MATHIAS STECK     Hello and welcome to this DNV podcast special, published ahead of COP27, this Autumn in Egypt. I'm your host Mathias Steck, and I'm joined by senior members of the DNV leadership team here in DNV's boardroom in Singapore, to explore the hopes and ambitions ahead of COP. Despite ambitious pledges made at COP26 in Glasgow last year, no country is on track to reach its 1.5 degrees target. Urgent action is required, right now, to keep net zero by 2050 at reach. What must COP27 deliver in order to realign on vital climate course? What are the challenges and opportunities ahead in the race to net zero? What actions do politicians, businesses and individuals need to take if we are to avert a climate crisis? To discuss these vital questions, I'm joined by four of my highly knowledgeable and experienced colleagues here at DNV. Each of them are specialists in their respective areas, including technology, policy and communication. They will provide us with a global view of the crucial issues around the energy transition. 

Welcome to all of you. And may I ask you to briefly introduce yourselves? 

DITLEV ENGEL     My name is Ditlev Engel. I am the CEO of Energy Systems at DNV. 

CAROLINE KAMERBEEK     Caroline Kamerbeek, responsible for Marketing, Communication and Public Affairs for Energy Systems at DNV. 

HARI VAMADEVAN     Hari Vamadevan, Regional Director UK and Ireland, Energy Systems. 

LUCY CRAIG     Lucy Craig, Director of Growth, Innovation and Digital in Energy Systems. 

MATHIAS STECK     So, welcome to all of you again and thank you for joining. Thank you also very much to our listeners for tuning in. Let me jump right in. 

A lot has happened since COP26. In most of the countries, normality has resumed after COVID19. But this global pandemic is far from over and it's still posing some significant challenges. In addition, we have seen new major and catastrophic global upheaval. In particular, the conflict between Russia and Ukraine, which has caused major shockwaves in the global energy markets. This is compounded by high inflation and mounting government debt in many countries, and we have also seen very visible signs of climate change as, for example, the high temperatures in some of the countries this summer, the droughts or other weather changes. So, in other words, we have a number of crises at hand, which each in itself are also posing a challenge. So, in this context, how much can we focus on the energy transition? 

DITLEV ENGEL     Thank you Mathias. I think first, what is very important to say is that everything related to the energy transition is about thinking long term. So, you are absolutely correct that in the short term, due to the things you just mentioned, we have a short-term energy crisis, but I think it's critically important that we don't lose sight of what is the way out of this situation that we are in, both when it comes to the climate crisis, but also when it comes to the energy crisis. And there, the way forward hasn't changed at all. We obviously have a short-term issue that we have to deal with, but the long-term perspective of how to progress hasn't changed at all, despite what we are watching at the moment. So, we have to make sure that we don't get distracted on the short-term basis because of this. So, I think this is critically important. 

MATHIAS STECK     So, coming back to what I said in my introduction, that no country is on track currently to reach the target of 1.5 degrees: how do we regain ground? 

DITLEV ENGEL     I think we first and foremost have to recognize that we have to do a lot of things very differently going forward. That was also the case at COP26, 25, 24, 23, 22; so, that hasn't changed at all. But right now, we know that if we're going to deliver on the 1.5 degrees centigrade target, we have to cut emissions by 8% every single year. And just to put that into perspective, during the COVID pandemic, we managed to reduce emissions by 6% when we were all sitting at home, not flying, etc., and we can only do that once. So, I think it's pretty evident for everyone that in order to deliver on Paris, something much more dramatic and a new approach and mindset is going to be required if we are going to deliver on the Paris Agreement. 

HARI VAMADEVAN     As Ditlev says, there’s a lot of short-term thinking. Why? Because the background of energy prices pushes countries to focus on energy security and energy independence. But we really need to remember – the cheapest form of electricity today is power from renewables. So, yes, we can have some short-term thinking to balance the energy system using, perhaps, coal. But in the medium to long term, we need investment decisions made today to bring on renewables, and that will not just support the energy transition, but will also improve a country's energy security and energy independence. 

