A disruptive mindset must be adopted by all energy stakeholders to support the current energy transition, said leaders at the 24th World Energy Congress (WEC) in September in Abu Dhabi, UAE.
“There is a tremendous amount of pent-up innovation ready to be released,” said Dr Mike Howard, President and CEO, Electric Power Research Institute (EPRI).
The excitement was often around sector-coupling, consumer-centric models, energy ecosystems, and value-add solutions. To flourish, these ideas require funds and regional vision.
Innovation – or at least a vision for it, can be aided by government.
“Setting aspirational goals is one of the ways to do it. … At least you’ve got the beacon in the right place,” said Dr Jeanne Ng, Director, CLP Holdings. Yet “the biggest barrier is in the mindset of the government, as they see the landscape as a separate power sector, a separate transportation sector, a separate water sector.”
Sectors need to work more closely together via sector-coupling, as they are energy-dependent and becoming more so. They also face many of the same market challenges. And what begins as a vision, leads to regulations – perhaps even cross-sector regulations – that provide companies assurance that their innovative work won’t be undone by unforeseen changes in the law.
“There is a lot of challenge [for] coordination of policy,” across sectors and diverse energy stakeholders, said Dr Angela Wilkinson, Secretary General-Elect of the World Energy Council. “We’re trying to learn even as we develop the market.
WHERE’s the MONEY?
This conflict between the need for regulations, but also for agility, can leave vital start-up capital waiting on the side-line. As Howard explained: “It’s a big industry and having regulatory uncertainty drives investors, drives planners [away].”
“We feel like 95% of the time you spend on raising money leads to nothing,” said Thomas Chrometzka, who works on strategy for Enapter, a start-up hydrogen generator (electrolyser) fi rm featured at WEC.
In their funding pitches, the firm has learned to express investor requirements and the company’s ambitions boldly, so as not to waste time. They’ve also taken advantage of their chairman’s network of investors from previous entrepreneurial ventures.
“We’re not so much talking to VCs. More family offices and seasoned entrepreneurs. … They understand technology and how disruptive it can be [and] … they get excited by our disruption potential.”
Too many VCs don’t understand energy. As Gina Domanig, Managing Partner of Emerald Technology Ventures, put it: “You need to have specialists on your team. … It’s too complex.” Or partner with them.
UTILITY as DISRUPTOR
“We met a lot of VCs who understand the space well: Those that are in the energy space on behalf of utilities,” said Nikolaj Martyniuk, Co-Founder and CEO of WePower.
The start-up helps commercial and industrial energy users’ source regional solar and wind energy on a 7-10-year-contract basis, via a blockchain platform. In theory, the standardised contract will hold value in a secondary market.
Dubai Electricity and Water Authority (DEWA) works more directly with innovators. To date, DEWA has worked with 35 start-ups, said Marwan Bin Haidar, DEWA’s Executive Vice President of Innovation and The Future.
“The company receives new, bold ideas and solutions, while the start-ups can benefit from years of experience and understanding of the industry,” Bin Haidar said.
DEWA keeps them in an incubator environment, and then, once proven, shifts them to the larger organization. In part, that’s due to an understood cultural divide between innovative start-ups and tradition-based utilities.
“As a utility, we’re risk-averse,” Ng said. “The digital world will move much faster, but with energy [there are] a lot of legacy assets with long lifespans.”
The same could be said for some private, large energy firms facing process-heavy management, few incentives for innovative ideas, and traditional job descriptions. But at WEC, Domanig said, “I was pleasantly surprised to see incumbents talking about innovation. … It’s still difficult, but at least the interest is there.”
The DDD THREAT
The largest energy firms and utilities are struggling with energy decentralisation, the digitalisation of all industry, and a growing demand to decarbonise. These provide opportunities for innovation, regardless of whether they are explored by cash-rich, legacy firms or small firms focused on a single task.
“It’s about using all existing technologies. It’s not a speed race here. We’re going to have to build a lot of bridges,” Wilkinson said. “The biggest jeopardy is that we could be burning our energy bridges.”
