How Europe can work its way out of today’s energy-supply crisis—and through the energy transition

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Neil Chatterjee
Former Chairman, Federal Energy Regulatory Commission; Senior Advisor, Hogan Lovells

The Rt Hon. Charles Hendry
CBE PC Professor, University of Edinburgh; Former Minister of State for Energy, United Kingdom

Regina Mayor
Global Sector Head of Energy, KPMG

Joseph McMonigle
Secretary General, International Energy Forum (IEF)


Randolph Bell
Senior Director, Global Energy Center, Atlantic Council

RANDOLPH BELL: So the—what does the energy system of the future look like? And what steps do we take now, even though—even as we’re trying to resolve the current crisis? How do we act now to build a better future and more secure energy future for tomorrow? So I’m going to just—you know, initial thoughts. And I have a bunch of questions, but let’s just go down the line, first starting with Neil.

NEIL CHATTERJEE: Well, thank you so much for having me, and to the Atlantic Council for hosting this forum in person. It is so good to be back at an in-person conference. Look, the energy transition that’s taking place in the United States right now, and quite frankly globally, has been very exciting. It has yielded tremendous benefits for the economy, for consumers, for the environment. And we’re starting to see the geopolitical implications as well. And it’s all something that we have to consider.

During my time as chairman and commissioner at the United States Federal Energy Regulatory Commission, my principal focus—that of mine and my colleagues—was on reliability. On the reliability and the resilience of the grid. We wanted to make sure that when Americans hit the switch the lights came on. And in my capacity, I actually got to serve in the international arena, advising our allies on how to design their markets to ensure clean, reliable, affordable delivery of electricity.

As we are undergoing the energy transition, we have to make sure that we do not take our eyes off of this concept of reliability. The reality is, is as we are—as grids are facing extreme weather events that are coming with greater frequency and more intensity, that has a challenge on the grid which, in turn, drives a greater need for accelerated decarbonization. But according to NERC, which is the reliability standards expert in the US, who worked very closely with my old association, FERC, decarbonization poses some challenges to the reliability of the grid.

And therein lies the challenge. Extreme weather events test the reliability and resilience of the grid, but we need to decarbonize faster to ameliorate that, but that in turn puts pressure on the reliability of the grid. And as we look to decarbonize the economy, that’s going to require an even greater emphasis on electrification. We’re going to look to electrify our transportation sector, look to electrify the vehicle—or, I mean, the—our buildings. And some experts have said it may even triple the amount of electrification needed in the U.S. And I imagine our allies will model that around the world. And so it’s a really complex puzzle that we are trying to navigate.

What we have seen in the US is that climate change doesn’t know political party or affiliation. We had two incidents in the past year-plus in the US—in Texas, a very conservative state, and in California, a progressive one—in which both of their grids were pushed to the brink. Texas by an extreme cold weather event, California by an extreme heat wave and wildfires. And what we saw is different market design flaws and a lack of emphasis on reliability in both instances pushed those grids to the brink. And so I think policymakers in the US need to have a greater focus on managing the energy transition, with an eye towards reliability.

What I saw firsthand during my tenure at FERC was that designing markets, balancing state policies, a focus on regulations and subsidies and mandates I found to be an inadequate approach to maintaining reliability. It’s not politically viable in the US today, but I would like to have the conversation around carbon pricing. In my view, a transparent price on carbon, a market-driven approach to decarbonization, is the reliability solution that will enable us to navigate this complex area. But obviously there are complications with moving in that direction as well. But it’s worth having the conversation. And that’s why I appreciate coming to forums like this, where we can have candid, serious discussion about these topics. Thank you.

RANDOLPH BELL: And I want to call out our good friend Adam Sieminski, who when he was at the EIA commissioned a study that demonstrated that a carbon price—a very minimal carbon price would put nuclear energy in the money in the United States, which would deeply enhance reliability. We’re seeing, with nuclear plants shutting down in the United States, that’s causing some of the reliability challenges that you’re talking about. So, Adam, thank you for doing that work.