MATHIAS STECK     Yeah, Hari, going a bit deeper on this. So, radical change is, of course, always a challenge. Moving from making commitments to then also implementing the actions is a very hard part to do. How do we facilitate this? 

HARI VAMADEVAN     I'm so pleased, Mathias, that you called it radical change because I think sometimes, we underestimate the scale. Today's energy system is 80% fossil fuels based. DNV's Energy Transition Outlook tells us for net zero, to stay within 1.5 degrees by 2050, we will need to flip that to 80% non-fossil fuels. To achieve that requires a huge doubling down of the effort. Yes on electrification, using renewables for power generation, we’ll need to create a hydrogen economy because there are so many sectors that are actually very difficult to electrify, like heavy industry and manufacturing. But that's not enough. We also need to decarbonize the fossil fuels and in oil and gas terms, that is, decrease the amount of methane and CO2 that is emitted from both production of oil and gas, focusing on energy efficiency and electrification of power generation. But also, crucially, we will need carbon capture and storage for net zero, both post combustion, after you've burned the gas for power generation, but also potentially to help hydrogen, using steam reformation to split the methane into hydrogen and again capture the CO2 and store it. So, we need many actions across the energy system if we're really to achieve net zero. 

MATHIAS STECK     So, Lucy, what is your view on this? 

LUCY CRAIG      Just getting more deeply into what Hari mentioned, the energy transition is driven by the efficiency gains from electrification. So, we need to have electrification of demand, electrification of transport, very fast take up of electric vehicles, for example, the electrification of heat. And then, of course, that electricity has to be delivered by wind and solar, and the very fast scaling up of wind and solar. Even on our current trajectory, we are expecting solar installations to increase 20 times by 2050, wind installations 10 times by 2050. And of course, for net zero, that acceleration has to be even faster. And then, of course, we need huge investment in power grids to enable the transmission of that power to consumers. And also, the distribution networks need to be more sophisticated to manage the distribution of that energy storage, for example, which will be achieved through the use of vehicle-to-grid charging. So, many different changes happening in this energy transition. And also as Hari mentioned, the rapid scaling up of hydrogen and CCS, so that we can also tackle the hard to abate sectors. 

MATHIAS STECK     So, you both just mentioned hydrogen and the oil and gas decarbonization. COP27 is happening in Egypt. These are highly pertinent topics. What can we learn from the way in which countries like Egypt or other countries in the region are approaching this? Hari? 

HARI VAMADEVAN     Egypt has a unique strategic position. Geographically, it’s at the doorstep of Europe. It has one foot in Africa and one foot in the Middle East. With the Suez Canal, it's the gateway between Asia and Europe and, in particular, China. From today's energy system, Egypt has significant oil and gas production and reserves and also a big petrochemical industry. And for tomorrow's energy system, Egypt is blessed with access to renewable resources, solar from the sun and offshore wind from its very windy coastline. So, you can see that inward investment coming into Egypt in the promises that have been made in the last 12 months – there’s been a commitment for 100 billion USD of money for green hydrogen, coming from companies all around the world, that will propel Egypt into one of the largest hydrogen hubs in the world with 3.4 million tons a year, second only to Australia. So, it's by harnessing all of this unique strategic position that Egypt has that it can really use COP27 to be the springboard for the energy transition in Egypt. 

MATHIAS STECK     Lucy, do you like to add to that? 

LUCY CRAIG     I'd like to take further the challenge that we face in hydrogen, because Hari has mentioned the importance of green hydrogen and the role that Egypt can play there. Of course, to really be able to achieve net zero, we have to scale up hydrogen very quickly. Our own pathway to net zero analysis shows that we need to have hydrogen comprising 15% of energy- final energy demand by 2050, from very low levels now. And to create that hydrogen value chain, we need to now start developing the demand, of course in the current manufacturing industry, but also expanding that to other applications, for example, heavy transport, maritime, aviation. So, a lot of work to do to ensure that we have positions in place to develop that hydrogen economy. 

