Transitioning faster together post COVID-19

NARRATOR Welcome to the DNV Talks Energy podcast series. Electrification, rise of renewables and new technologies supported by more data and IT systems are transforming the power system. Join us each week as we discuss these changes with guests from around the industry.

MATHIAS STECK Welcome to the final episode of this special series of DNV Talks Energy, where we explore with our guests the impact of COVID-19 on the energy transition. For this final episode, I’m delighted to be joined by Ditlev Engel, CEO at DNV – Energy. Welcome, Ditlev.

DITLEV ENGEL Thank you very much, Mathias.

MATHIAS STECK Ditlev, you have an extraordinary background, including eight years as CEO of a global wind manufacturer, as well as your work with the Sustainable Energy for All initiative in which you work with leaders in government, the private sector and civil society to gain universal access to sustainable energy by 2030. Please could you give our listeners an overview of your background and your role at DNV?

DITLEV ENGEL Yes, Mathias. Well, I think first and foremost, I would say I’ve been in this sector for the last 15 years and, as you mentioned, in different roles starting in the wind industry. But during that time, I automatically got engaged with a lot of people also in the public sector because obviously energy and the energy industry is very much connected between both the private and the public sector. And one of the things I’ve really learned, working with governments around the world, both in that capacity but also later on in other capacities as a chairman, as Special Envoy for the Danish government, is that it is so important that we do this together because industry needs to ensure that there is the products available and the opportunities from a technology stand, but also, government needs to make sure that the regulation is in place and obviously also that the other things that governments are focusing on, on energy security and so on, goes hand in hand. So, a very close relationship there I think is one of my important learnings over the last 15 years. I would then say as my role here at DNV, I’m the CEO of the business area, Energy, where we are 2,000 people working on renewable generation, transmission distribution, renewable certification, energy management and other services where we are 2,000 people working globally with players in the industry, both those who generate the power, those who transmit it, but also those who use it and those who invest in it who are our main customer focus groups. And we do that in our daily life, but we also do it together with other colleagues at DNV working in other business areas. So, we are in the company, total, 12,000 people and of course also being engaged, working with them. So, I think it’s important to say that being part of this industry in the last 15 years is really showing that sharing and working together is so, so important in order to achieve success.

MATHIAS STECK To get us into the topic, Ditlev, we have discussed here in this series how COVID-19 has profoundly impacted on policy, the economy and the wider society. And before we discuss some of the great insights from our speakers from previous episodes, I would like to ask a more personal question, how the pandemic has changed the way you personally approach your work and also how it changed the way that DNV is operating.

DITLEV ENGEL Well, first, I would say I’ve been pretty good at using Teams. Actually, since I think 10th March or something like that, I have basically only been engaging with both customers and colleagues over the PC. So, that’s obviously a big change. I have not been travelling, which I tend to do quite a lot, for the last three months. So, that’s a massive professional change. And of course, like everybody else, on a personal note, then obviously not seeing family and friends as one used to do. But then I still have to say, being based in Northern Europe, I think we’ve been quite fortunate that I’ve still been able to go out for a run and get outside where some of my colleagues have been basically locked up in their houses and apartments for quite a long time. So, it’s been a big change but definitely I think, for us, we’ve been fortunate, and it’s been manageable. But it’s a complete new daily life, and it still is. I actually next week will take a plane I think for the first time since more than three months ago.

MATHIAS STECK Right. So, as you alluded to, COVID-19 really had an impact on wider society. And there is one really significant result out of this we can see, and this is the change in the energy usage. One of our guests in this series was Jennifer Layke from the World Resources Institute. And she suggested that countries must, in her words, build back better following the pandemic to empower people to rethink consumption habits. In your opinion, Ditlev, what would be the right approach to do so?

