EuropeanEnergyandClimatePoliciesNeedaStrategicIndustryPolicyApproach

RuggeroSchleicher-Tappeser

21thREFORMGroupMeeting,SalzburgAugust29,2017

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DifferentPerspectives

materials,processes,concepts

compo-nents

technicalsystems

devices,machines

socio-technico-politicalsystems

⇆ ⇆ ⇆ ⇆Nanotechnology

Semiconductors

3Dprinting

RailwaysystemTransportsystem

High-speedtrain

Smartphone

ElectriccarCharginginfrastructure

Theinternet

Publicelectricitysupply

Electricitydistributiongrid

Lithium-Ion-Battery

Powerelectronicscomponents

MobilephonenetworkPCTelecommunicationsystemRecycling

High-Techceramics

PVpowerplantPVmodule Windturbine

Integratedcircuits

OperatingSystems

OperatingSystem

WarehouseLogisticssystem

Memorychips

ArtificialIntelligence

Watersupplyandwastewatertreatment

PoliticsSociety

ScienceEconomicsIndustry

Technology

• FordecadespoliticsinEurope,theUSandJapanwasthemaindriverofchangeinnationalandglobalenergyandclimateissues

• Meanwhile,technologyandnewindustrieshavebecomemuchmoreimportantasdrivers

• Atechnologicalrevolutionisbringingdeepchanges:acombinationofmaturingnano-level materialscienceandinformaticsbringsanewgenerationoftechnologieschallengingtheeconomiesofscale oftheeraofelectro-mechanicalandchemicalmacro-technologies

• Inaglobalisedworld,thecapabilityofEuropean,AmericanorJapanesepoliticstocontroltherateofchangehasdramaticallydecreasedàinfluentialincumbentcompaniesloosecontrol,butdamagetheireconomiesintryingtosaveoldinvestments

• InseizingtheopportunitiesoftechnologicaldisruptionsChinesepoliticsandindustrieshavebecomeveryinfluential

Achangingframeworkatglobalscale

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• RenewableEnergy Mainenablingtechnologies– SolarPV PVsemiconductors:nano-levelmaterialscience

powerelectronics:nano-levelmaterialscience– Wind conventionalelectromechanicalengineering

compositematerials:chemistry,nano-physicspowerelectronics

– Systemintegration• Storage electrochemistry:nano-levelscience

powerelectronics• Grids powerelectronics

controls:digitalisation,telecommunication• Sectorcoupling electrochemistry:nano-levelmaterialscience

controls:digitalisationpowerelectronics

• E-Mobility– Powertrain conventionalelectromechanicalengineering

powerelectronics– Storage electrochemistry:nano-levelscience

powerelectronics– Lightweightvehicle compositematerials:chemistry,nano-physics– Autonomousdriving sensors:nano-physics,electronics

digitalisation,telecommunication,artificialintelligence

Maturingnano-levelscienceandinformaticsreducescaleeffects,enableRENandE-Mobility

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Windinstallationsgrowsteadily– Europeslightlyslower

Source:REN212017

Capacityaddedin2016World 13%EU 9%

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SolarPVgrowsrapidly– butnotinEurope

Source:REN212017

Capacityaddedin2016:World 33%EU 6%

ComparingWindandSolarPVdevelopment

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CAGRCompound Annual GrowthRate

Wind SolarPV

2006-2011 26% 63%

2011-2016 15% 34%

2006-2016 21% 48%

Capacity added in2016 Wind SolarPV

World 13% 33%

Europe 9% 6%

Europe/World 0,69 0,18

• GlobalgrowthratesofSolarPVarealwaysmorethandoublethanthoseofwind• Bothgrowthratesaredecreasing

• Europelagsbehindworldgrowthrates:slightlyinwind,massivelyinsolar• Europebetsonthelesspromisingtechnology,neglectsthetechnologywith

mostgrowthandpotential.Why?

