Insights Report: 360-Degree View of the Energy Sector

The World Energy Council’s definition of energy sustainability is based on three core dimensions: Energy Security, Energy Equity, and Environmental Sustainability of Energy Systems. Balancing these three goals constitutes a ‘Trilemma’ and balanced systems enable prosperity and competitiveness of individual countries.

Guest Expert: Dietmar Siersdorfer, Director, Siemens Energy, Middle East & UAE

Co-Moderators: Patrick Allman-Ward, CEO, Dana Gas, and Cornelius Matthes, CEO, Dii Desert Energy / Desertec3.0

This conversation helped us better understand the challenges, opportunities, and strategies for the path ahead for the UAE and the region.

Patrick Allman-Ward: This is an extremely timely and particularly important session, as Europe and the world faces its biggest energy crisis for the last 50 years. Critically, we have a representation of the 360-degree view – oil and gas industry perspective, renewable energy at the other end of the spectrum and appropriately in between, we have our technology expert and supplier solving the problems that we are creating. Related to energy transition, Chevron CEO, Michael Wirth recently said in an interview with the Financial Times that the global energy crisis was exacerbated by Western governments doubling down on climate policies that have made the energy markets more volatile, unpredictable, and chaotic. He pointed to unintended consequences and the need for an honest conversation, which is what we will have this morning about the scale of the energy challenge.

Essentially, he was saying that the conversation about energy in the developed world is skewed towards climate and has under emphasized the importance of affordability and security. And his observation was that the fossil fuel industry still runs the world’s energy system. Today, 80% of the world’s energy supply is still from fossil fuels and will continue to be so for quite some time. So, that is a very oil exec perspective. Do you subscribe to that, or do you have a different view?

Dietmar Siersdorfer: Yes, I share his view. This is the reality. When you look on a global scale, fossil fuels and oil and gas will remain. However, we are building a new renewable energy system quickly but should be much faster. We need to ramp up renewables, wind, solar, hydro, nuclear, depending on the country. But we also need to be realistic that there is a dependency on the systems that we have today. Siemens Energy have always said that gas will also be a transition fuel.

Millions of people have no access to electricity, and we need an answer for them. In the UAE, where we have a very stable energy system built on oil and gas, we can ramp up renewables. This is the right thing to do – you need to have both renewable and non-renewable systems in parallel and mitigate any dependencies. It was an error for Germany to build an energy system that depended so heavily on gas supplies from Russia, just because it was a cheap energy source. The entire German economy was built on cheap access to electricity, which is now endangered. It shows the need to have a diversified strategy and energy mix for energy security and affordability.

Patrick Allman-Ward:  Gas powered electricity and gas turbines are a perfect complement to renewable energy in the sense that these systems can ramp up very quickly, regardless of rain, sun, wind.

Dietmar Siersdorfer: It takes only minutes. We knew that the systems in the future will have renewables, but wind and solar are fluctuating energy sources. We need to always have a stable grid. The European grid is interconnected and that is much easier because you have a lot of big power stations with rotating equipment and masses. However, in smaller regions, if you build mainly for renewables, then you will have spinning reserves. For a stable grid system, you need to have gas turbines. Our gas turbines ramp up in 15 minutes from zero to full capacity to mitigate intermittent energy in the grid. People focus on the energy source instead of the grid, which is a mistake. It is complicated, but the grid is an intensive part of the whole equation.

Cornelius Matthes: There is a burden on current infrastructure for larger quantities of energy to be exchanged, so how can we do this?

Dietmar Siersdorfer: It is about building shipping capacity, and we need to evaluate how many LNG ships are available. UAE is building up its LNG capacity. Qatar is multiplying capacity with the North Field expansion. And when I look at the forecasts for the next ten years regarding LNG, there is a gap with more needs than capacity available. On top of that comes green hydrogen which also needs to be shipped. So, we need to find ways to build up capacity for that.

Patrick Allman-Ward: This region is doubly blessed not only with hydrocarbon resources but also high solar intensity. In the case of Egypt, there is also a lot of wind capacity. However, there is a mismatch between where the energy is currently consumed and where it is needed. The industrialized North is the highest consumer whereas the cheapest, most available sources of renewable energy are in this part of the world. How do you realistically match the supply and demand?

Shipping green molecules either in the form of electricity or intermediate products, hydrogen, green ammonia, green methanol creates significant problems. What are the solutions to get the green energy from where it can be most cost effectively produced to where it is consumed? And what are the potential consequences long term for the industrialized North with respect to what appears to be, even with green energy, a period of extensive, expensive energy supplies going forward?

