential impact of CCUS is also recognized by industry. The Oil and Gas Climate Initiative, or OGCI, is a voluntary CEO-led initiative which aims to show sector leadership in the response to climate change. And this has CCUS as one of its primary areas of focus. BP Chief Executive Bob Dudley is the current chair of OGCI.
Launched in 2014, currently it is made up of 10 of the world’s major oil and gas companies that collaborate on action to reduce greenhouse gas emissions. These companies together represent over one-fifth of the world’s oil and gas production and are coming together with one aim: helping tackle climate change.
OGCI has identified a number of priorities to invest and the two main priorities, the first being carbon capture and storage and the second is methane emissions and expansion of the role of gas. So the OGCI CCUS focus is divided into three areas to help move this program forward. The first one is market mechanisms, and that’s clearly the big missing today, enabling CCUS to be deployed at some scale. The second is focusing at reducing the cost of capture technology. And the third is looking at CC storage capacity methodology.
So the market mechanism program is defining a joint position for CCS commercialization. And it will seek to identify how members could facilitate CCS development at scale. The CO2 capture program is screening breakthrough technologies that may be recommended for development with OGCI support. And the CO2 storage program is defining a methodology for reporting CO2 reserves or resources and is collaborating with key markets to undertake storage capacity assessments and update CO2 storage capacities based upon a new agreed methodology that’ll be done around the world.
On the 4th of November, 2016, OGCI announced its climate investment fund. It’s a $1 billion fund over 10 years, and the aim is to fund new ventures and projects that have the potential to significantly reduce emissions. The investment is specifically intended to develop and accelerate the commercial deployment of innovative low-emissions technologies such as CCUS. This figure does not include deployment costs, it’s purely the initial investment, and we expect our investments to have a considerable multiplying effect. This would come from partners investing alongside OGCI climate investment as well as their own and other companies investing in deploying commercialized technologies.
And CCUS will be a key part of the climate investment fund. These technologies, gas for power, wind, solar, biofuels and CCS, can be expected to play a crucial role in the low carbon transition, and are part of the portfolio of technologies needed. Breakthroughs in these technologies, particularly CCUS, could enable ambitious climate goals to be met, and met at lower cost to society. This combination of technologies will vary by region, but the right mix will enable fossil fuels to play an ongoing and a sustainable role in providing efficient, affordable and reliable energy, while meeting these ambitious climate goals.
MR. BECKMAN: Thank you. It sounds great of course but we also, I think everybody is also aware that the CCS effort that has taken place so far is very small compared to what is really needed. There are a lot of skeptics out there. What is your reply to them? I mean, the way I look at it from the outside is CCS is never going to be, you know, what the IEA, for example, says it should be.
MR. HILL: I think it’s definitely fair to say that the progress that’s happened to date has not been really what was expected or indeed what is needed. And so there’s some real urgency about moving that forward at some greater pace. Now the U.S. has got a number of projects up and running. Most of these are in coal, one is on biofuels, so North America is actually making progress. China has also done some projects. And of course we have one here in Abu Dhabi. So it’s demonstrating the technology, it’s up and working and actually proves that it does work, and there’s even more economic benefit when you can actually include that and use the CO2 in a productive way, such as enhanced oil recovery, where the CO2 is ultimately stored as part of that operation.
So I think as a matter of focus going forward that we need to collaborate to find ways to move this technology forward because such important key technology, as I say, can break that paradigm in use of fossil fuels and greenhouse gas emissions. And it can be sustainable technology to help us meet these climate goals. The OGCI is one example of where people are collaborating, and as the OGCI progresses its work, it will be looking to reach out and to collaborate with others, including governments, who can accelerate the deployment and the scale of CCS technology.
MR. BECKMAN: Great. If I can jump to Ed Holland now, and I’ll leave the best till last, the SolarKiosk. Because the reason I would like to do so is because at home he’s the, I’ll just get it right, CEO of Southern Company Holdings, integrated regional electricity company in the United States. And you also, you have a CCS project?
ED HOLLAND: Yes.
MR. BECKMAN: Kemper, and that has been criticized, I saw on Google also. If you’re not really delivering what’s expected of it. So maybe you can give your view on CCS and what do you think are the breakthroughs that we need.