MATHIAS STECK     So, you mentioned a lot of opportunities there already, and I want to go deeper on this later. But before we get there, we obviously also see quite a lot of barriers. So, what is holding back progress of the energy transition, Ditlev? 

DITLEV ENGEL     There are many things which we have to deal with, but I think it's very important here, now, just to take sort of a step back and maybe reflect on what we're seeing currently in Europe, because what we are seeing in Europe now is what happens if you do not have the normal energy supplies that you have gotten used to. And what are then the issues on the table? People are very often in Europe saying currently that we have an energy crisis. I would say we have a fossil fuel crisis because we are short of, in particular, gas at the moment. But it is also important to remember that people at the same time are talking about: “let's hope for a windy winter, let's hope that we get a lot of rain”. And that actually also illustrates that renewables are actually helping us at the moment. 

And if we had a full build-out of renewables as what we are planning to do in the coming years, then actually we would be energy independent. Now imagine, number one, if we hadn't already built out in a number of countries renewables, we would be in an even worse position than we are today. If we cannot use the hydropower in the Scandinavian countries, if we don't get enough wind, etc., then we will really have a big challenge in our hands. So, I think it's very important to recognize that if we had had enough renewables already installed in Europe, we would not be in this position. So, we know that there is an answer out there, but we are just not ready to capture on it. So, I think the very important issue at hand now is to recognize that that is actually the solution, not just on the short-term horizon in Europe, when we have to deal with it, but secondly, also when we look at the build-out that we have to do in order to make this happen. So, the best thing we can do is to actually accelerate the plans that is being made, for instance, in REpowerEU. Now, so back to your question, what is holding us back? It is not technology, and I think this is very important to recognize. It is about permitting, it's about planning, and it's about the market systems that is not doing its job in making it attractive enough to make these investments. So, we have to reform the external market and we at the same time have to make sure that all the processes and planning is taking a different approach. And probably here we would need a – can I call it a COVID19 mindset? i.e., that we just say this is just so important that everything have to give way so we can accelerate this at an unprecedented speed because, actually, the technology can do that. So, I think this is important to remember. It is not a technology challenge; it is an implementation challenge. And that actually means that the answer to all this, we can actually find in the mirror. 

CAROLINE KAMERBEEK     Can I link to that too? Because if you look at the challenge and you heard from our colleagues here, what is going on, I think it's the biggest change process ever, the energy transition, what's happening with climate change. And that's also, I think, how we need to approach it. It is, of course, a technology problem, but I think the technology can be solved. But we have to change all the mindsets globally, not only of the politicians, but also of the consumers, the organizations, the companies. I think that's where communication and marketing comes in, to – to paint a, you know, a rosy picture for the future – how could it look like? – and work on the narrative. That's one aspect. 

MATHIAS STECK     I want to go a bit deeper on this later as well. Hari, you wanted to add something to the barriers? 

HARI VAMADEVAN     Yeah, actually, just to pick up, you know, Ditlev described the energy transition and the challenges and barriers for the energy system. Caroline's just talked about, in fact, there are other challenges. So, it's not a single energy transition, it's multiple transitions and multiple changes. And you've got to carry the consumer. So, there's a consumer revolution happening. Consumers are going to demand the products and services that decrease greenhouse gas emissions, and they're going to demand their investments and their pensions are invested where there's a future. So, we should not underestimate how much we need to carry the consumer in this energy transition. And if we don't, there's a risk there'll be a break. And then the third energy transition, which I think is even more crucial and linked to the flipping of the energy system I referred to, from 80% fossil fuels to 80% non-fossil fuels, that's a jobs revolution. If we're not careful, the role of jobs links very much to the stability of governments and their ability to create jobs, and it's really important we're able to create the jobs in this energy transition around renewables and power grids, but also provide the training so that individuals and citizens can participate in that. Otherwise, if they can't participate, again, they will resist the energy transition. 

