ENGIE epitomizes the modern utility. It is re-inventing itself and steering a course into the global clean energy future. Executive Vice-President Shankar Krishnamoorty tells Diarmaid Williams how the company’s innovation strategy is helping it to adapt
PEI: Some utilities in Europe were slow to act in dealing with the rapidly evolving transformation of the energy system. ENGIE appears to be one of those companies that deliberately moved away from fossil fuels earlier than its peers. The recent profit announcements appear to back up the decision to favour decentralized and renewable energy. What prompted the company to cut its losses – was there a watershed moment?
Shankar Krishnamoorty: Watershed – yes, it seems there has been so much written about the company’s change in recent years, but it’s a fact that we launched our transition plan 18 months ago and it’s also a fact that in the years before the formal announcement of the transition plan, we had already started to move away from gas and coal in the direction of renewables.
In the area of electricity production we had started to feel the heat during the 2008-2009 financial crisis and the continuing fall of electricity prices.
In fact, I can remember sitting at a meeting with Gerard Mestrallet, the then chief executive, and he said that the peak of electricity production in the history of humankind in Europe has occurred and it will never return – and that was in 2008.
His point was that energy efficiency and decentralized energy had started to make such a dent in the consumption of electricity for the grid that, no matter how much Europe may grow, it will never consume as much electricity from the grid as it did up to 2008. So, I would imagine us being active in the area of trying to think of decentralised solutions and trying to move more into renewables around that time.
So, although we did announce this transition plan with a bang, there was really no watershed at that time per se. Having said that, it’s also true that like many utilities, we had our share of problems and that is visible in the way the stocks have been analysed, came down and started to recover.
We had sector problems and responded to that earlier, which then put us in a situation to produce a more definite plan for transition compared to others.
PEI: In 2015, ENGIE announced its decision to stop new investments in coal plants, and to dispose of €15 billion in assets to reinvest into projects that promote low-carbon, distributed-energy. The company also announced it will invest €22 billion in renewable energies, energy services such as heating and cooling networks, and decentralized energy technology. How is that strategic decision going in terms of R&D investment?
Krishnamoorty: In terms of sheer numbers, we are doing close to $200 million each year, but it’s much broader than that in the way we look at R&D.
The big picture for us is we have been spending a lot of money in terms of technology development rather than basic scientific research. There are a lot of companies that have historically spent too much time in that area, but we recognise that these days the technologies change much faster than they did in the past and too many new technologies arrive too soon.
So instead of being somebody that does what we call techno watch for the arrivals of the next few years, we are setting R&D in the science space, which is to say that we are looking into the future a bit more than we did in the past.
And that is in respect of all our businesses, renewables, services, everything.
We are cognizant of the fact that there are often too many technologies arriving and too many options to consider. This quickly evolving situation means dedication of R&D investment is slightly differently than previous.
In terms of renewables for example, we are involved with a company called Heliatek, an investment in organic solar PV. That technology is nascent and can challenge other PV either on cost or efficiency today.
We also do applied R&D in renewables for solar panels or wind plants. They are required to be inspected now and then for, say, soiling of the panel and of the blades and historically we were doing it differently, in that we had to take pictures or send people to assess.
Now we have drones visiting those facilities to view blades or panels. Before we got into that, we had an R&D lab in France for drones. There we would fly prototypes into pipes among other manoeuvres, learning to handle the technology in a lab environment and then in a practical, renewable space.
PEI: The group plans to invest €1.5 billion on digital and new technologies related to energy. In terms of this digitized energy – big data and digital tools for energy efficiency and network management – what other start-ups is the company involved in, that you are excited by?
Krishnamoorty: Being involved with the world of start-ups is the most effective way to remain associated with the innovation ecosystem.
If you put dollars into these businesses you get access to those people who are dealing with technologies of the future. This is helpful for us but we also bring to the table something for them, which is access to the market. This is how we positon ourselves to start ups.
Another example is Serviz, a California-based company in the home services industry.
It has a platform where you bring the service providers on one side to homes on the other side.
So, for example, say you want energy services at home. You don’t have to go to the Yellow Pages. You can go to this platform and schedule an appointment and then certified experienced engineers can show up.
It’s a two-way street as we are happy to be in their ecosystem and learn a lot about what’s going to happen, and they are happy because we expose them to markets.”
Kiwi Power, the UK demand response aggregator, is another company I would mention.
PEI: There is now a consistent drive to promote low-carbon, distributed energy. Is it possible with technology evolving so quickly for there to be a vision in terms of decentralized and renewable energy? Or is it just a case of being nimble and flexible to adapt to what comes?
Krishnamoorty: Internally we have an ecosystem that encourages future thinking. Specifically, in terms of the future of the sector and centralized-decentralized, it’s anybody’s guess as to what it will look like in 20 years.
Whether decentralized will be 30 per cent to centralized 70 per cent or the other way round, we subscribe to the opinion there will be centralized for a very long period of time – though decentralized will certainly start to increase its share.
We do not know whether it will be 25 per cent or 40 per cent, but we imagine it’s not 5 per cent and it’s not 60 per cent.
Therefore we would tend to agree more with a view tht it could be 30-70 in 15 to 20 years from now.
However, ultimately, I think the boundaries between centralised and decentralised will vanish within the context of how electricity will flow.
You will have bidirectional flow, so it’s not as if you will only have a consumer sitting at one end consuming electricity where it is produced.
The consumer will be prosumers – as they are even today – but the regulatory evolution in each area will be such that more bidirectional flows will occur.
So it doesn’t quite matter if you are all connected to the grid and if the electricity is flowing in two directions.
Of course a lot of data brings us to the question of digital and the money will also flow in two directions.
