People in power

An interview with Lars Josefsson

1 May 2010

The third in a series of interviews with the most influential people in the power business as reckoned by the force of their ideas, the size of their office or the spending power they can command. Professor Lars G Josefsson has been for 10 years CEO of Vattenfall, is an energy advisor to the German government and in 2005 made TIME magazine’s annual list of ‘the greatest heroes in Europe’. He has become one of the world’s foremost figures in the climate change debate.

MPS Perhaps we can start with climate change, and the efforts being put into promoting understanding and the need for action. Do you think the urgency of the situation is fully appreciated by governments and by the public?

Josefsson I suppose the short answer is ‘no’ – these things always move in trends and the urgency of the situation is not, I think, fully understood, but it is admittedly a complex matter. The urgency is not yet a question of too little time, but that of finding a path where we start controlling our own future and destiny.

MPS So is finding the technology enough? What else has to happen - one can imagine a timetable for the technology, but can one imagine a timetable for the political and physical action required?

Josefsson It’s a question of how quickly these things can be done in the political systems we have – we have just experienced the Copenhagen [climate summit] conference – it, of course, did not speed things up.

And looking at the USA, where president Obama is still not through with his health care reforms, climate change has fallen to a lower priority position. So we are in a situation where the UN process proved to be a disappointment in Copenhagen and there is a lot of rethinking going on. How are we going to get the necessary convergence for a meaningful deal? For myself I do not think that it will be achieved in Mexico later this year: I do think the best that could be achieved, which would still be an effort, would be to reach that point in South Africa a year later – but there are still huge uncertainties.

MPS Obama’s putting climate change in second or third place behind healthcare is a blow – healthcare is important of course but climate change is probably the most important issue there is.

Josefsson But to be positive – what Copenhagen did prove was that climate change is now centre stage, that it is a matter for heads of state, and that it is now more an economics question than an environmental question.

MPS Do you think then that government leaders are convinced, and can lead their administrations in the right direction?

Josefsson I think that has already happened in the cases of major national leaders – I think they have realised that they have to deal with the matter, and that position is now achieved, I would say.

As I said, it has become largely a matter of economics now –the matter will become more urgent because it is going to get more expensive, not less so, as time goes on.

MPS Another urgent question relates to renewables. I believe that to meet our targets we would have to install 70 000 wind units a year in Europe before 2020. That doesn’t seem a feasible proposition to me, I’m not sure the manufacturing capability is there. Do you have an opinion on that?

Josefsson You can find staggering truths in these kinds of numbers, but we must remember there is no silver bullet, and we need to use all the tools available; creating that process is a question for policy makers to settle.

An area in which I am very active myself is that of biomass, in which I believe there is great untapped potential which could be exploited in the relatively short term, so the answer does not have to be wind alone.

MPS Do you have a figure in your head for the contribution that biomass could practically make, given that biomass prices are starting to rise in some places, and the supply of fuel is not inexhaustible?

Josefsson For the moment biomass costs more than coal, but it has great potential to reduce emissions, and it can be used in existing power plants without costly investment. For that reason the demand for biomass will most likely correspond to the price of CO2. To reach the EU goals for reducing emissions, the use of biomass would have to increase more than all the other renewable energy sources, more than 800 TWh.

MPS The price of some biofuels is starting to go up in some areas of Europe, for example in Austria where they use a lot of biowaste, and that would seem to put a natural limit on what we can do.

Josefsson You have to rethink the whole equation – biomass is plentifully available on a global scale - it is a question of how you view it. If you view it as a major source of renewable energy you come to one answer and if you view it as a local niche product then you come to a different one – my point is that it is a totally underestimated fuel and it could have a great future with the right policy support.

MPS As we are talking about ambitious projects – how do you feel about Desertec? [Gigantic solar arrays in north Africa].

Josefsson Desertec is of course a fascinating and visionary concept – but it’s certainly a very long term one.

MPS Longer term than say a realistic CCS solution?

Josefsson Absolutely. The concept is to produce solar electricity in Africa and transport it to Europe. There are all sorts of questions you can and should ask around a concept like that, such as how much will it cost, where are you going to put all the cables and who is going to approve them, and a fundamental issue – Africa is a continent where a large percentage of the population does not have access to electricity and they desperately need it …

MPS They also have huge political problems, in creating it, as with the Inga Dam project for instance.

Josefsson They do have – and you can look at the geopolitical situation if you like – but apart from all that it is a fascinating visionary project and if the investors are prepared to invest of course they should do so.

MPS It would seem to be the kind of project that needs more than just private investment, that it would need some serious government leadership – it’s huge and involves many countries.

Josefsson Yes, absolutely.

MPS Another project of yours – a quite different one - is to try and get a minimum carbon price set – and the current very low price seems to prove your point, it is just not working as it stands. That would also need a lot if international co-operation.

Josefsson It will take some time, and will have to be an evolutionary process - to make a deal where everybody is part of a cap and trade system globally is of course not realistic but one could see an emerging situation where different regions were creating their own systems, then one could link these together, gradually creating a global market

MPS I know this is a subject close to your heart and one that you have brought up before in the context of 3C. Do you think advisory organisations like 3C [business leaders group Combat Climate Change] can have any influence with governments to get this sort of thing going?

Josefsson I definitely think 3C is a voice being heard in this context, and has been demonstrating that it is a useful tool, and the need for business voices in general to be heard is greater than ever. Of course 3C is one of these voices.

MPS You have also, I believe, been an advisor to Angela Merkel, the German Chancellor, and to the Swedish government on climate change issues, as well as being a prime mover behind the 3C business leaders initiative.

Josefsson That is so, I was in 2006 appointed as one of her energy advisors.

MPS How much influence does such an advisor have, or even an entire advisory body?

