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Fact. Energy Special Experts about Energy 2011 and beyond Dick Benschop All the components needed for the fuel cell car are ready Jeroen de Haas Local solutions are part of the cradle-to-cradle principle Wubbo Ockels I wouldn’t be surprised if most wind turbines were gone 50 years from now Pier Nabuurs Ultimately solar will be the winning technology Sipko Schat The real driver is to get control of the supply chain and reduce dependence on other countries Ton Hoff It will take decades for solar power to gain market share
Introduction
Few industries impact economic livelihood, societal functioning and
quality of life as significantly as the energy industry. Despite, and
almost certainly because of energy’s absolute necessity, the energy
industry faces a remarkable array of challenges even as many of its
companies are achieving tremendous financial results.
Hurricanes and the oil spill disaster in the Gulf of Mexico, since they encompass a wide array of views and inputs.
the economic crisis and political instability have all We hope our predictions will inform, fuel the debate and
contributed to high volatility of energy prices. As the fog in some cases help identify opportunities and potential
lifts over the global economy, we see an accelerating courses of action.
eastward shift in the world’s economic centre of gravity.
Continued strong energy demand in China and India calls This is the second year that Deloitte has published its
for massive investments in all elements of the energy Energy Predictions, based on in-depth interviews with
value chain. Meanwhile, the continuing focus on the clients, industry analysts, and senior energy practitioners
environment and concerns about climate change have from Deloitte member firms around the world. Useful
created renewed interest in alternative energy. Significant as these predictions are, we wanted to offer you, our
investment is needed in technologies that reduce the clients, more. So we went out to interview some of
demand for energy products, improve the recoverability the Netherlands’ key experts and thought leaders on
of hydrocarbon resources and foster environmental energy. In this magazine we share with you their views
sustainability. Countries endowed with oil & gas and comments on our 2011 Energy Predictions. The ten
resources are increasingly exerting control over them. In predictions themselves are presented in summary at the
the midst of this environment, when the industry most bottom of the pages. For further reading please visit our
needs creative and often hard-won solutions, its human website or ask for a hard copy of our Energy Predictions.
resources are aging.
I hope you will find this magazine interesting reading.
Against this background it may seem bold to make
predictions for 2011 and beyond. However, it is in times Peter Bommel
of uncertainty that we need to look into the future. Global Leader, Energy & Resources
Predictions can be useful when formulating strategy,
Colofon Contact Editorial board Photography
att. Walter Wijnhoven Peter Bommel Nanning Barendsz
Fact Special is a theme- P.O. Box 2031 Marcus van den Hoek
based issue of Fact, 3000 CA Rotterdam Leonie van der Meer Design
Deloitte’s corporate The Netherlands Copywriting and editing: Studio MCBD Deloitte
magazine. nlbcfact@deloitte.nl Carla Bakkum, Back2Back Rotterdam
Language Services
2
In this issue...
p. 4 Dick Benschop p. 10 Meb Somani p. 12 Jeroen de Haas p. 18 Wubbo Ockels
All the There’s a lot of Local solutions I’m amazed
components oil around - it’s are part of the how fast
needed for the a matter of cradle-to-cradle awareness is
fuel cell car are getting it out principle catching on in
ready the business
community
p. 22 Pier Nabuurs p. 28 Sipko Schat
p. 28 Alexander Alting p. 32 Ton Hoff
von Geusau
Homes are China builds When the There’s no such
going to be the equivalent Chinese thing as a silver
practically of two Chicagos decide to do bullet
self-sufficient a year something, they
energy-wise go big with it
Printing No part of this publication the publisher. Deloitte each of which is a legally Limited and its member
Henk Grafimedia center may be reproduced, refers to one or more separate and independent firms.
stored in a retrieval of Deloitte Touche entity. Please see
system or transmitted, Tohmatsu Limited, a UK www.deloitte.com/about © 2011 Deloitte The
in any form or by any private company limited for a detailed description Netherlands
means, without the prior by guarantee, and its of the legal structure of
written permission of network of member firms, Deloitte Touche Tohmatsu
3
Left: Dick Benschop, right: Marcus van den Hoek
1. M&A:
Converging
on emerging
energy resources will likely
make emerging markets the
fastest-growing area for M&A
during 2011. According to
of global M&A activity, while
Europe’s share has fallen to
29 percent — the lowest in 12
years.
companies from emerging
markets leading the way. First
there was the Chinese wave of
M&A activity in Africa, Asia and
data from Dealogic, deals now South America, as national
markets by companies in emerging M&A activity in the energy oil companies from China moved
markets (across all industries) industry appears to be occurring aggressively to get a foothold in
The drive to secure global already account for 30 percent in waves, with the oil and gas these resource-rich nations.
4
East
leapfrogging
West
The days are over when trends started in
the West and moved gradually eastwards.
Tomorrow’s trends will be a lot jumpier,
and they can start anywhere around the
globe – or in different places at once.
Dick Benschop, Shell’s Vice President
Strategy, shares his views with us on the
implications of this new order for what
in his job are the core issues: fossil fuels,
mobility and the environment.
