A Blueprint for a Successful Energy Transition

We live in exciting times. The coming decades are likely to be the most dynamic in history, in many ways. Geopolitics is increasingly driving geo-economics. In economic terms, we're in the middle of what many call the Fourth Industrial Revolution. We will see changes that are unprecedented in both magnitude and speed.

And when geopolitics gets tougher, every nation is well advised to provide and control its critical infrastructure. Here, energy should be at the top of the agenda. And what about the industrial priorities? All industrial revolutions were fueled by revolutions in energy: the use of coal to power steam engines, the discovery of electricity, the wide-spread use of oil, the rise of wind and solar power, and so on. The Fourth Industrial Revolution is no exception: It’s an energy revolution.

Two realities are shaping it.

The first reality is climate change. Today, sea levels, ocean temperatures, and the concentration of greenhouse gases in the atmosphere are all at record levels. And we're seeing more and more extreme weather events. Planet Earth needs our attention because there is no Planet B.

This is not a simple matter. There is a lot at stake: our planet, millions of jobs, strategic and economic interests, and the socioeconomic balance between industrialized and developing economies.

Strong, mindful leadership is needed to meet this challenge.

The second reality we’re facing is the soaring demand for energy. This relates to the disparity between developed countries and developing economies. By 2040, the world’s demand for electricity alone will grow by nearly 80 percent. This figure doesn’t even include other forms of energy. Today, one billion people worldwide still do not have access to electricity. Our aim should be to provide every family, every woman, man, and child with reliable, affordable, and sustainable power. For me, this is a fundamental human right.

The big question then is: How do we meet the soaring demand for energy, mostly in developing economies, and protect our climate at the same time?

The Energy Value Charter is Siemens' answer to this question. It's our blueprint for a successful energy transition. And it enables us to analyze energy systems and propose tailor-made energy transitions to governments and customers all over the world.

Any viable plan must integrate actions in these areas: technology, regulation, and social impact, for example, vocational training, local investment, and financing. The Energy Value Charter does that and sets three priorities:

Priority #1: Secure a flexible and sustainable energy supply.

This is about finding the best possible mix of renewable energy, highly efficient power plant technologies, energy storage and demand management for each country and ecosystem.

Five years ago, power outages were a fact of life and a major problem in Egypt. They inhibited the development of industry, stifled the aspirations of the country, and made its people suffer.

But Egypt's leaders took action and showed what’s possible today. They worked together with Siemens to develop an energy roadmap. We also assisted in offering a competitive financing solution, including export credit guarantees.

Within just 28 months, three highly efficient combined-cycle power plants were built, plus substations to integrate them in the national power grid. These plants are the largest of their kind in the world today! They provide reliable, affordable, and clean energy for 40 million people. And they save Egypt US$ 1.3 billion per year in fuel costs.

This project has had a broad positive social impact. More than 1,000 suppliers and subcontractors participated in the project, many of them local companies. 600 technicians and engineers were trained for operations and maintenance. And Siemens helped build a vocational training center that will educate another 5,500 people in the coming years.

Megaproject Egypt, as we call it, is a great example of how society benefits from leadership and partnership and a well-planned, fast-track energy transition. Of course, every country is different, but this approach can work in other countries, too. Siemens is committed to building critical infrastructure in a holistic way wherever it’s needed. We create value for society by enabling customers to achieve tangible savings and by providing high-quality training and education.

We’re currently working with countries such as Lebanon, Iraq, Libya, Pakistan, Afghanistan, and many more to provide a reliable supply of electricity and benefits to their people.

Priority #2: Build future-oriented infrastructures.

This is about modernizing the delivery system – about the transport and distribution of sustainable energy, including the reliable collection of electricity bills. And it's about the integration of the energy system in other sectors. (The technical term for this is sector coupling.)

The expansion of power grids and intelligent grid management are critical here because everything is connected.

Think of China's Belt and Road Initiative. It reaches 65 percent of the world population and has the potential to become the largest infrastructure investment program of all time. This is where we want to put the Energy Value Charter to good use.

Future-oriented infrastructure must also include green hydrogen, that is, hydrogen produced by renewable energy. To us, this is the fuel of the future – and a promising technology for storage and sector coupling.

Today, we’re capable of converting green electricity to hydrogen on a scale of around 10 megawatts. Pilot projects on a 100-megawatt scale are already in the pipeline. But what if we really scale up and go for 1 gigawatt?

That’s what we at Siemens are proposing in our energy roadmap for Chile. Patagonia is one of the world's windiest regions. The wind blows more than 6,000 hours per year. Chile can benefit from this. The opportunity here is to generate CO2-free electricity with wind farms and convert it into green methanol on a large scale, for use around the globe and in a variety of sectors.

Priority #3: Empower energy users.

This is about making energy users active participants in the energy system. The costs for solar panels, home battery storage, and building automation have steadily fallen. Many power generation facilities are now operated by home owners. In Germany, for example, the number of power generation facilities has grown from about 1,000 to 1.7 million within a matter of two decades.

Digital technologies enable energy users to manage their own energy assets – and to turn them into business opportunities. And digitalizing power distribution grids all the way to the energy consumer will help manage supply and demand much more effectively. Here, we see enormous potential – if a badly needed reform of the tax and levy system accelerates deployment of digital technologies and creates new business models.

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Fifty years ago, a human set foot on the Moon for the first time. Only a few years before, that seemed impossible. But John F. Kennedy challenged America. He said: “We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills.”

The moonshot challenge of our generation is to meet the soaring demand for energy and to protect our climate at the same time. The Energy Value Charter is Siemens' contribution to the world to meet this challenge. It's our invitation to make the energy transition real.