Investing in a green future

REMI ERIKSEN 

Welcome to Trust and transformations - leaders navigating change, a DNV podcast. I'm Rémi Eriksen, DNV’s group president and CEO. 

In this series, myself and our business area CEOs sit down with other global leaders to talk about how they tackle transformations, build trust in their business and people, and what they think is coming next for their industry. Right now, they are experiencing a series of historically significant transformations, making trust more important than ever. 

This episode is hosted by Ditlev Engel, CEO of Energy Systems at DNV. 

DITLEV ENGEL

Hello and welcome to Trust and transformations - leaders navigating change. I'm Ditlev Engel, CEO of Energy Systems at DNV and I'm pleased to be welcoming Christina Grumstrup Sørensen, Senior Partner at Copenhagen Infrastructure Partners to the podcast today. 

Founded in 2012, CIP is the world's largest dedicated fund manager within greenfield renewable energy investments and a global leader in offshore wind.  

The company has more than 500 employees and offices all over the world. In just 12 years, CIP has become one of the world's most sought-after investment firms for green energy and infrastructure partners.  

Christina, welcome to Trust and transformations, leaders navigating change. It's a real pleasure to have you with us today. 

CHRISTINA GRUMSTRUP SØRENSEN

Thank you so much. 

DITLEV ENGEL

I would like to start our discussions by asking you, after 19 years of experience working in the energy sector, what energizes you when you come to work every single day?

CHRISTINA GRUMSTRUP SØRENSEN

Well, it's the same thing as when I started my career and worked with something else. It's probably all around the people. But aside from that, I also think delivering energy, sort of a product that is so pivotal in our society and is the pillar of our modern way of living and building businesses, is of course super exciting in itself. Then, on top of that or at the same time, you could say the transformation delivering that same product in the 19 years you alluded to has changed so much. We deliver exactly the same product, energy, but the way that we have developed our business model and the energy system, I think is both interesting, complex and highly motivating. 

DITLEV ENGEL

So, you spent much of your early career actually at DONG Energy, which is known today, I think, as most known as ASTEL, and at that time when energy was just starting to scale. So, if you try to think back, what drew you to the industry and maybe can you give us just a little sense of excitement and challenges that you faced in those early days?

CHRISTINA GRUMSTRUP SØRENSEN

That's a good question. When I started in the energy company, the main energy source at the time was oil and gas, and it was coal-fired power stations. And I was heading the strategy department and then in the first years of our strategy making - this was back in 2005 - wind took up a little bit of space but really not a lot. It was almost sort of at the demo, or you could say ‘license to operate’, level at the time. So, the way that the supply chain delivered or grew in the timeframe, first from 2005 until 2010, to becoming a viable technology, and then probably from around 2012 until 2015 where the levelized cost of electricity really went down, particularly in offshore wind. 

And also just in the recent years, the way the levelized cost of electricity, for example, solar has developed so dramatically. I think it's fundamentally changing the way we use energy. So, today the energy source that really grows is electricity. So, I still remember when I was a child, I was told not to turn on the heat by electricity; that was way too expensive, and now we are talking about decarbonizing our energy delivery system so that we will use electricity for so much more. And that has been sort of in that transformation where the renewable energy has become the most cost competitive technology. So, I think there have been many exciting moments and many sort of examples where I look back and think, this is only 15 years ago, and that dramatic change is sometimes good to think about particularly also if you think about what is ahead of us. So, people will ask me, “can we deliver?” and then I come with some examples of where we were 10 years ago and some people don't even remember it and some people don't even believe it. 

DITLEV ENGEL

Sounds a bit like what Walt Disney said, you know, “if you can dream it, you can do it”, so maybe that's a good segue to talk a bit about the clean energy transformation ahead of us. If you should try to outline in broad terms ways in which CIP is supporting the transformation towards new energy systems in the future, what would you say there? 

CHRISTINA GRUMSTRUP SØRENSEN

So, in CIP we call ourselves a hybrid between an energy developer and a fund manager. So, we will typically do greenfield development of energy assets, and then we will connect this with financial investors, making it into an investment product. Over the years, we have accumulated more than 120 gigawatts of capacity in our pipeline, so all projects can be developed and built in the timeframe of the next five to eight years.  