The second wave, which has will likely consist of state-owned skills will be paramount, post-merger risks such as the
already begun, involves the next companies from India and the particularly in emerging markets quality of financial figures, the
tier of national oil companies, Commonwealth of Independent where complex financings, complexity of synergy goals and
which consists primarily of States (CIS). cultural differences and uncertain the viability of the execution
state-owned companies from regulatory environments often plan. Structural differences also
Russia, South Korea, Brazil and During this period of industry impede the realisation of come into play, particularly
Malaysia. The third wave, which re-adjustment, a company’s anticipated synergies. Companies in transactions involving the
is just beginning to take shape, post-merger integration (PMI) must be wary of a number of acquisition of independent
5
A
s populations age and demand sags in developed To start with, improving fuel efficiency is a universal trend. It is necessary,
Western markets, multinationals seeking growth are and it is being driven in the EU and the US by legislation. Benschop sees
shifting the focus of their activities to more promising hybridisation as a way of achieving this. “The conventional combustion
markets. Shell is no exception, says Benschop. Closing engine will increasingly incorporate electrical components.” Another
down refinery capacity in the West to expand capacity early option is biofuel. “Biofuels are particularly big in Brazil, with its
in the East is part of this bigger picture. “The megatrend has been huge agricultural sector. The US and EU are also running with it. But it is
strengthened by the economic crisis. Emerging markets were initially hit unlikely to be big in China, where less biomass is available.”
by the slump in demand from their key export markets, but they have
bounced back amazingly quickly. In the short to medium term, steep
growth paths are projected for China, India, Indonesia, Brazil and other
countries, while developed markets remain more troubled by uncertainty
and volatility.” This has consequences for Shell. “Chemicals production Full-electric cars will be a
naturally follows and even slightly outperforms GDP growth,” Benschop
explains, “but with energy efficiency improving, fuel consumption lags niche product at first, and
GDP growth, even in emerging economies. So new refineries need to be
close to where the growth is – in emerging markets.” maybe permanently
What makes these emerging markets so enticing? They have long
been export-oriented and thus heavily dependent on European and US Electric cars a niche product
consumer trends. But their own population, long merely a pool of cheap Electric mobility is unmistakably on the rise, but Benschop expects the
labour, is developing a taste of its own for consumer goods. “Hundreds pace of market penetration to vary geographically. “Plug-in hybrids are
of millions of people in these countries,” says Benschop, “are rising from interesting for consumers. For full electric cars, consumers would have
poverty to a relatively middle class income position. It’s a joy to watch, to adjust their behaviour to the car’s recharging needs and range. So
and it’s driving market dynamics. Their lifestyle is changing, and they’re I think they will be a niche product at first, and maybe permanently.”
coming to a point, for example, where they can afford cars.” Meanwhile, however, China is betting heavily on the electric car.
A preference based on more than just reducing carbon emissions,
A mobility mosaic Benschop thinks. “It’s also based on strategic considerations. China sees
The trend of rising mobility in emerging countries is at odds, however, an opportunity for itself in the mass manufacture of everything from
with other global trends, such as dwindling fossil fuel reserves and the lithium-ion batteries to fully-fledged electric cars, for its own market and
environmental need to cut carbon emissions. How will this play out? “A range for export markets.” This dovetails with the next Chinese five-year plan,
of new technologies is emerging, each promising in a limited number of which has China moving up the value chain from its current position of
applications, but none offering the ease of transport, the high energy value low-wage manufacturing powerhouse to activities involving more highly-
and the versatility of fossil fuels,” says Benschop. Long term, therefore, he sees skilled labour and better margins. “The Chinese are busy deciding which
them existing side by side, with no one winner. “We call it a mosaic. Multiple, sectors they want to specialise in, and energy ranks high on their wish
partly overlapping technological developments, with geographical differences list. They already own most of the world’s battery patents.”
depending on the resources available and on countries’ ambitions.”
companies by state-owned Given the importance of PMI to skills as well as softer change-
entities. Our experience in the successful execution of cross- management capabilities in order
emerging markets suggests border transactions, companies to complete these transactions in
that PMI risks in cross-border targeting acquisitions in emerging a way that improves, not hinders,
transactions are driven not markets will need to improve performance.
primarily by external factors like the their abilities to navigate all sorts
nationality of the buyer or target of merger-related risks. This
but by internal structural risks. means developing hard analytical
6
2. Refining:
The industry
moves east
the years. Tight worldwide spare
capacity led to a peak in refining
margins in 2007 while falling
demand during the economic
During 2009, five new refineries
were brought online, all from
emerging nations in the Middle
East and Asia. One industry
be added in Asia. This is the
great refining continental shift;
the largest consuming centres of
the west moving to the largest
recession led to estimated global commentator predicts that potential consuming centres of
utilisation rates of 80 percent, between 2011 and 2015, an the east.
The global refining industry has resulting in depressed refining additional 2.75 million barrels
had its share of volatility over margins only two years later. per day of refining capacity will
7
Hydrogen back in the picture market. For one thing, LNG produced in the Middle East with the US
The wildcard in the mobility game, Benschop believes, is hydrogen. in mind is now looking for another destination. At the same time,
Ten years ago, the hydrogen economy was heralded as our future, but by copying techniques used in the US, other countries like Australia
since then the theme has disappeared from front pages. Technological and China can tap into their own unconventional reserves.” Shell’s
developments have continued, however, and all the components technological know-how, built up in the US, is now coming in
needed for the fuel cell car are ready. It’s now a matter of up scaling to particularly handy in China, where the company is engaged in early-
mass production and installing infrastructure. Germany, working with stage exploration of unconventional fields in a joint venture with CNPC.
corporate parties including Shell and Daimler, is willing to give it a serious With gas now in plentiful supply, Benschop sees a “gas downstream”
go. “Electric cars are a hype now,” Benschop says, “but everywhere I developing, with a whole new dimension in applications. Besides in
travel, I see hydrogen re-emerging. In that mosaic I was talking about, transport, gas could feature importantly in distributed power generation,
fuel cells can be a very efficient solution, especially for larger cars and fuelling combined heat and power and micro-CHP units or gas-fired heat
commercial vehicles.” Economic rivalry will speed up the transition, he pumps. “With a smart grid in place, we could see more gas-fired power
thinks. “If Germany takes the plunge, Japan and potentially China cannot generation close to consumers rather than in big plants. Transporting gas
afford to stay behind.” is more efficient than transporting electricity.”
