Smart grid networks will make centralized power plants obsolete – Renewable Energy Agency chief

SS:With oil, gas, coal, etc. systems are already in place, right, - we have pipelines, power plants, oil rigs, etc. With renewable energy, though, we pretty much only have wires in the grid - won’t the costs of doing everything from scratch be absolutely enormous? How much i would cost to equip the world to be renewable?

AA: Not that much. There's a misconception that what we're doing is ripping out everything and changing everything overnight. But the fact is that renewables are now the  transformation of the industry of energy: how energy is produced, distributed, managed, and the imperative is really, to, one is the De-carbonisation Imperative - we live in a carbon-constrained world, and the current energy system we have is now taking us to limits that we cannot afford to pass without catastrophic change. The second is that renewable energy today, the technology that it provides, provides clean accessible electricity and energy that is now having an important business case around it so it's actually generating wealth, employment, growth in more and more countries around the world.

SS: We're going to get to that. Give us a number.

AA: Let me give a couple of numbers.

SS:Okay.

AA: In the last 3 years in a row the majority of new capacity addition to the world's electricity system has come from renewable energy - that's a combination of solar, wind, hydro-, geothermal and biogas. Three years in a row it's in a majority. We project that if we have the right investment pathways to 2030 - we've done a global roadmap for renewable energy - that we can reach around 36% renewable penetration in the system by 2030. We just did a major study for the G20, in preparation for the next G20 summit on decarbonisation. That has basically created a consensus around major energy agencies that you can actually achieve 90% of the de-carbonisation you want if you accelerate the growth of renewable energy and energy efficiency. That's happening. Last year, the total investment in renewable energy generation was $320 bn. The year before - $360 bn. Today, it's a $2 trillion industry and we're seeing growth projections that are exponential.

SS:What has to happen? Will we have to wait until there's an actual shortage of oil and gas for investors to shift en masse and invest in renewables?

AA: There's no shortage of oil and gas and we don't expect one to happen anytime soon. But there's a very famous Saudi oil minister who once said: "The Stone Age didn't end because we ran out of stones!", and the oil age will not end because we ran out of oil. One of the most interesting things about this whole transition that we see happening is how many oil economies are positioning themselves for the energy economy of the future, which is not going to be entirely based on fossil fuels. It's going to be increasingly renewable, it's going to be increasingly decentralised, and it's going to be increasingly managed by telecommunications, by big data, by digitalisation of grids, and so on. It's going to be a very different world.

SS:So you feel like there's going to be no choice? Like people will have to turn to renewables? There's not one major cause why everyone is just shifting?

AA: There's a reason we have to shift and that reason has to do with carbon emissions and the concentrations of carbon in the atmosphere. If you want to believe 99.9% of the reputable scientists of this world, there's a climate change trend, and we have a carbon budget that we cannot afford to exceed by 2050, because this will lead to unknown consequences, but serious ones. So that focuses the mind, but there reality of what is happening, is that the business case and the technology around renewables have changed remarkably in only a decade. In less than a decade, the cost of solar photovoltaic cells, the solar panels that you see everywhere, has fallen by about 80%. We're projecting that it's going to fall another 60% in the next decade. So, the costs are coming down and business case is improving and the investment climate is there, and it's really taking off.

SS: Yeah, but I mean, you have almighty oil industry and almighty gas industry - do you think they're going to go down without a fight? You really think they care so much about the emissions?

AA: Not all of them do, but Sophie, I'm in Russia. Russia is a major hydrocarbon economy. It's a global leader in hydrocarbons. Russia's interested in renewables. I had a very interesting quote from one of the senior officials that I met, which is: "Look, we know there's a global transformation happening, we either have to be in the vanguard, or we have to spend a lot more money catching up later on, so we would rather be in the vanguard of what is happening, understand the technology and be part of this momentum".

SS:These are great words, but I still don't understand how countries that are completely dependent economically on fossil fuels, like the Gulf states, or Norway, or Venezuela, or Nigeria - they're not going to give up their economic livelihood, right?

