Susana Quintana-Plaza of Siemens’ startup innovation unit next47 discusses disruptors, digitalization and decentralization

Siemens has pooled its existing startup activities at innovation unit next47 in a bid to foster disruptive ideas more vigorously and drive innovations. next47’s strategy is to combine the speed and agility of an independent investor with the breadth of Siemens’ business and technology.

The number 47 refers to the year Siemens was founded – 1847 – and the team, headed by Lak Ananth, has a €1 billion ($1.12 billion) pot at its disposal over the next five years and has offices in Silicon Valley, Munich and London.

Activities focus on five fields of innovation: artificial intelligence, autonomous machines, distributed electrification, connected mobility and so-called blockchain applications, which are designed to simplify and increase the security of data transfers in areas such as industrial operations and energy trading. We caught up with unit partner Susana Quintana-Plaza to discuss disruptors, digitalization and decentralization.

PEi: What is next47 doing in terms of adapting the grid to the future? And do you think that governments and power industry actors are doing enough in terms of investment to facilitate all this renewable and distributed energy?

Susana Quintana-Plaza (SQP): Some countries are not doing a lot and some countries have very robust systems. For example, a few years ago there was talk of the German gird collapsing due to too much solar power. It didn’t as the grid was robust enough. That doesn’t mean it can’t be done better. Some countries can’t handle the influx of renewables; there is no question about it. But in any case, the channels of new technology development, in terms of IoT and in terms of artificial intelligence to predict demand and supply, will be applied in the future and will make grids more robust.

PEi: How much faith do you have in energy storage to be the magic bullet? Is it advancing enough to make fossil power redundant or will we need fossil fuels to bridge the gap for decades before storage is economically utility-scale?

SQP: Storage is getting to the cost point it needs. Whether it is at the utility scale or not is a different story, but most definitely we have seen the cost reduction in batteries to be incredible. Siemens has two businesses now completely focused on storage and a lot of people say, ‘What will happen with storage – will people disconnect from the grid?’ And I always say, who cares? It doesn’t matter. As long as they withdraw 80 per cent less than they use from the grid than they do today it already kills the system – it’s going to create another system.

For me, the question is not a case of there being systems that are not going to connect to the grid. The question is whether solar and battery and decentralized energy will be big enough that it will reduce the need to have a grid and add up to a decentralized system. Of course, that isn’t a question of if but a question of when.

PEi: But isn’t storage some way off, maybe decades away from where we would need it to be?

SQP: I can tell you from my experience. I joined E.ON in 2009 and my first job was to predict how much solar we were to expect in the market for the next 30 years. I was the most bullish person in the room. There was a lot of push back against my opinions saying that will never happen. They were right – it was 10 times,
100 times faster than I ever expected. Even today it continues to surprise me.

All I can say with storage and batteries is that any prediction I see today is going to be an underestimation of what is actually going to happen. From 2009 until today we can say the energy system in Germany has completely and absolutely changed, and that is my expectation to follow.

PEi: When storage and renewables look so increasingly viable, are you bewildered then by investment in CCS and nuclear power?

SQP: Carbon capture and storage is still potentially good. No matter what, there is still CO2 being generated, not only from power plants. There are many other types of CO2 generation – so if we manage to do CCS I think it would be good. The problem with carbon capture is not so much a question of technology as public acceptance – the not-in-my-backyard issue. I wouldn’t call it a waste; there are effective uses for it, but whether it would be feasible in the end? I don’t have an answer for that.

On nuclear, it’s to do with costs. Look at the numbers in putting up a new nuclear power plant today versus putting in solar power and a battery.

PEi: Working in Silicon Valley, how much is next47 gaining from swapping ideas and being in proximity to so much general innovation? Does being in that culture and swapping ideas and information with other sectors lead to a lot of breakthroughs?

SQP: Most definitely. There is no doubt that today the centre of innovation is Silicon Valley and we benefit a lot from being there. That said, I think more and more innovation is coming into Europe and I see a lot more creation of new businesses models, the setting up of programmes and governments backing startups. So, while I think Silicon Valley is still the top venture market for innovation, I really see Europe coming up more in this space and creating new innovation and new startups.

PEi: What kind of impact do you see from the electric vehicle revolution? Will this go for or against the clean energy system objective? There is some criticism at the moment that more conventional power is being used to assist charging of vehicles.

