Putting energy policy at the heart of recovery

NARRATOR Welcome to the DNV Talks Energy podcast series. Electrification, rise of renewables and new technologies supported by more data and IT systems are transforming the power system. Join us each week as we discuss these changes with guests from around the industry.

MATHIAS STECK Welcome to the third episode of our new series of DNV Talks Energy. The series focuses on the impact of COVID-19 on the energy transition, exploring how the energy industry, businesses and society are responding to the global pandemic, and the role that policy, investment and technology is likely to play as the world seeks to recover. Our guest today is Bob Perciasepe, President of The Centre for Climate and Energy Solutions. Welcome, Bob.

BOB PERCIASEPE Thanks for inviting me, everyone.

MATHIAS STECK Bob, it’s great to have you on and I have briefly talked about the topic we want to discuss today, but before we go into this, it would be great if you could give us a bit more background about you as a person, as well as about The Centre for Climate and Energy Solutions.

BOB PERCIASEPE Okay, well I’ll try to give you the 25-cent version of that. The Centre for Climate Energy Solutions is a non-profit, non-governmental organization in the US. We do work around the world where we are generally called a think tank, but we work with businesses, with local governments and also with federal governments. We do some convening of countries around implementing the Paris Agreement, and we publish reports and try to educate and get policymakers more attuned to all the different options and ideas surrounding clean energy and climate change. As for me, I’ve been doing this for six years. Before that, I was the Deputy Administrator of the US Environmental Protection Agency for six years before that, in the Barack Obama administration in the US. And then before that, I was a Chief Operating Officer for the National Audubon Society, which is a global wildlife conservation organization.

MATHIAS STECK Very good. Very interesting, thank you. Bob, I want to start with some more, like, personal questions. COVID-19 pandemic is a truly era-defining moment, and it’s having an impact on every aspect of everyone’s lives, nearly. How has COVID-19 changed the way you approach your work?

BOB PERCIASEPE Well, The Centre for Climate Energy Solutions has been operating completely remotely. All of our employees have their own company computers. We have a variety of communication technologies we use. We’ve run webinars, we’ve run meetings. We have staff meetings every week. We communicate with each other in an ongoing fashion, with a variety of different technologies, and so we’ve continued, full bore, during the pandemic. And in many ways, being a small non-profit NGO, we were very used to flexible work schedules, since people do research and do writing. We often say, all right, work home for a couple of days and just keep connected through our various technologies. So, it has been a little bit of a challenge to switch to be completely remote, everybody, and we all miss seeing each other in the office. But we’ve been also having social hours on the computer, and so we try to keep a little bit of that socialising as well as the work.

MATHIAS STECK Yes, perfect. We have virtual coffee machine meetings in our organization. It works quite well. Well, as you have earlier alluded to in your introduction, you have worked at the heart of the US government, influencing their environmental energy policy. And of course, you are working there with some predictions of what the future holds and where it should go, but one scenario I believe no one had in mind a couple of months ago, was the drastic decline of the global energy demand, and it has been caused by COVID-19. How do you think global policymakers are thinking about the COVID-19 crisis and its impact on the global energy demand today, but also looking forward?

BOB PERCIASEPE Like predicting when something like this would happen, predicting how it will end is more of an art form than a science, although it’s informed by science. So, we know that, eventually, we will develop immunities, and somebody will develop vaccines and eventually we will get back to normal operating. But in the meantime, on a global scale, countries all over the world have issued stay-at-home orders. They have shut down areas where a lot of people congregate. This is starting to ease a little bit, but that has had a profound impact. It’s almost like turning everything off, suddenly, as opposed to a gradual decline in the economy. So, we basically shut off the economy in most of the developed world, and so there’s going to be an unprecedented global drop in GDP. There’s going to be an unprecedented global drop in jobs, and along with that, an unprecedented sudden drop in energy consumption, and with that, carbon emissions. So, these things are happening, and we’re starting to see how people are predicting how that might look on an annual basis. I think The International Energy Agency has predicted probably a decline of 8% on global carbon emissions this year. And in the US, we think it could drop almost 11%.

MATHIAS STECK You have mentioned just now, the shut down of economies, at least in the developed world. On the other hand, we are seeing now many governments which are getting into this mood of, they want to open up again. And we are seeing unprecedented interventions from policymakers in terms of stimulus measures, around the world, to help keep business and economies afloat or to get them going again. So, in your view, is there the possibility and the appetite of decision makers to approach these stimulus measures in ways that also help the progress of the energy transition?