AA: I'm based in Abu-Dhabi. My HQ. It's a very progressive oil based economy. They've just launched a new energy strategy for 2050. The objective of their energy strategy for 2050 is 70% de-carbonisation of their economy and 44% renewable energy in their power generation by 2050. Now, currently, it's' over 90% hydrocarbons. But what their strategy is talking about is that they see an economic advantage to investing in renewables for power generation, which is now, by the way, the cheapest source... When you have good potential, it's the cheapest source of power generation. But they're looking at their hydrocarbon resources for higher value added uses in future, petrochemicals and others. So, the whole conception that hydrocarbons are only for burning for energy is wrong! Because they're actually high-value resources. We can use them in very different ways.

SS:What I've seen lately is that with low oil prices, with the drop of the prices, we have instability and economic difficulties in the countries which are largely based on oil industries - do you feel like there's going to be shift, there's going to be instability?

AA: This is one of the very interesting things we started to look at now. We believe as the world of energy changes, energy is so fundamental to economic activity, social life and so on, that there have to be political or geopolitical implications for what this change is going to be. If we switch from oil pipelines, gas pipelines and oil tankers to electricity interconnections between countries, based on renewable - what are the geopolitical implications? What are the security implications? So that's one set of issues. The other is than in any major economic disruption, that's created by technology, there has to be change and instability, but the resilience of the country depends on how you adapt to that. Look at this whole discussion on coal. Coal is not dying in the U.S. because of fake environmentalists who want to stop coal. Coal is dying because it cannot compete with gas. Coal employment is dying because of automation. The future for coal in terms of energy doesn't look like it's very rosy. So how do you adapt to that? Part of that is the gas strategy, because gas is much lower carbon, but the fact is that if you look at the major utility-scale investments in solar and wind and geothermal, the electricity prices are coming in at below gas prices today.

SS:Solar and wind, they are probably good for low emissions, but what happens when there's no wind? What happens if it stops to blow? I know, recently in Australia they had to reopen a fossil fuel because they couldn’t generate enough wind energy…

AA: Well, you're not going to have only one thing. The systems of the future, to be resilient, are going to have to be multi-dimensional. So we're going to have a mix of sources. I visited recently a transmission region in eastern Germany. They've integrated 45% renewables in their systems - variable renewables from wind and solar, with absolutely no disruption to the system. They do it because they are interconnected with other transmission regions, they have a connection to the hydropower in Sweden, and whenever there are fluctuations, they are able to manage that by bringing in new sources of energy. But the other part of this is that they have perfected weather forecasting - so that they can tell 24 hours in advance exactly how much wind or sun they're going to have at any particular time with 97% degree of certainty. So, the planning is there, and you're going to have hybrid systems, but you're going to have to manage them intelligently.

SS:So does same go for the sun network, for instance? Because, I'm thinking, alright, let's say we have 7pm sunsets and it peaks at noon, but people usually consume of the energy after 7pm when they come how and when it's night, right? So how does solar network supposed to deal with, let's say, peak consumption hours, when there's no sun? And there's no wind.

AA: If you have only solar, you have a problem. If you don't have storage. Part of the solution to solar intermittency is storage. The cost of batteries and the innovation around batteries is improving exponentially, there's a lot of money going into it. You've heard of Gigafactory of Tesla, in the U.S., where he's really investing in trying to bring down the cost - Elon. China has 20 of those factories. Japan is investing in that, Korea is investing in that. So, around the world there's a lot of R&D happening on storage, to reduce the cost of storage that you much longer periods of using solar with stability. But the other is that you're going to combine solar with wind, or with hydro, or with other clean sources and you will have the ability... If you visit a modern control room of a transmission system operator, they have a huge wall and in real time you see exactly what source of electricity is coming into the market at any time. The market has become very sophisticated for buying and selling electricity, and it's a very resilient system now. I think that those technical challenges are challenges of the past.

SS:Wind farms, okay, they may be a source of clean energy, but they disrupt the habitat and migration patterns of birds, for instance. Then you have solar farms, and they occupy lots of physical space, destroying nature, you have hydro destroys ecosystems around its dams - so, I'm wondering is clean energy really that environmentally friendly?

