Are we on track for the energy transition? Insights from three CEOs

There has never been a time, I believe, in this industry where the speed of change has been so fast. Welcome to Radio Davos, the podcast from the World Economic Forum that looks at the biggest challenges and how we might solve them. This week, how is the energy transition doing? We hear from three CEOs from companies on the front lines of the rapidly changing global energy sector.

"Resilience is today the dominant discussion point, and resilience covers a lot of things. The sustainability element, the availability of supply, and it covers also, obviously, on how do you actually build an infrastructure in a geopolitical world, which is probably more a challenge than it used to be."

Renewables have become far cheaper than anyone expected. Can they help cope with the growing demand for electricity, not least from the rush to build energy-hungry AI data centers?

"At this time, renewables are absolutely crucial, absolutely essential to get these data centers built, to get them built quickly, and to continue to have the social buy-in to placing large data centers sucking up a lot of energy in different communities."

"And can improved storage technology ensure that renewables deliver even when the sun isn't shining and the wind isn't blowing?"

"I'm quite confident to see the long-duration battery storage is going to play a vital role to replace gas."

I'm Robin Pomeroy at the World Economic Forum, and with this look at the energy transition from three energy CEOs.

"You can't lean against technology. It's going to be hard to stop that."

This is Radio Davos. Welcome to Radio Davos. And this week, we're talking about the energy transition. And I'm joined by a co-host this week. His name is Charles Burggo. Charles, how are you?

"I'm good, thank you, Robin."

What do you do at the World Economic Forum?

"So, I here at the World Economic Forum, I am managing the electricity industry community."

So, that's a community of who or what exactly?

"It's around 50 partner companies in the electricity industry value chain. So that will be utilities, grid operators, technology manufacturers, companies that are on the energy demand management side, all those really who are producing and helping people uh consume our electricity."

And you said they're a community. That means they actually meet each other, and you convene them and bring them together?

"Yes, exactly. So they convene regularly two, three times per year to discuss indeed the challenges facing the industry and how they can contribute to the forum's objectives of improving the state of the world and advancing the, in this case, advancing the energy transition for society and the economy."

Now, you came to me and said, "You've got this community of amazing companies, brilliant people there. Perhaps if we reach out to one or two of them, we can talk to them about they're people really on the front line of trying to make the energy transition happen." And that's what we've done. So, over the last couple of weeks, we've been interviewing. We've actually got three interviews we're going to play out today. What did you say to them when you said, "Will you join us?" What were you telling them we would be asking them?

"Yeah, indeed. Um, so I think the energy transition at the moment is facing many challenges and is taking also different pathways depending on the countries where where you are. Um, so it was interesting to indeed sit down with uh CEOs of companies that are active in many different parts of the world to see how the transition is playing out in those different parts. What are the challenges that they're facing? What they think will be the way ahead uh in those geographies. So I think they each shared their views and that's really interesting to listen to."

It was really fascinating for me. I mean, on Radio Davos, we do a lot about climate change. We do a lot about energy. But it's always interesting to speak to people who are really getting their hands dirty, you know, building the infrastructure that's required to make these things happen. And these were three, as you say, very different companies from very different geographical locations doing different things. Who's the first one?

"Christian Brooke, who's the CEO of Siemens Energy. Uh, Siemens Energy is manufacturing equipment for the grid, also for wind turbines and gas turbines. So they have kind of a good overview of what's happening with a global presence."

"Let me start with our purpose. We energize society. And this is fundamentally what more than 100,000 people do across the globe and in around 100 countries of the world. We have built roughly a sixth, a fifth of the global electricity production worldwide. And obviously, we do it on the one side by really building generation capacities. This could be renewables, this could be gas, but at the same time also bringing electrons to people. We are transmission technology, and we obviously also try to get our arms around energy and electricity supply towards the industry. So what could we do? Hydrogen? What is the next electrification of industrial processes? So that is a very broad picture which we are driving. But we are also very much about really executing, realizing projects, building something, right? Building the next transformer station, building the next gas power plant, building the next offshore wind park. And as I said, this we do around the globe. And since 178 years, even so, we have been spun off roughly five years ago from Siemens and are acting as a separate company in the German DAX. We obviously have a long history and long legacy from Vienna. And this is obviously what drives us every day to energize society."

"It's been going on for well over 100 years, but we're in an energy transition now. How's that going?"

"People easily talk about energy transition, right? But what you see at the moment happening, there has never been a time, I believe, in this industry where the speed of change has been so fast. And I have to say, in that regard, lots of things are happening. People building out grid infrastructure, more generation capacity is built. There's an unprecedented level of investment into renewables. So, lots of things are happening. We are growing as a company on a double-digit percentage. I've never seen that before, right? And we are investing around two billion this year in expanding our capacity. So, lots of things are happening to build that energy infrastructure and to accompany. However, we also have to clearly say, if you look back to Paris, to the different scenarios, what we have seen in the sense of really driving sustainability and getting the CO2 footprint down, we are too slow. At the same time, we see obviously an unprecedented need for electricity. We see continuous electricity growth, and this is not matching yet in terms of all what we're doing. So despite this incredible speed, we are failing to meet the original targets in terms of temperature increase, what we all were inspiring. And that is the challenging situation at the moment. So I would say lots of things ongoing, a lot of positive elements, but at the same time, not fast enough."

"So despite a rapid increase in electrifying industries and various ways we do things, that's being offset by just a huge rise in demand which can't be met by renewable energies, for example?"

"Yeah. And what we may have underestimated to a certain extent, how big the replacement need is also, right? I mean, you at the same time you're trying to um serve a growing demand, but at the same time, a lot of the infrastructure in the electricity world is 40, 50 years old and needs replacement. This putting us at a challenge that you cannot just do everything by renewables and batteries. And what we also have learned is that you have to think system-wide. You have to think generation and transmission and distribution and storage, right? And it's somewhat at the end, what is the best solution? What provides you also stability of an electricity supply is a mixture. It's a mixture of things. There's not one silver bullet. It's a relatively interconnected complex system which needs to be managed."

"About the direction of this transition, because there's a lot of talk about energy dominance lately, also some talk about energy resilience. Where do you see that headed and how is that playing out with each other?"

