Energy Transition Now - Episode 20 with Libbe Skovgaard-Petersen

This week in the final episode of Series Three, David Linden speaks with Libbe Skovgaard-Petersen, Vice President at Copenhagen Infrastructure Partners, CIP, a renewable energy investment fund.

Libbe speaks to CIP’s goal of being a €100 billion fund by 2030 and the importance and focus on P2X – Power to X – particularly in reaching hard to abate sectors.

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About Libbe

Libbe_Skovgaard_Petersen

Libbe Skovgaard-Petersen, Vice President, is a member of the Energy Transition Fund. Ms. Skovgaard-Petersen has more than 14 years’ experience in the European Energy Market primarily from a molecule perspective within business development, origination, and negotiation. Prior to joining CIP, she was responsible for Business Development and Partnerships in Maersk Drilling.

Ms. Libbe Skovgaard-Petersen has extensive experience in the technical, legal and commercial aspects of project origination within the energy sector. She has worked within large scale energy companies such as Ørsted (former DONG Energy) and the Maersk energy group, mainly within areas such as management, contract negotiations, conflict resolution and commercialisation of assets. She holds a Master in International Business from Copenhagen Business School.

David Linden Hello, everyone. I’m your host, David Linden, the Head of Energy Transition for the Westwood Global Energy Group. And you’re listening to Energy Transition Now, where we discuss what the transition really means for the oil and gas and the broader energy industry. The topic we’re going to be tackling in this episode is on the opportunity for green hydrogen and more broadly, the power-to-x industry. My guest for today is Libbe Scovgaar-Petersen, Vice President at Copenhagen Infrastructure Partners, CIP, where she is a member of the Energy Transition Fund. Welcome Libbe.

Libbe Skovgaard-Petersen Thanks for having me, David.

David Linden It’s an absolute pleasure. Thanks for taking the time out, I know everyone’s very busy at the moment. Lots of things going on. I think just for context, some of the things that we see in this sector to move around the lots during this time. So for the listeners, we’re just recording at the end of March. So if you are listening to this in the future, should we say, things may have changed a little bit, but we’ll try and tag some of those things that might move between now and then. We’ve got quite a bit of ground to cover in the time that we have, but there might be some people out there and I would be surprised, but there might be some people out there who don’t know copenhagen Infrastructure Partners. Can you maybe just give us a bit of a 101 as to who Copenhagen Infrastructure Partners is, please?

Libbe Skovgaard-Petersen Sure. So we are a renewable energy investment fund. We’re primarily located in Denmark, but we have international investors and an international footprint. We’re about €17 billion and we only invest in renewable energy. We come from the offshore space and were created in 2012 focussing on investments in offshore wind. And then we’ve moved on to looking at biomass, looking at waste to energy, looking at transmission systems. And the latest fund that we have is the Energy Transition Fund that focuses primarily on P2X and P2X related activities. So that could be infrastructure related to P2X like pipelines. It could be some carbon capture facilities, those kind of elements that enable P2X.

David Linden And P2X, just everyone else is power to, power to X essentially.

Libbe Skovgaard-Petersen Power to X. Yeah.

David Linden Which we’ll talk about in just a second. But yeah, commonly known as P2X as well and I have seen you there’s quite a few other things that CIP is is be getting into. So in the UK as well, I saw the battery storage deal that you guys did recently. So there’s obviously quite a few different things you’re doing now.

Libbe Skovgaard-Petersen So we do sort of more or less everything that we feel enable the green transition and that will include, battery storages. We also do solar, onshore wind, for example. We have a global footprint. So we do have projects both in OECD countries and outside of OECD. So as we are growing and we are under a significant growth path, we will be looking into also expanding our even more our geographical footprint and then expanding the technologies because we take an approach that says that we believe that there are a lot of technologies out there that all need to get into the game in order for us to be able to reach the goals set out. So becoming net zero in 2050.

David Linden Again, let’s just sort of understand the role that you take, so there obviously there’s pension funds out there who are ultimately relatively silent kind of capital, etc. and the other folks who take a more active role in their investments. There’s a whole broad spectrum of kind of financial groups involved here. What spectrum do you sit as such? How involved are you in the projects that you’re actually investing in?

