Energy for Tomorrow 2015 | The Energy for Tomorrow Lounge: Renewing Renewables

Peter, what about you?

Well, we supply, if you like, the biotech software that is in a lot of biofuels plants. So liquid fuels. And I say we have 2 challenges. First of all, on, on cellulosic ethanol, we need to make it more cost competitive. So get the cost per unit down. And we are well underway to do that. And the other, which is the more significant issue, is actually access to market for our customers. Ethanol is— biofuels is included It's about 27% of the Brazilian mix. It's about 10% of the American mix, and it's a little less than 5% of the European mix. So worldwide, it's about 3%. And the biggest challenge of them all is access to market, bringing that fuel to consumers. It's actually cheaper than gas, but yet it has a difficult time getting to consumers.

Because of— The lack of transportation infrastructure like pipelines?

No, because the companies who own the consumer interface are deeply backward integrated into gasoline.

Okay. Niels, your biggest challenge?

Yeah, I think for me, I think basically twofold. I think on the energy efficiency side, I think the biggest challenge at least has been to make people understand the importance and the potential of that and really in some cases, especially in the developing world, to get projects there that are easy to finance. It's not so much to find the financing, but it's actually structuring products so that they are financeable in a way. I guess that's on one side. On the district heating side, I think the biggest challenge has been actually getting beyond kind of the governmental regulation now out to mayors and cities who actually need to make decisions about that. And I'm pretty optimistic after this week on how that is going.

Okay. Tom?

Well, it's a great problem to have because solar is growing quite rapidly. And I think what would cause it to grow faster would be financing. And financing is directly tied to regulations. So having visibility on regulatory environments and the scale of which we're growing at requires significant You know, hundreds of billions of dollars of financing, perhaps trillions of dollars. So as we look to the absolute mainstreaming of solar, that's really the key.

Okay. So let's stay with solar for one question. To hear some people tell it, the future, we're all going to be making our own electricity. We'll have solar panels on our roofs. We'll have EVs in our garages. We'll sell, you know, to our neighbors. We'll have microgrids. Which makes me wonder, could we be headed to a world with a central power station? And I guess you could answer this question too, whether, you know, the sort of the large-scale wind farm, the large-scale solar farm is kind of obsolete.

Well, I think obsolete is a little premature. I think we're, you know, perhaps 10 years down the road. In the interim, we'll have the addition of Solar with storage and energy management, you can do some really cool things. Will you get entirely off the grid? I think you want the grid so that you can arbitrage, as you suggested. You could wheel power from one location to another location, and you can optimize microgrids or communities. So we're probably going to have a grid for a while, but the idea of these gigantic coal-fired plants with, you know, huge transmission lines, yes, we've— you know, that's going to go away. I think that's a good point. to be in the rearview mirror very soon. It's the economics that are driving that, and it just makes sense to produce energy where you use it.

Your perspective?

I definitely think that we will have a grid for quite some time to come as well. And at the same time, I agree with the trends. I mean, the trends of small or more distributed distributed power station is very clear, and, and the trend that we need also investments in the grid to actually be able to absorb more renewable, I think, is also very clear. So we will go from a market with very high output power, very big power plants distributed out, to a more— a grid that can communicate with Smaller generation, and we need flexible generation as well. So I think the energy market, the electricity market, such a big market, so there will not be one source of generation. It will be a mix, but the trend is clear from very centralized grid to more distributed grid, and we need a market that reflects that.

And so what does that sort of say long-term though? for huge, enormous wind turbines that get bigger and bigger every year?

I think where you see the very big wind turbines is, of course, primarily offshore, and that's a little bit different economy offshore. So in onshore, if you look at the cost of a wind park, about 80% is the turbine. If you go offshore, it's 35%. Therefore, you gain a lot on the cost side with fewer sites and very big turbines. As I said, if you compare that to a very big nuclear plant, it's still fairly limited in size. I think that, again, wind are, relatively speaking, smaller power plants than the traditional fossil fuel or nuclear. on nuclear power plants. And so I think the sizes of the turbines is actually more a way to continue the cost reduction from wind.