Dietmar Siersdorfer: There is a discussion ongoing in Germany, that if they do not find a way to diversify and bring the energy costs down, we will see migration of industry into other regions, because they need access to cheap energy and electricity. They must find ways to access cost competitive electricity and energy. In this region there is an abundance of energy, especially renewable. We need to develop the shipment of these into Europe. Or maybe industry will come closer to the source of energy instead?

Patrick Allman-Ward: In terms of shipping, what is the most cost-effective way of moving green energy from the places where it is produced to where it is consumed. Hydrogen liquefaction point is minus 253 degrees centigrade compared to LNG at 167 degrees, which is another 100-degree centigrade to cool hydrogen, which is in itself high energy.

Dietmar Siersdorfer:  I do not think hydrogen will be shipped in pure form, but as methanol and ammonia. But we do have to build capacity – there is no fleet and no massive technology deployment yet for this. Additionally, new pipeline capacity needs to be built, which takes time.

 Cornelius Matthes: With the cost of solar down by 90% over the last two decades and cost of onshore wind down by 60%, there has been an opportunity for energy security through renewables for a decade. What can we expect for this decade, when we go from one terawatt solar to ten terawatts, and an explosion in wind capacity as well?                                                                                                                                                                                                                     Dietmar Siersdorfer: When you build an energy system, and you cannot rely on one country or unstable jurisdictions. Right collaborations need to be developed, with each nation needing to understand “what’s in it for me.” The infrastructure must be developed. Renewables have a good future. Middle East and North African countries, like Egypt and others, will connect to Europe and be a source of supply of ammonia, methanol, LNG to Europe.

Egypt is key. They have built an energy system on gas and renewables. There are megaprojects replacing old inefficient plants and they are building high efficiency gas fired power stations. They discovered gas in the Mediterranean Sea, and no longer needed to import gas from neighboring countries. There is also more integration between grids within the entire region – between Saudi Arabia and Egypt, as well as across the GCC. There is good stability with each nation helping each other with electricity supply.

Patrick Allman-Ward: What were the critical factors for success in Egypt? Can you replicate the success of Egypt in Iraq and elsewhere?

Dietmar Siersdorfer: The political will of its President Abdel Fattah El-Sisi who drove the infrastructure development, which has been a game changer for the country. They needed to stabilize a very vulnerable electricity system, but nobody was able to take a bold decision, until President Sisi took over. This is important for industrial growth and a more resilient Egypt. Due to his decision, we were able to build the power stations in record time, and the success is replicable. But you need decisiveness in the government leadership.

Cornelius Matthes: The technical capacity of the GCC power grid is underutilized. How do you see the development of reinforcing and boosting interconnections?

Dietmar Siersdorfer: Technically it is underutilized. But we also need to build new connections amongst countries and integrate the grid further. And we do need to develop and promote market models. This is an opportunity. It is great to trade in energy amongst partners so you can buy electricity when you need it, while another has a low demand at that time in his own country and can sell it to the neighbouring country, or a partner on the grid. We should have an integrated market along the GCC grid, and it would be great if the countries developed the mechanisms for this.

Cornelius Matthes: What about virtual trade, boosted with green certificates markets as in Europe?

Dietmar Siersdorfer: In the long term, we need to have electricity available at the sites. Green certificates can help to mitigate the carbon footprint until we have more renewables available. By 2023, we are aiming for all our global office buildings and factories to work on renewable energy.

Patrick Allman-Ward: Regarding energy dependency and security of supply, as Europe tries to ramp up renewables like solar and wind, isn’t the supply chain mainly from China? So, with the aim to not be so dependent on Russia for oil, will Europe now become too dependent on China for renewables?

Dietmar Siersdorfer: Yes, this is a significant risk. More than 90% of the solar supply of panels comes from China – this is a huge dependency, and we can have a repetition of what happened in Russia with China. The only other large-scale supplier for massive deployment of solar panels is in the USA. Regarding wind, there is Siemens and Gamesa, which are offshore. However, we have huge problems for onshore wind companies with a price war that is ruining the industry. We need to diversify the energy mix so that everything is included, and you need to have suppliers from around the world. Even in the Middle East, there is a huge supply chain dependency on China.

Patrick Allman-Ward: How can the USA and Europe protect itself from predatory pricing policy? Can Europe’s carbon border adjustment tax play a role? How important is the Inflation Reduction Act in the US, to ensure the survivability of these technologies?