Libbe Skovgaard-Petersen And it’s a really good question. We are very, very and usually we do buy some projects, but usually when we do that there at the very early start of the project development. So we go in and we do greenfield investments and sort of the bare field type of investments where we have to build everything from scratch. So in that way, we’re also a little bit different from some other infrastructure investment companies out there. That also means that when you look at the skill sets that we have, it’s a lot about getting in early and having the regulatory discussions, having the technological discussions, having the EPC based discussions as well, and understanding the risk in all of those phases in getting your investment over the board.

David Linden So essentially pretty hands on overall. Okay, fantastic. And did I read right that you want to deploy another sort of 100 billion or so by 2030 effectively?

Libbe Skovgaard-Petersen Yes. Exactly. So we have a goal of becoming €100 billion in 2030 and being 70 now, that’s quite a growth path that we will need to get on. And we see that the capital is out there and we believe we have the skill sets in order to activate it right into the market.

David Linden All right. So there’s lots of work to do. So I guess what we wanted to talk today about was not I mean, there’s so many different tools, as you say, geographies and technologies and things to talk about. One of the ones that I certainly found fascinating and have been sort of trying to unpick over the last few years a bit is around that sort of green hydrogen, P2X / power to X space. There’s been a lot of debate ultimately about why do we need to do this essentially right? So why don’t we just build more renewables and that’s it. Fine. You then you started off, you know, expanding your IP as a leader in the offshore wind industry. Why would we just do more offshore wind as such? So maybe just start us off all that sector. What’s kind of the value proposition that we have behind that? Why do we even need this is probably.

Libbe Skovgaard-Petersen I get that question quite a lot because why would you I mean, you waste energy when you convert electricity to these alternative energy bearing products that we’re talking about here. And the reason you do it is to get into the hard to abate sectors. So and where you’re also seeing quite some inefficient utilisations of the energy. So what we do here is we try to take the 80%. There’s this at least that’s what some consultancy companies have been out saying. About 80% of the world’s energy is related to oil and gas and 20% is based on electricity or power. And what we try to do is, of course, we try to push up the 20% and eat some of the 80% by just increasing the use of electric vehicles and converting things to power. And that work needs to continue. And then we try to convert some of the oil and gas utilisation into alternative green products where you can have bioproducts like biodiesel. Of course, that’s also a possibility. And then we look at the conversion of electricity to things like hydrogen, ammonia, methanol that can utilise the products directly. And where we see the utilisation of some of these things is also in the existing chemical industry. For example, they utilise some of these chemicals already and you can do a 1 to 1 swap. We see that also when it comes to fertiliser and it’s a 1 to 1 swap with the ammonia that we can produce. So it’s a way of converting these sectors that would be really difficult if you wanted to use biogas for all the ammonia production out there. That would be, in my view, quite an inefficient utilisation of the bio gas. And instead we can we can do it through P2X. And in countries such as Denmark, so we have a global footprint, but in countries such as Denmark where you have a really high penetration, then it makes a lot of sense to go in and start looking at how can we assist also on a global level with converting the 80%?

David Linden Okay. So when you say high penetration, that’s high penetration of renewables.

Libbe Skovgaard-Petersen Like operation of renewables, exactly where about 60 to 70% in Denmark today and look to be about a hundred when you get to 2030.

David Linden That’s very interesting. I guess when like when you start looking at the sector and certainly now I spend all the time looking at the offshore wind sector as well and. Part of the original argument was it helps smooth out the volatility of what’s going on. Is that still a valid business case, essentially, or is this really about hard to abate sectors? I would say only in the majority sense.

Libbe Skovgaard-Petersen I think it’s a combination of the two. So we definitely see that it helps smooth out the irregularities of renewable energy production in general, and it thereby also makes the business case for renewable energy buildout better because you can have these very flexible consumption sites instead of curtailing your renewable energy. So we see that it makes a lot of sense in that way. We also see that when you look at the build out of renewable energy, and I think that’s across all geographies more or less, there is a need for a strong build out of the electrical infrastructure system onshore in order to transport the energy. And you can say that putting in power-to-X that the right places, you can help make sure that the investments are done more rationally so that you’re not building a highway when you could, you know, you might only need a sort of a small village road type of thing. And you can convert that by routing through P2X take whenever you’ve got these really huge amounts of power coming in, then we’re able to go in and convert that to alternative products. And when the prices are right and the power is needed in the market, we can get its growth through.