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DisruptiveDynamicsofPhotovoltaics2017:PVcheaperthanwind

Source:SolarPower Europe

Costdynamics:PPApriceoffersforPVandonshorewindpowerplants

• Thedifferenceincostreductiondynamicsreflectsthedifferenceinthetechnologicalbase• Thehighcontentofconventionalmacrotechnologiesinwindenergylimitsitscostreductionpotential• Photovoltaicshasahighpotentialforfurthercostreduction:

• Improvednano-scaleprocessescanfurtherraisetheefficiency• ExpensesforconventionalmechanicalsupportcandropwiththeintegrationofextremelythinPVlayersinto

existingstructures(buildings,roads,textiles)• ConcentratingSolarPower(CPV)– whichmainlyreliesonconventionalprocesses– hasalreadybeen

outcompetedbyPhotovoltaics• ThecrossingofthecostcurveswillfurtheraccelerateglobaldominanceofPV– expectashiftfromwind

toPVexceptforwindneededforseasonalbalancing

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NREL:SolarUtilityPVintheUScheaperthancoalandgas

10Source:SolarPower Europe2017

GlobalAnnualSolarPVInstallations

SolarPVmarkets:Chinaistakingover

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DisruptioninChina:79%capacityadded,46%ofglobalnewPVcapacity

+79%

+58%

12Source:SolarPower Europe2017

EuropeanPVmarketshavecollapsedafter2011

EuropeanAnnualSolarPVInstallations

Sharesinglobalmoduleproduction• Asia 90%--- China 65%• Europe 5%• US 2%

Toptenmodulemanufacturers• 50%ofglobalshipments• 8Chinese,1American,1Korean

Equipmentmanufacturers• Europeancompaniesstillleading• Chinesestarttobuythem(Manz)

Source:REN212017

SolarPV:Industrystructure

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Source:IEAPVPS2017/own calc.

MarketcollapseinEuropecannotbeexplainedbyhighmarketpenetration,norbyclimate

2%4%25%5%17%

90%

20%1%

17%18%8%

51%79%17%33%9%79%13%58%24%59%8%

235%23%88%

capacityadded2016EU

Capacityaddedin2016:

World 33%EU 6%

Electricitymarketpenetration2016

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PoliticalprioritiesinGermany:EmploymentevolutioninPVandBrownCoal

100.300

22.770 31.600

20.744

0

20.000

40.000

60.000

80.000

100.000

120.000

SolarPV Browncoal

20112015 20112015

-9%-68%

• Browncoal(lignite)inGermanyaccountsfor17,4%ofGHGemissions

• Employmentplaysakeyroleintheintensepoliticaldiscussionaboutshuttingdownligniteminesandpowerplants

• Coalminersandutilityworkershaveverystrongtradeunions.PVworkershavenot.

• Longgrownpoliticalandpersonalconnectionsbetweencompanies,unions,theconservativeandthesocialdemocraticparty

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Mostlabourrequiredlocally:aroundhalfisO&M

SolarPVpowerplant

Distributionofhumanresourcesrequiredalongthevaluechain

Source:IRENA2017

• Employmentwasnotthereason• ClimateinEuropewasnotthereason• Highpenetrationachievedwasnotthereason

• INCUMBENTSHAVESTARTEDTOFIGHTBACKIN2010• LowerproductioncostsforstandardmodulesinAsia

donotexplainmarketcollapseinEurope

• EuropewasnotableandnotwillingtodevelopananswertodeterminedimplementationofstrategicprioritiesofChina

• HighqualityproductionwithadvancedtechnologiesinEuropewouldhavebeenpossible

WasthecollapseofPVinEuropeinevitable?DidEuropemissanimportantopportunity?

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DistributionGrid

generation

load storage

nuclearcoallignite hydro&

storageoffshorewind

hydro&storage

windPV

biogas storageindustry

windPV

biogas storageindustry

industry

industry

PV

household

PV

commerce

PV

serviceshousehold commerce services

load generation storage balancing

generation

load storage

consumers prosumers

International exchange

load generation storage balancing

Top-downsupplysystem(centralcontrol)

Multi-levelexchangesystem(subsidiarity,sharedresponsibility)

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offshorewind storage

generation

load storage

EuropeanSystemCompetenceConsiderablerecentprogressonbalancingatthedistributiongridlevel

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TheDebateaboutEuropeanandAsianstrengths

materials,processes,concepts

compo-nents

technicalsystems

devices,machines

socio-technico-politicalsystems

⇆ ⇆ ⇆ ⇆Nanotechnology

Semiconductors

3Dprinting

RailwaysystemTransportsystem

High-speedtrain

Smartphone

ElectriccarCharginginfrastructure

Theinternet

Publicelectricitysupply

Electricitydistributiongrid

Lithium-Ion-Battery

Powerelectronicscomponents

MobilephonenetworkPCTelecommunicationsystemRecycling

High-Techceramics

PVpowerplantPVmodule Windturbine

Integratedcircuits

OperatingSystems

OperatingSystem

WarehouseLogisticssystem

Memorychips

ArtificialIntelligence

Watersupplyandwastewatertreatment

• IsAsiabetteratmanufacturingcommodities,highvolumestandardcomponents?