Dietmar Siersdorfer:  The US has a clear stand to protect its industry and has enough supplies for its energy needs. They are not relying on any other country and are also building up renewables. Europe’s border tax mechanism can help enable investments in Europe, and they need to start rebuilding certain industries to diversify and have tech capabilities.

Cornelius Matthes: How do you see the development of wind power, which is more diversified globally and not concentrated in one country?

Dietmar Siersdorfer: Wind has enormous potential. Wind turbine is one of the biggest growing markets in the renewable industry. Solar is more complicated due to many parts supply-chain being dependent only on China.

Patrick Allman-Ward: Can you talk to us about challenges related to a green hydrogen future, particularly in the context of Europe, and give us a sense of scale? What does a Hydrogen Electrolyzer, or Hydrolyzer look like?

Dietmar Siersdorfer: Green hydrogen can be a game changer in the future. We have a 1.2 megawatts Hydrolyzer that produces 20 kilowatts of hydrogen per hour. The solar supply comes from Mohammed bin Rashid Solar Park and in the night, we use hydrogen and burn it again in a gas motor to generate electricity. It is a closed system at present but a showcase version and not on an industrial scale. Along with my colleagues from other Electrolyzer companies, we agree that none of us can fulfil the demands of hydrolyzed capacity at present. We must work together to succeed in all aspects of energy transition including hydrogen.

Patrick Allman-Ward: There is a huge challenge with respect to decarbonizing sectors such as glass, cement, steel, fertilizers and so forth. And hydrogen has been touted as a solution. However, we will have to double the current installed capacity of power generation in the world exclusively through renewables. How do you see that happening and over what period?

Dietmar Siersdorfer: I think the world will go in that direction, but it is a huge task. We have the old energy systems to transition into renewables, which will take two or three decades. Our study on decarbonizing the steel industry by 25% on a global scale shows that it will require 250 gigawatts of renewable electricity. That is Germany’s complete power generation today. We need to build an electricity system like that just for 25% of steel. And we have not even touched aluminum, glass, and cement. So, the magnitude is big. We need a huge technology deployment in the next decades to come and all this will take time.

Patrick Allman-Ward: Do you have concerns about the supply of critically essential metals? The ambitions of renewables for electrification will need a strong supply of copper. We will need to build five world scale copper mines every year for the next 20 years. However, there has been one world scale copper mine developed in the last 20 years. Isn’t there a mismatch between the ambition towards a green future and our capacity to supply the metals necessary to support it?

Dietmar Siersdorfer: Yes, this is another challenge for renewables. And one of the biggest copper mines in the world is in Russia, which is currently under sanctions.

Cornelius Matthes: What are your thoughts on projected ambitious targets and ground realities?

Dietmar Siersdorfer: We need lighthouse projects in this region. Furthermore, most of the projects in the hydrogen arena are not realized because there is no offtake, because companies find it is not economically viable without enough buyers. There is a strategic element to be put into place. For example, companies like Porsche have said they will invest in a renewables plant in Latin America to decarbonize the industry. And I do believe that the companies who will not go into a green future will not find customers.

Patrick Allman-Ward: It is encouraging to hear that there are companies now who are prepared to pay that green premium for having decarbonized products and using those decarbonized products in their in their industries and in their businesses.

Dietmar Siersdorfer: We have formed a Decarbonization Alliance with the aim to bring lot of companies together to help towards decarbonizing. At present we have 15 global companies from the UAE, the GCC, Europe, Latin America, North America, Asia. Many more want to join the alliance. At COP 27, we will have the first alliance meeting where the CEOs of the companies will come together and nail down what every company is doing to be traceable until COP 28. We need showcases from the companies and organizations that say this is possible to do. What are the actions taken? Beyond talking and pledging, what has happened and what has changed? We need data.

Patrick Allman-Ward: Let us talk about energy poverty, with about 800 million people who have no access to electricity. Do you think the COP discussion has been a very Western centric discussion. Will discussion in Egypt (COP27) and UAE (COP28) refocus some of that attention towards a more egalitarian energy future?

Dietmar Siersdorfer: This is a wonderful opportunity to cater for the demands of specific places. My African colleagues are developing roadmaps to present for COP27 that work for their countries’ needs.

Patrick Allman-Ward: Antonio Guterres, the UN Secretary-General, has recently declared that Africa should not use its newly discovered gas resources for power generation. Do you think that is a reasonable perspective to take?

