WGS Dialogues: Developing countries can drive energy transition from coal to gas – Siemens Energy CEO

  • Dr. Ing. Christian Bruch: Governments have moral responsibility to invest in decarbonization efforts, ensure people have access to clean energy

Dubai, UAE:  The global crisis is a wake-up call to the energy sector to get its act together, according to Dr. -Ing. Christian Bruch, President and Chief Executive Officer of Siemens Energy.

In conversation with John Defterios, CNN presenter and anchor, at the World Government Summit Dialogues today, Bruch urged companies and governments to collaborate to urgently adapt learnings from the pandemic to rebuild a more equitable and collaborative energy infrastructure for the next decade.

The inequality we see in parts of the energy industry is a cause for concern, he said. With many states in disarray, and even plunged into darkness following the pandemic, the world has begun to realize that a dependency on fossil fuels to meet the needs of huge populations will spell trouble.

Citing an Organization of the Petroleum Exporting Countries (OPEC) report, which states that US$12.5 trillion is needed from 2021 to 2045 to get the global energy transition underway and tackle the last billion people without regular energy access, Dr Bruch said the world’s leading industry players are clearly divided on their priorities.

“You see a pretty divided world. On the one side there is sufficient capital in the world and it is a question on how to deploy it. There is a lot of uncertainty – this balance of investing somewhere, giving people access to electricity and energy – how is this working out? One thing is clear, the old mechanisms are not going to work,” he explained.

Referencing a Carbon Tracker report on the concern that some countries such as Iraq, Libya, Angola, and Nigeria are overly-dependent on hydrocarbon revenues while countries like the UAE have a clear blueprint to an energy transition until 2050, and to the challenges the traditional fossil-dependent nations would face in making the transition, he said: “There are three classes of countries – industrialized countries which are now identifying stimulus measures and moving to decarbonization, oil driven countries – the Gulf region is a good example of these – that in the past several years have made smart plans to convert debt revenues into future proven revenues, and finally, the countries who have not made this transition yet and are heavily dependent on oil income and still have to ensure stability in their countries by granting electricity, ensuring income for the people.”

With more oil companies now renaming themselves ‘energy companies’, Dr Bruch noted that renewable energy transitions need to cut across sectors and technologies – otherwise we run the risk of living in a renewable bubble that does not really achieve long-term returns.

Asked whether stimulus packages risk creating the same renewable energy bubble, Dr Bruch noted that while these are helpful to trigger wealth creation and the energy industry could certainly benefit from them, something positive needs to be done with these stimulus efforts to drive change.  

Advising governments, especially in developing countries to start building renewable energy frameworks, to enhance the energy transition and ensure that the balance of energy is managed correctly, he said: “Decarbonization means energy will still be transported from the advantaged countries to the industrialized ones that need it – export and import of energy will continue and offer earnings models for these developing countries that you do not have today.

“Governments for their part, must ensure investment remains stable to support business models and create an investment climate that is favorable and assures the developed countries of a return of investment.” He highlighted the example of Germany that is investing its money in other countries for energy production and said this could be of joint interest if the parties are focused on increasing the share of renewables in power generation.

He urged developing countries to drive the coal to gas transition, to really push for enabling conditions to bring renewables into place and finally to invest in infrastructure. He noted that installing the adequate infrastructure to get ready for a new system is often underestimated but most critical – infrastructure, transmission, storage, and stabilization are going to assume growing priority in the next 3, 5 and 7 years. He also noted that these changes need a long-term perspective, with the world still too timid about making them.

While he welcomed the return of the US to the table in all climate initiatives, he noted that this was just one part of the equation. With the green transition now valued at US$2 trillion, today we are witnessing a tectonic shift that sweeps China, Middle East, Europe and the US as well as well as many others in its swathe. He encouraged the world’s nations to come together to solve these problems globally.

To a question on Environmental, Social and Corporate Governance (ESG), the three central factors in measuring the sustainability and societal impact of an investment in a company or business – and the issue with pension and wealth funds and university funds not investing in hydrocarbon focused industries, despite industries such as petrochemicals still needing to depend on fossil fuels, he said:  “I am a believer in interim solutions – we will not otherwise get buy in from society, or government if we take extreme measures.

“Sustainability is not something we do because we are good people. Sustainability is a call for a focus for business reasons. It is the one element which will drive profitability of companies going forward and if you get this thinking into companies, then we will be able to define interim solutions as interim.  The big concern people have it that you get forever stuck with interim solutions. That is something that governments, but also us as companies have to frame. Interim solutions can pave the way for a long-term future.“

One big change he would like to see for the energy industry? “Collaboration in the energy industry and parties coming together to solve future problems.”