Charles, your thoughts.

CHARLES HENDRY: Well, first of all, it’s a huge pleasure to be here. And thank you so much for the invitation. I think there’s a number of lessons which we can learn. The starting point is that we need to be more alert to the dangers and we don’t need to wait until they happen before we respond to them. We’ve allowed ourselves, particularly in Europe, to become too dependent on a single source. That we don’t get much of our gas from Russia, but Germany gets over half. Italy, I think, is 70 percent. Germany gets over half its coal from Russia. Europe, as a whole, gets half of its diesel from Russia.

And that we have allowed ourselves to become overdependent on one country. Winston Churchill said when he was minister for the Navy—he said, security comes from diversity and diversity alone. And that was true 100 years ago, and it’s true today. And so what we have to do now is to build into policy an approach which makes sure that we have diverse sources of supply and diverse routes for bringing that to our markets. So that’s the starting point. I think without getting that right, we’re not going to make—not going to learn the lessons which we need to now.

The minister, when he was speaking this morning, talked about the need for security of supply for decarbonization and for affordability. Of those, I always believed, as UK minister, that security is the most important, because you won’t decarbonize if you haven’t got security and it won’t be affordable if you haven’t got security. So we need to rebalance that equation and to make sure that we’re giving proper attention and focus to how we maintain our security of supply. And Europe I think now has learned a very harsh lesson. It’s going to get worse before it gets better. But we need to start building in that as a thinking element of government policy to make sure we get it right going forward.

The only bit of fortune which we have in this awful crisis is that it’s happening at a time when it actually makes economic sense to go for low-carbon sources. Wind, solar have now come down so much in price that actually if we were getting more of our electricity from renewable sources, it would have been cheaper than getting it from gas, where the gas price is at the moment. That’s a temporary situation, a temporary picture in the market, but actually it makes economic sense to go down that route.

So what we also then have to do is to harness the enthusiasm which you saw in the last panel, we’ve seen with the young entrepreneurs earlier on today. We need to harness the enthusiasm, to push forward innovation, push forward invention. This is an extraordinary era for innovation and invention. We need to make sure we do that more quickly. It takes too long to bring a new technology to market. Government has be to be more involved in that process. Government has to have targets backed with roadmaps, just as David was saying in the last session. And if we do that, we can accelerate the transition. But we now need to be much more alert to the risks in the world.

RANDOLPH BELL: Charles, thank you.


REGINA MAYOR: Three things, Randy. I would say we need to focus on commonality, communication, and collaboration. Let me just say a few things about those three Cs. Commonality is that—it’s about the common good, right? We’re all about trying to make the planet great again and address climate change. And the bad actor is CO2 emissions. And CO2 emissions don’t carry passports. So how can we reach across the aisle and recognize that we are fighting a common enemy, and it’s not a one side is better than the other, or one technology is better than the other. It’s how do we focus on the outcomes?

Just to give you a couple of examples, 90 percent of the world’s economies today are under some sort of a net zero commitment. How are we going to get there? In the US, if you just take a Tesla incentive, or tax incentives around electric vehicles, the implied cost of carbon abatement for a Tesla or electric vehicle incentive is $1,000 per—over $1,000 per carbon ton, per CO2 ton. Whereas, we have 45Q, which is $45 or $60. That’s radically diverse relative to what we’re implying the cost of carbon is. So I totally echo that we have to—we really have to solve that one because policy instruments are very blunt. And we’re already implying certain costs of carbon.

The second one is communication. And it is forums like this. You know, I’ve been to COP forums, I’ve been to Davos, I was at the World Petroleum Congress in Houston. You know, I sit and hear both sides of this story. And it’s only now that I think we’re trying to finally talk to each other versus at each other. But the communication is incredibly important. And what I counsel my oil and gas clients in particular, is you have to be able to tell a decarbonization story. What is your carbon narrative and how are you going to get there? And lower cost of carbon, hydrocarbons, can absolutely be a part of that solution, right? I like to think of it more as the energy transformation not the energy transition. Transition implies you’re moving from one thing to another. But we’re really going to transform all sources of energy to focus on eliminating the cost of carbon.

