Rethinking climate policy: a holistic approach

Welcome to the latest series of the DNV Talks Energy podcast, hosted by Mathias Steck, Executive Vice President, DNV – Energy. Each week, we will be joined by the world’s leading energy experts to discuss their insights and opinions on how governments, business leaders and wider society can help accelerate the energy transition.



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Rethinking climate policy: a holistic approach

The energy industry is widely recognised for its role in addressing climate change. However, it’s important to remember that other sectors – from agriculture and transportation to manufacturing – must equally evolve to ensure a faster transition towards renewables. Dr Lawrence Jones, Vice President, International Programs, at the Edison Electric Institute (EEI), discusses the importance of taking a holistic approach to this global issue, including the need for more inclusive policy change.

With billions of people in the world still lacking basic access to electricity, Lawrence explores the complexities around the idea of “inclusive transition” and how developing economies will require ongoing support and empathy from the rest of the world if they are to access cheaper renewable energy systems in future. We conclude the episode by asking Lawrence what the EEI is doing to harness, the new, collective focus on climate emergency in order to progress the energy transition.

Transcript:

Transcript:
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.
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MATHIAS STECK Welcome to a new episode of DNV Talks Energy. My guest today is Dr. Lawrence Jones, Vice President, International Programs at Edison Electric Institute. Welcome, Lawrence.
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LAWRENCE JONES Thanks for having me.
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MATHIAS STECK Lawrence, we want to talk about one of the important pillars of the energy transition, and this is policy. But before we do this, it would be great if you could introduce the Edison Electric Institute and yourself a bit to the audience.
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LAWRENCE JONES Sure. Well, the Edison Electric Institute is a trade association in North America, basically in the US. It is representing all investor-owned utilities in the United States. We also have an international program, which I run, and that program has about 70 international members, which are utilities with operations in about 90 countries. Basically, what EEI does is we seek to provide public policy leadership. We’re also very much involved in providing strategic business information for our members around the world. And we also convene a lot of strategic dialogues and events that would bring CEO or the C-suites together to talk about what’s happening in the industry, both in the US, but globally as well.
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MATHIAS STECK So, Lawrence, if Thomas Edison were alive today, what would you think he would make of today’s global energy sector and where we are going with it?
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LAWRENCE JONES I think it’s a very interesting question when it comes to Edison, because for a long time, as we look at this industry, Thomas Edison would come back, he would see the physical systems still the same, and he would be surprised to see the amount of engagement we have from customers. But I think one other thing Edison would be surprised to see is the level to which the disagreement he had with Tesla was really not a disagreement, because today, the world has converged on using both AC and DC. And so, this idea that you had to choose one or the other, from a business standpoint, back in the day, created this tension between Tesla and Edison. But let’s remember that, at the end of the day, Tesla, AC, dominates. Edison, DC, also dominates, but different ways.

So, I think Edison will be surprised to see that the physics hasn’t really changed. He’ll probably be upset that this Tesla guy is still bugging him, because you have AC still dominating. But he will also be happy to see that innovation is taking off, in terms of the cost of renewable energy going down, with solar prices going down. He predicted that was going to happen, to some extent.

And so, you will have that surprise on one hand, that things have not changed when it comes to the physics of the system, more or less, but that the services around the system, the regulation, the policy, the complexities, those things will sort of surprise him. And I think he will be happy to see us moving in a direction of transitioning the energy system, even though it’s taken us a hundred years, but it’s just the way it is.
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MATHIAS STECK Lawrence, your work spans business, technology, governments and academia. How are you seeing the thinking change around the world about the energy transition and the switch to renewables?
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LAWRENCE JONES I think in terms of the thinking around the energy transition, one of the things I always say is that the energy transition, albeit global in scope, everyone is talking about it, I think it’s also very local in context, in the sense that every country will have a different approach to how it’s being handled. And so, I tend to see the energy transition today, in terms of their thinking, is that a recognition globally that the energy systems of the world have to evolve. I think the real challenge is how is it going to evolve? We see it happening. Different approaches in different countries. Different regulatory approaches. Different policy prescriptions being put in place.

And I think the part that I found very fascinating is that everyone is trying to learn from one another, even though we know that what works in one country may not necessarily apply to another country without it being tweaked a little bit. And I think that creates a lot of interesting opportunities for policymakers, but as well as the utilities, in terms of experimenting on how we move forward.

