At the BVL conference, I had the opportunity to speak to the group, and provide them with an overview of the insights and trends from the global logistics study that is currently underway.
I also had the opportunity to introduce Dr. Michael Seuss, CEO of the Energy Sector for Siemens AG, and Member of their Managing Board. Dr. Seuss has met with many of the top energy CEO’s in the US, including Duke Energy, the Southern Company, and PE&G. He shared his views with the audience on the future of the energy industry, the implications for a sustainable economy, and the future of non-renewable forms of energy.
Dr. Seuss first pointed out that there is not a SINGLE energy system, but rather multiple energy systems globally. Two of the biggest are in China and India, where there is a huge demand for cost-driven power, which is dominated by coal, but fast development of gas power and renewables. In the US and Germany, some coal will be replaced with gas power plants and renewables, and there is great potential in the US for shale gas sources.
Dr. Seuss was also quick to point out in his future view of the energy sector in 2030 that the share of coal will go down, but not disappear (from 41% to 34%). Oil will stay the same, gas will grow from 22 to 24%, and the big prediction is that renewable energy will increase from 4% to 14% of total energy consumption. His big point here is that although everyone is “fired up” about renewable energy, the reality is that even if coal fired plants go from 40 to 26% of consumption, renewables will at most grow to 20% of energy consumption. In effect, fossil fuels will remain the backbone of our energy sources for the next 20-30 years. This is the simple and stark reality of the energy footprint.
This also poses challenges in terms of supply and demand. For instance, the Middle East needs 20% of its oil for its own energy, so 80% of its oil production will only be available for energy use globally. And as the next wave of growth in China grows, demand for energy will likewise grow.
Recently after the Fukashima disaster, Chancellor Merkel and the Germany government made a decision to not upgrade any of their existing nuclear power plants. Seuss pointed out that while this is fine and good, the actual production of CO2 for energy has since gone up since nuclear energy is being transitioned out! The phase out has left more than 1 million energy consumers who have seen shortfalls in energy that have been taken out of the grid. This is a real problem, and raises the issue of how Germany and other countries truly need to innovate when it comes to energy production.
Such innovation is occurring. Siemens has been working to increase the efficiency of coal fired plants by 47%; has generated another 200M MW through modernization, and has increased wind turbine capacity by 6 MW. Germany is the showcase of the world for wind power, but Seuss maintains that offshore wind is the only viable force that can work. The problem, of course, is that offshore turbines are in the north of Germany, and much of the need for energy is in the south. As such, there needs to be an intelligent way to consolidate energy sources by taking take wind power and bringing it onshore.
In a separate discussion, Dr. Seuss and I discussed what this means for the US. ”The US is a young country with a modern engineering society, full of smart people. You guys can do this! You need to lower your corporate tax rate, and require companies who want to sell in the US to invest in US innovation and US jobs. By consolidating energy sources in an intelligent way, I also believe you can take wind power and make it part of your portfolio. Energy isn’t free – but it can be affordable, secure, and of course, it must be available!”