MR. HOLLAND: Thank you, Karel. Appreciate it very much. I could just agree with Mr. Hill and we could move on, but we are building a state of the art coal gasification facility in Kemper County, Mississippi. Before I talk about that, let me just talk briefly about Southern Company. We are the second largest vertically integrated utility in the United States. Our market cap is in excess of $45 billion. We serve over four and a half million customers at wholesale and retail.
One of the things that we take great pride in is the diversity of our energy mix. The comments that were made yesterday by the energy minister of the UAE are very consistent with the approach that we have taken in the past and are taking as we look forward. We currently have an energy mix of 33 percent coal and 47 percent gas, 16 percent nuclear and 4 percent renewables. Five years ago, we were over 50 percent gas. I was struck by the comment that the director general made about the reductions that have occurred naturally because of economics in greenhouse gas emissions. Our greenhouse gas emissions over that period of time have dropped approximately 25 percent because of the switch from coal to gas.
We are very heavy in the renewables space as well. We have since 2012 bought or built and own and operate over 4,000 megawatts of wind and solar across the United States. Over the next two years we will add an additional 3,000 megawatts to that portfolio. We are excited about what the renewable space affords us, and where it is economic in our generation mix we are certainly open to adding it.
The thing I’m here to talk about today, though, and the thing I’m most excited about because I’ve been directly involved in it is the Kemper power plant and admittedly, yes, we have had our problems. This is a first of a kind technology. It’s a 582-megawatt coal-to-gas. Over half the reserves in the world are lignite and sub-bituminous types of coal. These are very inexpensive, high moisture, low heat rate, and to find a technology that can burn that type of coal in an economic and an environmentally friendly way is quite an accomplishment. We believe that we have done that.
I’ll talk a little bit more about it but I did want to show a very, very short video that will give you some idea of the magnitude of what we’ve done in Mississippi. If we could roll the video.
This plant, as I stated earlier, will have the environmental footprint of a gas plant. We are capturing 65 percent of the carbon emissions from the plant. A hundred percent of that 65 percent will be sold for enhanced oil recovery in the state of Mississippi. It will result in 2 million additional barrels of oil being produced annually from the CO2 that will be pumped into the ground. I think as most of you know, over time that CO2 will find itself permanently in the ground. So, from a sequestration standpoint, not initially but over time, we will get to that point.
Karel, you mentioned that it’s been slow, and it has been slow. But we believe that we are on the cusp of breakthrough technology, not only with Kemper but derivatives of the Kemper technology that can afford or will afford a zero-emitting coal-fired plant, no CO2 emissions, and we believe we will have zero water discharge from that plant. We’re excited about that. We’re going to continue to work on it. We’re going to continue to work with many of you to bring that to fruition and make it a reality.
MR. BECKMAN: Thank you. I think, like Donald Trump, you’re defying the New York Times. They have written rather critically about this plant. I am very pressed, we are very pressed for time now, so I’m going to turn right away to the last speaker, Andreas Spiess, and I think he has a very exciting story to tell. Earlier in this conference Michael Eckhart, Citigroup, I don’t know if he is still here. He was saying that almost all of the investment into renewable energy goes into the developed countries or the rich countries, 93 percent, and there was not enough investment in the developing countries. I think Andreas Spiess has a story to tell about that. He’s the CEO of SolarKiosk, and I think you can explain what you are doing to change the world.
ANDREAS SPIESS: Thank you very much. Distinguished dignitaries and dear colleagues, first of all I’d like to thank the Atlantic Council for this outstanding event. Bringing us to a racetrack yesterday night and having us put on helmets, that’s quite something, I would say. I really enjoyed it. Thank you for that.
We are not only talking about breakthrough technologies but also about geopolitical impact. And Mr. Baake, I am a very happy German taxpayer when it comes to—and I give in Germany, and I’m a very concerned citizen when it comes to the refugee crisis, which has just started to unleash its full scope in Europe. And we have to do something and it cannot be just left to politics. It has to be a task of entrepreneurs like myself. I’m heavily invested in Africa all through the continent in renewable energy, and I’d very much like to turn to this presentation because I believe you’ve seen a lot of middle-aged men throughout this conference, so please let’s go to these slides.
