Which energy transition do we want? Where do we really ... · French energy mix Sustainable Energy ... •Major investors decided to divest from coal in the aftermath of the COP21

Which energy transition do we want?

Where do we really want to go

and how can we get there?

Conférence de l’Institut Coriolis pour l’Environnement de l’École polytechnique Cycle Environnement et Transition énergétique

20th September 2018

Sébastien Soleille

1995-1998: Ecole Polytechnique

1998-2000: ENGREF, Mines ParisTech

2001-2005: INERIS (French national institute on industrial environment and hazards)

2005-2014: Total

2015-2018: Deloitte Sustainability

2018-….: BNP Paribas

Who am I?

2 Institut Coriolis / Sébastien Soleille / September 20, 2018

An energy/climate transition cannot be avoided

The energy/climate transition is here already

Why are we moving so slowly?

What do we need to go quicker?

Agenda


An energy/climate transition cannot be avoided


Growing awareness related to global warming (COP21):

• Physical impacts (extreme weather events, heat waves…

• Transition impacts (carbon taxes, subsidies for renewable energy sources)

Several drivers around the world

Why do we witness an energy/climate transition?

Institut Coriolis / Sébastien Soleille / September 20, 2018 5

Most countries have to (re)define their future energy system:

• Developed countries have to rethink their current systems, mostly implemented several decades ago

• China has witnessed the limits of a mostly fossil-based energy system (unbearable air pollution)

• Africa has to cope with a quickly increasing population

Increasing expectations from stakeholders

• Public consultation

• Safety (nuclear)

• Environment (including landscapes and biodiversity)

Global energy

transition

This transition has many aspects…

Temperature projections Other physical impacts

We do not know until which level… And the impacts should not be underestimated

Physical impacts: Temperature is on the rise


Mammouth?

World Bank, 2014 Source: IPCC, 2013

Physical impacts: A change of 4-6 degrees, in average, what does it mean?

We do not have any « recent » experience of an average temperature higher by 4-6 °C,

But we have some insight on what an temperature lower by 4-6 °C means


Business as usual scenario

Low Carbon scenario

High potential impacts, either in a business as usual scenario or in a low-carbon one

Economic and social impacts


“Indeed, a two-degree increase in the average temperature in the world may still be insurable, but what is certain is that a rise of four degrees is not insurable. It will inevitably lead to rising oceans, yet 80% of the world's wealth is concentrated along the coast.”

(Henri de Castries, AXA, 2015)

Source: BlackRock

Business as usual scenario Low Carbon scenario

High potential impacts, either in a business as usual scenario or in a low-carbon one

Societal impacts


Natural disasters

Water and food shortage

Rising sea levels

Most countries will not be able to cope with climate change’s physical impacts

The biggest effects will probably be socio-political


“We civilizations now know ourselves mortal”

(Paul Valéry, La Crise de l’Esprit, 1919)

World Bank

Migrations

Armed conflicts

One thing is sure: a significant energy/climate transition will take place before the end of the

century

If we do nothing, it may be the end of our civilisation as we know it

The only way to avoid a catastrophic future is to decide what kind of transition we wish

and to implement it as soon as possible

We have to accept that things will change significantly, whatever we do


It is better to choose the transition that we want

rather than undergoing it passively

“The future is not what will happen

but what we are going to do”

(Henri Bergson)

The energy/climate transition is here already

12

Institut Coriolis / Sébastien Soleille / September 20, 2018

COP21 and Paris Agreement (2015)

• Ambition to limit global warming below 2°C (compared to preindustrial era), even 1,5°C

Neutrality carbon for the 2nd half of the 21st century

At least 50-75% of the available fossil resources have to remain unexploited

French Climate Strategy (July 2017)

• Carbon neutrality for France by 2050

• End of new gasoline and diesel vehicles by 2040

• Increasing carbon price

• Planning of the evolution of the French energy mix

Sustainable Energy for All – SEforALL (2011)

• Initiative launched by Ban Ki-moon in 2011

• Objective: Speeding up the actions contributing to SDG 7 (universal access to sustainable energy by 2030) and to the ambition set in Paris Agreement

• 44 African countries joined this initiative (among which Zimbabwe and Malawi)

Raising awareness on climate and energy issues


And these impacts arrive quicker and are stronger than expected

Businesses are already heavily impacted by the energy transition (1/2)

5 years ago,

who had

forecast all

these major

changes on

business

models?

Heavy divestment from the coal industry

• Less than 10 years ago, Peabody, the US coal

company, was considered as a major success (among

top companies according to Forbes in 2008)

• Major investors decided to divest from coal in the

aftermath of the COP21

• Coal plants and coal mines’ values dropped

significantly

• Peabody went bankrupt in 2016

• In the US, 30 billion $ of decreasing value and 31 000

lost jobs in the cola sector since 2009-2010

• Engie had to close its Hazlewood (Australia) coal plant,

1,542 MW, bought in 2010-2012

What next?

Several major world investors, even if their revenues

came from oil and gas, decided to divest from oil & gas

(Norwegian Fund, Rockefeller foundation)…


Diesel cars soon to disappear in

Europe (and elsewhere)?