So, the thinking is changing. One place where I think we haven’t seen a lot of change is the complete understanding of the complexity of electricity. I think there are still some assumptions about what electricity is and what it isn’t. And I think unless we start to see change in terms of the perception of what electricity is all about and the value that it provides, we will have a longer road to this energy transition, because you have mixed expectations from the different stakeholder groups, and I think part of the reason is because there’s not a complete understanding of the complexity behind the energy transition and what it’s going to bring and not bring.
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MATHIAS STECK One thing which has definitely also changed in the last couple of years is the public awareness of the climate emergency ahead, and especially younger generations. They all have that on their agenda, because it starts affecting their lives. How do you see this with regards to policy? Has that helped us already to developing policies, putting new policies in place, which help us on a global level to affect transition as fast as we have to, to keep the gap as small as possible?
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LAWRENCE JONES That is a very interesting question from two dimensions. I think, first of all, if you think about the role of the public in terms of putting pressure on the policymakers, I think we’re beginning to see that happen. We’ve seen movements in Europe and elsewhere. What concerns me, though, is that the notion – and someone talked about it here, at this conference yesterday – I think it was a lady from EDF, who mentioned the notion of inclusive transition. Because if you think about it, there are still about 2 billion people in the world who lack access to electricity, and for the transition to be right and fair, there has to be a recognition that certain parts of the world will have to accept, for the greater good, maybe a lowering of their living standard, for the others to see an increase in their living standard.

And so, whilst I think there’s a public policy pressure coming from the consumers, I think there’s also a responsibility that the younger generation have to recognize, is that lifestyle has to also change. And what I always say to people is that, while we recognize the importance of being very galvanizing about the climate and the change that has to happen, we have to search ourselves and see what are we doing. And if you think about the disparity in the world in terms of those who have access to electricity and those who don’t, well, those who have abundance already, it’s always often easier to talk about changing something when you have it in excess. But if you’re in India or in Africa or other parts of the world where you have nothing, it’s kind of difficult to talk about change, to create a pathway, when you don’t even have anything.

And so, where I think the younger generation needs to help is to set an example by saying, look, we’re prepared to lower our standard of living so that the rest of the world who don’t have access to electricity can be able to get cheaper renewable energy technology, for example. And until that happens, you will have this disparity in terms of those who are saying, let’s change the world, let’s transition our energy system, but then you have a billion people who have nothing, and you’re telling them to not use certain types of fuels because it’s not good.

So, there needs to be an equality around this issue of energy transition, and I think it’s very, very important if we’re going to be successful. Also, one last point I will make there, because if you think of demographic shift, by the year 2050, which is the number a lot of people are referring to in terms of the transition, the vast majority of the world’s population will live in regions where there is still a use gap in terms of electricity and energy. And so, by the 2050, the richer countries will have a smaller population compared to those countries who are growing in population.

And so, there needs to be a strategy to see, how do we bring the rest of the world along in a way that provides standard of living and give them a bridge so that, maybe, for the next 20, 30 years, they may use certain fuel sources until they develop their economies to the standard where we want to consider it as being part of the industrialized economy.

I always say that, we talk about the fourth industrial revolution, and people say there is the first, second, and third, and then fourth. Well, on the globe today, you have people who are still in the first industrial revolution. And so, you’re talking about going to the fourth when you still have maybe 500 million or a billion people who are just in the first, right? So, that transition, that disparity has to be changed if the transition is going to be successful.
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MATHIAS STECK Right. Expanding a bit more on how we can support the transition. Your members in the US and non-US combined provide electricity and electricity-enabled services for about 4 billion people on the planet. With consumers around the globe increasingly being aware of the climate emergency as we just established, what role can you see them having in helping to drive policy change?
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LAWRENCE JONES I think there are three things that can happen.

First of all, we all need to lead by example, right? There has to be, first, a recognition of, what can I do? There’s a tendency to always ask policymakers to do things, right? But I’m increasingly saying to people, before you ask someone else to make a change, to make a transition, are you going to make a personal transition yourself? So, I think that’s where we should first start, right? So, because if you lead by example, it becomes more easier for you to put pressure on others to say, look, I’m not just saying these things. I’m actually doing it in my daily living, right? So, that’s the first thing that needs to happen.

The second thing that needs to happen is that people need to become more engaged. By engaged, I’m not just talking about protesting and demonstrating, which they’re also good forms of engagement, but I think people need to get into the minutia of understanding the complexity of this energy transition, and also understanding what it means to go from one fuel source to another. What does it mean in terms of the overall supply chain? What does it mean in terms of the total ecosystem that makes up this thing that we call the energy system? Because it’s not as trivial.