"Yeah, while obviously five years ago everybody was talking about sustainability, we know that electricity and energy supply is at the end the base for every societal development, for every stable society. Uh, these people need energy and electricity. And uh, in that regard, we obviously also have seen how vulnerable you are if you don't have that. And resilience is today the dominant discussion point. And resilience covers a lot of things for me. Resilience covers also the sustainability element. It covers also the availability of supply. And it covers also obviously on how do you actually build an infrastructure in a geopolitical world, which is probably more challenged than it used to be. And all of a sudden, you're down to the material supply, to the supply chains. What else could happen? And one thing which is obviously particular dominant at the moment is, does a country or does a region have enough electricity to power data centers to develop AI models? Because at the end, the question is, who will reach supremacy on artificial intelligence model? And you will only have this if you have electricity in abundance. So you do see that obviously this resilience element is each and everywhere if it comes to energy and electricity. You cannot untangle that. And this is also why obviously today we much more focus on also our company to ensure that enough power supply is available, no matter how."

"And what's the key to resilience?"

"I think the key to resilience is at the end also to be diversified. I mean, if you talk about certain elements, there's not never the silver bullet. And and because it is infrastructure, you are vulnerable, right? You can attack it in whatever way, right? And because you have global supply chains, it's vulnerable because you're dependent on certain suppliers or certain regions. So I think the only trick is, first of all, to think about resilience when you design a system, when you design an infrastructure, think about what could happen. And I think that is the first step really to get to better resilience. And then the second point is really in all these dependency, make sure that you diversify your risks, that from where you source your LG, from where you bring your copper, from where you source components. And that is something where there will never be the one solution which makes you 100% resilient, but it's a mixture of measures. The one thing we have to understand, and this is maybe underestimated, resilience will cost money. It's like an insurance. Are we willing to spend the money in a in a world where we are also competing on energy costs in terms of the competitiveness of the region? That is a difficult balance to strike, right? On the one hand, you have to spend the money to be more resilient. On the other side, you're competing on energy cost with other industries, and you cannot afford each and everything. And this is why it will always be a mixture. There's not a 100% perfect solution. But I think it starts always, think about it. Think that you could be vulnerable. The one thing is on the design. The other thing is also, I think we all have learned with the Ukraine war, with other incidents, how do you rebuild systems actually? How can you design a system if certain things break down for whatever reason, cyber attack, a war, or anything else, or coincidence, how can you bring a system back to produce electricity if it's down? So that is the second element which comes to resilience, but it's complex and it will cost money."

"Given the current geopolitical and economic environment, would you say that is becoming harder, unachievable, or what's the situation there in terms of resilience, in terms of of sustainability, and in terms of providing enough electricity to to the economy?"

"I would say absolutely the problem got more complex because you have more things to encounter. And in a world where you have to think through the resilience of your supply chains and certain disruption on a regional side, absolutely, it's more complex. And we as a company spend today more time to manage, strategize around the resilience of our supply chain than we did maybe five years ago. And obviously the assumptions in terms of what could be this black swan event where really something fundamentally changes the picture have got more in our discussions. If you discuss strategy today and what to do over the next five years, these outlier events become more prominent. They will not define your day-to-day strategy."

"What do you mean by an outlier event? What kind of thing?"

"Well, it could be a war, right? It could be a war which completely cuts you off a region, right? And you cannot plan for this in your day-to-day exercise. You cannot always assume the worst. But what you have to ensure in these situations, you're still able to perform certain things and you're still able to run your company. And that is, I would say, more intense than it used to be before."

"You mentioned earlier the massive demand from AI and the kind of race for AI dominance. I think the way you put it, do you think that also feeds into the international relations side of things?"

"I mean, AI will be a decisive tool for today and for the future, right? And who has an edge on AI will obviously also geopolitically have a lead. I'm I'm strongly convinced on this. And absolutely, it does influence that. And you see this, I mean, if I look on our gas turbine business, this year, roughly 50% of our annual capacity is devoted to the US. It's going there because they're pushing for electricity supply to ensure supremacy also on AI data centers. And you see it effectively happening. You see these regions sticking out, absolutely, yes."

"And how do you see the whole of AI in the energy transition?"

"I think it's multiple elements if you think about it. First of all, there is obviously currently simply this growth driver of electricity coming from AI. That's the one thing. On the other side, it's an enabler. It's a fantastic tool to make grids more efficient, to to really drive or use the physical assets what we have better. It's a fantastic tool to do things faster. What can you replace in an engineering process by AI and just execute projects faster? So there are so many elements in terms of really driving a different way of doing things with AI. It will be in the center of everything what we're doing. And I think we are just scratching at the surface to learn it. I mean, we all obviously use the tools, try to get an understanding, but the potential for driving particular efficiency of processes or usage of assets is just at the beginning. So in that regard, there's no question that AI will help us in the energy transition. The question is, how fast do we get into models that we really can scale? We in our company have a lot of use cases where we test, where we develop, and either for ourselves in terms of how we do things, or for customers, products optimization, uh, digital products in terms of rolling this out. However, can you immediately roll it out through the whole fleet? Can you really scale it in the speed you like? No, I'm not seeing that. But it will be the tool to use to drive further energy transition."

"Most of us don't have your job kind of at the head of a big company driving part of the energy transition. Just wondering on a kind of a human level, have you had experiences when you've been involved in a project, you've built something, and you've really thought, 'Wow, that's changed the way this is working.' I'm I'm sure anyone in a job, you do your day-to-day job, but do you ever stand back and think, what we've done there, we've really changed things?"

"I have the pleasure to work for a company which really physically does something and we do cool stuff, right? I mean, if you see our equipment, how large it is, how difficult it is sometimes to build it somewhere really in regions which are not easy, and let it be of whatever, bringing energy back to Iraq, or let's say rebuilding countries after a war, or building a super big offshore wind park where you stand on 170 meters height on the nacelle and see a 110 meter long blade going in front of you. Or if I see what we're doing in research and development where you're really at the edge of technology. I I have to say, I I love to work for this company because you see so many things where you say, yes, you can really influence something. So lots of things. If you'd ask me from a company also management perspective, the one thing which I'm quite impressed over the last five years, you know, listing a company and making it independent in the middle of Corona, while starting our power plants on remote, right, where nobody could travel, and the amount of changes and the amount of innovative ideas what this company and our 100,000 people brought to the table and and still have made this company independent, I found amazing. And that is obviously the energy of 100,000 people in one company. That's cool to see that."