Josefsson In the short term you cannot change anything, in the longer term you can change everything: this is a general truth.

The task we have is that we must shape the future. The future should not be something that happens to us, the future should be something we shape; and this also a fundamental realisation, that it goes for a company but also for society too, we are not here just to sit and wait; there is a dynamic element in that as leaders and managers we should manage the situation that evolves in front of us.

MPS We don’t seem to be very good at it – we have good science and technology bases, the will and the means, but what we don’t seem to have is the political will; when you put all the elements together, for instance at an international forum such as Copenhagen, not enough seems to happens to justify faith in all those other elements. Do you think there is some critical step that needs to be achieved before the world will work together and make other concerns subsidiary?

Josefsson The will and the political will are not great enough yet, people and government both, and in business too: on the other hand I could argue that change is already happening. Look around you: we are investing billions in Britain in new offshore wind parks, very much more effective than they were ten years ago and if you look at biomass things are happening as we are talking; if you look at where car makers are going, we have just had the Geneva car show where all the manufacturers were displaying electric cars …

MPS I think your company has an interest in an electric car doesn’t it?

Josefsson Yes, we do have a joint venture with Volvo, in which we have developed a plug-in hybrid Volvo, and we co-operate with BMW. So you can see things are already happening and you can argue about the pace of it, or you can complain that Copenhagen was a failure, but the process of change is happening right in front of our eyes.

MPS I think what has astonished commentators who have been seeing this going on for some decades at a snail’s pace is the sudden acceleration in the rate of political change.

Josefsson Yes, I agree. Also astonishing is the extent to which important political leaders were willing to be converts.

MPS Getting on to more personal matters - you will be retiring as Vattenfall CEO soon – will you retain your leading role in Eurelectric?

Josefsson Yes, I will be serving my term, gladly, and of course that will keep me in close touch with Vattenfall. I will also be active in several roles in the energy climate policy arena.

MPS Through bodies such as Ban-Ki Moon’s advisory group?

Josefsson Yes, that would be a good example.

I will also be focusing on non-executive directorships on various company boards, and building on the portfolio I already have. I have also promised my wife to be a little more available.

MPS Well, you have executive jobs too, including the presidency of Eurelectric; do you think Eurelectric itself has a role to play in all of this?

Josefsson Yes, definitely, a very important role, and it is my ambition to use the potential of that even more.

MPS Can you expand on that a little?

Josefsson There is the obvious role in Brussels with the EU Commission and the member states, there is also a role on the global scene – we have what we call an international electricity summit where all the major companies from north America, Europe, Japan, Australia, and so on meet: we will also try to engage Chinese and Indian companies. That’s a very good arena in which to advance these matters

MPS So you see it in a large global context, not just a European one?

Josefsson Yes, one must do that.

MPS The further development of a pan-European grid – is that a realistic prospect?

Josefsson It is very important but it is also a tall order. To build high voltage lines is always a challenge anywhere, because you have huge difficulties in getting approvals in place from different states.

MPS More technical difficulties under the sea, but maybe not so many regulatory ones. I’m thinking of the Supergrid. Does Eurelectric approve of and support the Supergrid idea?

Josefsson Our position is that it is good and necessary, with improvements in the grid, to come closer to the European copper plate [single electricity market] and it is a technical necessity in order to transport all the wind power that is planned. In those senses it is a necessity, and Eurelectric’s position is of course that even more priority should be assigned to it.

MPS It sounds as if you believe that an offshore grid, or offshore connectors at any rate, are more or less inevitable.

Josefsson Not necessarily a grid, but many more subsea connections at any rate, as a general case. And that has been widely discussed, and makes a lot of sense. For example a cable from Norway to Britain would make sense, as just one high priority item. I would also see a clear need for more connections in the Baltic.

MPS As I understand it the need for a trunk in the North Sea and Baltic is mainly to get power to the hubs without having to go through the rather weaker land connections immediately available onshore.

Josefsson Abslutely, you need to get away from congestion.

MPS the Norway-Britain connection of course has already been planned, then abandoned.

Josefsson Yes, and it could very well come back.

MPS Getting on to Vattenfall – led by you, I believe, it has green ambitions, a stated determination to reduce its carbon intensity. But on the other hand it also has a lot of fossil plants in place, and prospective fossil build, and of course a CCS project – how do these possibly contradictory elements fit together?

Josefsson Nicely, because if you are not involved in the problem, how on earth can you solve it? We are working on the ground, where the problems are.

MPS One of the places where you are working on the ground is Schwarze Pumpe, which has a year or two of testing behind it now: how has that been going, and, now you are moving on to the next phase, a larger plant, 600 MW, at Jänschwalde - have the lessons of Schwarze Pumpe been what you hoped for?

Josefsson Certainly they have, it has been critical to us and we are very pleased with the experience we gained there.

MPS Can you tell us a little more about what you have learned that can be built on?

Josefsson We know now quite a lot about the real performance of the capture stage and how to optimise it which is of course a key to building commercially competitive units.

MPS So the problems haven’t been on the combustion side, but more on the capture side?

Josefsson Yes, that was a big step. It was crucial to learn about the capture rate, I think we now have a full grasp of what we can do.

MPS Does that put a limit on the size of plant in any way?

Josefsson No, it does not, and we have learned that it can be scaled up efficiently.

MPS What are Vattenfall’s plans for its fossil plants? German new build has stalled rather.

Josefsson As a general statement I would say that we are building our last conventional coal plants. The next generation will have CCS incorporated.

MPS Not just capture ready, but incorporated?

Josefsson That’s our plan, yes.

MPS Are you talking about carbon capture, or are you including oxyfuel?

Josefsson Our major task is of course oxyfuel, but we are looking at other technologies too.

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