DITLEV ENGEL Well, I think, first and foremost, if we go six months back, none of us could have envisaged the impact that COVID-19 has had. And I see at least two changes from that. I see, first and foremost, that obviously, as we just talked about, digitalization has much further accelerated and will continue to do so, also as we discover new ways of working as we probably could not imagine, even though we knew that it was around there. I think that’s the major change of using new tools differently. Another thing is obviously, the climate challenge has not gone away due to the COVID-19 but we have also seen some changes, what happens when we reduce. As the COVID-19 has caused the carbon emission reduction quite a lot, I think a lot of people have seen maps over the world, over cities where, all of a sudden, you have seen that the pollution level has gone significantly down. I think people have shared pictures of mountains that you couldn’t see before that you, all of a sudden, can see again. Because before COVID-19, we had a very, very high also pollution level. So, we have also seen pollution going down. And we are starting to see that, actually, this gives also new opportunities of thinking of what kind of cities and pollution levels do we want in the future, where we’ve now got some real-life learnings of what it could be like when we have reduced pollution so much. So I think we are seeing that some of the things that we were working on will be further accelerated because the need for climate actions is, let’s say, as important now as it was before COVID-19 and, at least in our business, we have not seen that people have changed their focus. On the other hand, people are talking even more about how to green the grid and green the economy. And I think that is posing new opportunities, to Jennifer’s point, of how we are now using this very serious situation to hopefully create and accelerate a transition that we know we have to do, and that we also knew we had to do before COVID-19 but is now also being quite tangible, what are some of the other benefits that we actually now have seen, like lower pollution, could mean going forward by accelerating and building back better.

MATHIAS STECK So this crisis also holds a lot of opportunities and, later on, I would like to draw on this point that we also still have a climate emergency. But before we go there, I would like to ask the impact on industries. Some have been ramping down, even closing their operations. In your conversation with DNV customers, Ditlev, what are the biggest challenges that businesses are having to contend with, both in the present but also over the longer term?

MATHIAS STECK Yes, to go maybe a little bit deeper on this, latest since COP 21, climate change had become this kind of mainstream topic covered by media and has drawn a lot of attention from governments, but especially also from the public. And not long, actually, before COVID-19, we had arrived at the sense of emergency that there is a high potential that we’re actually already looking at a kind of climate emergency. So, when we look at the Paris Agreement, when we look at the Green New Deal in the US, you think they have jeopardized, or they are just a bit delayed?

DITLEV ENGEL Well, I think the whole world has obviously watched, for instance, how much the oil price has gone down. But one of the things that we do not hear so much about is how the electricity prices have developed. So, obviously, we have seen that because of the lower consumption of power, it also means that the electricity prices have gone down. So, I think it’s important to say that our customers differentiate between the short and the long term. So no doubt, in the short term, many of the clients have also been impacted by this. But when we then talk to our customers, looking ahead, we are not hearing anybody is shying away from sticking to their plans of moving ahead, of building out the energy transition, whether it’s on the generation side or whether on the transmission or distribution side. So, I think that is very much there now. What is also, I think, very interesting to follow is obviously because of also the very significant economic impact that COVID-19 has had, that we are now seeing many governments talking about, okay, so when we are now going to further stimulate the economy, let’s make sure that we do it in a more sustainable way; let’s focus on the green transition and use this opportunity also to create new jobs, new industries that hopefully can make also an economic recovery for many of the jobs that we have lost or that we stand to lose because of this situation. So it is, on one hand, posing of course a short-term challenge. But I think, on the longer term, it creates an opportunity for some major new developments and initiatives for hopefully also a very robust green job transition.

MATHIAS STECK So on this energy decrease or energy consumption decrease, we had Dave Turk here from the IEA in this series. And he discussed that renewables are proving to be hugely resilient during the pandemic. On the other hand, of course, we see, as you just mentioned, the drop in the electricity prices and we know that some of the zero-subsidy bids for offshore wind farms have made certain assumptions about the increase of electricity prices. What do you think this whole environment does to investors and their confidence in the clean energy sector, and what impact that may even have on the speed of the energy transition?