And if we look at that, whether that is sizable or not, we actually made the calculation that if we are successful with our fundraising with our investors and if we make all these projects to the financial investment decisions and commercial operations, they will actually displace between 100 and 150 million tons of CO2. And this is by 2030 that this pipeline could become relevant, and if we look to the targets of the Paris Agreement, 100 to 150 million tons actually is equivalent to 1 % of the target that we need to reach. 

So, in some ways, a small company, and you said it with a little more than 500 people, can actually also have an impact, not of course by ourselves, and I'll come back to that, but just the fact that we can actually leave a mark with our pipeline, I think that is quite significant. Then on top of that, we also need to take a look at what will the energy world look beyond 2030. And there, we continue to push ourselves to be both relevant but also ambitious.  

And one example of that is the Energy Island concept that we have worked on for the past four to five years. The energy islands will not be relevant tomorrow, but they will be relevant from late 2020s to the 2030s onwards. And they, for example, in the North Sea where we have shallow waters and loads of wind, they can become a collector of large-scale offshore wind projects.  

So, you can actually harvest the energy from the wind at a large scale and, combined with the power to X, it can be sort of delivering the base load that we were used to with the coal and with the fossil fuelled electricity system. So, I think, you know, that's how we try to work with it both in the near term and in the middle term and in the long term, and we need to push ourselves to continue to develop the system just as we did in the past 19 years. 

DITLEV ENGEL

And there you touched a bit upon the Paris Agreement and the political aspects of it, and last year at COP 28 in the UAE, both DNV and also CIP were there. I was there to advocate for the deep, deep carbonization of energy systems, notably through the triple up, double down campaign, and you and CIP launched a three billion growth market fund to finance 10 gigawatts of renewables in middle income countries.  

And now it's about half a year ago, what is your main takeaway from this COP and for the renewable energy sector and how it should evolve as you reflect on what was discussed there? 

CHRISTINA GRUMSTRUP SØRENSEN

I think in many ways you could say that the COP28 marked sort of the first stock takes since the Paris Agreement in 2015. So, in many ways I was pleased to see personally that the tripling of capacity towards 2030 is such a practical target. Then you could argue we didn't get it down to the last commitments maybe, but it's still practical and it's something every nation can do something about, and it's also very easy to communicate and understand what it is actually that we're trying to achieve. So, I think from that perspective, there are many very positive things from the COP discussions that took place late last year.  

Now we need the nations to act and governments to implement and developers and energy companies to deliver, and I have always found that the interesting role. So, just going from the long-term plans and then chopping it up and delivering actually the practical plans. So, I think that is the big task now and that's where we need to collaborate more than ever and to continue the good communications that have started now and again, and lastly, in the last COP. And also push ourselves to be as practical as we were when we decided to triple the renewable capacity by 2030. 

DITLEV ENGEL

And we also know now that, at least right now, that there are some challenges in the renewable sector: higher input costs, et cetera, et cetera. And at the same time, there's a big discussion of the support from governments in order to maintain the progress of the energy transition.  

How do you see your role as an investor in this transition to maintain the momentum, which is so important for the full utilization of the value chain? 

CHRISTINA GRUMSTRUP SØRENSEN

Yeah, it is actually true that 2023, you know, there were challenges on the supply chains, particularly in the offshore sector had some challenges, but I think it's also fair to say that the projects have come back and many projects have been delivered solidly since also those challenges.  

And the macroeconomic world changed a lot in the last two years. I think we had all probably gotten a bit used to, things didn't sort of increase or decrease for that matter, or decreased as a consequence of economies of scale, for example. But there are also other factors and we have been reminded of that in the past. 

I think in the past two years, we have also been reminded or maybe a little bit longer, that you know, a pandemic can happen. Terrible warfare, even on European soils, can happen. Trade wars can have large implications.  

And that's probably where it's more important than ever to focus on the implementation but also for the individual countries to continue on their strategy for renewable energy, because this is actually an opportunity for all nations to have a security of supply, to create local jobs, to make sure that you have affordable energy prices or an energy supply. So, I think from that perspective, there are many reasons why renewable energy is actually a solution in that equation rather than a challenge.  