David Linden One of the things I’ve worked on in the past is essentially, you know, one of the difficulties and sorry to sort of bring offshore wind in the air a little bit, but I guess that’s also part of CIP’s background. But you know, we’re both sitting in Europe and the offshore wind is often talked about as a great partner for green hydrogen, and power to x more broadly the sort of two questions I have in my mind just on that. Do you think the offshore wind sector is by far the best positioned sector for this or in theory, I mean, look, anybody can be well positioned because all you need is renewable energy. It’s just a question of where you get it from. The sort of second question and I can answer ask again in a minute because appreciate I’m asking you two questions at once here. But the second question is, is one of the benefits essentially of offshore wind that the difficulty of, for example, getting access to a power grid in the first place somewhere like the UK in particular, right, is difficult, so why bother? Why don’t you just do green hydrogen offshore or power to X offshore depending on how you set it up. And so avoid the whole regulatory investment sort of complexity. So, you know, is offshore wind advantaged in the first place? And secondly, is actually that sort of second part I was talking about there. That’s one of the other reasons really the green hydrogen is so well suited to that sector.

Libbe Skovgaard-Petersen Yes. So for the first question, I think it’s very regionally dependent so close to the North Sea, we see that offshore wind has some really good levelized cost of electricity, which makes it attractive to use for P2X. I think when we go further south, you’re seeing more combination of, for example, onshore wind and solar because you’re getting really good utilisation rates on those which give you low LCOEs. When we do then go to the Southern Hemisphere and we at least have a project in Australia where we’re looking at five gigawatts of onshore wind which will produce ammonia in a fairly remote location in Australia, primarily meant for export. And we also have a project in Chile which is also onshore wind, which also produces ammonia for export, and that’s because the LCOE for onshore wind in those regions where you also have the you have the land available makes a lot of sense. So I think it’s super regionally dependent on what gives you the low cost of electricity and how you best utilise the natural resources that you have as a country. And I think that goes into the second question, which is that when we look at the North Sea, we see that there is a potential for large build out and it is a possibility for it and nations to also go in and be able to export some of the energy that they have. So I think it has a natural transition from the oil and gas industry where you saw the export of oil and gas products and you’re very much still seeing that today to go in and then have a third type of export, which is the P2X type of products ammonia, methanol, potentially hydrogen. If a pipeline system gets built across Europe, which we really strongly believe it will. I think when it comes to then the build out of your onshore electrical systems, you will need to have some build out because we’re also converting a lot of onshore utilisation to electricity, heat pumps, for example, at least we see them in the northern hemisphere and electrical vehicles, etc. They mean that there is a higher consumption of electricity. And that needs to be matched with a production of electricity. So we definitely see that. But where we do see that P2X really comes in is in this bridging capacity. So the ability to make sure that you have a bridge between the production and the consumption where previously for production purposes, at least in Northern Europe, we’ve seen a lot of natural gas, coal that has some possibility for variation during the day. It doesn’t make a lot of sense for your offshore wind park to just curtail and stop producing or for you to turn off your solar panels when you’ve built them. And that’s where P2X can come in and take that power, and then you can still be building out your renewable systems towards the demand growth that’s also seen.

David Linden Very interesting. This is all the last of the question I want to ask around the opportunity specifically to make it clear why do we need to consider so many different types of fuels essentially to be producing here? Always saying this is ammonia replacing ammonia or are we talking about ammonia rather than hydrogen? Because I remember talk about hydrogen first and then it’s sort of shifted to ammonia. Do they have a particular value in what you’re producing and why you’re producing it?