A weapon in the war on greenhouse gases
The other strategic value of gas, Benschop points out, is the role it can
All the components needed play in fighting climate change. For one thing, it is an ideal backup to
renewable power generation. “In Spain, where the share of solar, hydro
for the fuel cell car are ready and wind in power generation is already high, we can see how unreliable
these sources are. So you also need a significant number of conventional
plants. But their utilisation is low. This is an emerging problem in the
power generation mix that has to be addressed. What could help is to
To complete the mosaic, Benschop sees a growing role in mobility for base payments to power companies not on the power they generate but
natural gas. Compressed or liquid natural gas is an eminently suitable on the capacity they uphold.”
fuel for trucks and ships, as it produces less carbon and no SOx or NOx
pollution. And availability will not be a problem for many decades to But in the next twenty years, there is another way gas can help the
come, as known gas reserves are actually growing. environment, says Benschop. “Replacing coal-fired power plants by
gas-fired ones is a fast way of cutting carbon emissions in half.” It
Gas downstream developing disappoints him that emission targets take no account of the time value
Indeed, Shell’s strategic focus has shifted to give more prominence of abatement. “A tonne of CO2 saved now is worth more than one saved
to gas, and particularly to being the leader in LNG and a big player on 31 December 2019. The faster we reduce greenhouse gas levels,
in the exploration and production of unconventional gas. “In the US, the greater the benefit to the environment. Natural gas can play a vital
unconventionals have triggered a revolution, lifting the country’s role here. The new abundance of gas has only been partly reflected in
estimated gas reserves from 35 to over 100 years’ worth, and making policy-making around the energy mix. From that point of view, I dare say
imports unnecessary. This has had a knock-on effect on the global that exploring unconventional gas in China, and thus helping China to
Why is this considered to enjoyed by western international the requirements of the Asian rates. Although Chinese gross
be a monumental change? oil companies. Their size, markets. The implications for domestic product or GDP is
Because Asian oil companies, government support and financial the Asian refining sector are forecast to slow somewhat
representing the fastest growing strength allow Asian energy numerous and positive, albeit over the next five years, it is
and potentially the largest companies to invest in building currently challenging. nonetheless likely to remain
energy consuming market, larger, complex and efficient impressive. A recent publication
will, and may already, possess refineries and chemical plants The magnitude of this shift by the Economist, “The World
the market power historically which are designed to serve reflects Asian economic growth in 2011,” estimates Chinese GDP
8
it to achieve the deep reductions we’re aiming for. And this is an area
where Europe and the US can still nudge ahead in the technology race -
provided they don’t wait too long.”
The Netherlands as a gas country has the tradition, the assets and the
expertise to be the CCS country par excellence, Benschop feels. “The
global megatrends are not moving our way. So we need to buckle down
and focus on one or two things we’re really good at.”
Who is...?
Dick Benschop
Vice President Strategy
Royal Dutch Shell Group
dampen growth in coal-fired power generation, could prove to be Shell’s Dick Benschop joined Shell in 2003. In 2009 he became Vice
single biggest contribution to the fight against climate change.” President Strategy for Royal Dutch Shell Group. Before that he
held positions in Shell Energy Europe and in the Gas & Power
business in Malaysia. Prior to joining Shell he worked in various
functions in Dutch parliament and in the Dutch Labour Party. He
No future scenario comes to was Deputy Minister of Foreign Affairs from 1998 to 2002. Dick
studied History at VU University Amsterdam.
mind that does not depend
on CCS Marcus van den Hoek
Dutch Industry leader Energy & Resources
Deloitte
We need CCS, period Marcus van den Hoek is the leader of Deloitte’s Energy and
After 2030, gas can continue to feature sustainably in the energy mix, Resources practice in the Netherlands. He has over 25 years of
combined with carbon capture and storage. CCS has a long way to experience in consulting in the industry and served in several
go, Benschop agrees. “Carbon capture is still at the very beginning of management roles in the last 15 years. He was Consulting leader
its learning curve. The technology will get better and cheaper going in the Netherlands from 1998 until 2006. Marcus joined Deloitte
forward. It’s something we as a society need to think about, though. No in 1997. He holds a degree from Wageningen University.
future scenario comes to mind that does not depend on CCS. We need
growth at 8.4 percent; India Kingdom, and 1.1 percent in the especially China, from only a hopes to increase consumption
follows closely behind with 8.2 Netherlands. few years ago. Furthermore, the by China for both imported luxury
percent and Vietnam at 7.0 Chinese government is looking products as well as for locally
percent. In comparison, annual But it’s not just GDP growth to re-educate its people in the manufactured products.
growth rates are predicted to be that is striking. Asia has been “manners” of consumerism.
significantly lower in the West, at described as the “one billion car By providing for targeted tax
no more than 1.5 percent in the market.” This prediction reflects incentives, rebates and price
U.S., 1.3 percent in the United changing views about Asia, and concessions, the government
9
What lies
ahead for
E&P?
Oil prices in comfort zone
Long term, I see a continuing increase in global demand for oil and
Meb Somani has worked for 20 years in gas, as supply struggles to keep up with the needs of energy-hungry
the oil & gas industry and another eight as emerging markets. This will involve a lot of investment across the value
an oil & gas sector dealmaker and investor chain, from E&P through infrastructure, transport and refining. The role
of technology is to help secure that supply cost-effectively. There’s a lot
at Barclays. His latest deal had him joining of oil around - it’s a matter of getting it out. Oil is an inverted market,
the board of promising Dutch newcomer where the most expensive oil is produced in preference to cheaper oil,
Tulip Oil. He shared with us his unique provided it’s not produced at a loss. The big reserves are in deep water
and oil sands, which thus determine the marginal cost of production.
double take on exploration and production OPEC puts the comfort zone at oil prices of $70-90 a barrel, and that
trends around the globe. may well be sustainable in terms of demand. What could change the
game is significant supply coming onto the market at $40 a barrel or
less - which would make it hard for OPEC to keep the price at $80. In
this context, the massive potential supplies in Iraq, which could at some
point spill onto the market, are a wildcard.
