The legacy from COP26: Five uncomfortable truths of the energy transition

This week it was wonderful to be at All Energy in Glasgow talking to ‘real people’ and only six months after COP 26 where we kept 1.5 alive… but only just.

I’m sure many of you agree with Conference President Alok Sharma’s disappointment that we didn’t go further at COP26. It’s true that on a global stage we should have seen more. But aside from what happened in the political arena my feeling was that for the first-time, business, government, suppliers and customers collectively appreciated the magnitude of the challenge ahead. Daunted, perhaps, but not disappointed.

Energy is the lifeblood of the economy. Everything we do, from travel, to work, to enjoying time with our friends and family, depends on reliable and efficient energy. The recent Scot Wind leasing round demonstrated that by matching ambition with policy and investment you can build an attractive place to do business and create thousands of sustainable jobs.

All-Energy has given me renewed hope and showed me that change is possible. There is no doubt the transformation we need to go through is enormous, but I’m convinced after the conversations I’ve had over the last few days that we are up for the challenge. We need to reach a net-zero grid by 2035. We have just 13 years to revolutionise and transform the power industry; that means changing how we regulate, build, generate, transport, consume and even store energy. But I have hope that we can do this together. COP26 set the direction. The time for action is now and in Glasgow I’ve seen plenty of proof there are liked minded businesses and organisations doing just that.

Siemens Energy is a technology supplier across the entire energy value chain. We have 4,000 employees in the UK and Ireland. They are working every day with customers, government, suppliers and developers across a broad range of energy technologies to help deliver the energy transition. We operate in every single part of the energy industry: from hydrogen electrolysers to the world’s most efficient, high performance gas turbines; from innovative floating turbine technology to pioneering interconnectors capable of sharing excess renewable energy with Europe; from a business with a proud heritage in the oil and gas sector to one that advocates for a just-transition and celebrates diversity.

I know the scale and the complexity of the challenge ahead. It’s the challenge of a generation and the clock is ticking. All Energy this week gave us the perfect platform to discuss and tackle some of the difficult challenges and uncomfortable truths together.

#1 The first truth: fossil fuels are an answer.

I know that is controversial, so I will explain. Whilst the target is and must be uncompromisingly net zero, we cannot switch off fossil fuels overnight. It’s important that we use them wisely. In 2021 the share of renewable energy increased worldwide by eight percent; that’s almost one-third of annual global electricity consumption.

The British Energy Strategy has increased the target for offshore wind from 40GW to 50Gw in just eight years. This is an incredible aspiration that starts to match the challenge of COP26. While we go all out for renewables, we still need to manage the electricity system.?We need dispatchable generation when the wind is not blowing. For now, that is natural gas, which burns cleaner than other fossil fuels. Natural gas remains an important part of the short-term solution.

The UK today still relies on about 40% natural gas for a secure electricity supply. Siemens Energy, Doosan and Aker Solutions are tackling the carbon capture challenge and together we provide highly reliable gas generation with carbon capture which eliminates CO2 reaching the atmosphere. Our large gas turbines are already capable of running on 75% hydrogen. Next year our factory in Lincoln will demonstrate a 100% hydrogen small gas turbine on an industrial site near Paris.?By 2030, all our gas turbines will be 100% hydrogen ready.

We need solutions that can have an immediate impact today.?Every step towards being ‘greener’ is better than not taking any steps at all. We need progress over perfection. Many of our industrial customers have legacy gas turbines working well below optimum efficiency.?There are relatively simple upgrades we can do quickly that significantly reduce emissions without waiting for carbon stores or large-scale hydrogen to become available. So, while we continue to put more renewables into the system, let’s use what we already have and make a difference.

#2 The second truth: renewables don’t come for free.

Wind and solar are sometimes touted as free sources of energy. I disagree. There is a high cost to using renewables on a bigger scale and on replacing an energy system that was built for an entirely different model.

The investments needed are enormous. Shifting the global economy to net zero to mitigate the effects of global warming will cost around €54 trillion by 2050. And that shift toward renewable energies and green hydrogen will have a profound impact on the geopolitical landscape. Developing a viable renewables industry costs money and time. Our sister company Siemens Gamesa of which Siemens Energy is a majority shareholder, opened its factory in Hull in 2016. The factory employs 1,000 strong workforce and has proudly acted as a catalyst for powerful growth, in the offshore industry. This didn’t happen overnight.

#3 The third truth, and one that as a technology provider, is especially close to my heart: Technology is not the issue.

We already have the technology to deliver energy with a much lower greenhouse gas footprint. While innovations are still necessary to commercialise these technologies at scale and make them affordable, frankly, technology is not the issue.

Getting to net zero is achievable by using both new and existing technologies. And we can. We have the technology. The real issue is how we become sustainable without leaving millions of people behind. The energy transition must be a ‘just transition’. McKinsey reported that in Europe the net zero transition would create an estimated 11 million jobs while eliminating six million. This shift will require retraining and support for millions of workers, if we want to avoid leaving large swaths of the population behind and underemployed. We need to work towards a net-zero future that benefits everyone in society.

#4 The fourth truth, the real problem I see: infrastructure is a major issue.

This is true of the UK and most countries globally. We are going to need a very different and much bigger grid to electrify industry, heat and transport.?We must get faster at consenting and approving new infrastructure.

The changing generation mix will have an impact on grid stability. So, devices like rotating grid stabilisers will become more common, like the one we recently commissioned at Rassau in South Wales. And we are going to need sector coupling, converting between electricity and chemicals and back again to decarbonise hard to reach sectors. The technology for sector coupling is here, but the development of its infrastructure continues to lag behind. We must prioritise investing in our transmission and storage infrastructure as well. Otherwise, we risk wasting valuable renewable energy by constrained networks.

#5 The most important truth and one that rang true in every, single interaction I’ve had recently: we can’t do this alone.

And so finally the last truth. This week, alongside SSE and other industry experts, including our competitors, we launched the Powering Net Zero Pact. We understand that the challenges that were discussed at COP26 are about more than one individual company.

We are going to see a level of collaboration that we have never seen in the past and we are working together because we know that there are no silver bullets – solutions will need to be co-created.?Delivering the energy transition is not only good for the planet – its ultimately good for business.

Siemens Energy is a newly stock-listed company. Investors tell us they want to see sustainable business plans rather than green washing. Results show that businesses that deliver on their Environmental, Social and Governance (ESG) targets are more profitable. It starts with being transparent about climate contributions, which creates accountability and helps us make informed decisions.

We need everyone to pitch in. The UK has already pretty much phased out coal with Scotland setting the pace for growth in renewables - More than 130 countries have set - or are developing – net zero targets. Measurement helps, but it doesn’t end there.

The real solution is to stop both working and thinking in silos. Politics and business must work together to address the demands of society. We must work internationally and hold each other to account. Consumers need to understand the changes we all need to make for a greener future and a healthier planet.

Was COP26 a disappointment? No. Do we have a lot of work to do? Absolutely. The clock is ticking, so we had better crack on.