MATHIAS STECK     So, we have now established some of the barriers that are holding back progress of the energy transition. But clearly, the energy transition also holds a lot of opportunities, not only from an environmental perspective, but also economically and socially. Lucy, from your technology and innovation background, what opportunities do you see and what benefits can they deliver? 

LUCY CRAIG     There are of course, huge opportunities and I'd like to start by reflecting on how far technology has already developed. If we look at how fast wind technology and solar technology has developed over the past 20 or 30 years, the pace of change has been astounding. I've been privileged to be working in the wind and solar industry for those past decades, and wind technology now, wind turbines are sophisticated power stations, solar PV is very much more efficient than it was even ten years ago. And the costs have come down dramatically over the last two decades. And it's really that reduction in costs which has been driving the energy transition, which is making it even possible. But, of course, we're really only at the start of what is now going to happen. We will see further maturing of wind and solar over the coming decades. And with the vast ramp up of wind and solar, we will see power grids, of course, becoming much more complex. We will see HVDC and HVAC hybrid grids. And to enable such a complex power system, we will see the rapid take up of digital technology. And of course, digital technology is the enabler of making the transition, this much more complex power system, even feasible. And so, I see huge opportunities in new technology as we see the new energy matrix develop over the coming decades and of course, more jobs. I would refer to a study by the IEA which demonstrated that there is a net gain in jobs from the energy transition of 22 million. And so, I think we need to really make sure that we are leveraging that opportunity. 

MATHIAS STECK     Ditlev, you wanted to add to that?

DITLEV ENGEL     I think just to build on what Lucy said, that the economics is unfortunately very often overlooked. If there is anybody listening today who are working in the Ministry of Finance in any country in the world, maybe this is an important takeaway, because actually we are spending about 3.5% of global GDP today on energy in the world. If we go to a net zero system as per the Paris Agreement, we will end up spending about 2.4-2.5% of global GDP, which means that we can actually not afford, just from that perspective, not to do it. And the reason for that is that the electrification that we talked about is going to make sure that the energy efficiency is going to be dramatically improved. And secondly, we are also going to see that the – thanks to the progression of technology – that the amount of money we invest, we keep on getting more bang for the buck. So, it is not a, let's say, a cost issue that we have to deal with, it is a transition issue. But at the end of the day, we'll be much better off also financially by heading down this path. So therefore, it's very important to remember when a lot of people talk about, can we afford this transition? I think the real answer is we cannot afford not to do it, both from a climate perspective and from a fiscal perspective. 

HARI VAMADEVAN     Success in today's energy system is based on access to fossil fuels, which not everyone has access to. The energy system that Lucy described is really very democratic. Why? Because every country has access to the sun, for solar, and access to the wind, for onshore and offshore wind; so, every country can participate in the energy transition. And Ditlev outlined the economic framework. And so, if every country can attract the investment needed – no country can afford not to – then every country will be in the energy transition, not just powering the energy transition, but turbocharging the world economy. 

MATHIAS STECK     So, we cannot afford to delay the energy transition. Still, no country is on track. Do we need to change the way we make commitments and define targets? Is it enough that those are made and defined on a political level? Or do we need to filter them down to corporates and citizens even? 

HARI VAMADEVAN     It’s a really important question Mathias, because governments do set clear targets and goals and they are important, we shouldn't dismiss them, because they set the ambition and direction for the country. But what's more important, and this touches upon what Ditlev was talking about, it's absolutely crucial that governments set the policy, an economic framework that encourages what they want more of and discourages what they want less of. And then you will find businesses do what they do best: they will go running in to seize those opportunities and make the transition happen. And then the citizens will have the products and services they demand to accelerate the energy transition. 