3. Nuclear
power:
Electrifying
shaping up around the world in
some unlikely regions, perhaps
none more than in emerging
locations that include the
the largest global oil producer,
Saudi Arabia. Many of these
oil-rich nations are embarking
on a new roadmap destined
Middle East and China. The to shape future energy usage
emerging nations Middle East region is home in the Gulf region. Kuwait,
to roughly 75 percent of the the fifth biggest oil producer
A nuclear energy renaissance is world’s oil reserves as well as to among OPEC members, plans
10Reactions to Gulf oil spill a blip unlikely. As for shale gas in Europe, the jury is out. The rocks may have
As far as deep water goes, the Gulf oil spill will have an impact. In the the potential, but the circumstances are different. It’s likely to be ten
short to medium term we’ll see tougher standards in the US, but other years before significant volumes come to market, so maybe you have a
regions will suffer knock-on effects, putting some upward pressure on window of relatively strong gas prices in the second half of the decade
production costs. Some areas will be restricted and come into play later, until shale comes in. Even then, production costs will be closer to $8
as price and the fiscal situation demand. In time it will be seen just a blip than to $4.
in that offshore drilling will continue.
China’s unconventionals
China has been trying for ten years to encourage production of its coal
bed methane with mixed success. Now Chinese companies are investing
There’s a lot of oil around - in US shale gas to access technology, and they’re teaming up with Shell
and others at home. Strong commitment, central planning and sufficient
it’s a matter of getting it out capital can help. But success in the US was based on the opposite model:
experimentation, a large number of players with acreage and a profit
incentive. Take ten geologists and put them in one company, and they’ll
drill two wells a year. Put them in ten companies, and they’ll drill ten or
US shale gas drilling unsustainable even fifteen wells a year. So I suspect it will take a similar timescale to
In the US an awful lot of drilling is taking place because the drilling that in Europe for shale gas to have a material impact in China.
licences on prospects will otherwise expire, or on the basis of
commitments made by financing partners. The financing is often Private sector capital
coming from large European or Asian buyers, often NOCs. Those Alongside the capital of NOCs and sovereign wealth funds, I see more
wells will get drilled almost regardless of healthy economics. That’s an deployment of Asian private capital, from financial and industry players,
unsustainable situation that could depress prices for several years to in the natural resource space. This will make profit more of a driver of
come. The marginal cost of producing American shale gas is not clear, investment there, rather than strategic and political considerations.
with estimates ranging between $4 and $8 or more. Some of the low
end estimates may not reflect full cycle cost and volumes. At current
gas prices, though, we see an M&A buying opportunity in conventional Who is...?
and unconventional gas. The big transactions seem to be in shale gas
with premium prices being paid for access to technology. National oil Meb Somani
companies are buying to get exposure to technology which they can Head Oil & Gas investments
deploy in their home countries. Barclays Natural Investments
Eastward pull away from Europe Meb Somani is Head of Oil & Gas investments at Barclays Natural
With gas demand temporarily under pressure due to the economic crisis, Investments (BNRI). He has invested in and holds board positions
projects initiated long ago under different conditions continuing to at several oil & gas companies in BNRI’s portfolio, including
deliver gas, and LNG destined for the US now coming to Europe, there’s Netherlands based Tulip Oil. Meb was previously Head of Oil &
a glut in Europe for now. How long it will last is hard to say, but what I Gas at Actis Capital, a leading private equity investor in emerging
do see is a reversal of the current dynamics. The LNG supply overhang markets. Prior to that he was Managing Director at Harrison
will get pulled eastwards as demand there picks up. There is also an Lovegrove & Co. Before that he was at Texaco and at Shell in
eastward pull on pipeline supply investments from Russia and the CIS. senior petroleum engineering and asset management roles.
You have to wonder whether megaprojects like the Nabucco pipeline, Meb is a Chartered Petroleum Engineer and a long standing
taking gas through Turkey to Austria, will take off, as the economics member of several industry associations. He holds a First Class
for some of these are questionable. Supporting demand, utilities will Honours degree in Petroleum Engineering from Imperial College,
increasingly switch to gas-fired power generation. All of this will be London and an MBA from Henley Management College.
beneficial for European price levels. So all in all, sustained low prices are
to build four nuclear power 80GWe by 2020 and 400GWe of over-relying on a single fuel the best choice for these nations
reactors by 2022, joining a by 2050. So why are these source for electricity generation and many others in terms of
push toward atomic energy nations increasing the use of and reducing the use of oil now to providing diversified, sustainable,
among Gulf countries. China, nuclear power? save it for future generations, and, independent and clean energy
the second largest economy in the case of China, emission close to where it is needed.
and the largest oil importer is Several answers come to the reduction. Integrating nuclear power into a
planning to increase its nuclear forefront, including diversification country’s energy infrastructure is
capacity more than tenfold to in order to decrease the risk Nuclear power appears to be not without its challenges.
11Looking
at local
solutions
Where will we find the solution to
tomorrow’s energy needs? Close to home,
says Jeroen de Haas, CEO of Dutch energy
company Eneco. Deloitte’s Global Energy
Leader Peter Bommel asks him why.