I’ve been in the sector all my life and have a view that some people share and some do not – that is, that we should not be thinking in terms of decentralized and centralized because how does it even matter when electricity flows in two directions.
PEI: You come from India. What is different about the company’s approach to developing powerhouses like India? Is all this new digital technology going to enable India to leapfrog investment in grid infrastructure, much like mobile phones made telecom infrastructure unrequired in parts of Africa? Could the developing world be the main beneficiary?
Krishnamoorty: In a sense everybody can benefit from that but I do not believe that the increase will benefit the developing world first. If you imagine the world 30 years from now – an energy cloud with centralized, decentralized and everybody connected, electrons flowing in two directions – I don’t think that will arrive first in places like India. It will come to places like California, where it is already happening in a substantial way.
Now will the fact that this has started happening suddenly change the pace at which the capacity gets added in India?
That’s hard to say. Look at the last five years and this country trying to add a lot of generation capacity.
Despite plans by India’s federal government to split 600 GW solar into 40-60 centralized-decentralized, the one that has taken off is centralized.
It may have to do with the fact that India is not a country with a lot of space. Centralized is easier from a permitting perspective and naturally has started to grow even though the government was promoting them both equally.
PEI: Does ENGIE have a role in persuading countries in the developing world, who are still keen to make the most of their fossil fuel resources, to go with cleaner energy? Or is your success in this realm the best way of doing that, in terms of setting example?
Krishnamoorty: Everyone has a role to contribute to the presevation of the planet. At first you have to take a decision for your own. What we do is play a part by not doing coal. Two years ago we had 15 GW of coal and we then decided to get out of the business and have got rid of 9 GW in the last 24 months either shutdown or sold off – what that does is send a strong message.
What that says from within a bloc of western investors is that we together are not involved in coal, and it provides a strong message to Asian and African countries.
Of course they have the option of going to the Japanese or Chinese. But even now the Japanese do not lend to coal with the same interest as seven years ago.
Japan Bank of International Co-operation haven’t the same interest as even one year ago we had several meeting with them and they saw us getting out and they must have talked to others as well. They no longer appear happy about supporting Japanese companies in their adventures abroad with coal.
There is a degree of influence also in terms of persuading them to go to renewables. Renewables are becoming competitive. I saw recently in India where wind dropped to $20 per MW hour and they got bids for a GW of wind capacity where the nominal tariff was $40 over the next 25 years, which effectively is $19 when you factor in inflation. With solar and wind both able to beat coal in India, that is a message, one way or another.
We also support the Indo-French effort in the International Solar Alliance very strongly. I have personally met ministers explaining what we can do and we have our own group called Terawatt Initiative, which is aimed at making it very simple for people to install solar capacity.
Part of that involves demonstrating for companies simple contract terms which can be used when involved in the renewable space.
We are overall a big presence in the International Solar Alliance and our chief executive Isabelle Kocher was the only utility CEO recently invited by Michael Bloomberg to participate in the Global Leaders on the Economics of Climate Change summit in New York.
We support Terrawatt Initiative, led by Lila Tretikov. This organisation aims to accelerate the Energy Revolution, to limit global warming and promote an equitable, peaceful world through universal access to renewable energy.
PEI: You’re also involved in smart cities. What does a smart city run by ENGIE look like and what can we realistically hope for in that area by 2050?
Krishnamoorty: If you look at smart cities, people are asking, ‘can you do a number of things’? Corporates try to aggregate their percentage of energy by saying ‘can I have renewables across the globe’? Cities think about looking at the needs of the city in its entirety. If you go to another level, for example, with the London Olympic Park – they want to aggregate their requirement within their own sector of the city by power, heat and cooling in an integrated way.
In the case of cities, they look at city planning so they’re looking at clubbing cybersecurity, lighting, telecoms and Internet of Things so it responds to the requirements of the city at a very high level.
A clean city like Copenhagen or Berlin has a climate plan to be climate neutral by a certain date perhaps. What we like to do internally is to aggregate all the skills that we have and try to match it with the changing requirements of the cities.
We never used to look at cities as a segment of business. We were supplying heating and cooling in France – we did security services in another area, lighting somewhere else. Now we try to aggregate the requirements and position ourselves as someone who can meet the total needs of the city.
We look at the requirements in a more collective or combined way, persuading cities not to bid out just for the lighting or security but to look at it slightly differently.
|Shankar Krishnamoorty (third right) with ENGIE chief Isabelle Kocher|
PEI: What is the company’s approach to electric vehicles? What will that impending revolution mean for the power sector and for ENGIE?
Krishnamoorty: I bought an electric vehicle last week and I also bought an electric charger from a company we now own called EV-BOX. In that electromobility space we are doing a lot of stuff. EV-BOX are a start-up engaged in designing, Managing the supply chain and getting chargers manufactured. We have a software platform, whose functionalities are being expanded.
This software will be capable of ensuring sequencing where there are lots of vehicles trying to fast charge. Simply put they will be able to schedule the charging in such a way that the charging infrastructure size doesn’t have to be too big. So the software will see the vehicles come, charge and schedule the charging.
Our software platform is continuously improving with a view to suiting the requirements of an ever-emerging business model.
The business models around generation, supply, charging etc will continue to evolve to accommodate e.g. flow of electricity in two directions so you will use chargers to be charged form the grid but at the same time you will look at a fleet of cars as being a source of virtual power.
That vehicle to grid concept is part of all of those things that combine for a holistic approach to decentralised and mobile production.
For such as EVs, charging structures and grid put together in terms of actual investment, we have a total of 50,000 charging stations already and growing faster and around that we are trying to build a business.
We have also just taken a participation in another start-up in the e-mobility sector called Gogoro, a two-wheeler company for electric scooters.
Shankar Krishnamoorty is a speaker at Electrify Europe. For more details click here.