MATHIAS STECK     So, what you are just describing there would require a complete mindset shift at all levels with targets and accountabilities defined at the citizen level or the corporate level. To get there, we would need – and coming back to Caroline's comment earlier – behavioral change on all levels. How can we achieve this? How can we make this energy transition a matter we all care about?

CAROLINE KAMERBEEK     Yeah, I just already mentioned that this is the biggest change process ever, and that starts with a kind of sunny and nice vision for the future. That's how you start a change process. And so far, we see melting icebergs, we see fires, so we see a lot of negative stories around the energy transition. So, first of all, I think we need to paint a very rosy picture of the clean energy future, how that would look like and how beautiful that would be. Another part is there are two big barriers at this moment, which is the complexity of the energy transition, I think that's where communication people and communication professionals can help, and also public resistance because a little bit chicken, egg, if politicians will listen to the general audience and the consumers, so also there, we need to ensure that consumers demand for another future. And that's how, when politicians start to act, because the goals are there, the targets are there, but still there is not enough action. 

MATHIAS STECK     Ditlev, I remember a nice comment you once made: nobody wants to work in a coal mine. So, what do you think about the behavioral change? 

DITLEV ENGEL     Well, I think first and foremost, we need to agree on: number one, do we measure the right thing? And today, what we measure in most countries is the cost per kilowatt hour that we are using. We are not measuring the cost of climate change and we are not measuring the value to society, that, for instance, what Hari mentioned earlier on, the jobs that is being brought forward. So first and foremost, we need to agree on what is the value to us as society that the energy that is being produced without emitting CO2. So, that will be a very important thing to put in place when we need to make some market regulatory reforms in order to make the right thing happen. That will be number one. Number two, I think we also have to recognize that we have what we need, and everybody speaks about: “ah, imagine if we also had this tomorrow”. So, this is really not making good the enemy of great. We have so many good things that we just need to get going and innovation doesn't come from that, you sit, you know, in a laboratory and then you have the perfect solution and then you implement it. You start out with something, and you keep improving it as you go. So, the faster we go, the more we get out there, the more we will also see that innovation will progress. So, these two things are very, very important. 

And we know now that actually the technologies we talk about can deliver what is needed. And therefore, the third thing that we also have to deal with is: what do we do with all the assets and the investments that we have that we will not need going forward? This is not so much talked about in energy transition, but how do we handle that? And just now that you mentioned, for instance, the example of the coal mines, I can, for instance, share here, I know, for instance, that the state of Colorado used to be a very big coal state, but they found out that emitting coal and having a lot of CO2 was working against, also, another important business for Colorado, namely tourists that are coming there to fish and ski. And then they found out that if they stopped the coal mines and instead implemented green electricity, that would go hand in hand with their tourist aspirations. So, they actually made a big job transfer, from people working in coal mines who work in – now producing renewable energy and all the equipment needed, and a lot of other jobs were then created. So, it is also about recognizing that there needs to be a job transition at the same time. So, there are many elements. And therefore, the key issue really is to recognize this on a country level, that this is not just for the Minister of Energy to get this solved. This is about the Prime Ministers in any country, sitting down and making the necessary reforms across the country, whether it's in the tax policies, whether it’s in industrial policies, in your climate policies, your energy policies, because it affects the entire value chain in society. 

And that's why COP27 is very, very important, because it is the biggest and most important thing – it has to come from the top. This is a leadership issue, i.e., this is on the table of each Prime Minister to deal with, because it involves everything within government policies. It involves the Ministry of Finance, the Ministry of Energy, the Ministry of Climate, the Ministry of Jobs, etc., etc. So, it is really about setting the right pace from the top, from the leadership in each country, and recognizing that the systems that are being used today in each country doesn't cut it. So, setting targets, if you have the wrong system in place, is not going to solve it. You also need to reform what you want to measure and what you would think about how it creates value to society. If you get that right, everything will just be running ten times more smoothly. 