• IsEuropebetteratdevelopingcomplextechnicalsystems?

• Forhowlongisthisdivisionoflabourviable?

China? Europe?

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ClimateChange:Notimetoloose,whendowegetserious?The Carbon Crunch

• Incumbentindustrieshavedelayedthetransition– thiswillincreaseoverallcosts

• Whenobligedtoconsiderrenewables,incumbentindustriespreferredwind–anolder,lessdynamictechnology– andhaveusedtheirinfluencetoshapemarkets

• Forequipmentproducersandutilitieswind(especiallyoff-shore)hastheadvantagetopreservesomeeconomiesofscaleandtoexcludesmallcompetitors

• Europeneedsanimportantshareofwindenergyforseasonalbalancing– however,photovoltaicswilldominategloballyandhashugepotentialinEurope

• EuropeanresearchisstilltopinPVtechnology,butdespiteconsiderabledevelopmentpotential,PVwasdeclaredtobea“commodity”

• EuropemissedanindustrialopportunityloosingtheleadershipinSolarPV

• Expertsforecastagrowingshareofsmallandmedium-sizedinstallationsinglobalphotovoltaicmarkets,notleastduetofallingpricesoflocalbatterystorageà economiesofscalefurtherlooseimportanceinpowergeneration

• Pricesforphotovoltaics,storageandpowerelectronicswillcontinuetofallà localpowergenerationgetsincreasinglyattractive

EuropeneedstoacceleratethetransitionNoescapefromchangingstructureofpowergeneration

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LessonsfromtheRenewableEnergyhistoryinEurope– sofar:• Europe’shighvariety,researchcapacityanddemocraticdebatehasproduceda

wealthofideas,approaches,products,experimentsandnewstructuresreflectingurgentneedsandnewtechnologicaloptions

• Europeanincumbentlargeindustrieswereblindforcomingdisruptions,stucktooldstructures,usedlong-establishedpoliticalinfluencefordelayingchange

• Incumbentcompaniesfollowingshort-termconsiderations,tryingtosavecapitalstock,causedlong-termdamagetotheoverallindustrialtissue

• EuropeanpolicieswerenotabletomakeuseofhugeEuropeanopportunities

• Chinahadtheforesight,thedeterminationandthestrategicmeanstotakeadvantageofthissituationafterEuropehadpaidthebillformakingrenewableenergyviable:Ablessingforglobalclimateandenergypolicy!

Incumbentindustriesinslow-growindustrialcountriesthreatenfurtherdevelopment

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• FearraisesthatChinesestrategicdeterminationbackedbyanauthoritariansystemmaythreatenEuropeaneconomiesandindependence

• ThereareotherareaswhereChinasuccessfullyaimsatstrategicglobaldominationofkeyinfrastructure-relatedtechnologies:– Microelectronics– Highspeedrail– Mobilephoneandinternetnetworks– Distributiongridtechnologies– Batterycellmanufacturing

• ElectriccarsandthetransportsystemmaybeanareawheretechnologicaldisruptionsmaymoreseriouslyaffectEuropeaneconomies

• Globalisationhaschangedtherules:Timesareover,whenwesternindustriescouldcontrolthepaceofchangethroughpoliticalinfluence

• Europehashugepotentialsbutneedstodevelopeffectivestrategiclong-termindustrypoliciesinanewcontext

CanChinesestrategiesthreatenEuropeaneconomies,independence,politicalculture?

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Prepareforsuddenchange:Historydoesnotfollowasmoothmasterplan

• Oftenchangeoccurssuddenly:whentippingpointsarereached,anudgeissufficient.WhohasaplanBwhenwindowsofopportunitysuddenlyopen?