So let me move on to Novozymes and biofuels. You know, we've had a lot of sort of issues around biofuels, certainly in the United States and other places. There are even questions about whether it really is environmentally helpful in a carbon— from a carbon perspective. So why— I guess the question is, why should we be investing so heavily in something where the science is being questioned by, you know, some environmentalists who supported it, and there doesn't seem to be a kind of rational subsidy system that makes it make sense?

Well, first of all, if we look at the the facts in the US, then 10% of all gasoline is biofuels in the US. And by far, most of that is made from corn, and of course, that creates an issue with food supplies. The future— I— just to make it straight, I think corn will stay there for many, many years. It's actually a very competitive way of producing fuel. But the future is one of using agricultural waste. So, I mean— And there are several plants today working in that way where it's the ag waste that's turned into biofuels. That is the future all around the world. And so what we envision is that farmers will have not only a, if you like, a food supply chain, but also a waste supply chain that will go into power plants or it will go into liquid fuel. So in many ways, the If you like, the solar panels, they transform solar energy into electricity right away. These systems, they transform the energy that's stored in plants and turn that into a liquid fuel. And when you use the waste, then there's no interference with the food system anymore. Actually, they support each other and create a double income. for farmers and actually creates a lot of jobs in rural parts of the world. Just go to the American Midwest and look at some of these small towns where everything was closing down. Now there's life again. The grocery store has opened again because there's domestic manufacturing of fuel, admittedly from corn, but it's going to— The future is going to be one of doing it from biomass.

Well, we are seeing some of that development. I've been to Iowa where they've got a cellulosic plant or 2 opening. But we've been hearing this for a long time, that these— this is the next generation fuel. And some of these plants that have opened, they're actually going to be focusing on making higher-value products because the price is so low. So how do you get beyond that? to actually make these fuels marketable and deployable on a mass scale?

Well, I think they are, and Brazil is a good example. I mean, actually, it's not in the US this is happening. It's happening in other countries like Brazil. And there are many issues in the American market. Actually, when you look at Brazil, then the biofuels are absolutely competitive to gasoline. That's why they use 27% in their blend. And biomass is really inexpensive in Brazil. It's probably the cheapest place on the planet for biomass. So it works well. The problem that most markets have is that there's not free access to the consumers. The consumer interface is owned by companies we used to refer to as being oil companies, and they, I think, prefer to sell gasoline and oil rather than renewables.

Okay, so moving down the line, energy efficiency, I think, is often, you know, talked about as being the low-hanging fruit and, you know, the sort of thing we should be taking the most advantage of and that it has tremendous, you know, potential for for saving carbon emissions. But I guess one question I have is just realistically, how far can conservation take us? You can't just— I mean, at some point you have to produce energy. So I'd like to ask you that. But also, how can efficiency work hand in hand with some of the other technologies we're discussing here?

Right. I think that's 2 good points. First of all, I think you just take the international Energy Agency, they basically say that 38% of all we need to get to the 2% pathway or 2-degree pathway could come from energy efficiency. So it's very important. It is as important as renewables in the entire equation. But I think it's also important that we don't see it as either/or or as 2 things fighting each other. I think they're actually very complementary because, for instance, By improving energy efficiency, you actually free up the grid so it can take more renewables on it. By improving energy efficiency, you allow, for instance, to do demand response. So you can actually take some of the energy into cold stores or into supermarkets or into different things where you can actually say we take the peak load or where there's a lot of wind or a lot of solar energy and you can use that in a good way in the grid. So there are several ways there and I think it's important for us in this transition that it goes hand in hand because you often also see energy efficiency being very— it's smaller projects, it's often very short payback, and I think you want that mix of investments in a transition period so you don't put all your funds into something that eventually works in with a 20 or 30-year horizon. You do something with a shorter horizon, something with a longer horizon, and one can help the other. So I think it's quite important to do that. One element, just one example of where we are bringing energy efficiency is district energy where we allow to distribute heat in a very, very efficient way. Now that's a backbone in a way like the electricity grid because it means when you have that installed, Then you can actually, you can put on biomass, you can put on geothermal, you can actually have solar systems, you can have electricity driving heat pumps, you can do a lot of stuff that then allows the energy to get into a district energy network and you can save it there. You can actually store it for days or even weeks. So it solves some of this issue of sometimes we tend to produce with renewables energy at times where it may be less valuable. And I think there are some energy efficiency technologies that can help leverage that.