MATHIAS STECK    So, that builds a nice bridge back to the point on leadership you wanted to make, Caroline. 

CAROLINE KAMERBEEK     Yes, yes. If you look, I talked before about the change management and how that is so important and, of course, what makes a key difference in making this big change are the leaders. And when I talk about leaders, to make it very practical, these can be, you know, the mayor or the governor in Colorado who shares his best practice with other countries around the world, other areas in the world. That is one. But also, CEOs of companies, that are Fortescue, your big mining company - we talked about heavy industry before with Hari - the CEO of Fortescue, you know, reaches out to other CEOs, and becomes a best practice and shares the best practices. So that is I think where leaders, people look at leaders when – when there is change. So, I think if we start there and they make big steps, and that's also where communication professionals can support the leaders in bringing the right stories out. I think that could help the energy transition go faster. 

MATHIAS STECK    So, we have covered a lot of ground in this podcast here already. I have one last question, which I would like to extend to all of you. Coming from your specialist area, what would be the single most important action we need to take in our race towards net zero? Starting with you, Ditlev. 

DITLEV ENGEL    I would say: use and understand the technologies, what they really can provide, is number one. And then, if I may add, number two is that most market systems that we have today doesn't work. We need to make market systems that is in tune with what we want to achieve. And then I would suggest that we would make a barometer for COP28 where we are measuring all the time. Did we from COP27 to COP28 reduce emission by 8%? And do we from COP28 to 29 see another 8%? Because then we know we are on track. So, we need to make it transparent and clear what we measure, what we want to achieve, and that everybody will follow through on that. 

MATHIAS STECK    Thank you. Lucy, what is your answer? 

LUCY CRAIG   If I look specifically at the technology needed to accelerate the pace of the energy transition, I would look at digital technology. I touched very briefly on that. But the way we use data, the way we leverage new technologies will be essential in speeding up the pace of the energy transition. 

MATHIAS STECK     Thank you very much.

HARI VAMADEVAN    Mathias, I don't think we should make the energy transition a single Herculean task. Why? Because none of us are Hercules. The energy transition is a series of mini transitions with a myriad of actions. Businesses and citizens just need to concentrate on delivering a few actions. Then we can make the energy transition not mission impossible, but we can make the energy transition mission possible.

MATHIAS STECK   Thank you, Hari. Caroline? 

CAROLINE KAMERBEEK    Yes. I hope that the players in the energy industry, they come together and bring a positive story to the world, because I think that's what we need, a positive vision for the energy transition moving forward. 

MATHIAS STECK    Ditlev? 

DITLEV ENGEL    Just as we are talking here and Caroline mentioned how important communication is, so I was thinking, how do we make it relevant for the individual? And when the crisis happened in Europe with Ukraine, I remember that – I think it was the German Minister who said that now renewables should be seen as Freedom Fuels, which was a new way to characterize renewables. But maybe we should understand that that is an i-fuel. And what I mean by that is that, you know, we have an iPhone, it's relevant for the individual. So maybe if we get to understand that this transition is an i-fuel, i.e., it involves everybody, everybody has important contributions to make, then we might make it happen. 

MATHIAS STECK    Thank you to all of you for what has been an important discussion ahead of COP27. The energy transition is multifaceted and complex, and what we all agreed on today is that only by breaking down targets and designing accountabilities on organization and individual level, we will see the change that is needed. The unfortunate truth is that, since COP26, emissions haven't decreased, they have increased. We can't afford for this to happen after COP27. The results of this would be catastrophic and will lead to irreversible destruction of the living environment for humankind. The race to net zero sounds to be a difficult task, but based on what we discussed today, we have a real chance to achieve it. To hear more podcasts, visit dnv.com/talksenergy and look out for a new series of DNV Talks Energy launching in December this year.