What I want to show to you is this, because these are my customers. This is in Ethiopia. Ethiopia right now is in a state of emergency and the state of emergency is not because of great political trouble but because of economic injustice. And that has a very, very simple root. The root is that 90 percent of the population is not electrified and they are suffering the most from under-developed economic strife, and that’s why there’s unrest. Now if you look at the mix of refugees that are hitting Europe right now, there’s not so many Ethiopians, but once the Ethiopians start, that will be a catastrophe because they are 100 million. We are doing something to cure this epitome right at the cause, at the root, and that is decentralized energy distribution.
Now we talked a great deal about energy production, and I’m so impressed with all these plants and all these amazing projects, and I’m very, very fascinated by billions and trillions of dollars unfolding. I would like to see some of that going into the field of decentralized energy solutions that companies like my company, but not just my company, are currently very heavily involved in because we are solving this problem. With our decentralized energy solution, we are tapping into a new market. The base of the pyramid currently consists of 3.5 billion people, of which 1.2 billion people have no access to energy. That’s a huge challenge but it’s also a huge opportunity for companies like myself. We see the challenge that a regular customer, regular energy customer at the base of the pyramid currently pays 100 times as much for energy as yourselves.
If I asked you to pay me 50 cents, 50 U.S. cents for charging your phone in my house, I think you would leave my house immediately. But that’s exactly what the base of the pyramid customer, who makes a dollar a day, is currently paying for just charging his phone. That’s a big challenge. We have to solve it because otherwise, again, geopolitical impact. Now what we have done, and it’s a huge opportunity because it’s a $30 billion market on lighting in off-grid sector alone, so it’s quite an interesting topic for venture capitalism. We are a last-mile distribution company. We’re really going into the base of the pyramid in rural, off-grid areas throughout Africa, Southeast Asia and also in the Middle East. I will be in Jordan next week to inaugurate the first solar-connected clinic right at the border to Syria, which is serving 200 patients from Syria every day.
MR. BECKMAN: You have one minute left.
MR. SPIESS: I’ll be fine with that.
Our technology is profiting a lot from what energy solutions or renewable energy solutions in Germany have developed, and we are just down-scaling it a little bit. We are reverse engineering it a little bit. We are making it very, very cost-efficient and then we are distributing it into rural areas. It’s German engineering for Africa. It is local manufacturing. All of our units are locally manufactured.
We have currently 200 projects reaching 2.5 million customers at the base of the pyramid, and the most important thing, it’s local business. We are empowering local business, local jobs and local energy production, and that is the game-changer. This is what SolarKiosk and other companies in the market are about. We are therefore reaching into the communities. We are creating jobs. Our energy solution is for productive use. We are creating 50 local jobs on community basis, which is massive, and this is how we believe we can solve the refugee crisis in the world. Thank you very much.
MR. BECKMAN: Thank you. I think, Fatih, you once told me that off-grid, decentralized energy is growing actually a lot faster than a lot of people think. But I have to ask you if you have any more questions to ask them later directly to the people here because I have to leave the stage now and give the floor to Frederick Kempe, who will say the last words of this conference.
FREDERICK KEMPE: Thank you. (Applause.) His Excellency Minister Suhail Al Mazrouei is going to give the very final words.
Karel, first of all, what a wonderful way to end a fascinating two days. And I’m actually sorry we didn’t have more time to hear you flesh out all of these brilliant new ideas because this has been the heart of what we’ve been trying to highlight at the Global Energy Center at the Atlantic Council. Zero-emitting coal, what a great dream come true that would be for all of us, how that could change things.
I remember when I took over the Atlantic Council ten years ago, one of my board members came up to me and said, you have to write about the geopolitical impact of shale technology and this is the coming thing. And I went to the director of our energy center and I said, look, I just heard about this. Let’s do a report. He said, no, no, that will never happen. I’ve heard about it before. And he’s no longer the center’s director.