DITLEV ENGEL Well, you know, Mathias, I joined this industry in 2005. So, being in this industry for the last 15 years, we’ve seen definitely ups and downs. And the last time that we had a major, let’s say, economic crisis was in the financial crisis in 2008-2009. At that time, the cost of the renewables was significantly higher than they are today. And if you look at how much we have taken the cost down since the last crisis, about 12 years ago, it means now that the cost of generation of electricity from renewables, the cost of batteries, etc., we have lowered the cost of energy dramatically compared to where we were at that time. This is giving obviously a completely different opportunity also, going forward, because the cost is so much lower. So, that’s one thing to remember where we stand right now. I think the second thing also is some learnings to say, what kind of industries do we have at the moment that could now play a new role in the energy transition, creating new jobs and opportunities? And if you allow me, just to share a story from back to the 80s that I have personally experienced. Back in the 80s in Denmark, where I come from, shipyard was a massive industry. And even though we are a very small country in Denmark, there was nearly not a city that did not have a shipyard. And that was the most important industry. But in the 80s, it became apparent that it was very difficult for European shipyards, and Danish yards including, to be competitive because of the rise of shipyard new building in Asia. And therefore, it was clear that a lot of jobs would be lost and it was a course that you couldn’t change. And that’s exactly one of the times where the wind industry in Denmark started to grow, where people looked at what kind of competencies do we have in the shipyard industry that we could use into a new industry. And therefore, the wind industry in Denmark is very much also built upon using skills from shipyards that no longer had a future, who have now then transitioned into a new industry. And that gave the wind industry a big push forward because they got a lot of competent people into that. So my hope is that what we are facing right now is that we will look at some of the competencies we have from industries who are challenged. How can we use these competencies, going forward, to build a new energy future which is carbon resilient and, at the same time, can ensure that many of the jobs we stand to lose from some of these industries, we can use building a new energy transition and a future? I think that would be immensely important for not only our economy but also in order to transition much faster because we will then utilize a lot of skills in a different way, just as we saw in COVID-19 that we were starting to use our computers in a different way because we had to because we couldn’t travel. So, I think we need to think differently. And I think also, we need to remember now that the renewable industry and the green industry has grown from a small industry to quite a significant industry, both in terms of value but also in terms of the way it needs to scale. So all this thinking we have to build into it. We have seen some examples of people talking about offshore islands, for instance, how to combine the offshore wind with green hydrogen, etc. So, we need to think much bigger, and then we need to look at what kind of skills and job transition can we do at the same time. I think that’s going to be immensely important to build back better. I think that will be very important. And it will be a double-up for both the transition and for the carbon reduction.

MATHIAS STECK So as you just mentioned, there is little doubt that renewables will grow strong. And you mentioned the example of the shipyard transforming their business in Denmark. We see the same globally, more or less, in the oil and gas industry turning very seriously to renewables since years already. But in a previous series of DNV Talks Energy, we have also discussed about the challenges of securing reliable energy from renewable sources. What do you think has the pandemic taught us about resilience in terms of the whole energy mix, and clean energy in particular?

DITLEV ENGEL I think, first and foremost, that again having been in the industry for a long time, in the old days, there were many questions about the reliability and the resilience. And that is no longer something we hear. I think what people are much more concerned with now is the future development of the market prices, that the market systems can handle it. And therefore, I think I would say, and which we also in DNV have said in our energy transition outlook, that we are quite technology optimistic but somewhat regulatory pessimistic. And what I mean by that is that in order for the new technologies really to thrive, we also need to think about how we’re going to reform the market systems. So we just don’t think about, for instance, the cost per kilowatt hour produced but what is the total cost to society, for instance, from pollution going forward? And what kind of value does that give in total to a society? So, I think we need both, let’s say, think differently but we definitely also need to see a more regulatory reform and an even stronger and closer public-private partnerships in order to make this happen, which will be, I think, the benefit for all.

MATHIAS STECK The term you just used, technology optimistic and policy or regulatory pessimistic, brings me to one other guest we had in this series, and that was Bob Perciasepe from the Centre for Climate and Energy Solutions. And he provided great insights into how COVID-19 is impacting energy policy. And as you mentioned in your introduction, you have worked with political leaders and other key decision makers, pushing the energy transition forward. How do you think the pandemic will be affecting policy decisions relating to energy and the environment in the future?

DITLEV ENGEL I think it’s a joint responsibility. It is, on the hand, the responsibility of industry to connect the dots on what are the technology opportunities, what are the job opportunities that could be provided. So, I think it’s very important here that the industry is explaining how this should happen and what it could provide because they have, let’s say, the business insights. At the same time, it’s also very important that when governments look at this, that you just look at it in what is the total cost for society and not just look at it just as an electricity provider, because it is the total cost to society that really matters to countries. And that’s when it comes to, let’s say, the total cost but also in terms of the resilience and the attractiveness of the solutions. And at least one thing that we have seen is that I think we have all known that the consumption has dropped, for instance for oil, I think as IEA has mentioned, by 9%. We’ve seen a drop in coal and so on. But when you look at the total power consumption here, actually, the share of renewables has gone up, also of course due to the fact that they don’t know that it’s COVID-19, so, let’s say, they keep on spinning. The wind turbines or the solar panels keep providing electricity. So, we actually see that the market share, so to say, in some markets of renewables has gone up. Which also means that we need to make absolutely certain that the transmission and distribution is ready to handle that. So therefore, it’s also very important when we look into this that we remember that it is the integration and the totality of the systems that we have to focus on, that we need to invest in, in order to transport it. Because we see electrification going up very rapidly and that also means we need to be able to handle it. And therefore, being ahead of the curve here is extremely important for the planning, to make sure that we can accommodate all these opportunities. But all of it, I’m absolutely certain, is going to be good, not just for the climate but definitely also for the economies and for the job creation.