"Maybe going back to infrastructure because you mentioned several times infrastructure, and I know you once said like the energy transition is an infrastructure project, but how do we build infrastructure in such an uncertain world?"

"First of all, I think in all uncertainty, what we know is that we need more infrastructure. And we do know that electricity consumption is going to grow. And that is the privilege of working in energy at the moment. The basis for the demand is existing, no matter what. And yes, there can be elements which are influenced in this uncertain world. How fast whatever a battery electric is coming in the automotive, or how fast data center is going to be. But we do know that population is growing. We do know that electricity share in energy is increasing. And no matter what, if you want to build stable societies, then it's needed to serve this demand. And in that regard, honestly, I have to say, I'm on the easier side of the table because the need for electricity for me is relatively certain in an uncertain world. The challenge is at the end, how do you execute? How do you implement projects? And what is the versatility you do need in your system to amend the way on how you execute, finding a different supplier, getting a different team, being more local. Um, but that is something what you can manage. And we obviously, we are a big company and and as I said, we're operating in around 100 countries of the world, which gives you some flexibility. What we are trying to do as a company is to change our management structure a bit to bring more agility into this responsiveness because what you do see is the complexity got so high, there is certain decision-making processes which by definition need to be more decentral to react on certain things. You cannot run it top down anymore in the structures we we liked to run it. So this agility element in a company is essential, uh, because plannability is less pronounced than it used to be."

"Are you optimistic about meeting the climate challenge?"

"Optimistic is probably the wrong word. I would say I'm a pragmatist, right? And and from that regards, I would look on a massive challenge where we are not on track at the moment. But I'm pragmatic enough to say, we work on the things what we can work on, and it still contributes something. And this is what makes me proud. And every day I get up and know what I have to do and with with the organization in terms of working on it. Whether I'm optimistic whether it will solve the problem, I don't know. But pragmatism helps."

"Christian Brooke, he's the CEO of Siemens Energy. Charles, it's very interesting what he was saying about, you know, it's a booming industry, electricity in general, renewable electricity even more. But there's also a boom in demand for electricity right now. And that means just masses more renewable energy in itself is not going to get us to net zero."

"Yes, indeed. Um, you're right. We need to decarbonize, but we need to do so in an environment where uh the energy demand is growing. Within this energy demand, electricity demand is growing even faster. And we have an old infrastructure. So we need to build, rebuild, modernize everything that we have in a short time frame. And he made that point, didn't he, about the replacement costs of old, you know, decades old infrastructure that just needs replacing. None of this is going to come cheap. Let's move on to the second one. Who's our second CEO?"

"So our second guest is Andres Glooski, the CEO of AES Corporation. It's a utility active in the Americas mainly, so the US as well as Central and Latin America. Uh, there again, with a good view on the challenges across different countries."

"The AES Corporation is a multinational, it's a Fortune 500 company headquartered in Arlington, uh, Virginia, really Washington DC. We are the world's largest provider of clean energy to corporations in the world, and also the largest provider to data centers. So we run utilities, we run a large renewables program, but we also have an LNG and we have a new technologies group that's done a number of very exciting things."

"What are your views on the energy transition today and what kind of direction is it headed to?"

"I I think there's a lot of noise in the system today about the energy transition. So it's sort of good to step back and and look at the facts. So in 2024, the world installed almost 600 gigawatts of renewables. Almost half of this, roughly, was in China. The bulk of it was in Asia. A little about about 12% was in the Americas, and of that, the bulk was in the United States. So basically, the world is building more renewables than anything else, and the speed is picking up very quickly. Other realities, the price of solar has come down 90% over the last decade. The price of lithium-ion batteries for energy storage has come down 90%. So the reality is, there's a lot more happening, I would say, in terms of the transition than you know, you might get, especially from the press in the United States. But we are seeing a segmentation of markets. There's no question that say, both solar panels and batteries are much cheaper outside of the United States because of tariffs, and I would say to some extent Europe as well, though less so. So you you really have a bifurcation. I would say outside the United States and you know, some parts of Europe, it's very hard to compete with solar plus batteries. In most of the world, it it really is a killer app. Now, there is no question that there's overproduction in China, and this has been helping to drive prices down, but it is an exciting time in terms of if you look at any forecast, anybody made over the past 10 years in terms of the growth of renewables, it has exceeded it. So this should make us feel very, you know, I'd say optimistic. On the other hand, if you look at the goals say of the Paris climate agreement, or if you look at the goals of net zero, we're behind it. So that has to do with, quite frankly, burning more fossil fuels. I think there were some assumptions but were unrealistic in terms of the transition, uh, the cost of the transition. But overall, I'm very optimistic about what we can do with technology, where relative prices are. Look, before I was in the electricity sector, I was in telecoms. And if there was one lesson I learned, is that you can't lean against technology. So, you know, first I worked in a large company, but you know, I was this part of the team that started mobile cellular, we went digital, and then we did an internet service provider. And even though say governments may wanted to stay analog or didn't want to invest in digital, or they wanted to keep prices high for long-distance travel, they couldn't lean against the technology. So my belief is that in the energy sector, you will see something similar. There's a lot of very promising developments as well. So I think that the transition will continue. I think we have to set a realistic pace, and I do think, you know, policy matters. So it might slow down in the United States over the next couple of years."

"Is there one reason that Asia has has leapt so far ahead?"

