€70 billion a year for 25 years: The cost to get Europe’s energy system ready for green transition

euronews (in English)

“If our competitiveness hinges on having the cheapest energy prices in the world, we have a problem,” E.ON’s CEO tells The Big Question.

Transcript

00:00We have added 20 million cars. Without adding roads, we need lots of innovation to make it cheaper for customers.

00:06If our competitiveness hinges on having the cheapest energy prices in the world, we have a problem.

00:18Welcome to The Big Question, the series from Euronews where we speak to some of the biggest names in business.

00:24I'm Hannah Brown and today I'm joined by Leonard Bernbaum, CEO of E.ON and President of Euroelectric.

00:29Thank you very much for joining us. So let's start off looking at the big picture.

00:33What is your vision for European power over the next 10 years?

00:37It's actually a very hard intro question. It would be easier to give you a vision for 2050,

00:42how a renewable future would actually provide us with secure, resilient energy supply,

00:48actually also in very competitive terms. The vision for the next 10 years must be

00:52how do we get the transition towards that future done.

00:56One element would be, if it's a positive vision, that we have achieved more electrification,

01:01because more electrification means more decarbonisation but also more competitiveness.

01:11Thinking about this future electrification, is the current infrastructure up to scratch to meet those energy and electricity demands?

01:18No. If you think about the future, we need to continue to invest significantly into infrastructure.

01:25First, one has to say the electricity infrastructure in Europe, in a global comparison, is actually very good.

01:31So it's not that we are starting from a bad base, but it's a bit like the analogy to cars.

01:37Now we have added 20 million cars without adding roads, and then eventually you run into trouble.

01:42And that's the same which we have done. We have added massive renewables,

01:46and now the reserves of the systems are just gone and we need to add more infrastructure,

01:52i.e. more electricity roads, so that we can continue with the transition.

01:56So the infrastructure is more of a bottleneck than the renewables.

02:00So in terms of adding these electricity roads, I love that analogy,

02:04what investment is needed to get our infrastructure up to scratch?

02:07Roughly twice as much as today. Let me just explain why.

02:11Today we have an electrification rate of 23%, roughly a quarter of our energy consumption is electricity.

02:17To decarbonize we need to go anywhere to maybe 60%, so let's say tripling.

02:22We have been investing as an industry across Europe at roughly 35 billion euros per year into distribution,

02:30which is in the road analogy all the roads but the highways.

02:34And then we have an additional 15 to 20 billion into the highways, so two-thirds, one-third.

02:41We need to go to close to 70 billion.

02:44So roughly twice as much for not one year or two years, for 20 to 25 years.

02:50So a lot more investments for a long time.

02:53Obviously a lot of money. Who will pay for it?

02:56In the end consumers have to pay for it. And if not consumers, then taxpayers.

03:00But one of the two has to pay for it because we can't actually swallow it as an industry,

03:05just lower your margins.

03:07Because if I need to double investments, 30 billion, this is not the margin we're making.

03:11So it's impossible. We need to earn more so that we can invest more.

03:15And I would also make the point that even more expensive than investments is not investing.

03:22Because if we're not investing, then actually we get into the situation in which we have been two or three years ago.

03:28We get bottlenecks. We get then spiking prices.

03:32We get markets which can't actually work.

03:35And we have seen that the curtailment of energy to the lack of infrastructure is actually more expensive than adding the infrastructure.

03:42I can give you a number. In Germany we are paying 4 billion a year only for curtailment, which is basically lack of infrastructure.

03:50If I would take 4 billion as a depreciation, I could have invested 100 billion into an asset.

03:57And it would make much more sense to have 100 billion in an asset and have the depreciation than wasting 4 billion every year,

04:04which in the end, this money is just gone.

04:06And you just mentioned it's a way to get more secure.

04:08In recent years, we've seen a lot of instability globally and conflicts.

04:12Can electrification help us to kind of become more secure in times of crises and protect us from that?

04:18Yes, it can. But there are two caveats.

04:22It can, first, because it's more decentralized.

04:25So it's very hard to attack a decentralized system, which is also not depending on imports.

04:30For example, we have seen that gas pipelines are vulnerable.

04:35Import pipelines are vulnerable.

04:37We have seen in the Red Sea that shipping is vulnerable.

04:40That all disappears if you go towards renewables.

04:43So yes, that can diversify, make you more resilient.

04:46The one caveat that you have is you need to work on cyber.

04:50Because you're obviously building huge digital infrastructure.

04:54And this digital infrastructure will come under cyber attack.

04:58So to make it secure, you need to constantly work on the cyber issue.

05:03And do you think that infrastructure is currently quite vulnerable?

05:06To be very clear, cyber attacks on every infrastructure are the new normal.

05:10And it's not only electricity.

05:12Every infrastructure is under constant attack.

05:14Every company is under constant attack.

05:16And so the more important electricity system comes,

05:19the more relevance it has for society to make sure that we protect it.

05:23It's a long journey to get to 100% electricity.

05:26But how do we get there? And how long do you think it will take?

05:30On the electricity side, we are getting close.

05:33The current projections are that by 2040, we're basically fully renewable in electricity.

05:39And it depends now on the speed at which we transition to electric cars.

05:45And to electric heating, heat pumps.

05:47How fast we can substitute fossiles in the other sectors.

05:51But the current planning is that we will be done by that in 2050 in the EU.

05:57And in that transition, do all the technologies that we need already exist?

06:01Or what else is needed?

06:03That is an interesting question.

06:05Renewables exist. Distribution systems exist.

06:08And so you could say we have it.

06:11But I would argue we will probably see more innovation than we imagine.

06:16Like if 15 years ago you would have asked the same question,

06:19who would have told you AI would maybe be a good idea?

06:23And AI will be part of it.

06:25So I'm saying we have what we need to run.

06:29But I still believe that additional innovation will make the transition cheaper.

06:35And we need lots of innovation to make it cheaper for customers.

06:38And finally, tell me a little bit more about the role that the power sector has to play

06:42in Europe's ability to be competitive.

06:44First I would say we should not reduce the competitiveness issue in Europe on energy prices.

06:51If our competitiveness hinges on having the cheapest energy prices in the world,

06:56we have a problem.

06:57And our competitiveness in reality is threatened by the fact that we're not innovative enough.

07:03Our infrastructure is not good enough.

07:04Our demographics don't work in our favour.

07:06Taxes are too high.

07:07And then energy is not cheap either.

07:09Second, we have to make sure that we supply secure and reliable energy.

07:15It's also very important.

07:16For example, data centres.

07:18For them, speed of connection and reliability is more important than price.

07:23And the second one is obviously, especially for energy-intensive industries,

07:26the quest will be how can we give them at least a price

07:30which makes them competitive at a global level.

07:33And this is also a task for the Commission to figure out

07:36how we can find the best way towards such a future.

07:39Yeah, so quite a task ahead.

07:41It's actually an exciting industry. I love it.

07:44Brilliant. Well, thank you so much for sharing your thoughts today

07:46and for joining us on The Big Question.

07:48Thank you very much.

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