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CERAWeek 2022 Now in its 40th year, S&P Global's
CERAWeek is widely considered to be the most prestigious annual
gathering of CEOs and ministers from global energy and utilities,
as well as automotive, technology, manufacturing, policy, and
financial communities. The theme of this year's conference was
"Pace of Change: Energy, Climate, and
Innovation."
The global energy and mobility industry is at a critical
inflection point. Meeting ambitious emissions targets while also
delivering energy and mobility for a growing world economy will
require new thinking, innovation and a transformation of a system
that supports the $90 trillion world economy.
Further complicating this picture are rising geopolitical
tensions and nationalism, growing trade friction, supply chain
bottlenecks, economic headwinds and the ongoing pandemic.
Energy & mobility
The intrinsic linkage between energy and mobility becomes more
obvious when viewed from the perspective of leading energy
companies. At CERAWeek, several senior BP executives spoke about
this linkage, and it was immediately clear that they have a lot of
electrification plans going forward. Intriguingly, they made
reference that this represented "non-fossil growth engines" for
BP's business overall. In fact, the commitment is of such magnitude
that BP is on track to allocate half of all its investments by 2025
into these non-fossil growth engines; the tide has really changed
in the energy sector. Overall, the BP key investment focus is
initially upon mainland China, the UK, the US and India; especially
in the area of fast-charging and fleet activity (such as
ride-hailing and fleet operators). However, BP has also earmarked
electrification as a huge business opportunity, especially as they
foresee 100 million electric vehicles (EVs) on the road by 2030.
According to BP, a lot of the away from home charging is done via
fast chargers, hence their strategy is aggressively embracing this
opportunity. BP also reminded CERAWeek attendees that they own
20,000 fuel stations today, which eventually could all become
dedicated EV stations (especially as they remarked that EV fleets
today are already competitive with ICE fleets in terms of total
cost of ownership [TCO]). Forward looking, the BP view on biofuels
is that it will have to play a part in this transition, especially
for the marine and aviation sector in the future. While hydrogen is
also seen as an opportunity, the company is aware that other
sectors (such as cement and steel) need it as well; therefore, from
a mobility perspective, perhaps it makes more sense to focus more
on the long-haul trucking and industrial sectors for the time
being. Finally, BP made indications that no matter what the future
holds, markets such as India or mainland China will also still need
natural gas for mobility purposes.
Shell also shared its perspective regarding the mobility
transition, and interestingly Shell fully supports the EU's
proposed ICE phase-out by 2035. This means that the company's
strategy is also geared toward providing charging infrastructure.
In fact, Shell now even has some dedicated fast-charging forecourts
only - supplemented by a retail outlet to further boost revenue
prospects. A brief reference was made to Shell's current number of
charging stations (90,000), of which 80% appear to be based in
Europe; Shell plans to have 2.5 million charging stations globally
by 2030. However, at the same time there is also the realization
that hydrogen also needs support, especially for the heavy-truck
sector, and Shell will facilitate this as well (as already
witnessed by their cooperation with Daimler Trucks).
The Renewable Energy Group (REG), now acquired by Chevron, made
it clear that multiple clean solutions will be required to support
future mobility, and the company sees good opportunities for
renewable fuels and other low-carbon fuels - among which they would
count bio-based diesel that is well suited for marine, rail,
aviation and trucking sectors. Furthermore, REG claimed that the
electrification inflection point is already here today, and that
the industry is changing before our eyes. However, so far, the
changes have been originating from US/CAN/EU, but now they also see
huge interest from Japan where demand for lower carbon intensity
fuel is high.
Switching to the perspective of a technology company, Schneider
Electric claimed that it sees key future opportunities in the
collective and individual mobility sector; however, it also
recognizes that infrastructure owners will need to be approached
for cooperation to enable electrified mobility. Ultimately, what
the energy and mobility transitions require is smart, sustainable
and efficient technology solutions; Schneider Electric sees huge
opportunities in the "Energy-as-a-Service" concept (utilizing
renewables, solar, etc.) involving chargers and microgrid
combinations, which it sees first occurring in the public bus
sector. Schneider Electric also shared its opinion that regulation,
economics and customer satisfaction are no longer obstacles
(especially for fleets); however, some challenges remain - among
which charging is one of the major ones. Ideally, Schneider would
like to see a global convergence of regulations; government
incentive support in more markets around the world to enable this
change to happen.