"The really the driving force here is China. And there's no question that China is selling, especially solar panels, at a very, very low price, and batteries as well. Again, the bulk of this buildout in in Asia has been China. And I think this gets into things like geopolitics. What's great about renewables is once they are built, you're totally independent of say imports or commodity prices. So definitely, I think uh, China's had a desire to become more energy independent. Additionally, there's a lot of talk about climate change, but nobody talks about particulate matter. And so the fact is that the air quality in China was dismal, was absolutely terrible, and it was affecting the health of their population. So by going to renewables, they've considerably cleaned up the air in their major cities. We're seeing the same, for example, in India. India, the air quality today is horrible. By building more renewables, they can reduce the particulate matter and improve the quality of people's lives. So I I think that's a driver as well. So you have not just climate considerations, but you have local pollution considerations as well. So on both these sides, you know, I think uh, renewables and zero-carbon energy is really key to improving people's life. Then you have the electrification. And if you look at what's happening with electric vehicle sales, you know, electric vehicle sales in China have skyrocketed, and this goes hand in hand again with cleaning up the environment. So, you know, we're actually seeing a lot of uh, new technologies, confluence of new technologies uh, which are pointing to a cleaner future."

"And what about new drivers of the transition? I'm thinking, you know, of energy dominance, there's also some talk of energy resilience. How does that play out?"

"Well, I I think I've talked about energy resilience, and I think the renewables play a key role in energy resilience by making you, once they're built, independent of external factors. So, I mean, you know, once a solar farm is built in the US, whether those solar panels came from China or not are absolutely irrelevant. Solar panels are going to be there and work for the rest. So, I think this has been a consideration in some countries' move towards renewables. So it I think it definitely strengthens resilience. Now, talking about energy dominance, look, the United States is a very gifted country. If you look at it's the biggest oil and gas producer in the world today. And it was thanks to technological innovation and really a spirit of entrepreneurship of the small frackers who didn't know any better and and kept, you know, going after fracking and driving down the cost. So the United States today is really the swing oil and gas producer, and it's it's a tremendous advantage, and it really gave it true energy independence. United States has gone from a major importer to a major exporter. In fact, today it's the largest exporter of LNG in in the world. So United States has, I would say, in the oil and gas space, does have a dominant role. Now, a lot of the talk of energy dominance has to do with AI, because if you think of AI, there really are sort of three pillars, I'd say. First is programming, second is compute, and the third is energy. And this is a three-legged stool. If you're missing any part of those legs, you're not going to have energy dominance. So, obviously, there's an international competition for this. So, it's very important to have the energy to be able to power these large uh data centers. Right now in the United States, what can be built immediately is, and and what's I would say in the queue, is a lot of renewables. You know, there is some consideration about using our gas plants more, and that certainly can be accommodated, but renewables will have to play a role. So, you know, we're very fortunate to be in, I think, the two most, I'd say, challenging and important sectors of our time or issues of our time. So first, I would say, it's climate change. Climate change is real. It's accelerating. Those of us who have large hydros and run distribution companies, we're seeing its effects. We're seeing more extreme events. Over the last couple of years, the one in 100 events that I've had happen almost, you know, monthly, for sure. So, it doesn't make sense from a statistical point of view to say that the situation is not changing, and it's changing for the worse. So, certainly climate change has to be addressed. I'd say the second is AI, and the two come together because AI is going to change the way we work, and it may have profound societal implications as well. So AI is going to demand a lot of energy. Again, you have climate change, you have greater demand for energy because of AI. They need not be incompatible, and I would say AI is part of the problem, the energy demand that it has, but it's also part of the solutions. It's going to very much help us, I think, with new materials which are less scarce, which are more efficient, both from, let's say, generation of energy to the storage of energy to the transmission of energy. You know, here at AES, we've been working for quite some time with AI, and together with one of the large technology companies, we came up with the first sort of digital twin for ISO a network that allows you to really develop it more efficiently, dispatch it more efficiently, react to, let's say, emergency events more quickly. Because there's a lot of talk about generating more electricity, but the truth is, people don't consume, you know, gigawatt hours or megawatt hours. They consume the services that it provides. And so we have to find a way to do more with what we have because the demand is immediate. But also, quite frankly, from an ecological and climate point of view, if we can use the same amount of energy to produce more welfare for people, that's also going to reduce the cost of it and and help people's lives more. I I think at this time, renewables are absolutely crucial because they are what can be built, let's say, in a two, three-year period. So without renewables, you're not going to get this additional power. So if you look at the United States over the last three years, 90% of additions to the grid have been renewables. So it's absolutely crucial. I think that we have to think about renewables plus energy storage because just renewables, yes, would be too intermittent. But if you combine renewables plus energy storage, they can power the grid. Now, it's, you know, I think also important to have an interconnection to the grid. It's also, you know, there's still a role for for gas in this in this model, but renewables can supply the bulk of the additional energy. And this is key because if we don't have new energy, the price of energy in the states will go up, and I would say the social backing for more data centers in their area may falter. So getting those renewables online is absolutely essential to get these data centers built, to get them built quickly, and to continue to have the social buy-in to placing large data centers sucking up a lot of energy in different communities. So again, we have climate change which we have to solve, and we have AI. AI makes challenges because we have more energy. It's going to disrupt, let's say, the industrial process, but at the same time can offer many solutions, not only in new materials, but in how we consume the electricity."

"I was wondering also if like we were talking about challenges. So what about, you know, the geopolitical, geoeconomic situation, the tensions, and you mentioned also the bifurcation. What are your views there?"

"Well, I would say obviously, I think we're in a time of, I would say, growing geopolitical tensions. Many of us had hoped that some of this competition would be sort of benign in terms of, you know, try to see who could be more efficient, come up with more innovative products, etc. uh, and hope that it not be, let's say, more aggressive. I think that the Russian invasion of Ukraine, and AES used to run the electricity of Kyiv and Rivne. So I know the country well, you know, really upset the political order. There was sort of a agreement among the great powers that you didn't invade small powers. So even though Russia had done this, let's say, in lesser extent, whether it be in Georgia, whether it had been in Crimea, this was a large-scale invasion, and which really disrupted gas prices, it disrupted Europeans' comfort in importing raw materials, especially gas from Russia. So this was a major disallocation, and it has led to, I think, more conflict because as I would say, Europe, United States, the West broadly, had has been trying to get Russia to stop this aggression. You know, it has also run a foul, let's say, of other countries and and led to say trade tensions between say, the United States and India, which it had an very positive effect. So unfortunately, this can, let's say, lessen the pace of technological change and technological sharing. There's a lot to be said of the United States and China working together. You know, those are two leading countries. If you look at a lot of technological change in our sector, a lot of the inventions came out of the United States, and it's really been China's advantage in fabricating and massifying it. So there's a lot of complementarity here, and it's a shame. But I would say what really sort of changed people's mindset of what sort of world we live in is the Russian invasion of Ukraine."