But I just want to say that this is a terribly exciting way to end all of this. And then you put together the geopolitical element of taking on the refugee crisis and off-grid. I was just talking to the minister about this. This is really applying what we’re talking about at the Atlantic Council, which is bringing together energy with geopolitics and really understanding where things are going.
You were talking about breakthrough technologies, geopolitical impact. The one thing, and I’m not going to try to conclude everything we heard the last two days. You all want to get to the reception, which is in Café Milano. When we leave here you’re going to be directed to where the reception is. I think we can all agree that there’s one common theme, and that is change. And what Fatih Birol said earlier today is that the one thing that, if I have this note that you said here, it’s the quote I’m going to take away from this. There is no single story about the future of global energy. Policies will determine where we go from here.
A lot of the speakers you’ve heard in the last two days and a lot of people in the audience over the last two days are the people who can shape the thinking, who can shape the policies, who can make sure that we adjust to this change. In that spirit of humility and ambition, we hope to establish this forum as an annual event to discuss the geopolitics of energy transformation and to discuss how energy shapes our future.
Mr. Minister, it was the greatest honor to hold this forum under the patronage of His Highness Sheikh Mohammed bin Zayed al Nahyan, crown prince of Abu Dhabi and deputy supreme commander of the United Arab Emirates armed forces. Please thank him on our behalf for his leadership and for his hospitality. It’s an honor to have had his patronage for this. Many of you in this room will stay on for the World Future Energy Summit and the IRENA annual assembly, another event in that framework of the Abu Dhabi sustainability week. We were proud to kick off that week with our forum these two days.
We’ve been honored to work with you, Mr. Minister, and with your ministry and your brilliant staff. We’ve been honored to work with Sultan Al-Jaber, host of this week, chairman of Masdar and CEO of ADNOC, and with Khaldoon Al Mubarak, CEO of Mubadala and IPIC. We are also very grateful to Majid Jafar, CEO of Crescent Petroleum and Karl Hopkins, global chief security officer and partner at Dentons, representing our plenum co-chairs, and all of our other sponsors. We thank you very much all for coming. We hope to see you again next year. And now it is my honor to turn the floor to His Excellency, Minister Suhail Al Mazrouei. (Applause)
MINISTER SUHAIL AL MAZROUI: Thank you, Fred. It’s really a true honor to have all of you participating in this great event. We were a bit not sure about how and when are we going to hold it, but I think we chose the right time. To have all of those distinguished guest speakers, audience for yesterday and today is just a demonstration of how important this event. And I’m gladly confirming that we would love to have it next year and years after that. I think it has been a great cooperation between us and the Atlantic Council.
It’s really exciting time for us in Abu Dhabi to bring the expertise from not only the geopolitical angle but also experts from companies, new ideas and new, exciting technologies that are first presented sometimes here in Abu Dhabi during the sustainability week. And sometimes it’s dreams for energy comes true in the United Arab Emirates, and we have seen it. We all dream when the solar energy is going to compete with natural gas. And we are not biased in UAE because we are a net importer of gas. So for us, we leave all forms of energy to compete on the merits of what’s good for humanity and what’s good for consumers.
And I’m very excited about the Kiosk, and I would like to inform you that we also here in UAE are trying to build a full house that is off-grid and we have two models and our trial. One of them is quite large. It’s about 6,000 square foot, but it’s totally off-grid. And we are testing it and we are trying to bring the cost down to have it as a solution for the future. It’s a great—again, it’s a great pleasure to have you all, and I’m very happy with the way it turns out and the turn-around from everyone. I know it’s weekend and people tend to relax on the weekend, but it has been an exciting weekend for all of us.
On behalf of the United Arab Emirates and on behalf of Abu Dhabi, I would like to thank the Atlantic Council for bringing to Abu Dhabi a distinguished audience, distinguished speakers, and we will again hope to host you next year for a more exciting event, where hopefully we will see some of the ideas that we discussed implemented, because the way things work here in UAE and around us and the world is totally different. We are trying to spearhead the region, trying to give hope, and we are trying to give an example where things work and where our big ideas turn into solutions for the future. Thank you very much. (Applause)
MR. KEMPE: We’ll see you all next year. Enjoy yourselves at the reception at Café Milano. Thank you for coming.