BOB PERCIASEPE I think the first thing we need to recognize, while we’re seeing these changes in the economy, and from that, changes in emissions and energy consumption, we have to recognize that millions of people are suffering. Not only from getting the disease themselves but also from job loss or temporary job loss. We have tens of millions of people globally that are in an economically constrained situation with their jobs. And so, the first thing that most governments had to do, and the United States is no different, is prepare immediate relief. In the US we’ve had a program called the payroll protection program, where loans are given to small businesses to pay for their actual payrolls for several months to carry them through this pandemic, bolstering the unemployment insurance program. And then actual cheques to individuals to help with rent payments or buying food. And so that immediate influx of support has been aimed at immediate relief and immediate support for first-line workers in the medical and public health arena, as well as others. So, that is what has been happening for the most part. Most governments and the United States is no different here, are beginning to think about, what will be that longer-term recovery approach? Once we get through the immediate suffering and try to mitigate that, then the question is, is there something long term that needs to be done to throw the switch back on, and how quickly can that happen? So, yes, those conversations are starting the US, and I think in most of the world. But the immediate relief has been aimed specifically at retaining jobs, mitigating the impact of job loss, helping the healthcare workers, and then providing some support down to the individual family level. So, it’s the next stimulus part which will have some opportunity to look at how we recover, and can we recover in a way that helps the long-term issues, like pollution and climate change, but also other issues like job creation.

MATHIAS STECK Yes, to go maybe a little bit deeper on this, latest since COP 21, climate change had become this kind of mainstream topic covered by media and has drawn a lot of attention from governments, but especially also from the public. And not long, actually, before COVID-19, we had arrived at the sense of emergency that there is a high potential that we’re actually already looking at a kind of climate emergency. So, when we look at the Paris Agreement, when we look at the Green New Deal in the US, you think they have jeopardized, or they are just a bit delayed?

BOB PERCIASEPE I’ve been very encouraged that, at least in the US, American businesses, but also some of these businesses are global businesses, have continued to work on climate and sustainability issues. Since the pandemic has been declared, we have seen major companies, including some that are headquartered in Europe, like Shell. But also, in the US, some of the power companies like Duke Energy in the Mid-Atlantic area, a major electricity provider, PSEG, a company which was hard hit by the pandemic. We see these companies declaring further ambition on climate reduction, during the pandemic. Now, this to me indicates, very strongly, that while we’re in this situation, we also have a business community, globally now, that has really come to recognize that they have to change over the next 20 to 30 years. And they are trying to find that balance between maintaining some momentum on that, while at the same time having to deal with the direct and immediate impact of the pandemic. And so, I see they are moving in that direction, to try to keep their eye on both of these issues, and not completely abandoning it. Now, on the government side, I think it’s a mixed bag. I think many governments have put aside thinking about the long-term issues, like climate change, while they’re trying to deal with the immediate loss of revenue, loss of jobs. Constituents that are very worried about the future, either because they don’t see the impacts of this pandemic directly affecting them. Others who see it directly affecting even greater. That’s creating political divisions in some countries, and so many public officials and policymakers are focusing on those tensions now, as opposed to thinking about the long-term. But I have some optimism that the world is going to be able to deal with these things together, and while we must deal with the immediate, we can do it. And as we start to recover, we can do it in a way that furthers both goals, economic recovery as well as thinking about recovering in a way that will improve the outlook for success on dealing with climate change issues.

MATHIAS STECK Yes, and I think the good sign, indeed, is that we saw an increase in renewables in the first couple of months in 2020, and that going forward, despite the energy demand dropping, which is drawing to the point you’ve just made about the private sector companies. One thing which is a concern, I think that not only because of COVID-19 but also in that sense, we see the world not necessarily standing together everywhere, which was one thing you’ve just mentioned, that they in some parts do. But we also see very different developments in different parts of the world. So, we had that issue already on the energy transition front, where, for example, in South-East Asia, countries are reacting in a different way to this emergency than others. But putting this together with COVID-19, we see that the developed world and the developing world is very differently affected by both actually, the potential impact of climate change, but also the impact of COVID-19. So, what has to happen to not get an even further divide here?