Libbe Skovgaard-Petersen I mean, all the P2X projects, they start with hydrogen. If there is a hydrogen grid out there, you can export the hydrogen or send it to the consumers of hydrogen, which could be things like large steel plants. It could be general industry refineries that currently use hydrogen. There are a lot of different possibilities for the utilisation of hydrogen, but the grid does not exist yet, and it’s a very inefficient fuel to transport by a ship, for example. So it doesn’t doesn’t transport well, which is why the first projects that we’re looking at here, I think 25 to 30, a lot of those projects, at least in our portfolio, focus on ammonia or methanol. And ammonia, you will need to spend some energy to convert the hydrogen to ammonia. So of course, you’re it’s a more inefficient process than running directly on your hydrogen. But the ammonia transports very well. And we see that both the existing industries, so the chemical and especially sort of fertiliser industries need ammonia. But we also see that industries such as shipping are very much looking towards ammonia as an alternative to fuel oil, heavy fuel oil, which when you burn ammonia and it of course it’s a toxic substance. So you have to have the right type of systems to manage it. But when you burn it, you’re not releasing CO2. So it would be and it works well as a fuel for the maritime industry. And that’s why we talk about so many products, so to speak. Then you have the methanol product that we also have in our portfolio, which I think I would put in the same category a sustainable aviation fuel. So both of those are CO2 based products. And the limitation there really is getting hold of the right type of CO2, at least based on the current definitions of what we like to utilise in at least the Northern Hemisphere. So there’s a preference towards biogenic CO2 or CO2 that has had a life before. You can say so repurposed CO2, and there’s just a limitation on the availability of those type of substances.

David Linden Yeah. I think we want to talk about some of this, about how you bring all these different things together. And certainly if you try and unpick some of the projects that you see in Europe, even just in particular, you know, there are multiple different streams of things going on to make something work. But we move on to that may be sort of broader kind of challenges of making this work. So, you know, it all sounds nice. It could solve a lot of problems. It’s got to make sure the LCOE is right. And you’ve got the right source of electricity and off you go. But essentially, what is sort of the, if you sort of categorise a few, the kind of key on both technical and commercial challenges that we’ve got to make this happen. You know, this is not something that’s right now competitive, I assume. Right. This is something that’s being built now with a few years time down the line, the expectation is it’s going to work. Please feel free to tell me I’m wrong there. But essentially, you know, there are still some challenges to work through and to scale this.

Libbe Skovgaard-Petersen Yeah, I think we’ve we feel it’s competitive now, but it takes a long time. So we have a large facility in a little city in Denmark called Esbjerg, where we’re looking at one gigabit electrolyser capacity to produce about half a million tonnes of ammonia. And getting the permits for that takes at least a year and a half. And building the factory probably takes around three and a half years. So the lead time for a lot of these things is just significant. You’re building what we’re building here is a large scale factory. And that needs to kind of go through all the normal processes that large scale factories go through. So even if the technology is there and the people are ready, then there is just a long lead time. Which also means that that’s the case for a lot of the rest of the industry. So when we look at that, we say, okay, well, there are some differences or some challenges around the regulatory regime, for example, but we also need to get our customers on that road. So, of course, existing customers of ammonia, they need to understand that there is a green product and that that green product comes at a premium. That can be a challenging discussion to have. And what is the green premium worth the fact that your product is power based versus maybe the more conventional natural gas based ammonia? Also, that makes for a different type of commodity somehow. Then you have new industries like the maritime industry that needs to make investments in their engines. So they have to convert their ships and their storage facilities on the ships to actually be able to run on ammonia. The regulatory system to utilise ammonia on a ship and in a hardware needs to be in place. So we work together with, for example, with the Harbour of Esbjerg to enable the creation of some of the regulatory aspects. And also we work together with the local maritime school to help make the guidelines for how you would you blast this on a ship and train the maritime industry in utilising it. So there’s a lot of different paths you have to go into where I think, you know, you’re doing an offshore wind park. I kind of see that like, you know, it’s a bit of a in a simple terms. You know, you make the factory, you just need the plug that you have to plug it into. And then you’re good to go and you produce your electricity. Here we have the whole value chain that more that needs to be created from scratch. And the technology part, which is often what’s being brought forth, is actually not the most challenging. So the electrolyser technology is there there will be some development over the next many years around it. But it’s there in the Fisher-Tropsch that we use for the ammonia. That’s an existing technology has been used for many years. So it’s not really all that innovative utilising it in the way we do where you turn it up and down in order to match the electricity system. That’s a bit new, but it’s it’s all possible when we talk to the technology providers. The regulatory system, I think, is probably one of the bigger challenges. Also when it comes to the EU, for example, we’re looking at what are the definitions that we need to live up to. Our customers, of course, are looking at what is the regulatory demands that they will have to live up to. And then you can say in customers like you and me, will we be able to understand how these products actually come to life and how will they help build a greener world? And so I think there’s a whole communication aspects on the side.