While Wallbox discussed the possibility of solving one of the
biggest questions regarding the future of the transition to
electric mobility: "What are we going to do when all these vehicles
plug into the grid at the same time?" It argued that "today there
already is more storage capacity in the electric cars on the road
(around 13 times more) than the entire stationary storage
business." Effectively, utilities should be seen as a key partner
for domestic charging station providers to store renewable energy
and for offsetting the impact on the grid of overnight charging, as
well as a go to market and return on investment (ROI) for the
bidirectional business model.
Moving on to the charging infrastructure perspective, ABB
E-mobility told the CERAWeek audience that there is no longer a
question about EVs as the demand is there; however, the sector
still faces so-called growing pains. ABB E-mobility has already
installed more than 65 megawatts of charging stations for fleets in
the US market alone. Another charging infrastructure provider,
Electrify America, revealed that it is working to install energy
storage and grid support at all its DC fast-charging stations; 150
of their 800 stations are already using energy storage systems
today. Although alternatives were also represented at CERAWeek,
with wireless charging provider WiTricity stating that it wants "to
get to the day when your grandkids ask you what do you mean you
used to plug in the car"? Reinforcing the company's vision,
WiTricity referred to consumer research indicating that once
consumers are aware of wireless charging, their purchase intent for
EVs significantly rises (up to 68%). Finally, Ample presented
another alternative of battery swapping; with some consensus that
indeed this business model is growing in popularity in Asia
(especially with 2-wheelers), the main current light vehicle
applications appear to remain in the fleet sector, and that future
success could depend upon system or technology standardization
efforts.
Climate
The CERAWeek audience at the plenary opening heard from US
Special Presidential Envoy for Climate John Kerry that, "The real
climate measurement is NOT the 2050 net zero goals, but the real
measurement should be what companies do in 2020-2030 and will that
be enough by 2050?" Kerry also noted, "We have energy
infrastructure challenges. Look at our non-existent national grid.
We can drive a rover around Mars but can't send an electron from CA
to NY." Further supporting this view, Energy Secretary Jennifer
Granholm stated that the US Government is here to "extend a hand of
partnership" to the oil, gas and automotive industry. "We need to
have a full battery supply chain in the US [...] It's a matter of
national and economic security." Granholm continued, "We are here
to work with anyone and everyone who's serious about taking a leap
toward the future [...] by diversifying energy to add clean fuels
and technologies."
During the city mayor discussion, the speakers reminded the
audience that cities are where emissions happen, be it via
transportation, heating, entertainment or others. Hence the role of
cities is becoming ever more important in the fight against climate
change and the energy and mobility transition globally. It is in
cities that we have seen much of the new mobility solutions roll
out; however, owing to the online shopping boom, it is anticipated
that more needs to be done here to help address this emission
growth. Amazon noted that as a company they already made a 2030
climate pledge back in 2019, and this is reflected in the
investment and order awarded to Rivian for 100,000 EV delivery
trucks. Although Amazon did also indicate that fuel-cell electric
vehicles (FCEVs) might be of interest as well (also as an energy
carrier for wider Amazon energy requirements). One discussion
participant stated, "80% of our global emissions come from the
energy sector. We can address this via emissions reduction alone,
but perhaps one should also consider consumption reduction? This
would have a profound impact on climate change."
Several CERAWeek discussions appeared to recognize that the
geographic impact due to climate change differs around the world,
which could also mean that the proposed solutions will differ
around the world. For some economies, that could include that some
degree of fossil fuels (potentially e-fuels) might still make sense
in the longer term.
Innovation
The climate challenge ahead is of such magnitude that some
energy and mobility companies spoke of linear investments being
required; this requires a high degree of planning and confidence
into the future and means that we cannot invest in all
alternatives. However, this implies that each company looks at its
own sector, and this could slow down cooperation between sectors
and/or competitors. Hence it is crucial to keep an open mind, as we
need all solutions going forward.
Several of the panel discussions and keynotes also touched upon
the subject of regulation, and how this could stifle true
innovation. Great examples here have been Google Waymo as well as
GM Cruise; as vehicle regulation is not up to date with current
technology. At the event, Nuro stated that even though its
autonomous electric robot delivery vehicle, which has no passenger
interior or windows - just room for delivery cargo - had
to feature a fake windshield with wipers as well as side view
mirrors before it was allowed on the road for testing purposes.