When real costs are taken into and construction of the nuclear perhaps the most important development programs in
account, nuclear is often more infrastructure typically lasts no challenge for the industry is the the hopes of growing talent
expensive than fossil fuels. less than several decades. Nuclear shortage of nuclear talent within in the fields of construction,
Nuclear energy takes a long waste is still considered to be the industry. manufacturing, engineering and
time to produce. The process more controversial than fossil fuel nuclear power. In particular, there
of permitting, environmental emissions, often requiring large One way governments are is a short-term need for technical
impact studies and the length underground storage facilities. rectifying this situation is experts who can deploy and
of time from planning to design Despite these obvious hurdles, to implement workforce maintain nuclear projects. In the
12long-term, governments should
consider campaigns that educate
the general populace on the
benefits of nuclear power in order
4. Renewables:
Here comes
the sun
a year. This fact alone makes it
easy to understand why experts
and laymen alike believe solar
energy offers vast potential as
to stimulate interest in the field. a renewable resource. Many
The sun delivers more energy countries around the world are
to the earth in an hour than investing aggressively to realise
the entire world consumes in this potential energy source as
13Left: Peter Bommel, right: Jeroen de Haas
they seek energy independence on the grounds of government Solar technologies will increasingly parity — the point at which the
and ways to reduce greenhouse buildings and military installations. trickle down from industrial users cost of electricity from renewable
gas emissions. What has been conspicuously to be embraced by residential sources rivals that of electricity
absent in most places, however, consumers and small business. derived from more traditional
Around the world, people have has been wide-scale consumer Just how fast solar energy can sources such as coal, oil, natural
grown accustomed to seeing solar adoption. That absence is now become mainstream will depend gas or nuclear. The time it takes
arrays on the rooftops of factories beginning to change. heavily upon how quickly solar to achieve grid parity is a function
and office buildings as well as technologies can achieve grid of several factors including
14PB: On a global scale, energy demand is set to increase by 50% in the operating costs could also reduce appetite for future investments in
next 30 years, due to the world’s growing population in general and its renewable energy. The energy companies who want to build the plant,
growing middle classes in particular. How are we going to keep pace EDF and Delta, are international players with international agendas.
with that? Apparently they can make a business case for a huge project like this.
My own company can’t. Not without considerable financial support from
JdH: To respond quickly enough to increasing demand, I think we are the Dutch government at least, and I have understood that government
going to have to generate a lot more of our energy locally as opposed to commitment is limited to the license only.
centrally, using renewable technologies like wind, solar and biomass.
PB: So should the Dutch government then deny a licence to these
PB: In Africa, I can imagine villagers sticking solar panels to their roofs parties?
and blissfully enjoying energy independence, but what about China’s
megacities? With such massive concentrations of population with JdH: No, I believe in letting the energy market operate as freely as
growing energy needs, surely you can’t avoid building large-scale power possible, rather than imposing restrictions on moral grounds. So by all
plants? In fact, power plants are springing up like mushrooms in China. means, give them a licence. But what the government shouldn’t do is
back the colossal loans and insurance costs these companies are going
JdH: Well, yes, but distributed energy is also mushrooming there. China to need – that would in effect constitute a considerable subsidy. Without
needs more power plants now, but it won’t be long before dwindling that government backing, it’s unlikely the project will take off.
fossil fuel supplies and unacceptable carbon emission levels make further
expansion of conventional power generation capacity impossible.
Besides, distributed power generation can help China achieve its
much-wanted energy self-sufficiency.
A new nuclear plant is not
PB: Aren’t nuclear power plants a good solution for countries like China?
No fossil fuels, no carbon emissions… a desirable option for our
JdH: The world cannot do without its current nuclear plants, and will country
probably need more of them before it makes the transition to renewable
energy. But as long as nuclear plants cannot be made intrinsically safe,
they are not sustainable and we would do better to avoid them. PB: In the renewable space, we also see big projects like offshore wind
farms, Spain’s solar parks and Desertec. What will they contribute to the
PB: In that light, how do you view plans in the Netherlands to build future energy mix of Europe?
another nuclear plant?
JdH: The technology is all proven. The bottleneck is logistics, getting
JdH: In my view a new nuclear plant is not a desirable option for our electricity over seabeds and across national borders to where it’s
country. We don’t need it for our security of supply, nor does it increase needed. Today’s national grids are not sufficiently connected. Ideally we
our independency of supply. High upfront fixed costs but low variable would have to have one big European grid, a kind of giant copper plate
local climate, utility rates, and 2020 in many regions, and it answer is “yes” — if appropriate Analyses conducted by the
government support. could become competitive at policies are in place. Consumers Paris-based International Energy
utility-scale in the sunniest areas can now purchase rooftop panels Agency (IEA) also suggest that
Several new studies suggest that by 2030. at many retail stores made possible major gains will be made in
photo-voltaic panels on residential by government policies which concentrated solar production
and commercial buildings could But are solar panels really ready to provide subsidies for residential (CSP) within the next decade.
achieve grid parity — i.e. with take their place at major retailers? solar applications as a means of The IEA expects CSP to become
electricity grid retail prices by Early indicators suggest that the spurring a lagging job market. competitive for peak and
15where electricity can be buffered, reducing the need for storage. This
calls for huge investments, and for a policy of mutual trust and courage
at EU level, but currently it’s every country for itself. And that is blocking Ideally we would have to
progress. For instance, what interest does nuclear powerhouse France
have in connecting Spain’s solar parks to Northern Europe? To be honest, have one big European grid,
I’m not optimistic Europe will get its act together any time soon.
a kind of giant copper plate
PB: What is also making the sector shy of big investments is that
governments keep changing their policies with regard to renewables.
Subsidies are here today and gone tomorrow. JdH: Meanwhile, conventional energy is in fact heavily subsidised, if
mid-peak loads by 2020 in the
sunniest places, once again if
appropriate policies are adopted. 5. Water
usage: Every
drop is precious
within the entire energy
industry, pushing up energy
prices and threatening parts
of the value chain that include
water. Water availability
affects hydro-electricity and
Present-day economic thermal power generation as
challenges have created turmoil well as playing a critical role
16you take into account every penny the government spends on security
of its fossil fuel supply, plus the subsidy on emission rights it grants to
coal-fired plants. Phase that out, and the transition to renewables would Local solutions are part of
be just five years away!
the cradle-to-cradle principle
PB: So assuming these big renewable projects are a long way off, that
brings us back to distributed power generation. How does Eneco intend
to adapt to the radically different energy landscape?