David Linden So if I was to summarise that, essentially what you’re saying is, is the technology’s there it can be commercial as long as you put the right business case together, let’s just say. But essentially, it’s requiring the creation of a new industry. And the regulation, the customers, all those bits, different bits and pieces, they all need lining up. They need to be brought on board. The world needs to be communicated to about this, etc. And therefore, a) it’s exciting because you’re doing this and that’s I think that’s great fun. It sounds really interesting. But b) ultimately it means stuff takes time because you need to get your ducks in a row essentially, and that requires people to get their hands dirty and make it happen.

Libbe Skovgaard-Petersen And lean out a bit. Right. So a lot of people will be taking a few risks on this, but I think that’s where we can line it all up. So the people who are investing, for example, new engines line it up with some supply of ammonia, make sure we have the right transportation opportunities for it as well. So it’s possible to line all of these investments up in one go. And we believe that that is possible and we see the appetite out there for that as well. But it is a lot of ducks that you need to get in a row. I think, though, there’s been a lot of growth and just the understanding of P2X. So an example of that was the Danish queen. She does a New Years speech every year. And this year she mentioned P2X that it was important that we in Denmark invest in P2X and know she’s 80 years old. And you wouldn’t have thought that you would hear that from the queen. And for me, that really signals that this is becoming something that also ordinary people talk about and see why we need to do it.

David Linden Wow. That’s quite something. I don’t think our queen says stuff like that.

Libbe Skovgaard-Petersen Not yet. Not yet.

David Linden But I guess it tells you about the importance of of that particular solution also to the future of the Danish economy. Right. And in terms of where that’s going on, and I guess that’s an interesting one for me, is when I’ve looked across, let’s say, Northwest Europe as an example. Each country is very different, though, right? So the opportunity we’re talking about here will vary significantly based on, okay, so what kind of customers are they? What kind of heavy industry with alternatives are they? Because of course, the alternatives you either try and electrify what you’re doing, if that’s possible, economically or technically, or maybe you you take some carbon capture and storage and plug that onto your plant. I mean, arguably, the jury’s still out on some of that as well. Right. So that’s another challenge. Your customers still need to decide which route they would like to go.

Libbe Skovgaard-Petersen If you don’t think it’s either more, I think it would be both. I think we’re going to need all the technologies that we have in our portfolio in order to reach the targets that we’ve set ourselves. And then I think what we’re seeing now, for example, with the Ukrainian war, I mean, this is wanting to be less reliant on Russian gas. P2X also has a huge potential to play there. You know, a significant amount of fertiliser gets imported into EU from Russia and that is another way of exporting natural gas in reality. So if we want to be independent of some of these things, we need to find alternative ways of doing it and maybe utilising Norwegian gas or LNG to create our own ammonia. And then having that CO2 is not the best utilisation of the natural gas. Maybe we should then utilise the ability that we have in Western Europe to create green energy to, for example, ensure that we have green ammonia available or green fertiliser available so that we can feed the whole Europe and where, you know, a significant portion of European farming is reliant on the ability to put fertiliser in the ground. So if we do not have that ability, we will have a significant shortage of food. So I see this with the security of supply and the ability to utilise your resources more efficiently has a lot of possibilities and I think it’s something that we will see also over the next 12-18 months being discussed more as this focus becomes a bit stronger than it maybe has been over the last decade or so.

David Linden Yes, certainly. Maybe anecdotally, more than firmly heard of projects being approved a little more quickly than others or so across Europe now, or certainly folks being told to get on with it in a nice way, obviously, to make some of this happen. But, of course, importing green ammonia doesn’t necessarily mean that you’re, you know, improving security supply because you’re just importing it from somebody else. So you’re right that the next 12, 18 months, it would be very interesting to see how that works out. It’s the same debate we’re having here around a spike in commodity prices does that equal higher oil and gas production right now or not. But it’s just a spike, right? So green hydrogen looks fantastic. Now from an LCOE perspective relative to it’s grey and blue kind of peers, but that’s a spike, you know. Does that change your mentality, though, in terms of where people think, okay, this is actually now starting to look sensible?