So let me just ask this though, from a business perspective, for both wind and solar, is energy efficiency something that you think helps push your business forward or hinders it, given that you're in the business of making the equipment that makes electricity? Not saves it.

I think it absolutely helps. I agree with Niels' point here, and I think that's really what Denmark has done and why last year almost 40% of the whole country's electricity need came from wind, because Denmark has also worked on the efficiency side, also worked on how to actually get The penetration of wind up to 40%, and that is a good example of the storage that you can do, as Niels talked about. So I think it's a very— that way of doing energy efficiency actually helps renewables to penetrate the grid and still maintain at 40% as an average for the full year a very stable grid. In connection also then with increased connectivity to neighboring grids, which Denmark also has done. So for me, it's, it's an important part of the equation to actually push the penetration of renewable, or in the case of Denmark, wind, and unfortunately not so much sun. But there are of course other places that are a lot more sunnier. So I think it's a good complement to increase the penetration. Thank you. Okay.

Tom, what's your—

A couple thoughts. One, as we see the cost of solar come down 80% in 5 years, we see the mainstreaming of solar, so we then shift from economics— not completely, we're still getting costs down— but we shift from economics to the electricity is only produced when the sun's out. So you need to combine storage and energy management and energy efficiency so that you can start to optimize the whole equation. So you go from, like, our company goes from a solar company to an energy company so that we're solving the whole equation, which means, can you store some solar energy and use it when the sun's not out? Can you reduce the amount of use when the sun's not out? Can you combine the two and optimize the system? And then secondly, what I'd say is the idea that we I think as solar and wind costs come down, we can have energy abundance. And as we get costs down, that we start to say, well, what can we do with this economic renewable energy? So I'm not so sure that, you know, I've heard a lot about, you know, we need to find ways to use less energy, and for sure in the short term we do, but as costs come down, I think we can go into a period of energy abundance.

But, you know, To what end, right? I mean, is that about me getting to blow dry my hair while I'm listening to music and whatever, or are there other benefits that you think can occur?

Well, you can make lifestyle changes. You know, it's often people put a solar system on their roof and say, wow, this is awesome, I'm producing my own energy, now I don't feel so badly about whatever it is. But let's say you buy an electric car, and if you overproduce solar energy, you're literally driving your car on renewable energy. That's sort of the obvious thing. So I think, again, as costs come down, you feel less guilty, and for good reason.

I think you wanted—

No, I just think the whole setting of this COP21 meeting is that we, we need to decarbonize the energy chain, and we need to do it very fast. And, and of course, the energy we do not use has a CO2 mitigation of 100%. So we just need all of it. This is not a competition between energy efficiency companies and energy-producing companies. We just simply need all of it, and we need it fast. So we need biofuels to go into cars, we need electrical cars, we need solar panels, we need wind turbines, we need biomass to go into power plants. We're going to need all of it, and we need it fast.

So what's going to make it possible?

Well, I think— I hope that the conclusion of this conference is going to be yet another improvement on that. I actually think business is stepping up at this conference in a very good way. When you look at this panel and other panels at this conference, I mean, there's a lot of solutions that could actually be applied. And we are very optimistic. We need the political courage to apply these solutions, and of course that's what we— I'm sure what brings us to Paris, that is to make sure that politicians understand that many of these solutions do exist, so let's get to use them, and let's do it fast. But of course it's not a simple process.

What are these solutions that you're talking about?

Well, it's wind turbines, it's solar power, it's energy efficiency, it's biofuels, fuels there.