BOB PERCIASEPE Well, I think, in many ways, we’ve been globally pushed into a position with the pandemic, where we see these different outlooks on how to solve or deal with issues globally. And we see them laid bare by the differential impacts or responses to a global pandemic. Those are the same kinds of different outlooks that are also bought to bare on a much more slower track crisis, like climate change, that unfolds over the next several decades, as compared to over a couple of weeks. And we see a lot of differential response to climate change around the world, in terms of how people see how quickly or how urgent it is that we need to do something about it. So, I think we can see those differential approaches, exposed in the global response to the pandemic, and we can see that even manifested in individual countries like the UK and the US, in terms of how they’re different approaches regionally, or different outlooks regionally. So, I think it’s helpful to see that. I think it’s also mindful that even though we have all those differential views and approaches, that the world is moving forward to deal with the pandemic. We have implemented globally, measures that have undoubtedly reduced the impact. Not completely, we could have done a better job globally, and we can continue to do a better job, but there’s been a coming together over looking for vaccines. There’s been a coming together on best practices to socially isolate while we try to move forward with a way to deal with this. And I think you can take some lesson from that on climate change, is that what we’re also seeing globally, with the Paris Agreement, and with other renewable energy developments, that that continues. We’re expecting, and I think others are predicting, including the International Energy Agency, that we’re going to have a continued growth in renewables this year. It may not be quite as high as everybody had expected, but it’s still going to increase the amount of renewable energy globally by 5% to 6%. And while we have an immediate problem with some of these industries, with job loss and disruption of supply chains, there is a continued underlying forward momentum. Just looking at the projections that are currently out there from Bloomberg New Energy Finance, on the sale of electric vehicles this year. They’re expecting sales of electric vehicles to drop 18% from last year, but the internal combustion engine sales of vehicles are expected to drop by 23%. So, there is an undertow of continued progress, regardless of these differential responses.

MATHIAS STECK Thanks for that, Bob. I would like to go a bit deeper on another dimension, behavioural change. We have talked about the drop in energy demand, as a result of COVID-19 a little earlier, and subsequently, as a result of this drop in energy demand, we have also seen a drop in CO2 emissions. It has been predicted though, that as people begin returning to work and vehicle use increases again, CO2 level could return to the same levels as before, or even become even higher. So, how do we avoid that happening, and encourage lasting behaviour change?

BOB PERCIASEPE There is something going on here that I think will… I’m just giving you an example of something that could have a profound change, particularly in the developed part of the world, in the post-pandemic period. What I mentioned to you at the beginning of our discussion here, that my small non-profit, or non-governmental organisation, we have been working remotely i.e. not driving to the office or not taking buses to the office, for over two months, and we have continued to operate successfully. Now, I’m not saying that that is something we should do forever, but I think most CEOs of major corporations, particularly with the knowledge-based part of their employees, are going to recognize and probably provide more tools, for more remote working. There’s always been a hesitancy to adopt these measures or to allow these flexibilities, but I think people are seeing that productivity and success can continue. So, I’m going to guess… I shouldn’t guess, but I’m going to suspect that there will be a part of the mobile workforce that will reduce its commuting time. And so, I think there alone, as we recover… And again, we dropped quickly, but I think we’ll recover slowly over the next year, year and a half. As that recovery takes place, I believe that the measurement in automobiles is called vehicle miles travelled. I think the vehicle miles travelled will decline. It’s going to go back up, but it won’t go back up to where it was. I think this is something that we’ve learned from this pandemic, and something that I believe will stay with us in the economy. I’ve heard some CEOs predict that some of their – maybe 10% of their workforce may not come back to the office at all. So, this is one thing I’m pointing to, and I think when all is said and done, the global oil demand is likely to never recover to where it was. And I think that alone is a piece of how we start dealing with some of the emissions. Not only do we need to continue to work on electrifying surface transportation and buildings as part of a larger global strategy, but what I think we’re going to also see now is a continued decline in the demand for oil. Certainly not going back to where it was.

MATHIAS STECK Yes, and coming back to the role of businesses to play in these times, by still going on with decarbonization, I would like to come back also to the role of the Centre for Climate and Energy Solutions. Since you are working closely with these leading companies, you mentioned to find pathways to decarbonization. I would be interested if you see different priorities in the light of COVID-19 in the light of climate change, in the different industry sectors. Would you have some examples there?

BOB PERCIASEPE It’s sort of split a little bit in how we’re approaching this. Before the pandemic, we were working very closely with stakeholders, local governments, state governments, and major businesses, on what would their pathways be to getting to net-zero carbon emissions in the middle of the century? And we produced a report in November called, Getting to Zero: A US Climate Agenda because we had three dozen companies involved with those discussions. And it laid out a host of policies and directions to take that would give the companies confidence that they can achieve a net-zero if there was supporting public policy in place. And therefore, then we would build support in the business community for advocating for those policies. And in this month, even in our remote working, we’ve been getting companies together with key members and their staff, in congress, talking about these approaches, as the congress starts to think about a longer-term stimulus. So, we’ve made a little bit of a pivot there, as an NGO, to be able to look at, all right, we know there’s some long-term stuff that we’ve been working on that are oriented towards climate policy, which one of those can really help now in recovery, so that when the recovery is underway, and if there is federal spending to facilitate it, that spending is done in a way that is aligned with, or on the pathway to, helping different businesses become decarbonized in the future. Things like the grid, the electric grid and making sure that it has more resilience to it. Battery technologies, infrastructure for charging vehicles. All of these kinds of things that can create jobs right away, but at the same time carry us on the path to a more confident decarbonized future. So, in our NGO, we’re trying to say we can’t lose track of that long-term. We can’t lose track of that, and companies need to keep their eye on that, and when we talk to companies, we try to help them see their own pathway. But on the other hand, there is an opportunity here, as we do start to look at recovery, to perhaps make some progress along that path.