JdH: Traditional power companies are asset-driven. Every twenty years Who is...?
or so, they put their thinking caps on to choose their next big investment
– in a gas-fired or a coal-fired plant, or maybe a nuclear one. When Peter Bommel
they’ve made up their minds, they can sit back again for years, in the Global Energy & Resources Industry Leader
knowledge that there will always be a market for their electricity. These Deloitte
companies are a dying breed. The energy company of the future doesn’t
deal in commodities, but in solutions. Peter Bommel has a distinguished career as an Energy &
Resources specialist and as an audit partner in Deloitte’s Dutch
PB: Local solutions? member firm. He has qualified as both a Dutch RA and a U.S.
CPA. Prior to joining Deloitte in 1999, Peter worked for several
JdH: Yes. It’s part of the cradle-to-cradle principle, where we meet companies in financial management positions. He lived and
our primary needs, including energy, close to home, and deal with our worked in the Western Hemisphere for almost 8 years, serving,
waste flows close to home. The smaller these cycles are, the better. among other jobs, as CFO of an integrated mining company.
The dominant economic model of the past fifty years was based on
specialisation, upscaling, centralisation. It was efficient to get our energy
from a remote source, because it meant that we could go on consuming Jeroen de Haas
without being faced with the consequences. The attending problems CEO
for people and planet were in fact exported to another location, where Eneco Holding N.V.
they no longer seemed to be our problems. But in a globalising world,
we can’t do that anymore - and more and more people just don’t want Jeroen de Haas was appointed Chairman of Eneco Holding’s
to. They’re eager to buy into renewables. They actually enjoy generating Executive Board on 1 January 2007, having been an Executive
their own electricity, and tend to use it more carefully. Communities feel Board member since 2000 and Vice Chairman since 2006.
ownership of their local energy sources . When we wanted to build a From 1996 to 2000, he was at the helm of energy company
wind turbine in Scheveningen in 1996, people picketed against it. Now, cooperative Enercom, six members of which merged to form
years later, we wanted to take the outdated turbine down – and people Eneco in July 2000. Previously, De Haas held an executive
picketed to save it. They’ve even given it a name now: Dune Bird. So position at Roccade. He studied Dutch law at the University of
renewables are really taking flight! That is something I am optimistic Utrecht.
about and I look forward to the flight, including the unavoidable
turbulence, because the destination is worth it.
in nuclear-generated power, Six billion people in the world capita consumption of water corn, bioethanol from cellulosic
bioethanol production, coal today are currently using about continues to rise, humankind will feedstocks, petrol from U.S.
and petrol from conventional 54 percent of all accessible likely be using over 90 percent of conventional crude obtained from
crude and Canadian oil sands. fresh water. Within the next 15 all available fresh water by 2025. onshore wells, petrol from Saudi
In short, water is the common years, humanity is expected to This dilemma is highlighted in one Arabian crude, and petrol from
denominator among all energy consume about 70 percent of recent study where researchers Canadian oil sands.
options. fresh water resources. If current evaluated the fuel lifecycle for five
predictions hold true and per fuel pathways: bioethanol from The analysis revealed that the
17Happy energy
Professor Wubbo Ockels of Delft
University sees the transition to renewable
energy sources as the next giant step in
human development. A step we’re on the
brink of taking.
amount of water used to produce water re-injected for oil recovery. where 10–17 liters of water are at a rate of 2.8–6.6 liters for
each fuel type varies significantly The study results also indicate consumed to produce one liter of each liter of gasoline produced
from one country to another. In that crop irrigation is the most ethanol. Water requirements for for more than 90% of crude
oil exploration and production, important factor determining switchgrass ethanol production oil obtained from conventional
water consumption depends water consumption in the vary from 1.9 to 9.8 liters for each onshore sources in the U.S.
on the source and location of production of corn ethanol. Nearly liter of ethanol produced. and more than half of crude oil
crude, the recovery technology, 70 percent of U.S. corn used for imported from Saudi Arabia. For
and the amount of produced ethanol is produced in regions Meanwhile, water is consumed more than 55 percent of crude oil
18Sustainability a matter of civilisation of bottom-up initiatives. Towns, groups of farmers starting energy
“The Netherlands has always been a nation of merchants, and I think co-ops. Our world-leading market gardening, flower cultivation and
that explains why we cling to our fossil fuel based energy mix. But simply cattlebreeding sectors are brimming with sustainable innovation actions.
going for what is cheapest now puts us at the very bottom of the ladder And then there’s the corporate inititives. I’m amazed how fast awareness
of civilisation. Even a tiny step up the ladder, other values come into play. is catching on in the business community that companies have to change
If we exercise caution, think long-term, care about what kind of world the way they do business if they want to still be around in another
we leave to our grandchildren, then we’re operating on a higher ethical twenty years or so. All this is happening without any government push.
level. And we accept that quality – sustainability - comes at a price. It has nothing to do with innovation platforms, subsidies, or stimulus
measures.
Along this vein, I’m certain that electric cars will catch on so quickly
In developing a sustainable that our government won’t know how to deal with the situation. A
wide range of cute electric cars is coming onto the market, because
world, we should follow manufacturers see a demand for them. The government insists that
before we can make the transition, we need to install two coal-fired
the pattern of nature itself: power plants so we have enough electricity. But this is not correct,
we have sufficient production already. The problem with today’s
diverse, diffused, organic electric cars is their range. They need charging up after just 150 to 200
kilometres. For commercial and fiscal reasons, energy companies and the
government would like to see this happen at dedicated charging poles,
while consumers would much prefer to plug the car in a regular socket at
home. And with the current generation of cars, they can.
Education, fostering knowledge and passing it on to future generations,
is another aspect of sustainability that our country has been neglecting.