MATHIAS STECK And I would like to continue here and go back to a point you have made earlier, Ditlev, and look beyond COVID-19 since we do not only have a pandemic; we also have a climate emergency that requires businesses, governments, industry to combine their powers to limit temperature increase to preferably below 1.5 degrees centigrade. What will the greatest challenges be on that journey?

DITLEV ENGEL I think that it’s obviously that we have the possibility… Because I think we do have the technology. As I said, we are technology optimistic. But that we have both regulatory reforms that make it possible to really utilize all the opportunities we have for building out the generation capacity, for building out the grid, for building in the infrastructure for EVs, etc. That’s of course going to be a prerequisite. But, of course, we also need to deal with that, in this energy transition, how are we going to deal with the things that we need to get rid of? How are we going to handle, for instance, coal fired power plants that are not that old that we need to take out, and how are we going to provide financing for taking out that capacity? Which is also an important part of the energy transition. One thing is to build out, but also is what we have to take down, so to say. But all of it actually is the question of also how you calculate this. Because if you look at what many people have looked at, what is the total cost for climate change, it will cost much more in the long-term if we don’t do it, even though people today, some people, are saying, well, we can’t afford it right now because of the COVID-19 situation. And I would then just argue that here we have to dare more and we also need to remember that the industry that we are seeing here and the scaling possibility in the industry is immense. And that is something where industry really have to show what we can do if we get the opportunities and think big. I think that’s very, very important, that we need to think big. And we see that, for instance, in the offshore wind sector where just the size of the offshore wind plant has grown massively over the last ten years, and I’m sure will continue to grow massively. Plus it starts to provide new opportunities for how to use the wind power as, for instance, into green hydrogen as an example. And I just read an interesting observation the other day that last year, I think it was, in the US for the first time, the market share of renewables on the grid was higher than coal. And that’s the first time since 1885. So, there is things happening and I’m absolutely certain, going forward, that we will keep seeing the market share of renewables growing compared, for instance, to coal.

MATHIAS STECK Ditlev, as you alluded to earlier, we have changed the way we work. You have also said that some parts of digitalization were maybe accelerated. So, in that strategy, how is DNV helping customers with these kinds of new approaches to support their transition towards renewable energy sources?

DITLEV ENGEL I think, first and foremost, we have many different types of customers. So, we help people in the financial community with how to look at it from an investment point of view. We help customers looking at it from some of the technical challenges of how to better integrate, for instance, renewable into the grid, etc. But I think also we are seeing a new type of customer coming up, and that is customers who are not traditionally players in the energy sector but are some of the biggest consumers of electricity, who are very concerned about the fact that they want to make sure that all the electricity they do consume is 100% green that is being used. And therefore, many of them are now getting engaged into the green PPA market. And we have, for instance for that, developed a new service which is called Instatrust where we connect buyers and sellers of renewable energy and we are also, through that, helping people on the green PPA side because, of course, it’s about generating it, it’s about transporting electricity but it’s definitely also about those who consume it. And here, we have to remember that, for instance, the digitalization and the use of data centres and others have a massive increase in electricity consumption. And there, it's very good to see that there are so many companies now, for instance in the RE100, who are joining and saying we would like to make sure that we really decarbonize our carbon footprint and could you help us with finding a way to do that? And so, these are some of the new things that we are getting involved in. We are also, for instance, very much involved in implementing various programmes, for instance, in the US where we are helping utilities to find ways to drive energy efficiencies. So, there are many ways that we can help our clients finding new business models and also new ways of looking at it. And I think that’s very encouraging because it’s something we all need to get engaged in. And even we have seen lately now that there are some companies who, as a prerequisite, in order to buy products form others are asking that the company should show their carbon footprint in order to, let’s say, allow them to be a supplier to them of products. So, again, it’s driving the need for demonstrating that the actual reduction of carbon emission is taking place, and again, something we are helping people with on a lot of different dimensions. And I think that’s very encouraging. But we also know that we have to move very fast because we are not, as a world, where we would like to be in terms of carbon reduction, compared to the Paris Agreement. So, we know we need to move very, very fast. And therefore, it’s so important that everybody joins in, either people in the energy industry but also, as I said, other companies who are, let’s say, customers of the energy industry also engaging in this now. I think that’s very encouraging.