However, the company has since made progress via a close liaison
with National Highway Traffic Safety Administration (NTHSA) to
qualify for exemptions.
Further innovation will continue to be required for some decades
to come, among which is the issue of storage of renewable energy.
An elegant solution could be a systems approach (or networked
business model) where markets utilize the EVs as storage (when not
in use), which could provide significantly larger capacity compared
to just the local utility supply. However, it also raises the issue
of whether this would happen in emerging markets versus developed
markets; and would this potentially lead to a 2-tier system?
CERAWeek was used by Ford and Pacific Gas and Electric
(PG&E), a large utility In California, to jointly announce a
bi-directional charging partnership. Ford CEO Jim Farley discussed
that the connections between electric companies and automakers are
becoming more important to achieve a smooth rollout of EVs.
According to Ford and PG&E "We have to reinvent the grid…
ensuring electrons are both clean & resilient, reliable &
affordable, that is what grid reinvention is". The partnership will
start with 500 systems that will allow F-150 lightning e-trucks to
power homes. For now, it's a pilot but PG&E sees it as a step
toward using EVs as a source of power during peak hours in
California (note that ~20% of US EVs are currently in PG&E's
territory). Ford's CEO added "We have to vertically integrate &
secure [battery] capacity, those that have access from raw
materials to manufacturing will determine the winners & losers.
Supply chains become a strategic advantage". Furthermore, he added
that the shift to cars becoming "digital products" (with advanced
electronic architectures) is a bigger transformation than the move
to zero emissions EVs on its own.
Further highlighting the strategic importance of the new EV
supply chain was provided by the US Department of State's Kimberly
Harrington who argued that "a typical EV requires 6 times the
critical minerals than a conventional gasoline vehicle. This is
what drives much of the State Dept's investment right now in this
area."
The issue of supply chains and critical materials continued to
take center stage when JB Straubel, Founder & CEO of Redwood
Materials, took to the stage: "We must look at the entire battery
chain to address cost and emissions. If you only do recycling, you
must export the recovered raw materials, usually to Asia, where
battery components are made. Hence, Redwood Materials is building a
fully integrated process in the US". Comments which were echoed by
the Schlumberger CEO telling the CERAWeek audience that: "The
security of supply is becoming critical for many countries".
Similarly, the Lithium Americas CEO added that North American
lithium production will have to urgently grow over the next 8 years
to match current global output. Which he referred to as
"unprecedented growth" that will be required. But it's not just all
about the usual resources such a lithium, as other panel
discussions highlighted that the road to the energy and mobility
transition also depends upon copper and others. Listening to
commodity miners/traders (like RioTinto and Trafigura) future
supply deficits are looming as permitting, approvals and project
investments lag global demand.
The CEO of Rivian Automotive, RJ Scaringe, provided further
context from a leading EV start-up perspective, by sharing that the
constraint for broad scale adoption of EVs is the upstream supply
of batteries and raw materials. According to him the challenge
ahead represents a "staggering amount of work and investment that
is needed to scale this industry quickly"; and that "90% to 95% of
the battery capacity supply chain the industry will need over the
next 10 years has not been built yet".
Finally, there was also the realization that new skill sets will
become necessary in the future to help accommodate this
energy/mobility transition. This is something that Korn Ferry
referred to as 'employment value proposition' as especially the
OEMs and Tier-suppliers need to come to terms that a different
workforce will be required in the future, and new skill sets (like
software among others - as also referenced by the Ford CEO). But
all is not lost for the 'old economy', as highlighted by the
International Renewable Energy Agency (IRENA) which stated that the
renewables sector could account for 38 million jobs by 2030. Their
message was clear, be a part of the future of energy and mobility
and let's work together to advance the transition.
Overheard at the conference:
Vehicle manufacturers are getting worried globally about the
Chinese battery giant CATL, as they are getting too powerful and
could pose a geopolitical risk to their supply chain. It was also
suggested that even Chinese manufacturers have similar concerns,
but more from a fair pricing point of view.
Such is the anticipated anxiety (or angst) regarding sourcing
sufficient raw materials and minerals (especially cobalt and
nickel) that Volkswagen is considering setting-up its own dedicated
supply chain in China via two local Chinese partners (Huayou Cobalt
and Tsingshan Group).
The global auto industry continues to navigate a challenging supply chain environment as well as lingering COVID-19… https://t.co/Z5fAb0yo7i
May 17
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