Our spending on education and research as a percentage of GDP is
among the lowest in Europe. This may threaten the development of
talent to build our sustainable future. And it has another consequence I wouldn’t be surprised if
as well: rather than a knowledge-based society, we’re steadily becoming
an opinion-based society, where opinions demand the same respect as most wind turbines were
facts, and scientific findings are seen as just another opinion.
gone 50 years from now
Bottom-up movement
It’s no surprise, then, that our government hasn’t succeeded in putting
the Netherlands on the sustainability map. We’ve actually lost ground Solar dominance in nine years
in recent years. But the Netherlands is ultimately a smart country, and The same struggle between innovation and vested interests is going
it is getting its act together. In the past three years there’s been a flurry on for solar energy. It’s a viable option for power generation even in a
from Canadian oil sands, about
5.2 liters of water is consumed
for each liter of petrol produced.
These figures paint a scenario that
6. E&P
operations:
Exploiting hidden
component in petroleum
exploration and production
(E&P) operations. From seismic
surveys to deepwater drilling
is unsustainable. and artificial intelligence,
depths the operations of today’s
oil companies’ exploration
Technology remains a critical and production departments
19temperate climate like ours. I foresee more and more private households pattern to what happened with internet and mobile phones: penetration
in the Netherlands buying solar panels in the near future. They’re easy of solar will at least double every year, and nine years from now solar
to install, and even at their current price and without subsidy, they offer cells will produce more electricity than all the world’s power plants
a cheaper alternative to the electricity supplied by power companies: together.
17 versus 20 cents per kWh. Companies will be slower to jump on the
bandwagon, as they pay much lower electricity prices – you see an
inverted economy of scale here, courtesy of the government.
Meanwhile, the power companies are spreading the story that we first I’m amazed how fast
need to have a grid that can absorb the excess electricity produced by
people’s solar panels, but these are just more stalling tactics. People awareness is catching on in
don’t have to be able to feed in to benefit. Their overproduction, and
thus their missed income, won’t amount to very much. Power companies the business community
want us to think the grid is essential so they can maintain control over
power supply. The beauty of distributed power generation, however, is
that we may not need to maintain such a tight grip, we can afford to let There are two problems facing this model of power generation. One
it develop organically. is efficiently storing energy generated when sunshine is abundant, the
other is servicing large industrial users. If they are eventually to use the
excess energy produced decentrally, the grid will have to be in place. We
have another five to ten years to work on this, though.
Nine years from now Wind a stopgap technology
solar cells will produce Wind energy is fantastic now, and should remain so for another 20 years.
It supplements solar because it goes on during the night and under
more electricity than all cloud, and current production costs are very competitive. But I wouldn’t
be surprised if most wind turbines were gone 50 years from now. Wind
the world’s power plants is a transitional technology, but the story doesn’t end there. What would
constitute a happy ending is solar power - plus a wonderful storage
together medium. We’re still waiting for a real breakthrough in the latter field.
Going forward, moreover, the price of solar panels will go rapidly down.
Already, a US company can produce them at $1.40 per watt-peak, and
reports from China suggest photovoltaic film will soon be produced at
a tenth of this price, $ 0,14 per watt-peak. This means we’ll see a similar
resemble a vibrant, high-tech has historically been supportive costs by remotely operating next-generation wireless sensing
nerve centre easily mistaken of exploration and production rigs in extreme location and system to acquire extremely
for use in deep space technology development. The weather areas such as the high resolution seismic data to
exploration. Motivated technologies used may serve Antarctic. find and measure underground
to improve competitive to increase the probability of reservoirs of oil and gas. This
advantages and efficiencies, a find, enhance the ability to Two giants in their respective new technology improves on
as well as by the reward of the extract heavy crude and the fields, HP and Royal Dutch Shell traditional 3D techniques by
“next big find,” the oil industry capability to limit risks and PLC have teamed up to develop a allowing images to be created
20Revolution
Renewables aren’t simply a replacement for fossil fuels, they’re the next
giant step in our cultural development. Once people understand this, the From a knowledge-based
momentum will be unstoppable. Look at it economically. In our society,
we spend barely 10% of our income on basic necessities, the other 90% society, we’re steadily
goes towards things that make us happy. Towards meaning. As soon
as the issue of sustainability shifts from the 10% to the 90% category, becoming an opinion-based
we’re there. Everybody will want to be a part of it.
society
The post-industrial Who is...?
revolution means playing Wubbo Ockels
with nature to our Professor at Delft University, and Groningen University
Head of Interfaculty Institute ASSET, Delft University
advantage, looking for win- Wubbo Ockels enjoys celebrity status in the Netherlands as
win outcomes the first Dutch astronaut to travel to outer space in 1985 with
the Spaceshuttle Challenger. More recently, he has made
headlines with his solar race car Luna, his ladder mill, and his
Superbus. He has a PhD in nuclear physics, and worked many
In developing a sustainable world, we should follow the pattern of years for the European Space Research and Technology Centre
nature itself: diverse, diffused, organic. Avoiding unmanageable risks (ESTEC). He is currently a professor at Delft University and head
(nuclear waste!), learning from each other, fine-tuning as we go along. of its Interfaculty Institute for Applied Sustainable Science,
Since the industrial revolution, our strategy has been to bulldozer Engineering and Technology (ASSET), while also holding a special
nature and impose our own, artificial order on it. But we humans aren’t professorship at Groningen University.
artificial – we’re a part of nature, and it’s a part of us. The post-industrial
revolution means playing with nature to our advantage, looking for
win-win outcomes. And that’s going to bring us joy. I call that Happy
Energy.”