So you mean technological solutions that exist that haven't yet been aligned properly with policy? Is that part of what you're saying?

I think there's— I've heard Al Gore speak many times, and he has a, I think, a wonderful phrase that he often closes his presentation with, that it requires political courage. And then he adds, but political courage is a renewable resource. And I'm sure that's true, but it's a very scarce resource right now, and we just need more of it. And I think it could actually be done, but it requires courage because you're going to change systems. There are companies who are currently benefiting from the old world's way of doing things, and there'll be new companies benefiting from the way It's supposed to be done. So there are changes to be made, and we need to work together to have them made. And I think that requires political courage.

So in the absence of political courage, how much can you move things forward? How much of a difference does it make the day after the agreement is struck or isn't struck? What do you guys do?

I can volunteer. I think the— I mean, the day after some deal is struck here, I'm sure there will be large debates about whether it's ambitious enough, whether it's binding enough, whether it's fair between one and the other, it's differentiated enough. I think in my perspective, I think the deal is important just being there, kind of a signal of going from Now we talked for a lot— first we started debating whether global warming or climate was an issue. And we've come a long way down the road and now most people actually have understood and agreed that that's an issue. Now I think we came via Copenhagen to say, okay, we should actually do something about it. We're not successful in Copenhagen. Assume we're successful here, then I think it could be the kind of the signal to start more action and do things faster. And I think— just these INDCs that have been put in now on a voluntary basis, they may not be ambitious enough to get to the 2 degrees pathway, but they're clearly more ambitious than what we've seen in the past. And if everybody goes home and says, okay, let me think about what I need to do to get to this, then I think we will get, as I said before, we'll get legislators, we'll get mayors and others out there in the mood of making actions and start to move things. And that's, I guess, that's what I will do on Monday, and that is making sure that we follow up where people have stuck their nose forward and said, we think we can do this, and then we'll try to go and say, how can we help do it?

I think day plus one, we need to educate, you know, that the businesses we are in are good businesses. They're creating jobs, they're getting costs down, they're innovative, and importantly, they're solving what the customer needs. So I think as policymakers create markets that we can thrive in. Our job is to get costs down and to satisfy the customer, and that's what we're doing. And this is good business. So I think we need to educate. And the trends that we already see of 184 countries submitting voluntary plans— think of 5 years ago, it was, you know, unheard of. China and the U.S. agreeing to a plan. So we've already seen catalysts that can make a huge difference in our businesses, and what we need to do is we need to offer solutions and communicate those and educate.

And of course, what businesses are, I think, in general pledging in Paris is to put a cost to carbon. If you put a cost to carbon and you can create that level playing field, which is complicated, I know that, but if you can put a cost to carbon, then innovation and businesses will deliver, then we'll reduce our carbon emission either whether through energy efficiency or through renewables, just put a cost to it. Mm-hmm. Because if it's free to emit carbon, then it won't change. That's one of the issues that many of these technologies face is that it's free to emit. So then put a cost to it. And it's complicated, but very often when I at least sit in these discussions, I get reminded of this old saying We shouldn't let the perfect get in the way of the good. And I think very often we are kind of waiting for the perfect solution, the golden-plated solution, while we actually have technologies, and we represent some of them here, that could be applied today and they would actually help. They probably aren't perfect yet, but then we'll make them perfect.

Yeah, I think a lot has been said. Of course, there is a lot of positive momentum around a conference like this, and that is important on the political side as well. I mean, energy markets are regulated, and long-term policy certainty actually makes business a lot easier. It makes it easier for us to bring the technology to market, to work on the cost out, to work on the right or but also to get financing into the sector. So since this is a regulated market, long-term policy certainty is important. And I think in general, of course, we have a very positive momentum with all the country pledges, but then also, as was mentioned, actually also corporate pledges on how they will use energy for their own operation, but actually also all the companies that now will invest in renewable energy. So a lot of things is happening on the corporate side. And then we shouldn't forget the consumer that actually also politicians listen to. And also, as I've seen, is that 70 to 80% of actually the end users Prefer renewable energy.