And then the last thing I think we need to recognize as consumers is that the world today is not going to be the same as the world 30 years from now. And someone said in Singapore this week, I think it was the minister who talked about the Singaporean mentality to doing something today for the next generation. Well, even if you’re a young person, you can still do things today for a future generation. So, thinking long term, being more forward-thinking in terms of what we do on a day-to-day basis, I think is critical. So, those are the three things I think the consumers can do today.
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MATHIAS STECK Since the UN statement about the time left to really make a change, how concerned are you that we can still make it on the timeline we are given?
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LAWRENCE JONES I’m very concerned. So, being a father of three kids, and I say kids because the oldest is eight and the youngest twin boys, they are four. When I look at them, I ask myself a question, and that is, what is their lives going to look like in the next 25 years? And 25 years may seem long, but it’s not, right? And so, if they’re telling us 12 years, there has to be a recognition that over the next decade, we as a global community will have to begin to have what I call really frank and candid conversations about what we’re going to do for the next decades ahead. If you look at what’s happening in regards to the frequency of extreme weather events, we see wildfires, we see floods, we see all these things happening, right? And in the midst of all of that happening, we’re now about to transition the energy system.

So, I’m optimistic, that I think we’ll make progress. Will we reach the goal that we’ve set? I don’t think so, because it’s just too many things at play, but I don’t think we should give up. I think if you see utilities around the world, many of the members of EEI both in the US and around the world, are already making steps towards cleaning up their supply source, but I think it’s not just the energy system that has to transform. We have to look at holistically other systems; transportation, agriculture.

There’s a tendency to always say, well, if we can only fix the energy system, we can tackle the climate crisis, and I think it’s not the right approach. I think we need to take a holistic approach and say, okay, where, on the entire set of systems we have, where can we make changes in all of these systems? So, transportation. Building sector. Building is a huge part of this whole thing. Agriculture. So, we need to take a holistic approach. And if we do that, I think the chances of us making a dent is much, much higher than if we only focus on one sector and say, let’s just fix the utilities sector. The utilities can clean up as much as they want. If the transportation sector hasn’t cleaned up, it is what it is. Same with the building sector, manufacturing.

So, we need to take a holistic approach, which comes back to public policy, because for a long time, we continue to make public policy on a silo basis. So, you have energy policy, water policy, transportation policy. And I’m always saying, if these systems are all interconnected, why not try and create a holistic policy framework? It’s not easy, but that’s what I think needs to happen.
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MATHIAS STECK Right. Lawrence, I’m going to read a quote from one of your speeches you have held around the world, and that is, we should simplify the message and story of energy for customers and other stakeholders. We must neither trivialize the problem nor miss the opportunities of electrification. Why is it important to you to keep repeating that message?
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LAWRENCE JONES I think it’s important for me to keep repeating it, and we should all keep repeating it, because if you think about the energy system, it’s very complex, and what has happened is we’ve reduced it to a switch. I gave a talk in New Zealand a year ago, where I talk about what I call the invisible innovation, because people will say, the energy sector is not innovative. Utilities are not innovative. And what I said, it’s not true. The thing is what they do innovate, you can’t see it.

So, for example, in this building, the lights are on. Well, if the utilities in Singapore is doing a lot of work to keep the reliability at the same level, you as a customer will not see any change in that lightbulb. But behind the scenes, there’s a lot of innovation, invention that’s being done to keep the lights on every day. There’s a lot of decision-making on a real-time basis to keep the lights on. Because we’ve simplified electricity to just a switch, people then take it for granted and say, just switch it on.

And so, we need to remind people that, yes, it’s just a switch, but behind that switch, there’s a lot of complexity. And in fact, I’ve always said that in the next decade, one of the biggest jobs of electric companies, and even companies like DNV, would be to understand how to manage complexity, because we are layering on top of systems and systems. You have the energy system today, which Edison will still recognize, and now you have all these IT systems you’re putting on top of it. Where do you have the human capacity to understand this amount of complexity?

And so, we should certainly try to talk about the energy story like the minister did yesterday in Singapore, so that people can understand from a consumer standpoint, but we should not simplify it, because if you simplify it, people will take it for granted, and it would be a disservice if we did that. So, I’ve been saying this now for the last couple of years, and people say, why do you keep saying don’t trivialize the problem? I said, because if you trivialize the problem, you can’t come back and make major investments in infrastructure, because people are like, if I just switch the light on, it comes on. Well, there is something called circuit breakers. There is something called transmission lines, distribution lines. These physical systems are still necessary to keep the lights on.
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MATHIAS STECK In DNV’s Energy Transition Outlook 2019, we talk about the world needing extraordinary policy action if we are to close the emissions gap by the 2030. Based on your work across the globe, are the collective of industry, customers, most importantly policymakers ready to introduce this level of policy action, replacing short-term with long-term thinking and pragmatism?
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LAWRENCE JONES First of all, I must commend DNV for your transformation report. I was privy to hear about it when I was in Iceland, and I downloaded it and I read it, and it was actually very good. So, congratulations for that. In terms of the public policy and what’s happening in that light, I think we are beginning to see different policy experimentation around the world, right? Some countries are taking an approach that will accelerate the investments in renewables. Some are taking approaches that will attract more capital. So, I think the thing that has to happen along with policy, which I think investors… Because it’s going to take a lot of money to transition the energy system, right? And attracting capital requires stability.