on land rather than in a marine being used in PetroChina’s heavy Norway’s state-owned oil which allows it to withstand
environment. oil E&P project in northwestern company Statoil has also made extreme conditions and be
China’s Xinjiang Uygur a notable breakthrough in remotely controlled from a surface
Steam Assisted Gravity Drainage Autonomous Region. This new E&P technology. Developed in vessel. The rig began testing
(SAGD) is another advanced technology is extremely useful in partnership with the Stavanger- during the summer of 2010, and it
oil extraction technique that is boosting production of heavy oil, based company Seabed Rig, the is likely to see action in deepwater
greatly enhancing the industry’s which does not flow when the drilling equipment features a and Arctic seas soon.
production capacity. It is currently temperature is below 80˚C. patented encapsulated design,
217. Electric
cars: Giving
automakers a jolt
Consumers have always had
plenty of options concerning
the look and feel of their cars
and trucks, but soon they will
dollars as well as first-mover
advantages that conventional
powertrains will ultimately be
replaced by nascent, climate-
have just as many choices friendly technologies such as
concerning what powers hybrid electric vehicles (HEVs),
Purchasing a new vehicle them. Automakers around plug-in hybrids, pure electrics,
just got more complicated. the world are betting R&D hydrogen fuel cells, compressed
22Timing is
everything
Having spent years at the helm of KEMA, our country’s flagship
centre of energy expertise, Pier Nabuurs is the right person
to run a few pithy energy predictions past. He’s pretty certain
about where our energy will come from in the ultra-long term.
Navigating our utilities through the years in between is the
challenge.
natural gas, ethanol, clean in heavy vehicles and in fleet buyers in Europe (i.e., BMW and and ample landmass to produce
diesel, or some other concept. applications such as transit buses, Volkswagen), but it has not been sugar-cane ethanol, see it as a
The question is which of these semi-trucks, school buses, waste as readily embraced elsewhere viable replacement for petrol.
choices have the power to disposal trucks and delivery as a top consumer choice. Hydrogen fuel cells have now
convince consumers to switch? vehicles. Clean diesel has made Ethanol has gained widespread been successfully demonstrated in
significant inroads in commercial acceptance as a petrol additive test vehicles but are thought to be
To date, compressed natural trucking, school, and transit but few countries other than a decade or two away from mass
gas is being used predominantly bus fleets as well as with auto Brazil, which has an ideal climate production.
23Our great-grandchildren will live in a solar powered world. how fast renewable generation capacity will grow, and utilities want to
Oh, no question. Ultimately solar will be the winning technology. The be sure they can supply their customers. Companies keen to invest can
sun shines all day every day, and the solar cells to convert that sunshine still safely do so now, I reckon, but time is running out. The best choice
into electricity are becoming smaller and more versatile by the year. We in that case is a gas-fired plant. They take less time to build, and they can
can stick them to windows, walls, roofs… I’m not saying this out of a be combined with other technologies like coal gasification and biogas
shiny-eyed belief in technological progress, but based on my experience production.
at Philips. The first CD players were put on the market for 1400 guilders.
The lenses in these players were polished microscope lenses that cost 80 Nuclear is in for a second peak
guilders to make. Further along the learning curve, we mass produced Right. A nuclear plant is the accountant’s dream: costs and revenues are
them in plastic, using a whole different technology, for just a few cents. utterly predictable. Also important: they produce no greenhouse gases.
For solar, we’re at the very beginning of our learning curve, so the These days plant safety is no longer an issue, while storage of nuclear
potential for cost reduction is enormous. Long term, homes are going to waste is predictable from a technological point of view: utilities know,
be practically self-sufficient energy-wise, and large-scale solar projects down to a milligram, exactly how much of it they will need to deal with
like Desertec can supply big users. and can plan accordingly. So many utilities, especially in the Near and Far
East, are likely to build new nuclear plants.
They will all drive full electric cars.
Same story. Battery technology is still in its infancy, so the current
problems with range and recharge time will soon be solved, and
prices will drop. Current models look very similar to the cars we know,
but I’m sure designers will eventually become more daring to extend Homes are going to be
functionality and cut costs. Grid developments will easily keep pace with
market penetration. practically self-sufficient
Conventional power plants will be millstones round the necks energy-wise
of utilities.
Indeed, the question that’s worrying utilities is not whether the
transition to solar will take place but when? Will it happen before their A global system for emissions trade will stop climate change in
conventional assets have been written off? Going forward, it’s becoming its tracks.
increasingly risky to build new coal- or gas-fired plants. The combustion If only! It’s proving hard enough to get an EU-wide system up and
engine technology is mature, so the scope for efficiency improvement is running, let alone a global one. Emissions trade as we know it now
near zero. Meanwhile, the likely long-term trend of fuel prices is growth seems to have become an end in itself, a new way to make money,
above inflation, so the amount of MWh your capex/opex euro buys will rather than a means to reduce carbon emissions.
gradually decline. But the amount of solar or wind energy your euro
buys will increase. Experts put grid parity somewhere between 2020 and Holland will again be famous for its windmills.
2030, and that’s not even factoring in the price of carbon capture and I’m not optimistic. ECN is strong in wind turbine technology, but we’ve
storage. It’s still a complicated choice, though, because we don’t know lost the race for production, seeing the latest big contract for an
The move toward electric- all have popular models on the being reflected in production commitment to producing electric
powered vehicles is already market, and automakers are trends. Renault and Nissan have vehicles as acknowledgement
underway. In the past few years, expecting this trend to continue. begun to produce electric vehicles that the transportation industry
several commercial HEVs, which In 2011, HEVs will remain popular, en masse while General Motors, is on the cusp of a major
are powered simultaneously by but plug-in electric hybrids and Toyota, and Ford have projects in transformation. This shift is being
batteries and fuel, have become pure electric vehicles are also likely the works. driven largely by technological
mainstream. Toyota, Honda, to proliferate based on consumer advances, such as capacity
Nissan, Ford, and General Motors demand. This likelihood is already Some see major automakers’ to store and use energy in
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