AA: It's remarkable how the advocates of coal are the ones who are talking about the environmental impacts of renewables. It's stunning to me. It's not to say that there are no environmental impacts - there's virtually no industrial activity that you're going to be engaged in that has no impact on the environment. What you can see in terms of energy and power generation, renewables have the smallest environmental footprint of any generation technology that you have. Having said that, there are important issues with wind, especially in the past with the older designs of the turbines where there was a lot of vibration and noise. You have the issue with birds, especially migratory species. There's been tremendous developments since then. There's a very sophisticated way of accessing migratory routes and siting wind farms, in the future, so we try to minimize that kind of impact. But the reality is, if you look at the wind farms in the U.S., which are quite substantial now, they are more birds killed on highways of Florida by cars, than there are by the entire windmills in the U.S. You have to put that a little bit into perspective. The other is that some of the big producers have invested in very interesting new technologies. You have radar systems now in some of the really tall, big turbines, that are able to detect oncoming flocks of migratory species of birds and shut down the turbine, until the birds pass. So, all of these improvements are happening. It's not to say there's no impact - impact is being reduced. On solar: you can put solar on rooftops - there's very little environmental impact to that. You put solar in dry areas, where there's a lot of solar radiation, but there's no agriculture or anything like that. Solar footprint is not that huge. I think the footprint in solar is more in the production and disposal of modules at some point in their life and what happens with the chemicals and heavy metals that were contained in that, and we're working on trying to see how we can have a recycling program around solar modules in the future.

SS:I want to talk a little bit about biofuels, because that's also a controversial topic. Let's say ethanol - the most famous one in the new right now -  it’s made out of corn, but its production inflates food prices and diverts farmlands - so should corn be used for food or for fuel?

AA: It depends on resource in demand. In the past, it's been negative. I think, there's a consensus that the use of corn for ethanol has been a little bit wasteful in terms of the resource. There was also a huge concern at a time when we had food crisis in the world, that the competition between food and fuel was creating a situation of risk for populations that were dependent on food aid. A lot of the corn produced in the U.S. that doesn't go for ethanol, it's surplus is actually used for food aid in developing countries. There has been this debate. We believe that first of generation of conflict between food and fuel is more or less over, because we now have a second generation of technology, which is basically using crop residues, using first waste - crop waste, food waste, to generate biofuel at lower cost, and that technology, cellulosic technology is beginning to become economic. Whenever the price of oil is low, biofuel is not competitive which the case is more or less right now. If oil prices start to go high, biofuel becomes competitive for transportation. So, it's a very market-driven sort of thing.

SS:Another huge thing is obviously the carbon emission, and everyone is so worried about it. So if governments want zero-carbon energy, why haven't they turned to nuclear energy?

AA: Nuclear is expensive and dangerous. It requires huge investment in infrastructure.

SS:More than renewables?

AA: Oh yes. Much, much more. There's a difference between nuclear and renewables in that you can switch renewables on and off at no cost. Once you have built a nuclear plant and you get it running, you're not going to shut it down, it will take you 3-4 days to shut it down...

SS:That's what I'm thinking, it's already there, the plant's already there, the infrastructure is there.

AA: But it's very inflexible. They are in a few countries. And some of those countries that had it are already phasing it out. Look at Germany - there's a popular movement against nuclear. There are some countries that are making the choice, and that's their strategic decision. But nuclear cannot become the main source of any system, because it's a very inflexible source. It can become a kind of base-load for part of it, and it's a low-carbon technology, and we shouldn't discount it, but I think the safety concerns around it are really pressing in people's minds.

SS:So, you've mentioned Germany, and we know that third of its energy now already comes from renewables, but we also know that its emissions have risen by 10 mn tonnes - that's a lot. So, I'm just wondering, playing devil's advocate, but you'll probably correct me - switching to renewable energy doesn't necessarily mean drop in carbon emissions?

AA: Energy decision-making is very complex. It involves economics, society, politics. There's no linear route. So while Germany is probably one of the world leaders, together with China and a few other countries, in renewables, they have to make decisions that are going to impact industrial growth, that are going to impact the coal belt of the country and what happens to employment there. They have to make choices between different generation technologies at different points. Paradoxically they have a lot of gas generation that was mothballed while they used coal. But none of this linear. What we see as a long-term trajectory is that coal is going to fall off more and more in Germany. I was there a few days ago and I was told that 30% of lignite is going to be discontinued over the next year. So, coal use in the German electricity system is going to fall off more and more over the coming years. I think that the optimum mix we're going to see is between gas and renewables.

