Natural disasters will happen more likely with growing climate change

Will energy security derail the energy transition?

Christian Bruch and Jason Bordoff on pitfalls and approaches for a world in transition

Rising concerns around about energy security threaten to stall the transition to clean energy. Siemens Energy CEO Christian Bruch and policy expert Jason Bordoff discuss why climate and energy security must go hand in hand.

By Daniel Whitaker

The transition to renewable energies will have a decidedly profound impact on the energy’s geopolitical landscape and magnify already rising concerns about energy security. Are security and the transition at odds? Or will one accelerate the other? Siemens Energy CEO Christian Bruch and leading expert on energy and climate policy Jason Bordoff discuss security pitfalls and approaches for a world in transition.

“The question is: How do we react to this moment?” 
Jason Bordoff

The energy security crisis

Jason Bordoff: It's been many decades that we've largely been failing at climate change. And now we're failing at energy security too. Europe is obviously having immense difficulty making it through this winter, next winter may be even harder, and this is having ripple effects in many other parts of the world.

 

There's a precipitating event, which is Putin's unjustified invasion of Ukraine. But we should remember, Europe was experiencing an energy crisis even before this and there are a set of underlying factors that I think have made it even worse because we’re in a moment of transition. And so that leads to tighter markets and potential for price spikes and market crunches and volatility that is not just bad economically and geopolitically, but risks undermining support for the energy transition itself

So the question is, how do we react to this moment?

           

Christian Bruch: Jason, I agree with much of that, but for me it still has to be proven how energy security issues will affect the transition. We’re currently not on track with the transition – we might not even be on track with security and by no means on energy affordability – and we shouldn’t forget this third element. Because what’s happening at the moment is that industrialized countries are exporting their inflation towards poorer countries. I mean, Bangladesh, Africa, other parts of Asia, for example, are heavily dependent on LNG imports and can’t afford it anymore. So you see the first power outages there.

“Industrialized countries are exporting their inflation to poorer countries.” 
Christian Bruch

Jason Bordoff: Right, this is having ripple effects in many other parts of the world with rolling blackouts in Pakistan and Bangladesh. And coal is at record high levels as well. 

 

Christian Bruch: So, we’re seeing that this trilemma of energy security, affordability and sustainability is closely interlinked, and so far we haven’t taken any deliberate choice in any direction. At the moment, it's neither doing good or bad to the energy transition, but now is a point in time when we have to make the hard choices. Talking is no longer enough.

An opportunity to balance security and sustainability

Jason Bordoff: I think we'll never forgive ourselves if we look back on this moment of crisis and feel like we missed an opportunity to now take the urgency and imperative of energy security, meeting people's energy needs securely and affordably, and combine it with the urgency of climate action and decarbonization to make faster progress toward an energy transition.

 

Christian Bruch: Right, there's all the good reasons to build out faster renewables, to build up the grid and really bring energy security and sustainability closer together. But it also means we have to do certain things substantially different going forward. At the moment, most of the consequences are higher CO2 emissions. We ramp up coal in Europe. We’ll still have a substantial coal fleet for a long time in Asia. The current new build in renewables barely covers the growth in the electricity market and isn’t bringing CO2 down.

“This is going to be one of the greatest sources of geopolitical risk.” 
Jason Bordoff

Policy and technology

Jason Bordoff: I think first there needs to be a recognition that this is going to be almost inevitably a somewhat disorderly transition. And we can try to make it as well managed as possible, but the idea that you’d get anywhere close to a goal like net zero by 2050 – which is only 27, 28 years away! –  the scale of transition, the scale of the global energy system, the pace of that transition is unprecedented relative to anything we've ever seen in the history of energy. And we’re going to make mistakes along the way.

 

This is going to be one of the greatest sources of geopolitical risk of the 21st century. But to be clear, not doing it is even a greater risk because of the impacts of climate change, conflict, refugees, migration, flooding.

So, I think that means more not fewer tools to mitigate volatility moving forward. We need new regulatory systems to cope with more intermittent sources of electricity. We are going to need new tools of diplomacy and foreign policy to manage potential geopolitical risks such as who controls the critical minerals supply chain. And we are going to have to manage trade conflict.

 

I lead an organization with the word policy in its name, the Center on Global Energy Policy. I would not do that if I did not think policy was necessary (we are already seeing governments step in to subsidize or cap the price of energy), but it is certainly not sufficient. We are going to need the technologies, and Siemens Energy is one of the most important companies in the world for that.

 

Christian Bruch: And the problems are still ahead, and they’ll be so disruptive that we will need a new era of public private partnership: good policy and strong private capital flows, both built on solid plans. Energy infrastructure needs to be comprehensively reborn. But we shouldn’t neglect the demand side, which we can use to counter some of the volatility from generation. Additionally, we need to deal with the massive growth in electricity volume – possibly tripling in two decades. Industrial policies like in the US are needed to trigger the required grid investments and we need to make optimal use of the assets we already have – for example, with gas and nuclear. Every technology must play its part, and efficiency will be vital. 

Moving toward a greener energy system is a choice

Jason Bordoff: I think we've touched on the most important things. But maybe I'll just put a spotlight on them again: which is sustainability and security and affordability – if you fail on any one dimension of that, I think you actually undermine the pace of the others. The potential for unrest in Sri Lanka, the iconic yellow vest protests in Paris, or if people have trouble paying their energy bills, I fear that support for strong climate action, which is what we need, may wane as a result.

 

So, we're going to have to pull every lever we can to deal with the immediate urgency of the crisis – finding extra supplies, maybe in the near term, ramping up a diesel facility or a coal facility here or there, building some new LNG import terminals. But I think the opportunity now is to remember that many of the things that would give you greater energy security, more energy efficiency, conservation, more electrification of the economy, more use of clean energy, point you in the direction of decarbonization as well. 

“It is our choice whether we want to turn it around.” 
Christian Bruch

You see examples across Europe and other countries where in some cases it is accelerating a move toward a different kind of energy system in the future. It just takes time to get there.

 

Christian Bruch: And I can only say we have to speed up. We still have it in our toolbox of possibilities to influence that. Time is running out and we really have to move to action. While we continue to add renewable energy, we can improve energy efficiency, strengthen electrical grids and make use of the existing infrastructure. We can also develop a clear plan on which policymakers and industry can really take decisions.

 

All the technologies we need to drive a substantial change are already available. It's our choice whether we want to turn it around.

Sustainability Report 2022

Sustainability Report 2022

Climate action is more urgent than ever. How is Siemens Energy tackling this challenge together with partners around the globe? Learn more about our sustainability program, targets and performance.

About Christian Bruch

 

As president, CEO, and Chief Sustainability Officer of Siemens Energy, Christian Bruch defines his purpose energizing society. “We want to ensure all people have equal opportunities to sustainable, reliable, and affordable energy – no matter where they are.”

 

Follow Christian Bruch on LinkedIn

About Jason Bordoff

 

Jason Bordoff, one of the world’s leading energy and climate policy experts, is Founding Director of the Center on Global Energy Policy and previously served as Senior Director for Energy and Climate Change on the Staff of the National Security Council.

 

Follow Jason Bordoff on LinkedIn

December, 2022

 

Daniel Whitaker, based in London, is an economist and journalist who has been following the changes in the renewable energy sector for years. His work has appeared in a number of media outlets, including the Financial Times and The Economist.