MATHIAS STECK Bob, talking about investment and investment opportunities in renewable energy, and decarbonization technology, where would you see the greatest investment potential around the world?

BOB PERCIASEPE I think a portfolio approach to investing in clean energy would be in anybody’s interest. If you have a firm belief, and we all need to have this, that the world needs to decarbonize in the next 20 to 40 years, then there’s a host of technologies, whether it be wind energy or solar, carbon capture for some industrial sources that can’t be run on renewable energy or for natural gas turbines, that might still be around, or making hydrogen if we’re going to use hydrogen for either transportation or generating electricity or storing energy seasonally, for powering the grid. All these different technologies that you’ve heard of, it may be even advanced nuclear, more modular nuclear plants for large industrial operations, or more remote areas in the world that – we need to bring their quality of life up. Electricity is going to be a key component of that. If you were going to invest, you would want to invest in that portfolio. Companies and practices that are geared toward all of those different factors, because – I say portfolio, because it is possible that some of them will go faster and some will go slower, and some may not survive looking forward. But at this stage of the game, we need to be moving all of those ideas forward. We need to have all of these things invested in now. And many governments are looking at this broader portfolio. Certainly, what we recommended in our report last year. I would characterize it as a technology inclusive pathway. That you would not say, this is the only way to solve the climate problem. It’s going to be multi-faceted. We may have hydrogen fuel cells in cars. We may have batteries in cars. Cars are going to be electric motors, so motors would be a great thing to invest in.

MATHIAS STECK Thank you for these interesting insights, Bob. I have one final and summarizing question for you. What lessons do you think we can learn from the global response to the COVID-19 pandemic in order to transition faster together, to a clean energy future?

BOB PERCIASEPE Yes, we talked about that a little bit earlier, but I guess the biggest takeaway is that – and again, this is the glass is half full or the glass is half empty. But if I look at it as the glass half full, which is usually what I do, it’s half full, because the globe did respond. It did respond. Things were done virtually everywhere, to try to reduce the spreading of the virus. If I’m a glass half empty, I could say it was not enough, and we needed to do more. And we should have done more, faster. Well, that same situation exists with climate change, that we’re no longer in a situation where people are saying, we don’t need to do anything. And the glass is half full because we have that recognition. We have large major corporations making major commitments. We have many governments implementing policies. Even in the United States, which doesn’t have a very active federal government at this time on climate change issues, we’ve been able to reduce our greenhouse gases. We’ve been able to implement certain measures. The economics of energy in the US are pushing a decline in carbon emissions on the electric generation. We have automobile industry investing in a large way, and electric motor driven surface transportation. China, and the US, and Europe are major markets for these cars. They’re not going to go away. So, from a glass half full, all that is going on, and in a glass half empty, it’s not enough. So, in a way, that is what characterized our response to the virus. We certainly globally responded. Some could argue, it was not enough. So, I think the lesson is, that we just have to keep pushing here, and that we need policies that are going to help – I’ll call it, if you’re in sailing, putting wind in the sails of some of these directions that are already happening, with the investments of companies, with the changing economics of different energy sources. The fact that renewables have become very competitive, price-wise. The fact that we learn from the virus response that people will see that they may not need to drive to work as much as they used to, and we may be able to reduce the amount of emissions from cars, even in the near term, by not using them as much. So, I think all these things are there. I’m a glass is half full kind of guy. I notice that with the exception of the United States, no other country has said we’re going to pull out of the Paris Agreement. So, for me, the glass is 80% full there. So, and that is not a sustainable long-term position for the United States anyway, so there you go, glass half full.

MATHIAS STECK Thank you very much for these highly interesting insights, Bob. It was great to have you. And thank you also to the listeners for joining us. That was Bob Perciasepe, President of the Centre for Climate and Energy Solutions.

NARRATOR Thank you for listening to this DNV Talks Energy podcast. To hear more podcasts in the series, please visit dnv.com/talksenergy.