SQP: I think it is true today that electric vehicles rely mostly on conventional power because there are more conventional power plants. Now EVs will do one thing – they will increase the need for electricity, and any increase in electricity will be supplied ultimately by renewables, and that will be better for the overall system and it will stop the burning of fossil fuels in order to produce electricity. Renewable generation will increase and, ultimately, it will lead to reduced combustion from transport.

PEi: Is there any particular technology that you have seen in your time at next47 that excited you in terms of potential impact on the energy system?

SQP: There is a lot of very exciting stuff coming up – I mentioned IOT innovations that are making the grid smarter, and artificial intelligence to increase understanding of supply and demand, but I think the goal for decentralized generation is to create an industrial supply chain that can serve the end consumer. Today the whole decentralized system is not very sophisticated and that’s the innovation I would look for.

PEi: You have expressed a lot of faith in the merits of distributed energy resources. What is behind that vision, given that some hold fast to the perspective that centralized generation will continue to be dominant?

SQP: I look at the development of solar in the last few years. Then, energy generation in the next 40 years will double and all that generation increase will come from renewables.

They predict the amount to be 3.5 TW peak of solar and 1.3 TW of wind. The beauty of solar is that it’s a simple technology and there are no real economies of scale behind it. To set up and maintain a solar system there is no advantage in putting in 1 GW or 100 kW.

There really is no difference so I would question why we would want to set up a centralized solar system and create a grid to distribute that energy versus putting a solar system where it is going to be consumed.

Technically, I don’t see any real advantages attached to centralized solar systems over decentralized energy, particularly in developing countries like Africa and the Middle East.

I truly believe for those markets solar will definitely be the energy of the future and I don’t see the value in developing a new grid
there.

A lot of people make the argument that solar is not always there, and you need backup. That’s a very western view of the world, that you have to have energy 24/7. Many of these communities would be happy to have energy just for several hours a day, and now with batteries you can better manage the number of hours of energy you have. The advantages of a decentralized system are more.

PEi: What about resistance to that point of view, particularly from the coal sector? They would contend that developing economies are right to rely on their coal resources. Even though it is often the case that they have an ideal solar resource, clean coal technology is recommended despite the fact that choosing solar is the socially responsible option.

SQP: What are the economics for solar versus the economics for a coal plant – not only in terms of generation, but also in transmission and distribution? I don’t think it’s just the socially responsible thing to do, I think it’s the economically responsible thing to do.

For the people who have had the capital, that’s the business they know, but that doesn’t mean it’s the most economic system. There are nuclear power plants being set up in the UK when the subsidies are going to have to be much, much higher than what we can produce by solar. So, the social responsibility is there but it’s the economically sensible thing for government and companies to do too.

PEi: There is still plenty of resistance out there to the clean energy transition. Despite utilities having lost so much, there has been some slowness to adapt away from fossil power.

SQP: I think there is a resistance from traditional utilities, but not in the market because everything being set up today is in renewables. In China they are not even constructing coal plants anymore. I see that people want to hold on to the past, but the markets are clear.

PEi: What is next47 doing in Silicon Valley in terms of innovations facilitating or assisting decentralized energy?

SQP: To clarify, next47 is above all a venture capital activity of Siemens. We have €1 billion to invest over the next five years in startups around the world.

We are looking for who we think are the category-leading startups in the decentralized energy space and looking to invest in them. At the same time our value add is not only to invest in them but to bring them internally to Siemens or to Siemens customers in order to help them scale and grow.

Our job is to really focus on who we think are the differentiative new companies in this market.

PEi: Are there any particular companies you can tell us about which are working with next47?

SQP: Definitely. We are investing all the way through the energy space from the smartphone to grids to charging infrastructure for electric vehicles.

For example, Tado, the smart thermostat company in Europe, or Atom Power, the solid-state circuit breaker company set to completely change how circuit breakers work today. Also for example, ChargePoint, which is setting up charging infrastructure all over the world.

We are also committed to a spin-out called Apogee, which is a winning team spun off from Siemens. They have worked together to build a platform (an energy-efficient building automation system) that facilitates business on top of electric charging. This business on top could be management of the grid or other various business models, so we are doing quite a few things all along the energy value
chain.

From the home to the grid to areas like monitoring conditioning systems for wind turbines, smart grid and Internet of Things technologies to manage the grid – there’s quite a lot across the spectrum.