• Fukushima wasdecisiveforterminatingnuclearpower,suddenlyinGermany,slowerelsewhere

• Thefinancialcrisiswasalostopportunityforecologicalinvestments:nobodyhadaPlanB

• InAfrica,intercontinentalbroadbandlinks andincreasinginternetavailabilitysince2011triggeredmassivemigrationtoEurope

• TrumpandBrexithaveopenedmanyeyesforprogressandopportunitiesbroughtbytheEU

• ThecoincidenceofDieselgate andTesla3maytriggeratransitionpreparedbya40year-oldtransportdebate+advancesinbattery,powerelectronicsandAItechnologiesTheendofthe

internalcombustionengine

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TonySeba (Stanford,RethinkX):imminentheavydisruptioninthetransportsector

CostsofindividuallyownedICEcars,i.o.EVsandTransportasaService(TaaS)

BasicAssumption:Autonomousdrivingbecomesavailableby2021(asFordandothermajorcarmanufacturershaveannounced)

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Pricedifferenceelementsbetweenconventionalcarsandtransportasaservice

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Theconsequence:rapiddeclineofindividuallyownedcars

Highspeedadoptionoftransportasaservice(TaaS)

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Projectedtrendsinannualsales

Individuallyownedcars

TaaS vehicles

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Projectedtrendsinfleetsizeandcomposition

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Plummetingrevenuesofcarrelatedindustries

RevenuedistributionalongthecarvaluechainintheUS

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Impactonglobaloil demand

Evenifthesedramaticforecastsbecomerealityadecadelater,impactsonawiderangeoflivingconditionsandpolicieswillbehugeandcallforactionnow:• Employment&Economicstructure

– EUautomotivemanufacturing:3.3millionhigh-skilledjobs,10.9%ofEUmanufacturingemployment.Whowillwintheraceforprovidingfutureautonomouse-vehiclesandtransportservices?

– EUautomotivesector:12.6million,5.7%ofEUemployment.Millionsoflow-paidjobs(drivers…)willbedisplacedbyautonomousvehiclesandtransportsystems

– Newmanufacturingtechniquesas3D-printingmayadditionallyshrinksupplychains

• Spatialpatterns:– Plummetingpassengertransportcostsandimprovedtransportcomfortfacilitatecommuting– Improvedaccessibilityforruralareas?

• Infrastructure:– Plummetingfreightroadtransportcostsàmodalshift,pressureonroadinfrastructure– Moreefficientinfrastructureuse,especiallyincities– Dramaticgaininfreedparkingspace:newopportunitiesincities– Conventionalpublictransporthastoadapttonewpartnersinintermodalmobility

• Energysupply:– Increasedelectricityconsumption– Opportunitiesforsectorcoupling,especiallywithwirelesscharging

Discussingsocialandstructuralimpactsandoptionsintimewillbeessentialforseizingopportunitiesandavoidingharmfuldisruptionsandheavylossofglobalcompetitiveness.Europehasallresourcesfortacklingthischallenge,butitneedstousethem.

Deepimpactoneconomyandsociety

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Whowillshapethesechanges?AsianCompaniesdominatebatterycellmanufacturing

Source:RolandBerger /fka 2017

Goodpoliticalstrategiccapacitieshavethreeaspects/components:1. Long-termstrategicevaluationoftrendsandoptions2. Transparent&democraticdiscussion&decisiononoptionsandstrategiesat

differentlevels3. Coherentpoliticalimplementationofstrategiesabletofaceincumbentand

particularinterests

• Neo-liberalismhasabandonedstrategymakingtolargecorporations• Climatechangeconcernshavetriggeredstrongglobaleffortsonaspect1• Chinahasveryeffectivestrategiccapacities– howeverneglectingaspect2• Japanhadveryeffectivestrategiccapacities– neglectingaspect2andkeyissues• BesttimesofEuropeanstrategiccapabilities:Delors /“celluledeprospective”

Europehasexcellentbutscatteredstrategicthinking.Moretransparencyandsystematisationcouldbefirststeptostrengthenaspects2and3.Abetterunderstandingofmulti-levelgovernancewillbeessential.

Europeneedsimprovedstrategiccapacities

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