Dietmar Siersdorfer: I do believe that all nations need to diversify their energy systems according to the various energy sources available to them. Countries need to develop a roadmap that makes sense to them and use gas as a transition fuel. Gas is a valuable energy source that we should use for the future. It helps us to make this energy transition real. Even Europe has gas resources, but they are not using it.

Patrick Allman-Ward: Do you think there is too much emphasis on the complete halting of the use of all fossil fuels too soon?

Dietmar Siersdorfer: If you have a coal fired power plant and you replace it with gas fired power plant and you have gas available, then it is a good thing to do. And as a strategy for the future, you can also use the same gas fired power station to burn hydrogen and will have a dual use. We have announced that we are phasing out of coal and are not supporting it with any technology anymore. We will continue to service the plants which customers are already operating, but that is it. We are not deploying any new ones. However, gas can help bridge energy scarcity gaps, and it can drive the green generation for the future. Gas turbine technology is very efficient for generating power.

On decarbonization, Siemens has many technologies. One is to improve the efficiency of gas turbines another is for heat pumps. There are many process plants all over the world which emit excess heat and instead of wasting this, you can use new technologies to generate energy from the heat. This also helps towards decarbonizing. We are planning to build a hydrogen test centre in the UAE where we can test hydrogen turbines in the future. We will build one of our four global Innovation Centres in Abu Dhabi. The others are in Orlando, Berlin and Shenzhen, China. The aim is to develop technologies for clean fuels, find ways to make grids more resilient, connect hydrogen into different sectors like transportation, etc.

Audience 1: What is it that we need to do as a society in this energy transition from the government side?

Cornelius Matthes: This region is not lacking in bold plans but in execution. Egypt can be a model for clear execution. Create a structure for a one-stop-shop for developers and create good policies for multi market segments. Energy transition is moving towards democracy, creating markets, and decentralizing as well.

Dietmar Siersdorfer: Governments can play enhancing roles. One is by creating new partnerships, like the German one recently. Governments can make the energy industry more secure, by creating overarching policies across regions or even on a global level. How do we how do we bring energy from A to B. Is nuclear considered green energy or not? We also need more diligence on the role of governments and regulators’ role. Governments should fund lighthouse projects for new technologies, like a Hydrogen Fund. Though economics are important, we also need the first movers that are showcasing technologies, which require much larger funds that only governments can afford.

Audience 2: a) How can we track the carbon intensity of electricity used industry and city developments? b) What are we doing enough to consume less? c) Producing hydrogen is very energy intensive. And if I am just shifting surplus electricity from my solar farms to power the hydrolyzer, losing 30%, and then when I convert it back to electricity or gas, I am going to lose another 30%. So how does that impact my levelized cost of electricity and why are we so excited about hydrogen?

Dietmar Siersdorfer:  a) Regarding tracking energy usage, there is technology available, and we have a project that is looking at tracking what is the CO2 footprint of a certain energy element or what is the CO2 footprint for a barrel of oil that we sell somewhere? How is this decreasing over time? There is blockchain technology involved. b) We can keep developing technology to become more efficient and decrease wastage. And regarding changing consumer behavior will involve putting a higher price on electricity and fuel. c) We need to decide where it is useful to apply hydrogen and it is still for the future in gas turbines. Today I would never use hydrogen because it is not economical. But, as we are developing new energy systems, we need to look at these technologies and what needs to be enhanced in terms of efficiencies, etc. We have roadmaps and R&D in development, and technology we expect to come. Hydrogen is at the stage that solar was in 2006 and seemed unaffordable. Hydrogen is going to be a game changer for the future, and we must work together as a community.

Cornelius Matthes: Energy efficiency is the best business case. The challenge is often bankability. It is a very fragmented market. It is about credit worthiness as well with a long-term ESCO contract. I encourage everybody to look at opportunities for energy efficiency and I see companies moving into this field now because for example, solar has become competitive and there is much more money to be made in energy efficiency than in solar.

Audience 3: What are the new technologies being developed?

Patrick Allman-Ward: Three disruptive technologies. First is small modular nuclear reactors, and it would be great if we could get this off the ground. The second is nuclear fusion. I know it has been the technology that is about to happen in the next 20 years for the last 50 years. And if we can finally make it happen, that would be amazing. And thirdly, Cambridge University Science Park is experimenting with technology that converts methane into hydrogen and native carbon – i.e., carbon black, which we need for carbon fibre, windmill blades, etc. If this is scalable, it would be amazing, and has huge global application as replacement for steel. They are shipping a container to the UAE for testing. An exciting opportunity.