Europe Energy Transition: a balancing act between securing energy and net zero targets

This session engaged experts across Europe and addressed the breadth and severity of the most serious situation impacting Europe since WWII.

Karina Litvack brought her expertise and broader vision to describe what the perfect storm is about: a climate crisis has been happening for a number of years; the pandemic added economic and social challenges; when Europe was at the beginning of a post-pandemic recovery, it became evident that there was a mismatch with supply chain capabilities. Then the war created major disruptions and an extraordinary hot and dry summer contributed to an extreme energy crisis.  What hard lessons has Europe learned? What do we do next? 

Dr Werner Schnappauf, who leads the German Council for Sustainable Development and is a former minister of energy in Bavaria, added the global trends: changes in demography, the need of increasing digitalization, high prices for energy and food, high inflation and recession ahead. It is clear that climate is framed by multiple crises. Europe has become suddenly fully aware of the need to act in such acute situation: our values and market-oriented economy have been put under pressure, while we still need to protect the climate, biodiversity and nature. We learned that have to pay a price to defend democracy.

The way forward is to maintain a mid-term horizon while dealing with the emergency, with the goal to turn around the energy system. Germany has a target of 80% of energy production from renewables by 2030 and reaching neutrality by 2045. These goals are not changing, even if we accepted that we would have to use more coal and LNG in the short term. Industry and people need a stable frame for sustainable development and future; we need to increase resilience and leverage innovation. Collaboration among corporations, governments and civil societies is essential to solve this critical situation. For the first time, industry, banks, insurance companies are all highly committed to work for a sustainable future. ESG is the main direction to follow, and it is desired by all players. Financial institutions, including banking and life insurance, have by nature a long-term sustainability goal. Governments (national and local) need to facilitate: for example, bureaucracy for permits is still too high (6-8 years for obtaining a permit for a wind park). 

Lucyna Stanczak-Wuczynska, chair of BNP Paribas in Poland and advisor to private equity infrastructure and financing in Eastern Europe, added the perspective of investors in emerging markets. Recognizing the need to balance energy security, energy affordability and net zero targets, a key question to address is what projects to fund. Investors recognize that there is an emergency to deal with and that some regions may need more time than others to address the climate transition. Investors look for a path: green financing is high on the agenda; specific funds are being developed to support the transition and the attention is on how companies are prepared to face the challenge and explain their view on the long-term targets. In the assessment of the path, energy efficiency, the decrease of energy intensity and technical innovations need to play a big role. The solution may be in a combination of technologies, which may include, for example, hydrogen. The objective should be to explain the evolution of the infrastructure in the long term and how strategy will evolve, even if the path may be slower. This is critical to ensure the energy transition will decrease the gap between Western Europe on one side and Eastern Europe and the Balkans on the other. 

Silvia Stefini, addressing questions from the audience, emphasized the message that multiple solutions are required to balance short-, medium- and long-term goals:  next generation nuclear is, jointly with Hydrogen, a long-term solution that requires investment in research now; the support from some governments in using coal has to be seen in the context of the seriousness of the energy security issue in Europe.

The CEO of A2A, Renato Mazzonzini, showed additional and more specific examples of the value of collaboration between private and public sector. A2A, with €11M of revenue, is the largest multi-utility company listed on the Italian stock exchange, with a presence in power production and distribution, gas distribution, district heating, waste management. A2A has always been very innovative, being based in the region, Lombardy, with the strictest emissions regulations in Europe. The ecological transition is at the heart of its 10-year roadmap with €1.8 billion of planned investments. A recent study from A2A showed how the Italian market can decrease the dependence from natural gas with a structured nationwide approach to leverage solar, wind, water and waste. With a more intense utilization of renewables, Italy could reach 60% of locally produced energy (from the current 22%) even in absence of natural resources. The role of local municipalities and government will be critical to facilitate the transition.  

Marco Moretti, from the industry practice of Boston Consulting Group, addressed the decarbonization project pursued by a group of hard-to-abate industrial corporations, who have teamed up with industry associations and gas providers to identify solutions that could represent a cleaner and cost-efficient utilization of energy. The specific projects under development in Germany and Italy include carbon capture, CO2 transport and storage, utilization of biomethane and hydrogen to replace natural gas. The industries include cement, steel, pulp, ceramics, chemical, glass and foundry.