"Did that have any impact on the adoption and the development of renewable energies though? Because Western Europe was importing a lot of oil and gas, and the invasion of Ukraine, in some ways, didn't it make people say, 'Well, look, look, can you create domestically?' And domestically for a lot of countries that don't have oil and gas could be renewables. People were talking about that. I remember when that invasion happened, we didn't know whether that would be the. Looking back on it now and the current situation, do you think that we can feel that impact?"

"Well, first, it was very costly. Europeans have paid a very high cost of having to import more expensive LNG. When we think about commodity shocks like this, I think that uh, the media often doesn't do a very good job of separating short-term effects and long-term effects because you have elasticities, you know, to use an economist's term, elasticities of supply. If prices go up, you're going to get much more supply, but you're not going to get it overnight. You know, you have to drill wells, you have to build liquefaction trains, etc. You're going to have a supply response, but it's over time. And the same thing happens with demand. In other words, people will find substitutes. And I think one of the um, things we've learned when people make predictions, whether it be for Brexit or anything like that, is that people are very creative in finding ways to let's say, soften its effect or at least delay its effect. So what did we see with this? I think it was a tremendous cost to Europe. It caused social tension as well between the production of electricity. It made people question subsidies. You know, prior to this invasion, the the real concern was that the Inflation Reduction Act was subsidizing renewables to the extent in the states that how could Europe compete with this? There's where I would like to see a healthy competition. Let's see who can come up with the best scheme to accelerate the energy transition. So, look, think of it as a tax mostly paid by Europeans and other gas importers. In the US, I mean, I think it was honestly from an economic point of view somewhat beneficial for the US because the high prices allowed us to take a chunk of that LNG market and let's say prior was really supplied by by Russian gas. So, I think it showed us the um risks involved with depending on commodities for setting energy prices. I think it also showed the interdependence of countries. So really, unfortunately, that second part hasn't been taken seriously enough by all players, that how much better we are working together to face up to these crises."

"There's some people who are even like blaming renewables for the high prices of energy, and there's a lot of green lash, as you mentioned. What kind of benefits can consumers expect from the energy transition? What are you saying to those people?"

"It tends to be when we go to the extremes that you get sort of rube ad absurdum, you know, that things get a little bit crazy. So, you know, if you're in uh, say, Alaska, solar is not going to work very well. But if you're in the Mojave Desert in California, it works fantastically well. So, look, some of it, there's been a lot of subsidies, especially in countries in Europe like Germany, very early before the technologies were ready. So I would argue that many times it's better to subsidize the R&D rather than roll it out before the technology is ready because it's it's more efficient from from an economic point of view. It's easy to pick on renewables, but again, if Europe hadn't built so much renewables, think about the impact of the cutoff of Russian gas. It would have been much worse. So renewables plus batteries do work. There's no question about that. And that they help drive down cap prices. And there are countries, for example, where you have minimal subsidies. Take something like, we operate in Chile. We're the biggest provider of clean energy to the mining sector in Chile, which produces the copper and the lithium that are needed for the energy transition. Energy prices have dropped in Chile. Before the big buildout of renewables, you know, energy was around $100 a megawatt hour. Now it's about 40. You know, with minimal subsidies, you have a $5 per ton carbon tax. So, thinking of places like Africa, which need to electrify. I learned this in the telecom sector. You know, Africa didn't build out, you know, hundreds of miles or thousands of miles of bearing copper and go to expensive analog systems. They jumped directly into cellular distributed networks. Look how creative they were in creating new businesses around having this mobility communication. So when I think of Africa, they should jump directly to the new technologies. You know, a lot of places have abundant sun, and you don't have to build all of the transmission infrastructure for isolated places. I mean, if I were a minister in in Africa trying to electrify the country, certainly for the more remote villages, I would go to, you know, solar plus batteries plus some wind. But what I think is needed is really sort of fundamental analysis. Some places have great wind, and some places have great solar, and not to try to force the use of a technology in places where it's inappropriate. So if you have poor solar, you know, there are other things that you can use. Now look, we also have to say, what is the goal? The goal is not renewables per se. It's zero carbon. So in the future, I think there's a possibility for, you know, enhanced geothermal, especially in the United States, because we have a whole infrastructure of fracking. You also have small modular reactors. But again, we have to think of the time frame. That's not here now. That's not going to solve our problem for the next 10 years. So renewables are the, you know, what's going to work best. And in the West, quite frankly, the economic viability of nuclear has yet to be proven. In the United States, we've built one nuclear plant, two units, in the last 40 years. They're extremely overcost, you know, without massive subsidies. So really, I tend to be biased towards market solutions. What we really need is a carbon tax. If we had a carbon tax, this would do a lot to improve nearshoring and onshoring because if you had to pay the cost of say, shipping a parts two or three times across the Pacific, that would have a high carbon tax. I think it's economically efficient because there is a cost to carbon. There's a cost to carbon in the climate, and there's a cost to particle pollution. So it should pay that cost. So if you did that, you know, just think about how much renewables are competing and winning in places with basically no subsidies. If you added a carbon tax, there's no question that it would be superior. But having said that, I'm not one who believes that we can just cut off fossil fuels overnight. There has to be a transition. I think there will always be a place for fossil fuels. Quite frankly, think of something like aviation, just the energy density of liquid carbohydrates. I don't see with current technology we're going to have batteries or something or, you know, green hydrogen that can truly replace it in certain roles, but that's okay. We we could offset those carbon. So my dream world would be, you know, we have free trade, we have a carbon tax, and then we let the market operate."

"How do you impose a carbon tax, particularly in somewhere like the United States?"