And then the last thing is on collaboration. And here’s where money and policy and corporates can come together. What was striking about COP-26 in Glasgow was the strength of the corporate commitments that were made, and the GFANZ, and a lot of the private money that have been put to the table. My KPMG colleagues who do a lot of financing say, Regina, follow the money, because that’s where things are going. And we’re doing an IPO for a company in the US that’s pre-revenue for hydrogen. So now it’s pre-revenue IPOs. But I think there’s way to create new project financing vehicles to bridge the investment so that public financing perhaps de-risks some of the upfront investments and then encourages private financing to come to the table.

And to lastly echo what Charles said about innovation, we did a program with the World Economic Forum—actually, it was launched three years ago—on how do you create public-private partnerships to scale greater sustainable energy innovations. And I don’t think we’ve cracked the code yet, but we’re getting a lot closer on that. So commonality, communication, and collaboration.

RANDOLPH BELL: Regina, thank you. And I have to agree, at the COP the corporate pledged, the corporate ambition, which for the most part seems very real, was hugely impressive. And they’re moving much faster than governments.

I want to come back to a couple of things you raised, but first I want to go to Joe.

JOSEPH MCMONIGLE: Well, thanks very much. And, again, let me echo the sentiments of my fellow panelists and say it’s great to be here. For those of you who don’t know, the IEF, the International Energy Forum, is the producer/consumer international organization. So we have 72 member countries. Colombia just joined last week. And I met with the Albanian minister today. I think they’re going to be joining shortly.

RANDOLPH BELL: Fantastic. I like it when things get done at the Global Energy Forum, yes. Yes.

JOSEPH MCMONIGLE: Exactly. That’s why I’m here. That’s why I’m here. And, you know, we have—OPEC and IEA are both on my executive board. So it’s a very collaborative group. But unlike OPEC and IEA, that really focus on either producer or the consumer side, I’ve got both. And so we’re much more of a neutral platform, and try to take a very practical all-of-the-above approach, if you will.

You know, it’s basically two years almost to the date where WHO, you know, decided this was a pandemic. And what did we see shortly thereafter? We saw oil prices go into negative territory. The market lost about 10 million barrels a day. Another way to look at it, though, with the world economy shut down, the world still used 90 million barrels of oil a day. So it just shows you how dependent we are. We went from lower for longer to higher and more volatile, especially now with the Ukraine situation.

So as I look at the—sort of the topic for this discussion, about rebuilding, I think of three areas where we really need to rebuild. One is investment. And investment, I’m talking—this is kind of whispered at conferences, but now it’s spoken I think a little more loudly at conferences—investment in upstream. Even prior to the pandemic, we were in a very, very tight market because of investor pressures, ESGs being one of those, but also, as we’ve heard producers talk about here and other conferences, capital discipline. The pandemic created great uncertainty over the last two years.

So you saw NOCs and IOCs cut capex by about 25 percent each year over the last two years. We need to get back to about $525 billion in capex upstream spending just to meet demand each year for the next 10 years. That’s while we pursue the energy transition very enthusiastically. I agree with all the sentiments of my fellow panelists. But, you know, it’s already a very tight market. The JODI data, which the IEF manages and hosts, showed that demand came back to pre-pandemic levels of about 98 percent, but supply is only about 95 percent.

A lot of people point the finger at OPEC for that supply gap, but really half of that gap is from the US producers who are, for capital discipline or just investment during COVID, not coming back. And I raise this because we’re obviously—in the winter we saw higher oil prices and natural gas prices. Obviously, Ukraine situation has exacerbated that. But I mention this because I think that it’s important for climate progress also. If the public starts to equate higher energy prices with climate policies, it will undermine public support, and we’re doomed.

And at least in the United States, you only have one shot. If you lose them on something like this, it’s gone forever. And so I think we have to…—we also hear more measured practical discussions about the transition. We need to manage the transition. It needs to be orderly. And we have to be very careful about it.

