The Russia-Ukraine crisis and the current geopolitical climate has brought to light critical concerns regarding European energy security. The European Union’s (EU’s) dependence on imported gas for meeting its energy requirements puts its energy supplies in a vulnerable position, and thus, highlights the importance of energy transition. The European Green Deal, which targets 40 per cent renewables in EU’s total energy mix by 2030, is going to be a key enabler in this transformation and help in strengthening EU’s global geopolitical position.
Anna Borg, President and Chief Executive Officer, Vattenfall AB participated in a panel discussion on Energy Security and the European Green Deal at the World Economic Forum Annual Meeting in Davos in the Swiss Alps. In her remarks, she highlighted the importance of sustainable business strategies and Vattenfall’s plans. REGlobal presents edited excerpts from her remarks in this session…
We are going to achieve our target of enabling a fossil free living within one generation. We must achieve that in order to be competitive in the future. This transition is not only about mitigating climate change which is immensely important but now we have a geopolitical perspective as well. I think it is a matter of competitiveness for companies in the future.
It is clearly our business strategy, and not a sustainability strategy, but it is surely a sustainable business strategy. We have started our journey and we are one of the leading renewable energy developers and operators, mainly of offshore wind in Europe. To succeed going forward, and especially with this more squeezed timeline, it is important to not exclude any fossil free energy sources. We are going to need everything that we can get our hands on and that is true for wind power, solar power, nuclear energy, and any other kind of innovative solutions that can be helpful.
We need to focus now on what we can do as the technology, the capabilities and the financial markets are already there. Now we need to widen the existing bottlenecks in order to get these projects up and running much faster that what was the case before.
“We need to widen the existing bottlenecks in order to get these projects up and running much faster that what was the case before.”
I welcome the initiative from the European Union on actually shortening the permitting processes for building new wind power or solar power. However, this also needs to include infrastructure as there is a sort of possibility to do this, but we need to release the forces that can make it shorter.
My main concern is the speed of development right now. The reason for this concern is that the demand is clearly there. Currently, the business community is moving faster than political will, which in some way is a positive thing as that means we can join forces. Many companies have realised that the risk of not transforming into a sustainable value chain and business model is much higher than remaining as it is. I can give three examples regarding this.
The first example is that we joined forces with SSAB (a steel-making company) and LKAB (a mining company) in order to produce fossil-free steel using green hydrogen rather than coal in the process. This has proven to be very successful, and the quality of steel looks as good as traditional steel. The demand is skyrocketing so there could have been a sale of much more fossil-free steel right now if it was already on the market.
The second example is regarding sustainable aviation fuel which is a project that we are doing together with Shell, LanzaTech and Scandinavian Airlines using captured carbon from a biomass-fired power plant and combining this with green hydrogen to produce electrofuels.
The third example is of a project that we are building which will be the world’s first hydrogen producing offshore wind turbine. This will be integrated from the beginning, so that not only are we speeding up the development of offshore wind power but also producing green hydrogen directly in the wind farm and transporting it ashore. There is a huge demand from different kinds of industries that would like to integrate this from the start.
Thus, while challenges do exist, so do solutions and there is nowhere else to look but at our own selves to solve this. When we consider updated market designs, the fundamental problem is that of demand-supply. We want to have more supply of fossil-free energy in Europe, but how do we foster that. It might not be a market design issue only and there might be other considerations as well.
When it comes to investments into new energy production, they have to last for 25 to 40 years. Thus, the fact that the pre-requisites in order to invest are stable is also important. If there is going to be a taxation, it should target the right things. For instance, fossil fuel components could be taxed in order to speed up this transition. But it needs to be carefully done so that it does not hamper investments into new renewable energy deployments. In our case, 50 per cent of our investments go into new renewables and the rest goes into taking care of the existing renewables. So, tailoring this right is extremely important.
“If you look at building new electricity production facilities today, then clearly the cheapest way to do that is through onshore and offshore wind and solar power.”
If you look at building new electricity production facilities today, then clearly the cheapest way to do that is through onshore and offshore wind and solar power. Further, an energy system is required with a holistic view that integrates different kinds of fossil-free energy sources as well as flexibility systems and storage to manage everything. However, the fundamental problem of discrepancy in demand and supply remains. While the knowledge, capability and capital to provide that additional supply exists, the political will and regulatory frameworks need to widen the bottlenecks and enable all of these to come to market at the earliest. This includes secure supply chains, short permitting processes, provision of land and sea for deploying capacity, and also addressing of social concerns around building these new business opportunities. Thus, removing uncertainties in investment pre-requisites is critical.
I feel clarity is important and we are now witnessing an alignment between mid-term and long-term targets. However, we need more action in the short-term to speed up our implementation. Thus, we need to work together to widen these bottlenecks.
Going forward, we will focus on two things. First, we will continue the reshuffling of our asset portfolio and our investments to ensure even more fossil free electricity generation. Secondly, we will work on these integrated value chain partnerships to create not only good business opportunities but have a greater impact overall.