"Well, right now, I think it's politically impossible. That is true. For a carbon tax to truly work, it has to be universal. Now, I do think that if you had say, Western Europe, Japan, United States, Australia, Canada together, you know, they are a sufficiently large portion of the world economy, maybe 50%, that they could have a carbon tax. And what we have to avoid is sort of demonizing, you know, the other side, because if you think of China, it has probably peaked in its carbon emissions because of green energy, which includes nuclear, but also thinking about electrification of transportation and becoming more efficient. So, you know, global warming affects us all, and there's going to be no winners from global warming. I mean, perhaps Putin thinks that he's going to have better agriculture in Siberia, but uh, I think if you put everything in context, probably not. So, there really are no winners in this. And so, we have to work together. I think going to the technical fundamentals is key. You know, you're not going to win ideological arguments. And I do think also defining what you're trying to achieve and then working towards it is much better than taking sort of holier-than-thou stances. is, you know, we have to get off our fossil fuels tomorrow. I'm the good guy, they're the bad guy. It's not that simple. And um, truly looking at it, I mean, I remember thinking about say, in Europe, bringing Russian gas from the Euros into Europe over some Soviet era gas pipelines. What is the leakage? So technically, if you had a leakage of around 10%, it's worse than a coal plant. So, you know, it might make people feel good, but it's really not achieving anything. Perhaps one of the the biggest tragedies of our time is that people don't listen to expertise anymore. And that is very bad. I mean, you know, my opinion on u I don't know, open heart surgery is as good as, you know, Dr. Debbie in Houston, which is just simply not true. So it it's true about economics, it's it's also true about physics, and it's true about energy."

"So you mentioned your experience in the telecom industry. Was there also a big learning moment in your experience in energy, like one time where you had a, I don't know, Eureka moment or something like that?"

"Certainly had a lot of opportunities to learn. The best opportunities to learn are your failures, you know, because what you did right, fine, but what did you do wrong? I I would say what I've learned is that execution is key. You can have a fantastic strategy, you can have a fantastic technical assessment, but if you have difficulties in executing, that's going to be very difficult. And so in our case, we had a run-of-the-river hydro in Chile, which was an expansion of an existing facility, and it turned out to be much, much more difficult, even though on paper it was the best project the company had. So, so I would say that's a learning. I mentioned another one is that you can't lean against technology. So if we get new materials for renewables, it's going to be hard to stop that. It's going to be hard to stop more efficient AI programs about consumption of electricity. It's going to be difficult to lean against better utilization of existing infrastructure. You can have a say, pro-coal policy, but if coal is not cheaper throughout the whole chain of, you know, from mining through delivery, it's unlikely to happen. I think those are the big learnings."

"And maybe one last question about whether or not you're optimistic optimistic about the future and our ability to address climate change."

"Look, I'm by nature optimist because I think to be a CEO and to start companies to really change a company, as has gone from primarily a coal generator to primarily a renewables and and gas company. So to make that..."

Transition, you have to be sort of innately optimistic. So I do believe that we will continue to make progress, and I think, you know, it will be two steps forwards, one step back. I think the question for us all is that the climate is perhaps one of the most difficult things to model. We really don't, because it's chaos theory. You know, a butterfly flapping its wings in China causes a hurricane in Central America. There's some of that, but it's difficult to model everything, and there are feedback loops that we don't know. So I guess my question is, I hope Mother Nature gives us the time for human ingenuity to execute on this. And then if Mother Nature does give us a surprise, maybe that will shock us into going more quickly.

"What's been your greatest contribution to the energy sector in the transition?"

Look, I have been, uh, very fortunate that at AES, we really were the first to develop grid-scale use of lithium-ion batteries that allowed many things. It's a little bit of a hammer, but we first used it to increase the capacity payments of existing fossil plants. But then, you know, our goal was to use it for renewables, because the great complaint about renewables, they're intermittent, therefore they're a tax on the system. Well, with energy storage, that's no longer true. You know, you can overbuild, say, renewables. So, what you do is during the hours that, say, the sun is up, you store that energy and you supply it to the shoulders when the sun is not up. And we have, um, facilities. We were the first to really have 24/7 renewables, you know, by overbuilding a grid and putting on energy storage. So it has been fascinating to see how the prices dropped, and we really started a global industry. So we started 15 years ago, and technically it made sense that lithium-ion batteries could work. Economically, it did not make sense. So what has happened is on the first, we tried so many different applications to see which one made money. And second, there were the control systems that had to continually improve. But what we saw was that we were several years ahead of the market. So if we just did energy storage for AES, it would be limited, and the pace of adoption would be much slower. So what we did was spin off this business and make a joint venture with Siemens. And with Siemens, we formed a company called Fluence. We did an IPO. It was a $7 billion IPO. And today, you know, Fluence sells energy storage in more than 50 countries. But it's also very exciting to have companies like Tesla, to have companies like BYD copy essentially your idea. So today, the entire market in the world for renewables and energy is different because of lithium-ion-based energy storage. We did change the world. And look, had we not done it, would somebody else have invented it? I think so, but I think it would be three to four years later than when it occurred. So I think all of us at AES are very proud of the work we did in this and the multiple applications that we have invented for energy storage. You know, for example, it is a key in solving the transmission bottlenecks. Take an example in Germany, it's being used to bring offshore wind to Bavaria over existing lines. Because since transmission lines are not used at 100% of capacity, you can store up the energy in banks and transmit it over existing lines when that line is more available, saving billions of dollars and saving, you know, a decade of permitting. So I would say that's one of our proudest moments.

Andres Gruski there, CEO of AES Corporation, based in the United States. Really interesting. He was talking about artificial intelligence. I think all three of our speakers will talk about artificial intelligence, and the fact that it requires a huge amount of electricity to run these data centers, and his company's involved in supplying that electricity. And he says, to keep consumers happy, the consumers that share that also need to get electricity at a decent price, and they want clean air. There will be demand, he thinks, for that electricity that's supplying data centers to be supplied from renewable sources. Do you think he has a point?

Yes, indeed. I think what we're seeing worldwide is that clean energy and renewable energy is making up the most part of capacity addition at the moment. Uh, so indeed, if we want to answer data center needs, part of the solution, if not most of the solution, is via renewable energy and batteries.

"Let's get on to our third and final CEO then. Could you introduce this one?"