As Ed Morse, you know, the expert oil analyst at Citigroup once said on one of our panels regarding the higher energy prices this winter, he said, you know, some politicians are calling it, in Europe, a bump in the road on the energy transition. He said, it’s not. It’s a revolution in energy, in energy transition. The transition is a revolution. We need to think about it like that and be much more careful about it.

The other area is technology. And it’s been referenced here. The IEA came out with this technology report that basically said half of the emissions we need to address to meet our climate goals have to come from new technologies that aren’t commercialized or aren’t even invented yet. So we need R&D. We need governments to invest in R&D. We need private sector to invest in R&D. And we need to invest in hydrogen, the last panel very, very exciting. There’s a lot that could be done there. CCUS, the circular carbon economy that KAPSARC is really spearheading a lot of the public discourse on. It’s very, very important.

The third area to this rebuilding process that I think we really have to focus on is energy access and energy poverty. And, you know, sometimes this gets overlooked, but the COVID and the pandemic has really made it much worse—the gap between those with energy and those without. And for—let me just give you one example that I think really shines a light on this. Heathrow Airport consumes more energy than the entire country of Sierra Leone.

I had one—I was in Nigeria about two weeks ago at an Africa energy conference. And one of the ministers there said: We will decarbonize, but first we have to carbonize. And, you know, there’s a lot of discussions at conferences like this about stranded assets. And I get the point. But right now we have stranded lives that are demanding energy, that need energy for so many important reasons. And so I think we have to raise energy poverty and energy access really to the top of the agenda as we look at rebuilding.

RANDOLPH BELL: Joe, thank you.

I want to pick up on the investment thread, because it also goes to something that Regina said. On investment, do you see an opportunity to create a new type of investment that’s not ESG that funds the upstream but is greening, that encourages greener production, that encourages ultimately, you know, scope one, scope two, net zero production? And, Regina, to tie this in, you say that the—you’re finally starting to see communication, that people are not talking at each other, they’re talking to each other. Do we have a moment where that type of investment is really possible, because the communication is finally starting to happen, and people are—sort of both sides sort of get what the other—what the other cares about a little more? You can both answer. And, actually, I know you all will have things to say about this.

JOSEPH MCMONIGLE: Well, on the investment side, I think we have to be honest. I think we have to admit that we are completely under-invested in oil and gas development now. And I think the minister said this morning, or other panelists said, these are long-term investments. And right now the investment community is really handicapping these investments. Certainly, uncertainty and COVID has really added a lot to it, but I would—I would agree with what Regina said. I do think companies, especially on scope one and scope two, are really leading by example. And there’s no company today that doesn’t—any serious company—that doesn’t have a decarbonization strategy.

The question is, what happens on scope three? Because scope three is about demand, public demand. And it’s really out of the control of these companies. And so I think, you know, regulators—Neil and some of his former colleagues, not necessarily this was your focus—but, you know, as we look at scope three emissions—and the SEC in the United States, I think is coming out with something shortly on this—we have to be very careful about the messages we send to the investor community. And so I think we have to be honest, though. We need to start investing again. And I think the end goal is so that you can make climate progress. You have to prevent price spikes certainly hurting consumers. But what you want to do is make sure that we have adequate energy supplies so that the costs don’t get out of control and the public blames climate policies.


REGINA MAYOR: What I would offer is—I didn’t want to sound overly Pollyanna, you know, or anything, because I don’t think we’re necessarily completely collaborating the way that we need to. There are components of the investor community that are incredibly sophisticated, and they do understand the dilemma, the energy poverty dilemma, energy security, affordability, reliability. I am a survivor of Winter Storm Uri myself. Thank goodness I had natural gas infrastructure that went straight into my home, not like a lot of other parts of the world would.