MATHIAS STECK Ditlev, you have just talked about the engagement with clients and the great insights we are getting there. And we are putting this knowledge into our energy transition outlook, especially the Power Supply and Use report. So, experts have a big influence in how things are shaping up. We see that also in the COVID-19 time. So, my question is how important are experts also in supporting the global energy transition? And do you think that the COVID-19 pandemic has cemented the role of experts in helping to influence the approach of policymakers and businesses?

DITLEV ENGEL Not surprisingly, I obviously think that’s very, very important. But I would like just to elaborate on that. And first to say that the energy transition is now becoming much bigger. Like, for instance, the work on the energy islands I talked about, we see floating offshore wind coming in, as an example, which require additional services than just, let’s say, the energy services that we do provide together, my colleagues but also other colleagues we have in the company who have a very strong knowledge, for instance, on the maritime sector, on the insurance part, the digital part, how we have been working in the oceans in the oil and gas sector and so on. So I think the energy transition now also requires much bigger integration of partners because the projects and the scaling have become much larger. So, that is very, very important, and having the technical knowledge and deep insight on how to handle this. Because these are very complex challenges that need to be overcome, it does really require that. And obviously everybody at DNV, all 12,000, are important for supporting this and we are very happy to do so. But I also think that apart from having that, it’s also very much based upon, as I said, learning from other industries in the past. And there is no doubt that many of the learnings that DNV have had over many years is something that we can use now also into the further acceleration of the energy transition. And that’s of course exactly what we hope and are planning to do, going forward. But may I also say that when we look into the future, it’s also very important that we use all the tools that we have in a different way. And just as a small example, for instance, when we were all sitting here behind our computers just a few months ago, we were discussing how can we still do, for instance, remote services. And thanks to the fact that over the last five years, we have had a very strong focus on digital services provided to clients but also to build a very robust digital infrastructure in the company, we are now in a position that we can do virtual site visits, remote solar farm commissioning, remote trainings, remote inspections, etc. So, we are also, during this, learning new ways of doing our job to support this even in a smarter and faster way. And I’m absolutely certain that this is something we’ll continue to see unfolding. Also with the imagination of many of the people we have, but also working closely together with our customers on finding new ways, that we can use the digital tools to further accelerate this transition, build upon many of the experiences in the past and then, combining with the new technology opportunities, I think really is a very important recipe for success, going forward.

MATHIAS STECK Thank you very much, Ditlev. I have one last question. What lessons do you think we can learn from the global response to the COVID-19 pandemic in order to transition faster together to a clean energy future?

DITLEV ENGEL I think that if we put our heads and minds to something, we can change everything very fast. I think it has been, of course, on a very sad background. It has been incredible to watch how fast the whole world has engaged and rallied around this. They’ve understood the seriousness of it and have taken the precautions. And I’m absolutely certain that if we take the same kind of, let’s say, joint focus on how to accelerate the energy transition, then we can for sure do that. I think we have not all but close to many of the tools in the toolbox that we need in order to transition faster on the energy. It’s all about how we use them together because we need to do it together. And I think that’s a very positive learning from the COVID-19 situation. And secondly, I would also say that I’m very technology optimistic. We make also some forecasts about where technology is going to go in the coming years and the cost of batteries are some of the things we address in the energy transition outlook. And when I look at all the things we have not yet, let’s say, unfolded of the technology opportunities that are at hand, and the speed at which we can use technology, I think it's going to make it very, very exciting. So we need to also have great faith in what technology can do for us if we remember to use the technology the right way, going forward, and not use, let’s say, maybe also regulatory systems that were created for another type of technology, but remember that the regulatory reforms have to follow the opportunities that technology will continue to provide. And I’m sure here, we are just at the end of the beginning. So, as I said, I am extremely technology optimistic. We just therefore have to make sure we show people how to connect the dots and use the technology. And this is, of course, where we would very much like to contribute, going forward.

MATHIAS STECK Thank you very much, Ditlev, for your time and these highly interesting insights. And thank you very much also to the listeners for joining us. That was Ditlev Engel, CEO of DNV – Energy.

NARRATOR Thank you for listening to this DNV Talks Energy podcast. To hear more podcasts in the series, please visit dnv.com/talksenergy.