Well, actually, it brings up a question, which is, what's more important, these corporate pledges or corporate purchases?

I think it's, of course, a little bit different time schedules. Purchases is, of course, very good here and now, and of course, it also— it's a broader question, I think, because what we need is, of course, both long-term policy pledges, but then of course we also need short-term targets and perhaps even more important today, execution. So it's not just enough with the grand vision, you have to actually clarify the road there and on that road you need to start to execute on your way.

Let me ask you also one other question. Partly, you know, we have 3 representatives from Danish companies on the stage, and Denmark has obviously been a leader in this area, and yet they're pulling back on wind investment. So does that make it more difficult for you to sort of go be a global ambassador and marketer of wind power?

No, I wouldn't say so. I think that, as I said, last year 40% of the country's electricity came from wind, and there are still plans to actually build more wind than that. Looking— Denmark is now also looking offshore. Yes. So I think that coming back to what I said, if you look at the country that not just have had a vision but actually invested in that vision, and even more important, actually executed on the vision, I think Denmark is still a benchmark for many other countries.

Okay. So I'll pose this question to Tom, but really anyone can jump in if they like. You know, we've seen a lot of turbulence in the renewable energy market. Stocks are taking a beating. Abengoa is having some trouble going bankrupt. Are we— is this a market correction? Are investors out of sync with what's happening on the ground? And what kind of effect does this have, do you think, on renewable energy investment going forward?

Well, I think what's happening is— I like to say capitalism works, right? There's a huge market opportunity. We're talking about trillions of dollars in the next 20 years. The solar market opportunity is $2 to $5 trillion. Trillion. So it's a massive market opportunity, which brings in tons of competition, which means we have turbulent markets, which means we have business plans that don't always work. And in the near term, that's not good because investors have invested and then they lose money and then they lose faith in the sector and then they abandon the sector, or at least they participate in the sector less. In the long term, clearly this is the place to invest. This is clearly a long-term trend and there will be long-term winners. So we just have to be comfortable that not everyone's going to be a winner and there'll be a separation. And that's always not linear and up to the right. That can be a bit disruptive. So I think we're seeing in the last 10 years— I've been doing this for 13— our second significant disruption in solar. Having said that, what we're seeing is, in my tenure, 30 times as big of a market. So the overall trend is apparent. It's just not always up and to the right.

Okay. Anyone else want to take that on, or shall I move on to my— what I think will be my last question before opening it up to the floor?

One, one maybe additional comment is that at least I feel that investors are starting to understand that a very good way of doing risk mitigation is to invest in companies that are— has an exposure on renewables, sustainable businesses, that's a good way of reducing your risk profile. And you've heard some of them here in Paris talk about exactly that. I think these companies that has that— that are sustainable in their business model, they stand to win. And of course, as capitalism is working and as you evolve, then somebody is going to fall off at the wayside and others are are succeeding, but generally I think investors are starting to open their eyes on the risk of not being sustainable, and I actually think the premium for sustainability is going to increase going forward.

Okay, great. So in a minute I'll take some questions from the floor, so if you want to email us at q@nytimes.com, feel free. So this comes from a conversation we were having just before coming on stage with you, Peter, that, you know, looking at, you know, tiny steps that consumers can take. We've talked a lot about what countries can do, what big companies can do, but you were talking a little bit about, you know, how much you can reduce just through washing your clothes in cold water and creating products that allow you to. So I just want to get a sense, because this is a matter of some debate, like, does it Does it really make a big difference, any difference, what, you know, I do in my home as opposed to nations and states and huge corporations?

But I think at the end of the day, what makes a difference is what consumers do in their home and the fuel they put into their car and the car they buy. Those are the things that actually makes a difference. And the point I was making is that when you look at Yes. If I look at what my company is doing, then we supply by far the lion's share of all these detergent makers. And actually, one big quest they have now is to get to laundry clothes in tap water. And the energy saving that's in that is actually a large part of the electricity consumption in a home. That's a part of the 38% that can come from energy, from energy efficiency. Energy efficiency goes well beyond the heater of the appliance. It's also the technology put into it. That also goes for a car and it goes for laundry machines. So it's all about how consumers behave.