• Germany was very proud of its big

cars (VW)

• The « Dieselgate » and the new

scandal for VW on atmospheric

emissions created suspicion

regarding diesel motors and the

automotive industry

• European countries contemplate the

increase of taxes on diesel, or even

the end of diesel and gasoline cars

What next?

Several countries plan banning diesel

and gasoline cars before 2050 (France,

UK, India, China…)

And these impacts arrive quicker and are stronger than expected

Businesses are already heavily impacted by the energy transition (2/2)

It is getting cheaper to produce

power from renewable than from

nuclear plants

• The cost of solar photovoltaic

technologies have decreased by more

than 80% since 2009, and it should

further decrease by 59% by 2025

• Security constraints have increased

the cost of new nuclear plants

What next?

What is the remaining technological

potential to decrease production and

storage costs?


5 years ago,

who had

forecast all

these major

changes on

business

models?

European producers reshaping completely their

business models

• A few years ago, the business was rather stable for the

European power industry (EDF, Engie, Areva, RWE, E.ON,

etc.)

• The Fukushima disaster (2011) and the strong increase in

power production from renewable sources created a very

difficult context for nuclear and fossil fuel power plants

• It led to significant asset impairments (> 26 M€ in 2015

for 5 European power companies) and heavy losses

• Several companies (RWE, E.ON) decided to split new

businesses (renewables) from old ones, then to merge in

different configurations

• Engie, relying heavily on nuclear and gas

a few years ago, now develops renewables,

energy efficiency and digital services

What next?

The power industry gets more decentralised,

more digital and more renewable in the coming years

“Shaken”:

Peabody and the coal industry

European power producers: Engie, E.ON et RWE, EDF…

Automotive industry

“Converted”:

Schneider Electric

“Natives”:

Tesla

“Outsiders”:

GAFA

Danone

Retail companies

Business impacts: Several families of companies


Renewable energy: It goes quicker than expected

The energy transition is underway (1/3)

17

Renewable power generating

capacity saw its largest annual

increase ever in 2017 (raising

total capacity by almost 9% over

2016).

Overall, renewables accounted

for 70% of net additions to

global power capacity in 2017

(due in large part to continued

improvements in the cost-

competitiveness of solar PV and

wind power).

(Source: REN21 Renewables

2018 Global Status Report)

Solar PV technologies electricity generation

costs have decreased by more than 80% since

2009.

It is forecast to continue falling by up to 59% in

2025, making solar PV the cheapest form of power

generation.

(Source: IRENA 2016, The Power to Change: Solar

and Wind Cost Reduction Potential to 2025)

More solar PV capacity was added in 2017 than the

net additions of coal, gas and nuclear combined

(Source: REN21 Renewables 2018 Global Status

Report)


Renewable energy: It goes quicker than expected


18

On the 8th of May 2016, renewables

supplied Germany almost all (87.6%) its

power demand.

(Source: 15 signals evidence the energy

transition is underway, WWF, September

2016)

57 countries have 100% renewable electricity

targets.

(Source: REN21 Renewables 2018 Global Status

Report)

Overachievements: comparing projections done

by international energy outlooks for global

expansion of renewables with reality shows that

international agencies have underestimated

the potential of these technologies.

(Source: 15 signals evidence the energy

transition is underway, WWF, September 2016)


Finance, local authorities and job creation


19

The green bonds market grew at an

impressive compound growth rate, from

close to zero in 2007 to an outstanding

US$155.5 billion by end 2017.

(Source : Green Bond Highlights

2017, Climate Bond Initiative)

In the aftermath of COP21, cities networks and 700

mayors declared their intention to strengthen their

efforts to reach a 3.7GtCO2 annual reduction by 2030 in

urban areas.

(Source: 15 signals evidence the energy transition is

underway, WWF, September 2016)

Renewable energy employment hit a

record in 2017, with 10.3 million jobs

recorded.

(Source: IRENA Renewable Energy and

Jobs - Annual Review 2018)


The energy transition is underway.

But clearly not fast enough.

Most countries are not on the right track to meet their long term objectives…


Why are we moving so slowly?

Overestimated issues and real problems



Overestimated issue: Technical solutions are being developed

Technical issues are probably not the main issue


Overestimated issue: The cost issue is clearly overestimated

In the near future, we will have to spend money on energy systems, whatever the energy mix we will choose

Source: Ademe,2015 (power mix 100%

renewable in France by 2050)

Nuclear 2G Nuclear 3G (EPR) Wind onshore PV Gas Biomass Unit

Upstream 2.7 2.8 (China) – 6.8 (US) (6.6 for Flamanville)

1 – 1.7 1 - 4 0.6 0.3 – 6.3 M€/MW installed

Operation 22 17 – 22 nd nd 3 nd €/MWh

Fuel 4 nd nd nd 70 15 – 25 €/MWh (LHV)

Maintenance 2.5 3 – 4 14 - 25 2.6 – 32 nd nd €/MWh

Total Use 13 - 29 21 - 30 15 - 52 10 - 55 73 15 - 30 €/MWh

End of life 1 nd 0,016 - 0,133 nd nd nd M€/MW installed

TOTAL 42 - 50 120 - 133 50 - 108 60 - 100 61 - 100 97 - 170 €/MWh

Offre Demande

Demande non flexible 258

Demande moyennement

flexible156

demande flexible 66

Offre non intermittente 290

Offre Enr intermittente 190

0

100

200

300

400

500

Annual pow

er

dem

and a

nd s

upply

in

2035 in F

rance [

TW

h]

Intermittent power production vs. flexible demand

Key hypotheses:

• Based on the Hertz scenario Hertz

developed by RTE for France

• Term: 2035

• Ceiling on national GHG emissions.