So our final CEO on the podcast is Le Jang of Envision, uh, company operating from Asia and, uh, delivering also hardware for the grid and for renewable energy, as well as software to bring it all together. Envision is a future energy system company. We believe the transition needs more than equipment. The transition to net zero needs a new renewable-based energy system. So it will comprise of wind turbine, solar panel, energy storage, grid technology, software, AI, no green molecules. So this is the new energy system. We believe it's so important to have a system view. In particular, we see many challenges once we are living a system dominated by renewable energy. It will have so many great opportunities, green everywhere, abundant and low cost, but also it's going to be very fragmented, volatile, intermittent. So how do we create a green but a reliable, robust, intelligent future energy system is become a very critical mission.

"And how do you see that mission advancing at the moment? Where are we at in this transition, would you say?"

You know, I'm quite optimistic. There's no question about green electrons beating fossil energy. So wind, solar plus storage is more cost-competitive than fossil-based electrons. However, to achieve net zero, the electrification rate is going to be much higher than today. So we probably now around the 30% electrification rate. In order to achieve the 90% electrification, we have to remove our dependence on oil and gas. Think about maritime transportation. The diesels carry a huge amount of energy in a much less costly way. So it's going to be difficult for using a battery to power maritime vessels. So we need green molecules. Green molecules provide not only high energy density but also with zero emission. So that's why green hydrogen and green hydrogen-based derivatives like green ammonia, green methanol, and SAF. So they are going to be the very important driver for decarbonization for the second wave. Today, this is still quite challenging in terms of cost, in terms of scale, in terms of speed. So from this point of view, I think we have to solve this big challenge on creating cost-competitive green molecules.

"Is that a technological challenge? Is it a policy challenge, collaboration? What is the main challenge? What needs to happen to make those green molecules available and cost-effective and at a scale that really makes an impact?"

I think it's kind of a chicken and egg issue. Some companies claim we need green molecules, would like to source at a group price, but there's no green molecule supply. Okay. But the producers say, okay, in order to take such a huge capex investment, so we need long-term offtake agreements. Just put an example for green ammonia. There's no such a long-term offtake agreement that has been issued to any developer. So which makes investment bank financing, project financing, is going to be difficult for the developer. Envision, we decided a few years ago, okay, let's break through such a dilemma. We don't need long-term agreements. We believe in our technology is going to create the most cost-competitive green ammonia. So we start a 1.5 million ton green ammonia project now. The first 300,000 tons has been commissioned. Then, okay, starting from the beginning of this year, we start talking to the so-called first movers. Guys, we have green ammonia. It's going to be much cheaper than what you want in the past, but still no serious commitment. And people told us, oh yes, sorry, so our procurement time starting with 2028, 2029. You know, this is a real test for the belief and the commitment of those first movers. Of course, we see some countries moving. So like Korea, so they are auctioning for national green ammonia and blue ammonia supply. So starting from 2028, 29 with a serious quantity. Now, of course, we see Singapore is starting to firming some kind of policy, but we are making the green ammonia below $600 FOB, which is a great price. Still lack of real commitment. So I think policy, financial schemes playing an important role as well. In Envision, we are able to develop multiple technologies because we are a renewable energy system leader. We are making wind turbine, grid technology, storage, ammonia sensors, green hydrogen electrolyzer, and software, AI, weather forecasting, AI grid together to create this most cost-competitive green ammonia. Otherwise, it's going to be much more expensive than this price. We see this wave definitely is coming, but it's much weaker than what we expected, even we show a big breakthrough on the cost and supply. And think about today's global subsidy on oil and gas. I haven't got any statistics, but it's worth to look at, you know, the amount of capital that have been received for subsidy. For sure, comparing with green molecules, this is a tiny part.

I wanted to go back to electrification. You mentioned 90% electrification with wind, solar, and battery. Do you think that's possible in every economy?

Of course. So think about the solar is everywhere. The solar panel cost is dropping significantly for the last five years, 80% something like that. So if you look at the energy storage system, the battery storage system, I think the cost for the last three years has been reduced 90%. So this hybrid solar wind with energy storage system now has become very competitive. So that's why people start to think about using storage even for a long duration, not only for daily or weekly, but think about even for seasonal storage. Your storage system reduced 90%. I believe for the next three years, this could potentially see another 40 to 50% cost reduction. So then why not having a 10 hours or 20 hours battery storage system, which is going to replace gas power stations in the future? It's going to be happening. Technology is relentlessly developing. So I'm quite confident to see the long-duration battery storage is going to play a vital role to replace gas.

Can I ask you about the impact of geopolitics on the global energy transition? You know, for example, trade tensions between China and the US. How do those geopolitical tensions impact the energy transition and the work that you're undertaking?

So China is developing comprehensive renewable technology products from electric vehicles, batteries, solar PV, wind turbines, and grid technology. I think China is so important to commoditize such a technology because of scale, because of industrialization, cost has dropped significantly for the last 10 years, almost every part is 90%. So which makes using renewable technology more affordable. Because once you have such a low-cost energy generation, using the low-cost renewable energy from China, made solar panels and batteries to power the AI data center to train your large language model. You can use low-cost green energy to create much sophisticated chemical refineries or to run communication systems, 5G, or whatever. So for every society, the cost of energy is the commodity. Just think about Europe still imports oil and gas from the Middle East. Today, for instance, the challenge in Europe is the energy dependency. But Europe does have abundant renewable energy, North Sea wind, or Spain with solar, or even the neighbors, North Africa has abundant renewable energy sources. So if using the low-cost generation technology, creating very cost-competitive energy electricity, then Europe's household living is going to be much improved. So people pay less. So I think this is different angles how to leverage low-cost commodity to create a much value-added economy. China-made renewable technology comparing the oil and gas promoted by the US. Now I think they offered two kinds of choices to the world. But I believe not only from an emission point of view, but from a cost point of view, you will clearly see the advantage of the renewables.

And you mentioned AI. What role do you see for AI in the transition? And are you already using it to optimize, you know, your systems?