But I think the challenge—the challenge is the common investor. And I speak to a lot of board members within the oil and gas community. And they talk to a lot of the younger analysts that represent Wall Street. And some of them are less attuned to the—they don’t—for example, they don’t understand that carbon emissions and based on estimates. And I just—I was shocked by that, that a lot of the investors that they talk to in New York don’t even understand that the basic carbon reporting that we see today are based on algorithms, measurements, extrapolations, et cetera.

So I think it gets to where Meg where was talking about earlier, is we have to get to the point where we can count carbon in the same way that we count money. And that’s what Mark Carney said to us at KPMG when we were at COP-26 in Glasgow. The accounting firms really have to figure out how we start counting carbon emissions in the same way that we count currency, down to detailed levels. And only then, I think, will we have the level of transparency to reduce emissions that we need to provide for the investor community to be confident in what we’re doing.

RANDOLPH BELL: Yeah. If you can’t really measure it, you can’t really change it. So if it’s just guesses then, yeah.

Charles, I know you wanted to jump in here.

CHARLES HENDRY: Yes. I think that investors are becoming much more critical in this area. If you look at the way that they’ve turned their backs on coal, very hard to find public investment into coal now. And the oil and gas runs the risk of moving in the same direction. And so for publicly quoted companies, they’re going to face shareholder activism. And if they are not moving in the right direction, if they are not investing heavily in low-carbon technologies in the way that BP and Shell are, if they’re not tackling their methane emissions, if they’re not looking to how they advance carbon capture, that they will then be marked down and they will find it much more difficult to get that.

So there is a market which is working here. But the industry is going to have to show that it is really moving the dial. But the greening companies, as opposed to the green companies—so, the hydrocarbon, the oil and gas companies which are moving significantly into this sector, have the ability to carry out that transformation or their transition more so than the green companies do, because they’ve got the heft, the huge balance sheets, to enable them to do it. We cannot make the transition in the way we need to and that the speed we need to without those companies being involved. And so we do need that joined-up debate as to how we encourage investment in there. But we do it in a way that then encourages them to be doing the right things environmentally.



NEIL CHATTERJEE: I’m coming at this from a slightly different perspective. I was an energy market regulator, not an environmental regulator. But we confronted many of these issues in a lot of the policy decisions we had to make. And an energy market regulator, we’re grounded in questions around carbon mitigation and decarbonization goals. The approach that we took was twofold. The existing market structures in the US—and we’re seeing this somewhat amongst our allies globally—were designed to protect incumbent monopolists. And what we essentially did during my tenure at FERC, that I’m quite proud of, is we removed barriers to entry to some of these innovative new technologies to enable them to be compensated for all of their attributes—for capacity, for energy, for ancillary services.

And so this really ties together everything that my fellow panelists have been discussing. Talking about innovation, to me, competition drives innovation. And so when you give these new technologies an opportunity to compete and have access to the market, that not only drives cost discipline but innovation. It also draws investment. When investors see that there is some market certainty and opportunity, they come in in that regard. And what I’m hopeful for, because the political environment in the US is so volatile to this day, because I served during a Republican administration and we moved these market roles that were in place for a couple years during the prior administration and are being cemented during the Biden administration, they will provide regulatory certainty.

And that has been one of the things that I think has frustrated investment in the US, is that the necessary investments to rebuild, you know, these aren’t short term. These are 10-, 15-, 30-year investments. It has become maddeningly frustrating to invest in the US, when the political pendulum swings rapidly so back and forth. You look at US EPA, for example. EPA went one direction under the Obama administration, when a completely different direction under the Trump administration, and now has reversed course the other way under the Biden administration. How do you make long-term investment decisions with that kind of regulatory volatility?

So one of the things that I appreciated about the role I got to play at an independent, bipartisan market regulator is we were able to put rules in place that are largely going to be durable and withstand legal and political challenges. And I think that is critical. Having that steadiness, that beacon of stability in this otherwise volatile regulatory landscape, I’m hoping will draw out some of these cleaner energy investments.

RANDOLPH BELL: Neil, thank you.

Joe, you want to jump in.