• 15.6 million battery-driven vehicles

• Electricity mix:

o Nuclear: 47 %

o ReS: 45 %

o Thermal: 8 %

Overestimated issue: Intermittency of renewable energy

Wind and sun do not run 7/7 24/24 but we can probably deal with it (demand response management and smart management will be key)


Mark Carney: Breaking the tragedy of the horizon – climate change and financial stability

Speech by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, at Lloyd’s of London, London, 29 September 2015.

Real barriers (1): The tragedy of the horizon


What to do if key stakeholders do not want to play the rules?

Real barriers (2): The tragedy of the Commons, a global issue with local solutions


Real barriers (3): A significant lack of imagination

Lack of a vision

Resistance to change

Sticking to a single vision of progress and development


What do we need to go quicker?


1st elements of such vision: Carbon neutrality is the only way

We need a vision (1)

Carbon neutrality in the 2nd half of the century is necessary to respect Paris Agreement’s target


Companies’ long-term climate strategies should be based on sobriety, efficiency, renewable energy and compensation

We need a vision (2) 1st elements of such vision: 4 pillars

Energy sobriety

Curbing energy demand:

• Estimating precisely energy

needs

•Adjusting demand to actual

needs

• Finding the best match

between supply and

demand

01

Renewable energy

Producing low-

carbon energy,

through renewable

energy sources

03

Carbon sequestration

• "Offsetting"

• "Insetting":

compensation within its

value chain

•CCS (carbon capture

and storage)

04

Energy efficiency

• Producing, transporting

and consuming energy in

the most efficient way

possible (technological

progress)

02

Overall strategy, processes and disclosures

• Assessing carbon footprint

• Assessing climate-related risks and opportunities

• Defining long-term energy and climate strategy

• Disclosing key information


Energy businesses change and related jobs evolve accordingly

We need a vision (3)

1. The energy transition will be decentralized

− Decentralization of production

− Decentralization of governance (public consultation…)

2. The energy transition will be participatory and collective

− Collective actions to optimize the match between supply and demand

− Crowdsourcing for renewable energy projects

− The impacts on the modes of production and consumption are such that gaining the acceptance of civil society is key

3. The energy transition will be digital

− Energy and digital transitions are closely inter-connected because:

o The digital transition has a significant environmental impact (energy consumption)

o The digital transition offers important levers to reduce energy consumption


Investment in R&D

Develop new solutions and then improve them

Do not stop everything as soon as you discover a flaw in your solution

• (Rare earths, mining in China and the energy transition)

Always keeping in mind both the vision and the way

We need a way Defining and implementing concrete solutions

32 32 Institut Coriolis / Sébastien Soleille / September 20, 2018

Technical guys, politicians, financers, etc. do not talk the same language but they have to develop projects together…

We need a trust framework

We need:

• Metrics to monitor progress

• Real success stories to show that it works

• A common language to engage all the stakeholders

• A clear and balanced way to dispatch and mitigate risks among the key players

Key institutions from the financial world are developing such means to foster trust and common understanding

• G20 -> FSB (Financial Stability Board) -> TCFD (Task Force on Climate-related Financial Disclosures)

• European Commission -> HLEG (High Level Expert Group on Sustainable Finance )


Creating convergence of motives

• Individual motivation

• Business interest

• Political agenda

Using convergent actions by different kind of stakeholders

• Companies

• NGOs

• Public authorities

• People: citizens, workers, consumers

A single reason, how good it may be, will not be enough to create enough momentum for such significant changes

We need a convergence of motives


Significant changes (in our ways of producing, of consuming, of living) lie ahead of us; the whole society needs to be convinced that these changes are worthwhile

We need a story to tell about a desirable future

We need:

• Imagination to convert the vision and the way into a desirable future in which the whole society can understand why we have to go there

• Storytelling to describe our vision and the associated way in a clear and understandable way

• Communication to raise awareness about the vision and the way

• Engagement to make each citizen/consumer/worker play one’s role in the global storyline


Any questions?

Let’s define a

desirable future

and make it happen!


@sebsoleille

linkedin.com/in/sebastiensoleille

https://www.linkedin.com/in/sebastiensoleille

https://www.linkedin.com/in/sebastiensoleille

Documents

Which energy transition do we want? Where do we really ... · French energy mix Sustainable Energy ... •Major investors decided to divest from coal in the aftermath of the COP21