Libbe Skovgaard-Petersen Yes. And I think that that’s a good question. And when we look out, I mean, we’re not done with. So we’ll be selling ammonia from 2027 and onwards and are currently. You know, in the process of doing so. And although it’s nice to see that the price of ammonia right now is, you know, 2000 plus euros per ton, you know, it doesn’t really reflect what we expect the price to be in 27. But I think it’s still, you know, then it says, okay, well, you might have a premium towards your green or a premium on the green versus the grey, but that there is also a cap maybe on the green in reality. So you get out of that risk of all of a sudden not having it available if someone decides to shut down a pipeline, etc.. But it’s actually there and it’s it’s there very close to where you’ll be producing your fertiliser and the same actually with the ethanol and the and the potential for sustainable aviation fuel as well. Now can you produce your own fuel also for these, I think super important commodities that we need in order to have our society actually function then. We would be in a better place and the ability to import it. That’s always a question. I think we believe in a bit of a mix. So for example, on our Australian projects, they are usually looking at an export towards Asia because Asia doesn’t have a lot of other opportunities, especially countries like Japan and South Korea where we see that there are some appetite there. The projects in Chile also not really focussed on local demand. There is necessarily that big a local demand, but you’re very close to the US and other parts of Latin America where you might have some utilisation. It will be some export import. What Europe decides to do, of course, is important, but we also have a global footprint in general. So we try to follow the discourse across. And that’s also a complication in itself. Right. Everyone has or all of the big economies have their own view on what’s the right policy and what’s green and what’s not green yet. So so it requires quite a bit of market insight to be able to follow that.

David Linden Now that makes sense. That makes a lot of sense. I mean, just listening to that, I mean, essentially it’s, you know, my background is into gas and LNG originally before I sort of moved into power and then renewables and so forth. But you know, it’s very much describing a commodity market, right? So some of it there some of it is local. And I so once you start to turn something into a fuel or a commodity like that, it does get started to treat it like that. So it’d be very interesting to see how that works. Certainly for LNG it was always like always going to become a, you know, a commodity traded market and it’s going to be like oil soon, etc.. But of course the reality is, is it’s point to point long term and there’ll be some flexibility. But realistically, you know, these needs to be underwritten, these projects, they need to be supported and they need to be commercial. So I’ll be very interested to see how that works out.

Libbe Skovgaard-Petersen We look towards the LNG market a lot, so quite a few people in CIP also come from the LNG market. Right, because we believe it’s it’s a competence and a structure that can be utilised in the especially the ammonia export type projects. And we actually look towards the natural gas markets to some degree when we look at Europe because a hydrogen market would probably be look a little bit like a pipeline, gas type of market and then with the power irregularities that are there. So in the Danish market, for example, your gas market is a daily market, your power market is an hourly market. I know that for the parts in Europe, it’s both of them are already, but it will be a mix between the power and the gas. And therefore, I think some of these oil and gas competencies that we have been building over the last 20 or 30 years more, I would say then they’re really important. When we look at the green energy transition, especially within the power-to-X space there, there’s no need to invent, you know, anything from new if we can utilise the existing thoughts and infrastructure already there. So I think that’s super important and I think there’s a lot of possibility there as well.

David Linden Yeah, I guess the difference here is, is you’re trying to bridge between the two worlds and that that’s not often easy folks to understand. And and the EU, you know, I was a lot of work I was doing originally was around the opening up of the gas markets and the work, you know, the opportunity that created as well as the work. But the EU clearly has a history around regulation, and trying to get that right. I mean one of the things we haven’t talked about so far is some of that complexity the EU can add but also for the right reasons, I suspect. Right. So and this is this Reg 2 regulation.

Libbe Skovgaard-Petersen So yeah.

David Linden So I guess I guess I just wanted to ask you about that. What’s the implication of sort of Reg 2 and the discussion around that right now is that a risk to what’s going on here or?

Libbe Skovgaard-Petersen It’s a huge risk from a European perspective that instead of being on the forefront of politics, Europe is going to be sort of at the back of the bus and being building really small facilities that are inefficient.

David Linden You just give us some context around that, just for the listener. Why are you saying that?

