Ahead of the Erasmus Energy Forum, meeting in Rotterdam on 28-29 June, Volker Beckers and Wolf Ketter argue that we need a joint understanding of the need for energy transition and how to implement the necessary changes. Once that is achieved, the market will provide momentum.
We have to recognise that the energy transition is a comprehensive challenge. We need skilful engineers, information experts and economists. And we need a new holistic approach to influencing economics. Businesses must rethink their sustainability goals: is sustainability a “nice to have”, or something vitally important? Where are the touchpoints with our business or with education? Sustainability should be a mandatory part in every syllabus. Businesses can only be successful if they think holistically about how best to achieve sustainable results.
To achieve the transition, we must overcome a range of different beliefs and challenges. We need a diverse group of people to face and work on these challenges. No-one should be excluded from this transition – everybody can and in fact should be a part of this.
Who are the key partners for the energy transition? We all are.
Governments must set the political and regulatory framework that provides certainty. Then society and we, the consumers of energy, have to sign up to this framework. After all, consumers will have to shoulder the cost of the energy transition. It is critical, therefore, that we all feel aligned on this objective. Research and development must anticipate and support the transition in every way possible – universities, think-tanks and inventors. We need to commercialise innovations so businesses can step in and scale up deployment. And technology companies will have to drive a new type of generation, and the applications that will enable customers to take the new direction.
Money is not necessarily the issue. The financial sector is ready to make investments, but energy is competing with other infrastructure sectors and business more generally. With COP21 and the aim of keeping global warming below 2ºC, we know we need to take action now. Most of all it is a matter of political timing and putting our ambitions into action.
Attracting the money
So, how do we attract all the money needed?
Infrastructure investors are uncertain about the political framework, so these investments do not necessarily go into the energy market. Investors are anxious about their sustainable return on investments – will their investments deliver long-term results? Will the governments of tomorrow stand by the things they confirmed today or said even yesterday – and for how long?
Donald Trump argues that there is too much regulation and that markets are imbalanced. What he misses is that a market is defined by a set of rules and thus regulations. Can a market really be fully open and “free” and left only to “competitive forces”? Experience has taught us that we need fair rules and an open and transparent framework, and this ensures fair trade is not at any price.
The EV example
One example of a sector that will initially require more regulation and standardisation is the electric vehicle (EV) industry – which is crucial in creating and accelerating our transition to using clean and sustainable energy sources.
The US president is looking firmly backwards to a time when vehicles with internal combustion engines ruled the world. In fact, when you have new technological innovations to bring to market, you need to look forward.
New markets in particular need support and initial subsidies to get new technologies off the ground. You have to give these businesses a chance to survive, and you want to give customers looking at expensive new EVs an incentive to buy. When technology takes off, standardisation and more regulation will enforce and accelerate the shift to the future. In that sense, regulation enables innovation, supports new industries or branches of industry, allows for the emergence of new markets, and accelerates a societal move to the new.
Market phenomena indicate that the energy transition is well under way. In the first quarter of 2017, something unprecedented happened in the US automotive industry: the market value of pioneering EV and energy company Tesla rose above that of industry giants Ford Motor and General Motors.
Where are we heading?
Tesla is a good indicator of where the automotive industry is heading. It delivered a reported 22,000 vehicles in the fourth quarter of 2016, compared to the 2.5 million and 3 million vehicles delivered by Ford and GM, respectively. But the most impressive fact is that, in just 48 hours in April 2016, 400,000 people reserved Tesla’s Model 3, an electric vehicle designed to be affordable.
The more trust in Tesla from the automotive industry or stock market, the more money the company will have available to invest.
These are economies of scale. If a company is producing a small number of specialised autos, each car will be very expensive. If the company has more money, it can construct more sophisticated automated factories and build cars for less.
Without Tesla, the big companies like Ford and GM may have never invested in bringing their own EVs to market, and now Chevrolet has the Bolt EV and Ford has the Focus Electric. Elon Musk’s vision is to thrive by showing that sustainability is compatible with successful business. For that reason alone, Tesla is a significant company now, and shows that when a company or person brings a real – and appealing – innovation to market, they not only have an influence on the market, but they can also have a positive effect on society. Let’s ensure that standardisation and regulation is enabling and supporting the transition to this new world.
Voting for change
Those who voted in favour of Brexit and elected Trump, did so in protest against the status quo challenging the establishment, not necessarily to disarm the renewable energy agenda.
This did not apply for the elections in the Netherlands and France. This political phenomenon, ultimately, will have nothing to do with the sustainability agenda, it is simply “one in the eye”.
More important, the question is whether we jointly believe in the necessity of an international and cross-sector energy transition.
Indisputably, a change is needed in the way we use our resources – what we take out of the soil, the air we breathe, and the way we deal with resources such as drinking water. We see exciting initiatives on local and national level. This should be encouraged: politicians and entrepreneurs alike should support local initiatives for energy transition because it works best there – in community energy or even community resource initiatives.
The race to be the country with the most sustainable energy system has begun, but the winner is not decided yet. Countries and regions, metropoles, mega-cities and villages should try to become best practice examples for others, and ultimately set the benchmark for sustainability.