If there’s one thing policymakers around the world are beginning to recognize is that you have to allow the public policy to work. You have to have what I call patient regulatory mindset. You can’t keep changing. You can’t rush. And so, we’re beginning to see some places around the world where we’ve seen successes in terms of being patient. In the US, there are certain states that have taken certain steps to accelerate the transition. But I think one of the concerns we’re beginning to see is that… I always say, there is sometimes a disconnect between regulation and public policy. By that, I mean you can have a very good regulatory framework, but if the policymakers keep intervening, then the system is not going to work. You have two signals you’re sending to investors. On the one hand, you say, yes, here’s the name of the game. These are the rules of road. And then you keep changing the rules of the road as the game moves on.

And so, we need to be very careful that as we bring these new regulatory and policy strategies to accelerate the energy transition, we should have patience to let it work and not quickly keep changing them, because it just sends the wrong signal to the investor community, and it also sends the wrong signal to the operators of the systems, because you just don’t know what the rules are.

So, for renewables to work, for example, I remembered, 20 years ago, in Sweden, when we’re talking about offshore wind. A lot of people said it wouldn’t work. Eventually, it did work. And the reason why, because Denmark, give them credit, they were very consistent. When they put in their public policy for becoming the world leader in renewables, they didn’t change it every time there was a change of government. In fact, if I remember, they had several different governments in Denmark, but the public policy objective never changed. It stayed the same. And that was what triggered… And I think if more and more countries can adapt that ability to be patient with regulation and policy, this industry transition will occur much faster.
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MATHIAS STECK What is the Edison Electric Institute doing to harness the new collective focus on climate emergency to progress the energy transition?
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LAWRENCE JONES I think, across the globe, if you look at all the… Most of our members, they are all taking steps to really put in place measures to reduce their greenhouse gas emissions. We see it happen with utilities in the US, or electric companies, as we like to call them, in the US, as well as in Europe. I think our members and our partners around the world are also trying to take a very active role in terms of our engagement both at the sub-national level or when it comes to things like COP 21 or COP 22. We participate in these dialogues. The other thing we’re doing is really focusing very, very keenly on the industry story. This is one of the areas where EEI has made a lot of investment in terms of working with our members to be able to tell the story, because we recognize several years ago that there’s a lot that we do as an industry, but we are not good at telling stories.

And so, in fact, three years ago, I believe, three or four years ago, EEI launched something called the Lexicon Project, where we began to redefine how we’ll talk about energy or electricity with our customers. And so, focusing on communication, telling stories, but in customer centricity, making sure that you put the customer in the center of everything that we’re doing. By doing so, we’ll be able to really take advantage of the urgency and contribute to moving the planet to this new energy world.
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MATHIAS STECK Lawrence, I have one last question for you, because you made me very curious bringing a book to the table. So, what is that about?
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LAWRENCE JONES So, the book, the title of this book is called Persuasion, and the subtext of the book, the subtitle is How Do You Convince Others When Facts Don’t Seem to Matter? Right? We live in interesting times. And as we talk about the energy transition, there are a lot of facts behind it. In fact, you guys at DNV put out this factbook that talks about energy in different numbers, right? But if you’re talking to people and bringing all the facts and you’re not getting them to move, what else do you do?

And as I’m reading this book, because it talks about empathy, it talks about emotion, it talks about storytelling, one of the places where our industry struggles across the world, I’ve seen it in so many different countries, is that we’re very fact based. We have all the facts, but we don’t have the emotion. We don’t have the empathy. We can’t tell the story. And that’s where I think we as an industry, if we’re going to be successful in energy transition, we have to be able to tell the story in a way that is not just fact based, but is also empathetic, in that people understand the emotions behind it. Because I always say that, if you live in Africa, and the only light you have in a clinic is the light from a cell phone, and you’re going to have a baby, and the doctor cannot even find your vein to give you an IV, but they have to use a cell phone to get light, you have a different perception, reaction to energy than if you live in Sweden or Norway or Germany, wherever, right?

So, I think we need to tell the story about energy transition in a way that is empathetic, not just fact based. Because right now, people don’t really care about facts when it comes to this transition. They just want the result. And so, that’s why I’m reading this book, Persuasion. I highly recommend it. By Lee Carter. I don’t know who he is. I don’t know who she is. Could be a she. But I think it’s a very good book.
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MATHIAS STECK Thank you very much sharing this with us, Lawrence. And also, thank you very much for the great insights you’ve given us in this episode. And to the listeners, thank you very much for listening in. That was Dr. Lawrence Jones, Vice President, International Programs at Edison Electric Institute.
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LAWRENCE JONES Thank you for listening to this DNV Talks Energy podcast. To hear more podcasts in the series, please visit dnvgl.com/talksenergy.
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