You will always need to manage your risks, whatever they are at any time in your projects and that's also one of the cores of our business model and the risks are probably a little bit different compared to what they were five years ago. But it's still a lot about risk management and we can still deliver attractive projects, as can many others and many projects are coming online. And I think we have seen many of the adaptations from the recent economic turmoil now lowering again and the input prices being more stable. And then we need to manoeuvre around the changes that have evolved from the global markets polarizing a bit again and so forth.  

But they are all manageable. And I think we will still, the green transformation has started, and I don't see any sort of change to that movement. 

DITLEV ENGEL

That's very good to hear and maybe just a last question here, at least on this topic of the clean energy transformation. I mean, we are every year, publishing our energy transition outlook and what we always tend to say is that we are very technology optimistic, but somewhat regulatory pessimistic and we actually do a lot of studies which shows that the political angle is seen by many as a much larger risk than the than the technology risk.

So, we’d be keen to hear that it's about two billion people going to the polls this year. We just had the EU election as well. Are you anticipating any changes in investments in green energy because of this or how are you preparing for it or do you also see, what you just said, this as a risk that you need to manage or service, kind of, how to find a way to navigate those waves? 

CHRISTINA GRUMSTRUP SØRENSEN

You somehow ended on answering my question. I think it is a risk that we have always monitored, the country specific risk and the regulatory risk. And it is also true that in some ways it's something we tend to speak more about today than five or 10 years ago. 

I think though the fact that the green and renewable energy is cost competitive is the main driver of why it's still such a relevant technology. And then I think what we see in most markets is that the energy transition is becoming an integral part of the industry policy of a nation, typically regardless of a government. 

Security of supply is of broad interest to any political party. And just the affordable energy is also important and the one thing I probably didn't mention so much in this interview so far is also naturally the delivering or the war against climate change. So, it all started, or at least one of the key rationales back in the days when we first started doing green energy, was avoiding CO2. It's still a factor, but there are so many other factors that are important. So, in my opinion, when we look around in our projects, of course there are risks and there are also outcomes that would be sort of reasoning with a faster or slower pace, but the pace is there and the rationale and the investment rationale for green energy is still intact. 

DITLEV ENGEL

And now obviously you are running a lot of big projects that you also of course have to land, and you said that the close collaboration between the development and construction teams, suppliers and partners and shareholders, for instance, was crucial in the success of the Changfang Xidao offshore wind farm in Taiwan. So, as an investor, how do you ensure this kind of collaborative approach in such a big project like this? How do you work with that as an organisation?  

CHRISTINA GRUMSTRUP SØRENSEN

So, I often say in my organization that a project is king. I work with a lot of financial colleagues, and they always say cash is king. I always say projects are king. And that is really important because projects are governed in a way where roles and responsibilities are clearly delegated, including stakeholder management and how we work with our suppliers and with the regulators and so forth.  

So on the specific projects, Changfang Xidao and Taiwan, we inaugurated the project just a few weeks ago and it will be fully commercially operational later in the year, so this is 2024. We started working with that project back in 2017, so we’ve worked there, we've been on the ground. The first people we hired for the project are still there. They were hired in 2017. 

And we have been of course traveling extensively back and forth until the team reached a critical mass and an experience and expertise level where they could of course also independently manage many of the risks and the stakeholder communication and collaboration on their own. And if you ask me today if there were a lot of problems during the development and construction, I would say there were some.  

If you sort of looked in my calendar at specific times during the construction and development, then probably there were some sizeable issues because Taiwan is building up a new industry and there were no offshore wind farms when we started developing this wind farm, so the whole regulatory regime had to be developed in parallel with us developing the project. And some of the construction site or production sites, manufacturing sites for the large steel structures had also to be set up and developed in parallel with us developing the project.  

And when you do things in parallel, they're typically faster, so that's good. So, they are already now deploying a lot of offshore wind in Taiwan but it's also more difficult because you need to coordinate and collaborate more. So that's really integrated part of our values and how we work.  

