Clean Energy Wire: What regulatory change would advance the energy transition the most?
Hendrik Sämisch: Obviously, a comprehensive solution would be to introduce a fair carbon price. But I suppose that’s not really a concrete policy demand because it’s such a huge subject. Also, we’re active on the market on a much more operational level, therefore I would choose another subject. One issue we’re very critical of – and which is often overlooked – is that grid bottlenecks cause immense costs. That’s because Germany clings to the illusion of a unified pricing area. But, in effect, we’re transferring hundreds of millions of euros from west to east and from north to south in order to keep electricity prices the same. We must find a way to deal with the common situation of strong renewables production in one part of the country and strong power demand in another. Investing a lot of money in switching power plants on and off can’t be the right answer to this problem. We need an integrated European power market, which will also include grid extensions. Temporary regional price differences shouldn’t be a problem. This is a central issue with a lot of market design details attached to it. If you could draw up a power market with a high share of renewables on a blank sheet of paper, it would look very different from what we have today: flexibility would have a price, for example. The market should also see early on that very cheap renewable power is available in many hours of the year, but also that there are shortages at other times. The market needs signals for both so it can incentivise investment - for example in a gas power plant that can become profitable by generating power only for a few hundred hours per year, when electricity is scarce and therefore very expensive.
Clean Energy Wire: Do you believe Germany is still a pioneer in the energy transition?
Hendrik Sämisch: Germany did manage to make a great leap in the period between 1998 and 2005, when it placed a very large and also risky bet on renewables to bring the costs down, which worked surprisingly well. However, the country didn’t make the second or third step with the same consistency. But at least the energy transition’s burden on households is about to decrease in the years to come. It will be a rewarding task to be minister for economic affairs – we will witness a further expansion of renewable capacity while the renewable levy will fall year after year.
There is still great interest from abroad in finding out what we did in Germany, what went well here, and what didn’t. The experiences the country has gained during its head start are still valuable. But other countries are catching up fast. I’m not an expert, but there is a lot of movement in many countries – just look at China. It’s incredible how they’ve managed to lower costs in PV solar – just imagine what would happen if they do the same for batteries.
We see a rapid renewable energy rollout in lots of other countries where this has become profitable. In many markets, it has become even more obvious that policy can no longer stop the breakthrough of renewables – just think of the US, where federal policy is not exactly climate-friendly at present. Despite this trend on a global scale, the large technology companies are not very active in this field yet. So, there are still lots of opportunities for us.
Clean Energy Wire: What do you consider the most important milestones for your company in the future?
Hendrik Sämisch: We have already expanded our market in Europe – we offer market access for renewables as well as power generation forecasts, and experience a rising demand for solutions to control renewables in order to balance the grid, and to understand what will happen in the power market in the hours to come. The increasing rollout of renewables poses many questions for grid operators in countless countries that need answering: Where does the power come from? Where does it go? What will happen in four hours? – and we’re happy to assist them by saying: ‘We can tell you how much power renewables generate this very second at each grid intersection, we can visualise the process, and we can forecast what will happen in four hours.’ These issues will become increasingly important in every country on earth within the next five years and we want to provide answers by using our technology.
Clean Energy Wire: Who do you consider your most important competitors?
Hendrik Sämisch: That’s difficult to answer because we’re active in several segments of the market. But I can approach it from another direction: the conventional energy industry has not become a real competitor. What we do is not relevant to them – from their point of view, we’re about technology, and about meteorology. That’s why we’re keeping an eye on interesting technological developments. This is still a rather abstract competition, but we will have to face it. We need machine learning and algorithms to improve our weather forecasts, for example. We need to be on the lookout for good ideas. Just from reading the newspapers, I would guess that it wouldn’t take very long for Google Alpha to understand how to deal with huge amounts of weather data, which means competitors could appear in the longer run. But at present, on a more operational level, our competitors are mainly power traders, power companies and technology firms that work in energy – such as Siemens or ABB.
Clean Energy Wire: You are already expanding in various European countries. Do you have any plans to enter markets beyond Europe?
Hendrik Sämisch: Yes, we already have a number of Virtual Power Plant (VPP)-as-a-service projects outside of Europe, where we build up a VPP infrastructure for utilities or other aggregators. We have accumulated quite a bit of experience and technology by operating in Germany, which is a real bonus because this was the first country with a large number of renewable energy installations. This experience gives us an advantage that we would like to carry into the world. Publicly, we have mentioned projects in Japan and South Korea, but we could basically go anywhere. Japan is very interesting because that country has just launched an energy transition policy and is very keen on technological partnerships – there is a very positive atmosphere at the moment. But we also see many opportunities in other Asian countries, as well as in Africa, and North and South America. This also poses major organisational challenges for us, and we’re trying out a lot of new things. From a commercial perspective, these opportunities look very promising.
Clean Energy Wire: Do you find it worrying that oil majors appear to look upon your area of expertise as a business opportunity and have started to expand rapidly by swallowing smaller companies? Shell has bought solar battery pioneer Sonnen and might also become owner of green power provider Lichtblick by purchasing Dutch utility Eneco, which is also one of your shareholders.
Hendrik Sämisch: First, one must ask: Why does Shell do this? I guess various motivations are possible: marketing and greenwashing, or even an attempt to stifle competition. But, to be honest, I don’t think that’s the case here. A major group like Shell doesn’t need to bother. Therefore, I believe the decisive factor is the realisation that it won’t be able to make money with oil and gas in the medium term. Given the incredible profits they make in this business today, why not pour money into the sector that will one day replace it, and is still comparatively cheap? There is probably a sober economic consideration behind these moves, and Shell now appears to march down that path very decisively. It’s true that we had this sort of movement once before – just think of BP’s slogan ‘beyond petroleum’ – but I think this time they are serious about it.
Still, this poses some important questions: will we fill in the old trenches and join forces to find the best solutions? It’s also a fact that these developments change the environment for other emerging renewable companies. I doubt that Shell’s company culture has already evolved as much as their management decisions. The conventional oil and gas world simply works totally differently from the renewable world. I don’t want to play them off against each other, but I’m convinced that a business model based on producing CO2 is not the right one and should disappear sooner rather than later. But to reach that point, why should it not be an option for large emitters to support those with cleaner solutions by investing in them? We will have to see. At present, I’m quite happy to work with a Dutch green energy provider as a minority shareholder. You just notice there is a common spirit – it’s about working with people who want to make the energy transition happen.
But anyway, you can also see it in a positive light: a company that makes billions of euros by producing CO2 uses some of its profits to change its business model. That’s good news for the world. And it’s not only Shell – Total is doing the same. They’re all doing it, except the US oil majors.