Yes. So AI is very critical on managing, forecasting the complex systems. If you think about the climate and the weather system, it's the area that needs super AI because it's so complicated. Wind, solar, the rain, temperature, everything is moving every moment. So it's the best area to apply super intelligence to predict the weather pattern in seven days or for next months, next winter, also for the climate transition. We are applying the AI weather model because of the advantage of our AIoT system. So now we are significantly improving seven days ahead weather forecasting. This has become so important. Why? Because our future energy system is going to be dependent on the weather. The weather system is becoming an energy system. We're also using AI models for managing the grid, managing wind turbines, AI storage, because storage needs to communicate with the grid to know when to charge, when to discharge, how much, how fast. We do see AI is probably the new energy system, in particular, it's going to be a heavy user of advanced AI technology. At the same time, think about where's intelligence coming from. The super intelligence is coming from energy. So people realize energy is able to creating everything. Energy is creating transportation vehicles. Energy is creating communications, 5Gs. Energy is creating food. Energy is creating protein. Energy is creating steel. Now energy is creating intelligence, that's the AI. Energy is creating even currency, blockchain, Bitcoin. So energy is behind all social industrial development. So this is going to be so important for our civilization advancement.

But some people fear that we won't have enough energy for AI.

I don't think so. So if you look at the Gobi Desert, Sahara, or Australia Desert, if you combine the renewable energy from these deserts, we are able to power the planet 10 times what the planet needs, just from the Gobi Desert. This is tremendous. Renewable energy is there.

Do you think there'll be another big breakthrough in this area? You mentioned the surprising drop in the price of solar panels over the last few years, which most people didn't see coming. Can you imagine something like that happening again? Kind of a game-changing advance in this area of renewable energy?

Ultimately, we have free nuclear fusion energy from solar. And what we are working on is energy conversion. So wind turbines, silicon solar panels, or energy storage systems are all conversion technology. The efficiency of the conversion devices is improving significantly, and the cost of conversion is also continuously dropping. For instance, the perovskite solar cell is going to have a much less cost and much higher efficiency as a next-generation solar technology. And the sodium battery, the supply of resources, sodium is everywhere. Think about the electrode of hydrogen electrolyzer. We are improving 30% every year with new membranes. So this is all the conversion technology. With the conversion technology cost down and improvement, we are able to using the free nuclear fusion energy from the solar. This is going to be a tremendous opportunity for us.

Is there any achievement, you know, that you're proud of over the last few years with your company in like moving the energy transition forward that you'd like to mention? Any moment you realized that, okay, the transition is underway and will not be stopped?

So I personally have the vision to create new coal, new oil, and a new grid. Recently, commissioned the world's largest green hydrogen project in Mongolia. It's one of the achievements. We make it not only the largest scale on operation in the world, but also the lowest cost. And this cost under $600 is so critical to give people the confidence. So we are able to embrace a large scale for green molecules, and we do see the cost is going to drop significantly for the next few years. We commercialize, we continuously innovate, and we continuously drive down the cost. But what we are most proud of is this new oil project is running on an independent renewable grid system. It's not linked to the public grid. It's 100% renewable energy, wind and solar. We create a very sophisticated grid technology, the AI grid, also even IoT technology, graph database, milliseconds simulation analysis in order to make sure the energy system is reliable, fully operational every second without public risk support. Because we believe in the future, in order to accelerate decarbonization, we need so many independent renewable grids like what we are running today. We have to explore the most advanced grid technology. That's why from the starting point, I say Envision is not simply an equipment company. We are the energy system company. We should take responsibility to develop the most reliable and competitive renewable energy system. And that's why I'm so proud of that. And most importantly, this pioneering technology, the largest scale, lowest cost, is not happening in some very developed area. It's in a remote, abundant, useless place, Gobi Desert. There is so much potential. The place used to be useless, now becoming the new space for our humanity, the new prosperity. So if we can do it in Gobi, why not the Sahara? Why not the Middle East? This also is giving people, inspire people to have another angle to see, okay, renewable energy, it is not something luxury or liability or expensive. It is the free energy, and it is the only path for human beings to reach the next level of development.

Le Jang, the CEO of Envision Group, based in China. Energy independence is really putting the case there, for sure. That oil and gas and other fossil fuels are still available. And all three of our CEOs, none of them are saying we're going to stop using those tomorrow. But what he's saying is that renewable energy, obviously he's got an interest in selling it to us, but it's not only much cheaper than we thought it was going to be a few years ago, but also it provides independence from if you're importing your fossil fuels or energy from elsewhere. If you've once imported, perhaps from his company, the ability, the equipment needed to make solar power or wind power, then it's domestic energy, or he even calls it free energy.

Indeed, it's free. You just need to invest in the ways to harness it. But if you can bring down that cost, then indeed you have, uh, very cheap energy.

And he also makes a good point about storage. This is something I didn't realize was advancing as fast as he's saying it is. One of the drawbacks of renewable energy can be that it's only available when the wind's blowing or the sun's shining. All three of our speakers have said re, uh, solar and wind plus storage or plus battery. And he was making the point that there are advances being made in the technology and the price of that is coming down. Is storage and batteries really a big part of this whole transition?

Yes, definitely. It's a big enabler. And as prices for indeed for batteries are going down, this means that we'll have more and more batteries available to pair with variable renewables. And that is probably a revolution that is unfolding as we speak in the energy field.

Charles, thanks so much for bringing us these three speakers. Tremendously interesting, quite detailed as well for those of us who are involved in this every day. We asked each of them if they were optimistic about the energy transition, ready for net zero in our lifetimes. Huge, massive undertaking. Are you optimistic, or are you pessimistic, or are you realistic?

I would say I'm optimistic, but it doesn't really matter because we just need to get on to it. You know, we need to do it. And whether we succeed or not, it doesn't matter because, as the saying goes, every fraction of a degree counts. So we just need to build more infrastructure to make sure that we advance towards decarbonization.

Charles, thanks very much for joining us on Radio Davos.

Thank you so much, Robin. Thanks to Charles Borgo. He's the manager, electricity industry at the World Economic Forum. On this podcast, you also heard Christian Brook, CEO of Siemens Energy, Andres Gruski, CEO of AES Corporation, and Le Jang, CEO of Envision Group. You can find out lots about what the World Economic Forum is doing on energy on the website. I'll put links in the show notes. Radio Davos has plenty of episodes about this subject as well. Look back on our back catalog. You can find that wherever you're listening to this or on the website. Please follow the podcast wherever you're listening. And if you get a moment, please give us a rating or a review. Radio Davos will be back next week. But for now, thanks so much to you for listening, and goodbye.