JOSEPH MCMONIGLE: Yeah. I mean, to Neil’s point on this investment and sort of certainty, we just hosted in February our annual energy outlook symposium, which—and KAPSARC participated in that. But we co-hosted it with IEA and OPEC. And the short-term forecast, of course, in February we presented them. They’re completely out the window now. But the medium- and long-term forecasts are still there. And I think the lesson that we’re learning from the current crisis is maybe we need to listen to markets instead of models. Regina talked about, you know, gap—you referenced gap procedures. Maybe we need some kind of gap standard for forecasting—energy forecasting.

Because basically we examined these long-term scenarios that OPEC and IEA and IRENA and different—even different private sector companies. And if you look at the difference in oil demand in 2050 between the highest case scenario for demand and the lowest-case scenario, the gap is 100 million barrels of oil. That’s today’s oil market. So if you’re an investor or you’re a company that needs to make an FID, you’re a policymaker that needs to choose a pathway, how do you make these decisions with such great uncertainty? And this is a big problem that we have to address. I’m kind of joking about the gap for forecasting, but I’m quite serious about it as well. We have to get much more—we have to listen to markets, I think, more. And we have to be much more practical and realistic about the future.

RANDOLPH BELL: Joe, thank you. We have about 10 minutes left. And with that last 10 minutes, I do want to—I want to pivot a little bit and talk about cooperation, international cooperation, because it is going to be crucial. But, Joe, you mentioned that, you know, 50 percent of the technology that we need to decarbonize is not yet invented. There’s a risk that this gets invented and gets kept in one country or another country, that there is not technology transfer—the technology transfer that’s needed to really—to decarbonize globally. Because this is, of course, a global challenge.

So I’d love to just think through what are the various opportunities for international cooperation. From where I sit at the Atlantic Council, we obviously think, first and foremost, US-EU, though that’s just a bias from where we sit. But since I have that, I’m going to start there and go to Charles. Charles, when you were energy minister, the UK was still part of the EU. And now we—and we still think of it as broadly Europe. So I’d love your thoughts on this first.

CHARLES HENDRY: I sort of developed a concept which I called energy diplomacy, which was about how you actually use diplomatic mechanisms to try and strengthen your energy position. So, for example, Mohammed Al-Sada, who was my Qatari counterpart, I would send him a message every time Manchester United won a football match and say: Well done, great results. Because he was a huge supporter and I thought, well, if we’re a bit short of gas and I need an LNG terminal, I’ve done the background work and so he’ll send one in my direction. And the collaboration is really critical as part of this.

The UK is not an island when it comes to gas. We have a whopping, very big gas interconnector from Norway, and we have other interconnectors so the gas can—we can be a transit country for gas. So we cannot isolate ourselves and protect ourselves from those global changes. We’ve got to see ourselves as part of that continent, even if we don’t want the political connectivity which comes with it. So absolutely collaboration is part of this. We get about 3 percent of our gas from Russia. Germany, as I said, 50 percent, Italy probably 70 percent. We will not make the changes which are necessary unless we work together to help them to reduce their dependency on Russian gas. We can do it on our own, but it makes not an iota of difference to the big picture. So we’ve got to find ways in which we do more collectively in order to do it.

And the other aspect of that, given the magnitude of the challenge and the new technologies coming through, we heard in the hydrogen panel, then let’s collaborate. Let’s work together. Let’s share the ingenuity which is there to see if we can accelerate it, because we are facing a global crisis. And even if we think that competition may deliver the best results, actually sometimes you need to collaborate to bring the best minds together to create bigger projects, to make the change from concept to commercialization that much more rapid. And you can’t do that without the collaboration, I think.


Now, Joe, you work at an organization that is defined by international collaboration. How do you think about that in terms of next-generation technologies, and making sure that those get developed, and shared, and deployed globally?

JOSEPH MCMONIGLE: Well, one of the things we’re doing right now is actually a suggestion that David Livingston and his colleagues in Secretary Kerry’s office recommended, and DOE. Is to really track government spending on clean energy R&D. I guess Mission Critical used to do it at one point, but when they became 2.0 Mission Critical, that sort of dropped. And I think on the—you know, following up on this IEA technology report, I think that it’s becoming critical that clean energy R&D, especially by governments on kind of the most riskiest type of technologies—I mean, you really need the governments to really be investing here.