Great. So any questions from the audience?

I get questions from the audience sent in to me, and actually the audience sees you as competitors, just so you know that. So I have 2 competition questions. One of them is bio, wind, solar, tidal. They're all competing technologies. Shouldn't we pick one and invest all of our energy into making that one work? And the second competition question is, aren't renewables competing too much against each other instead of joining forces against fossil energy?

Well, I'll start. I'll be brief. I'll give you a little bit of time to think about how you're going to add on. You know, solar produces energy when the sun's out, wind produces when there's wind. They're usually complementary. They operate at different scales, and so I think factually they can be complementary, and they don't need to necessarily compete head-on in the marketplace. I think where you collaborate and where you educate is in policy. In policy, we need to work together for sure, because there's soundbite policies that don't make any sense. And I think we can work together to make sure there's facts— factual-driven policy, not soundbite policy. But the idea that we need to join forces, I think free markets are working, and costs are coming down, and solutions We're addressing customer need better and better every day, and I think it's working fine.

I think it was a very good answer. I think we actually are working together on against fossil fuel, both on the energy savings side, on, on if you compare solar and wind. So I think we actually do that. We can of course do more, but generally speaking, I think we are quite often under the renewable umbrella, all of us. Maybe in more enlightened conferences like this, you have a bit more in between, but in general, I would say we are all within the renewable umbrella. And as I said when I talked about Denmark as an example, I think it's a very good example where actually you need all these different methods in order to get a real impact on CO2, and actually they help each other. In my example, renewable penetration is helped by the heating system, which is a saving system that comes from waste and biomass and biogas. So, of course, you will find places where you compete. I fully agree also on solar. In almost majority of places we go, it's a very good complement between solar and wind.

Maybe I can just offer, not being directly in renewables the way they're defined, I think there's also a lot of synergies across, like when, for instance, when we do products that help electrical motors save a lot of energy, That exact same technology, at least the basic components of that, the power modules going into that, they go into the solar system, they go into the wind turbines. So in order for us to be competitive, even though it's solar, it's wind, or it's in the efficiency, we need to have scale. And it's always— it really has been the big issue, that is that renewables have had to gain scale up against the fossil because it's an unfair or an impossible comparison if you start with no scale. You see how the prices come down on solar, that's because the installed number of gigawatts just goes up, same with wind, and we have to run down those experience curves. That's how one day we get grid parity and we get below that. And to the extent we can get synergies between what we're trying to do, I think that benefits all of us. And actually today, I will be I'll be supplying some of those guys out of the same supply chain that also produces energy efficiency, and it benefits both parties.

Okay. I think we can take one quick one from the floor. Right, you, sir.

Hi, my name is Lawrence Jones. I'm with Edison Electric Institute in Washington, D.C. I have a comment and a question. I think we hear a lot about the issue of the grid going away, and I think you asked the I think you answered the question, Diane, what's going to happen with centralized, decentralized, and I think, Tom, you alluded to the fact that in the long run we're not going to have sort of a— the grid is going to go away. Now, the question I have is if we think of urbanization where a lot of people living in big megacities are going to need electricity, where are we going to put all these distributed generation resources? Because again, rooftop is great when you have a home, but if you live in a multi-dwelling home, you have a building, you need enough energy in that building. And then secondly, the issue of—

I think we're only going to be able to take one because we're almost out of time.

Okay, decarbonization. Can you do it without centralization?

I'll be really, really quick. The grid isn't going away. I hope I'm not quoted as saying it will. It's not going away. The answer to your question is rooftop community-based solar and microgrids. You can do solar offsite and bring it to

Okay, great. Well, thank you all so much. It's been a great discussion, and I will now turn things over to my colleague Keith Bradsher, who will handle the last panel of the day.