We try to explain it every day that we are a proactive financial investor. We take responsibility and relationship and long-term relationship is a call to how we work because I also say that no one person can build a wind farm, not even a CIP person. 

DITLEV ENGEL

Sounds pretty true and of course, I also will have to ask you that in order to have this kind of trust in the decision making within CIP and of course having international standards for certification of new technologies and so forth and so on, how important is this for you to get the trust and willingness to really finance all this scaling and have the necessary trust also from your investors into you? 

CHRISTINA GRUMSTRUP SØRENSEN

It's a really good question and it's actually down to one of the elements that I tend to talk a lot about. I think we can probably do a good project without standards and certificates. I think we cannot move very fast if we have to do one project at a time.  

So, I think having standards developed for industry and for platforms, for technologies, and being on the forefront when we know we need hydrogen pipelines and ammonia handling in the next five and ten years, we need to develop those standards and protocols now, because otherwise they will be the bottleneck for the deployment of new technologies.  

So, it's a little bit like if we were speaking all our local languages in the world, it would be difficult to collaborate. If we cannot agree to standards and protocols in the green energy transition and be proactive with them, it will just be an immensely slow transition and we could probably not call it a transition, but rather development. So, from that perspective, and in my opinion, it's just pivotal to the speed and the scale of the deployment that we can work effectively around this area as well.

DITLEV ENGEL

Another topic that has come up I would say a lot in the last few years, is the whole issue around cyber security. And of course, the energy sector is something being much more interconnected, and then also being critical for the functioning of societies.  

So, how is that affecting your investment criteria about how to make sure that your assets are really cyber resilient? 

CHRISTINA GRUMSTRUP SØRENSEN

Yeah, so I think all of us can agree to in the past five years, it has become more sort of troublesome even to check your email. So, I think the same goes for the energy assets. The systems that they are operated on and how they interlink with the energy system, the requirements are also increasing and that is of course an integrated part of developing an energy project. 

So, we of course continue to follow that development and expect also the development to continue. When we have the energy system where molecules and electricity are combined and we cannot rely on the energy sources that you can just turn on and off all the time and they need to, distributed energy needs to interlink with central energy in a much more difficult way than we have done before. I'm also sure that the cyber agenda will continue to play a large role in that system. 

DITLEV ENGEL

I'm sure we could go on talking for a long time, Christina, so I will end on asking you advice to hopefully many of our listeners. Now, you are a female, very successful senior partner and a global leader in the energy sector, which unfortunately still is predominantly a male environment. 

So, my questions to you are really number one, what advice would you give to young women who are in the early stages of their career in this very fast evolving industry, and what should the men do in order to make sure that we get a much better gender balance in the industry?  

CHRISTINA GRUMSTRUP SØRENSEN

Those are super good questions so thank you for that. I think I would first want to congratulate all the young people who have chosen to work with the energy and with renewable energy because you have chosen a topic that I'm sure is quite easy to be passionate about and that's probably one advice - working with an interesting topic is of course always good. And working with interesting people is also very important. Also because you need both patience and stamina.  

So, unfortunately, the 10,000-hour rule also applies to working in a workplace and working with your career. So, you need to be good at your work and to deliver on your end products to see sort of the progress in your career and also making a larger and larger impact on what you're working with.  

On the gender part, I would say there's a big difference to when I started my career 25 years ago. For example, when I got my children, it was very common, it was only the female taking the leave and the male did not. Anywhere in our country and society at least, and I see a very big difference today where it's much more normal that both the mother and the father take an equal part of that share.  

And I would say to the women that I think it's great that we let go and also, you could say, embrace that we have the fathers also taking care of the kids in the early years. And I would say to the fathers that it's great that we support the mothers in getting safely back to the workplace so that we can start working in a new life, which we all know it is when you have a family with smaller children.  

I think it's a privilege to work in a society where we have developed like this, and then we also need to embrace the changes and do it as it was set out.

DITLEV ENGEL

Thank you for sharing that and thank you so much Christina for joining us today. As always, a real pleasure speaking with you. And also, a big thank you to everybody who joined and listened in to Trust and transformations, leaders navigating change. My name is Ditlev Engel. Thank you so much for joining. 

REMI ERIKSEN

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