Certainly, the private sector does its own, but I don’t think we should expect the private industry to invest in the most riskiest technologies. But in any event, we’re encouraging our member countries to invest. And the US, I think commendable, the administration has proposed quadrupling clean energy R&D in the US. Italy is discussed. France has come up with a big new industrial policy that puts a lot of focus on clean energy R&D. And so we’re encouraging a lot of member countries to do that.

But the next natural step of following clean energy R&D is this part that you’ve talked about, the collaboration and making sure that tech transfer is available. And I can tell you—again, I was just in Nigeria for this conference. They’re yearning for help on the technology side, and really very, very open. Yes, they want to develop their own natural resources, but when the alternatives come, they don’t want to be left out either.

And I think lastly, it’s important to recognize the role that this region is playing in this clean revolution, if you will. You have the UAE and Saudi Arabia pursuing aggressive, as we heard in the last panel, clean, green energy—green hydrogen projects. And, you know, they have a special role to play. They not only have to become trailblazers in clean energy—and I think are doing it because they see a commercial opportunity here, but they’re also doing it to be good stewards of the planet.

But at the same time, they have to provide, you know, gas and oil that drive today’s world economy. So I think we have to commend them and encourage them in what they’re doing both on the clean energy side and, simultaneously, providing supplies that the world economy depends on today.

RANDOLPH BELL: Joe, thank you.

So, Regina, when you’re advising clients, many of whom are big multinational companies, but, you know, they develop a new technology, they obviously want to make a profit off it. How do you think—how do you think through this challenge for them in terms of making sure that, you know, they make the investment, they make the money that they need to make off of it, but also that they are good corporate citizens? That this is going to be part of the future?

REGINA MAYOR: So we were just having this conversation with one of the very large IOCs about thinking radically differently about how they finance their investments. A lot of them are balance sheet financers. So their cost of capital is still quite low. Could change, but right now it’s still quite low. And we think that the area of clean energy, particularly around hydrogen and particularly around carbon capture and sequestration, is a little bit like the disruptive moment that offshore wind faced 10 years ago. And if you look at the model of Orsted, formerly Dong, and how they grew and capitalized, I think there’s an opportunity for the IOCs to do that.

So they could do, you know, half a billion sort of experimental developments with CCUS projects, do four or five of them. That’s $2 ½ billion. Onward—de-risk it, get it running, have off-take agreements. And two or three years later, onward sell 49 percent of that, maintain the cash flows. Green investors are probably going to pay a premium for those assets. What an idea! So I think that the industry is going to have to think very differently about access to capital, how they fund projects. This notion of really long-cycle investments that are more joint venture, we are tied in for 20, 30, 40 years, that’s not the wave of the future. So that’s the kind of advice that we’re giving in terms of thinking differently about how to scale innovation and investment.

RANDOLPH BELL: Got it. Thank you.

Now, Neil, you are a domestic—you were a domestic regulator. Did this ever come up in what you were working on, where you’re thinking we’ve got to solve this problem here but there’s a whole wide world out there?

NEIL CHATTERJEE: Yeah, it did. Look, I was surprised when I took my seat as a domestic energy market regulator at what opportunities I would have to engage in the foreign policy arena. One of the responsibilities we had at FERC was to evaluate applications for liquified natural gas export facilities. So I thought maybe I’d go and visit some of our allies to see if there was sufficient offtake before we authorized a domestic build. What I found was our allies are closely studying US power markets. They’re looking at the US example, where we at FERC have the foremost expertise, you know, two-plus decades now, of designing markets that have provided consistent delivery of clean, reliable, affordable electricity. And we have successfully squeezed out carbon in the US through our market designs.