The oil and gas industry, for example, has an image problem that is hurting its ability to gain funding, said Rene Kofod-Olsen, CEO, Topaz Energy and Marine. In September, Sultan Ahmed Al Jaber, UAE Minister of State and Group CEO of the Abu Dhabi National Oil Company (ADNOC), said that the global oil and gas industry requires an injection of $11 trillion.
“The narrative is not with them (oil and gas industry). … If you don’t have that intelligent conversation, then large financial institutions don’t fund,” Kofod-Olsen said, adding that it’s also hurting the exchange among energy stakeholders. “There’s a lot of learning from being at this for 100 years.”
“The growth is going to be in renewable energy,” but “the illusion of one form replacing another” any time soon is unrealistic,” said UAE Minister of Energy and Industry Suhail Mohamed Al Mazrouei.
“For us in the UAE, we welcome any technology and any form of energy that is going to help us. We know the demand is increasing. … We need a longer term – 20, 30, 50 years – to find other forms of energy that are competing with hydrocarbon.”
Howard agreed the future is a mix of energy.
“I think the one thing that really stands out is the intense focus globally on reducing our carbon footprint. The second, though, is that to achieve that, it’s going to take everyone. It is going to take a significant amount of … innovation and a lot of capital as well,” he said.
Mixing in hydrogen
Increasingly, that mix may include hydrogen.
“Low carbon-based generation is the best enabler for more renewable energy. They both have to work together,” said Howard, adding hydrogen and ammonia have got to be a big part of the energy sources going forward. At WEC, “the discussion about hydrogen was much more than I thought. … Right now, it’s expensive, but it will get there.” There is “huge potential for hydrogen in fleets of vehicles,” said Jon Dee, Co-Founder and Managing Director of the Do Something Foundation. ENGIE’s Chief Science and Technology Officer Dr Michael Webber agreed, adding that off-road vehicles such as warehouse forklifts, can be charged three times faster than electric forklifts. Hydrogen might also work well for heating, said Filippo Gaddo, Head of Energy Economics, Arup.
Chrometzka said it’s already here. “We have a technology that allows us to minimise our devices (and to) string them together and then mass produce them. … We have a product on the market. … Our biggest challenge now is to scale that up. … The goal is to make a highly automated factory soon.”
To do so, his firm is studying the solar industry for commoditising lessons.
Dr William d’Haeseleer, Director of the University of Leuven Energy Institute in Belgium, asked his industry colleagues to be patient.
“I do realize we all love green hydrogen.
… Let’s give it its sweet time to adapt,” d’Haeseleer said.
Enapter represents a recent trend among energy start-ups in that it sells hardware, said Andreas Kuhlmann, Chief Executive of German Energy Agency (DENA), which hosts the global innovation platform Start Up Energy Transition (SET). The programme’s top 100 start-ups for 2019 were featured at WEC.
Hardware is tougher to scale than software, but it must be part of the solution mix.
“They are small start-ups, but they are really touching real issues,” Kuhlmann said.
Efficient for end-users
Regardless of the solution, many will be selling services instead of energy, as customer-centric business models are increasingly adopted. That means energy end-users need to be part of strategic conversations – especially since they may no longer be the captive audience they once were.
Today at ENGIE, “we are an electricity, a gas and service company. In 2040, more of a service company. The company and the customer want efficiencies. Today there is a misalignment,” in that inefficiencies lead to more sales, Webber said.
To assist in this transition, energy subsidies must be gradually abolished, said Tim Nelson, Executive General Manager, Strategy and Economic Analysis, Australian Energy Market Commission. Speakers sitting alongside him at WEC agreed.
“Consumers have forgotten the value of the energy they get. … The collaboration that will work in the future is going to be around demonstrating (value), making their life better,” Nelson said. “Whoever does that really effectively is going to win the race.” This will work in tandem with efforts to improve efficiencies.
“It’s not that sexy and yet … that’s where we can get the best bang for the buck,” said Dr. Adnan Shihab-Eldin, Director General, Kuwait Foundation for the Advancement of Science.
And efficiencies will continue to grow via new platforms. “If you have blockchain enabling, you have more people in the market… That should lead to efficiency in energy as well,” Webber said.
As outgoing Secretary General of the World Energy Council Dr Christoph Frei summarised it: “We need to stay in a mindset of disruption.”