SS:Another thing is the biogas from cow dung, that's proven to be a very effective source of energy. But that's been there for a while. Me and producers were discussing this, in 1993 - we read an article about it - it's been around for decades, so why haven't farmers switched to cow power by now?

AA: Some do. There are some countries where it's quite advanced. In India, for example, there's a lot of cow dung and people are using this for energy generation. In my country, in Kenya, there's quite a lot of biogas being produced in certain areas. But so far, it's a very small scale technology, and in places where you have alternatives people don't invest in biogas. For example, in Russia you have massive biogas potential, but because natural gas is so cheap and so widely distributed, it's all the question of economics. So if the economics are right, if there's an economic case for the householder or the investor, they'll do it, but if the case is not there, it doesn't work.

SS:Also, it's a fact that renewable energy is more common in rural areas. What has to happen for cities to be adjusted to the renewable energy?

AA: There are so many visionary cities today that are moving very strongly in the direction of sustainability and renewable energy. Of course, you cannot install acres of solar panels or huge wind farms in the middle of cities, but what cities can do is have their procurement policies favor the procurement of renewable electricity over others. That gives a very strong signal to investors, and that's happening in many places: San-Francisco, Vancouver, there are cities in the U.S. which are actively doing this, there are big companies in the U.S. based in these cities who are actively preferring renewable energy procurement over others. So this provides a signal to the investors in power generation from renewables to invest more. Power generation increases and the city is fed with renewable electricity. There are other ways of doing it also, and in the future what we're going to see is more and more rooftop solar in most countries. With this decentralized system what we need is smart grid system that's able to connect all of this, understand what is happening with electricity generation from decentralized units, be able to buy power to the grid or sell power from the grid to the household that has solar installed, and this smart system will allow sort of demand-side management, it's a very intelligent way of managing energy which will reduce the impact of energy use.

SS:I also feel like that the biggest problem will be how to change people's perceptions on new technologies, because people like you who are explaining it so wonderfully on your ten fingers, you guys are more of an exception at this point, maybe you're going to be majority in the future, but let's say going electric could be one way, but buying a car is a huge thing for most of the people. So they're going to think twice whether to invest in a normal car or an electric car, because even big cities, even visionary cities, they don't have the facility to charge your car everywhere where you want to go and take big journeys is going to be so difficult with an electric car. I think Tesla is beautiful, but if I had to choose, I'd probably go for something else.

AA: First of all, transportation is the big issue. I think the issue of power generation from renewables, that's a done deal, that's going to be the wave of the future. Vehicles, where the majority of carbon comes from is going to be the challenge. Look at what is happening. Tesla is kind of leading visible thing. Elon Musk is this wonderful visionary who has these ideas about what he wants to do in the future, which are incredible... But I was talking to the Minister of Energy of China recently - I met him at a meeting in Germany - and he told me that they currently have about half a million electric vehicles on the road, just over, maybe, but they're expecting to have, in the next 10 years, five million. China's automobile industry is growing. The interesting thing about China, which is so big on R&D: they are not spending any money on R&D on the internal combustion engine. They're putting all of their R&D dollars in looking at new platforms and new technologies for the electric vehicles of the future. This is going to be the wave of the future. They're cleaner, they're less noisy, there's less service involved, the engines are more efficient, they use electricity more efficiently and these are great cars to drive because the acceleration is much better than with internal combustion. So you're not sacrificing anything. But how we get that to scale is really the challenge that we're looking at.

SS:So, if you were to look into the future, which source of renewable energy do you see as the most promising globally - solar?

AA: Solar is the one that's growing fastest at the moment.

SS:So we're doomed in Russia.

AA: If you can do solar in Germany, you can do solar in Russia, come on. There's a very interesting experiment in the Arctic circle, using solar in the Arctic - because you have 6 months of sun in the Arctic. It's remarkable, where you have radiation, you can have solar. It doesn't matter about heat. But solar right now is winning, but wind is also very cheap, and there are areas where wind is winning. We already have hydro, which is the base of much of renewables, but geothermal, I think, has a lot of potential in the future, also.

SS:Thank you very much for this very interesting insight. We'll meet in 10 years in time, let's say, and see how things have changed in the world. We were talking to Adnan Amin,  Director General of the International Renewable Energy Agency, discussing the possibilities the green energy sources are opening up for the world. That's it for this edition of SophieCo, I will see you next time.