And I thought the US State Department, across administrations, has done a very good job of using FERC for this type of soft diplomacy, where we have gone in and entered into these MOUs. I think I signed seven MOUs during my tenure as chair of the commission with our allies to basically go through this exercise of teaching them what has worked and what has not worked for us as we have gone through this experiment of basically competitive electric markets and delivery. And what we found is that there is a hunger for technology to meet the market design. So as we enable our allies to structure their markets in a way to push for decarbonization while maintaining reliability, it’s an opportunity for US manufacturers, for others to have that tech transfer and to make sure that that’s there. So you create the market dynamics that lay out that regulatory ecosystem that drives innovation and enables the technology to come in.

RANDOLPH BELL: Neil, that’s really interesting. I wasn’t expecting that answer, so that’s—I’ve learned something new today. And I’ve actually learned a whole lot today. We only have two minutes left in our final program, and so I want to give each of you 30 seconds to just—if you had one thing, one action item that a policymaker, a government, a company could take. You can name if it’s a company, a company, or a government, or whatnot. Your choice. What would you advise them to do to build a better energy system going forward? And we’ll go down the line, starting with Joe.

JOSEPH MCMONIGLE: Well, I think based on the current crisis we need to look at the immediate short term. And that’s really investing in energy today so that we can provide energy security to countries, with obviously a special emphasis on Europe. But really, as I talk to ministers around the world, they’re all now very specially concerned about energy security. So I think a focus on energy security in the meantime, and investing to make sure countries have the adequate supplies for their economies and for the world economy, is probably the most important thing right now.

RANDOLPH BELL: Joe, thank you.


REGINA MAYOR: I’ll finish where I started. Commonality, communication, collaboration. Energy security is at the forefront. I’m a child of the ’70s. I remember waiting in the backseat of the car on odd and even days, I grew up in Hawaii, because we didn’t have access to gasoline. So I had to wait hours and hours just to fill up the tank. We’re learning that lesson again. But if we could focus on the common good, carbon emissions. We need—they’re no good. We want to reduce them. But we still need—energy poverty, we have to address it. I was in India right before this, and they import 85 percent of their country’s needs. And to face this kind of pricing environment is absolutely really challenging for their economy. So I’ll leave it there with my three Cs, Randy.


CHARLES HENDRY: Joe’s right about the short-term issues, but I’d add to it actually the long-term issues, which means we obviously have to talk about everything. Because what they need to be looking at now is where is the next crisis coming from? We can already see, I think, where it’s happening. We’re seeing this huge growth in the demand for electric vehicles, but 87 percent of the lithium chemicals for the electrical vehicle industry comes from China alone. A hundred percent comes from Asia. And if we want to have sustainable EV industries in the states, in Europe, then we have got to make sure that we are doing more of that processing work to have a sustainable industry there. So absolutely, focus on the here and now. But let’s be much more alert to the problems which are coming down the line and where there’s evidence to show us that it’s happening.

RANDOLPH BELL: Charles, the Atlantic Council’s publishing tomorrow a new paper on battery minerals and sustainability and US-Canada cooperation.

OK, Neil.

NEIL CHATTERJEE: Look, I’m speaking—my one idea, from someone who’s spent the totality of my career in the US political and regulatory environment—the one thing that I would advise, this is applicable to the US and I think globally as well, I want to make energy policy boring again. Energy policy is boring. And you allow the engineers and the economists and the lawyers to sort it out, you get productive outcomes. What is happening now is energy has become too interesting and too politicized. And you have a political actors who are making decisions around serious things like resource adequacy. We need to take the politicians and the pundits out of it. Let the engineers and the economists and the lawyers design our markets going forward. Make energy boring. It’ll make this conference less interesting, but it’ll be better for the planet.

RANDOLPH BELL: Yeah, I can’t recommend that just because of, you know, we’ve got this thing that we have to do every year. It would be really dull, but I take your point.

Thank you so much, everyone. Thank you, again, all for joining us today. Really give everybody a round of applause. This was fantastic.

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Image: The sun sets behind a thermal power plant in Kyiv. February 2, 2021. (REUTERS/Valentyn Ogirenko)