Libbe Skovgaard-Petersen Yes, exactly. So the current drafts that are out there are linking the power producing facilities and the P2X facilities very closely together. So in effect, stating that the P2X facility needs to run more or less directly on the renewable power. That means that what we were talking about earlier in the programme, the ability to actually fluctuate with the market and make sure that power is put into the market when demand is there, which will be seen through high prices and be able to take power out of the market when demand is not there and creating a more level and cost base also for new renewable energy to come on, that is kind of taken away. So instead of just facilitating a renewable industry, the renewable build out, you will be taking out specific renewable assets and just utilising them for P2X. And we feel that that’s a really poor utilisation of what P2X can offer to the market. And if that comes through, you can say there are two options there. One option is to say, okay, it doesn’t make any sense. So we will do what we believe makes sense. And that’s probably the simple approach to that. The second is, of course, to say, okay, we’ll only do something that then ticks these many boxes that the EU has made. And then in reality, you’re down to these really small facilities that don’t have an export potential where your customers are really able to build any new infrastructure on their side. And therefore, the whole utilisation and development that we need to go through will just be delayed. And in reality, you will start building P2X outside of Europe and then potentially will be importing it in. But, you know, you are not, from a European perspective, getting the tax income, you’re not getting the job creation, you’re not getting the technological advances and the innovation that you would like to see.

David Linden Okay. So essentially what you’re saying is it’s as a real potential to scupper the industry from what its real potential could be. If you don’t mind me saying it’s a typical issue we do seem to face with many governments essentially not quite realising that here’s an opportunity here. How do we take advantage of it and instead sort of overregulating it.

Libbe Skovgaard-Petersen And being super scared that what will happen is you will take a lot of coal power and utilise that for P2X. So I think that there is a you know, and I can understand that. But sometimes when you focus on what’s the worst case, you’re not seeing what’s the best case, so you’re regulating against something, but then you’re also not getting the best potential of the product. And then I think there is a big if we look at Europe, I mean, we have countries in Northern Europe that are now 60 plus like Denmark, Norway, etc. and then you have countries, of course, that are much further down the line and that have challenges just getting enough electricity. Rather than maybe focussing on P2X. So there is a big discrepancy in Europe. But I don’t think that changes the fact that if you then want more, we will also build out in the countries that are needing it now. The ability to get that into the market at the right times and take out all the cheap power will, you know, will enable the build out of renewable as well.

David Linden Yeah. Okay. So there is yeah, it comes back to your point around what are the challenges and things that this permitting there is regulation more broadly and obviously get your customers aligned but this one just sort of came up was a particular sticking point as you try and make it work.

Libbe Skovgaard-Petersen It definitely is, and for our customers as well. I mean, just the fact that it’s not it was supposed to be there and by the 31st of December 2021, and we now have, you know, the 28th of March 2022 and the definitions are still not ready. I think it both highlights there’s probably not an alignment in the EU around what’s the right thing to do, but it also means the industry is waiting for another three months right then, plus however long it will take them to approve this. So all of that delay is delaying the possibility for investments in this space.

David Linden I think the we know that uncertainty is probably the biggest. I won’t say killer. That sounds like a horrible word, but it’s the issue for people to commit, let’s just say. Right. And especially when they ultimately putting a business case on the line. So.

Libbe Skovgaard-Petersen Yes. And then by the time you were done with Reg Two, you’re going to be looking at Reg Three, right?

David Linden I mean, obviously I’m sitting here in the UK, we’re outside the EU now, but know we have our own issues with this kind of thing as well.

Libbe Skovgaard-Petersen And I think that that’s actually that’s a really good point, David, because I mean, why is Reg Two so important if what you’re producing is a commodity that’s exportable? But I think the fact that a lot of countries are looking towards the EU also to see some guidelines around what would be a definition for green hydrogen. So in that way the EU has the possibility to be at the forefront of that definition if used right. Because, of course, I mean, if you’re exporting it, you couldn’t to some degree. If you’re sending it to Japan, it would be the definition of from Japan around what green hydrogen and green ammonia thereby is, rather than the definition in the EU. But we just see that all those systems, I mean, they will need to kind of converge at some point. This is the assumption.

David Linden But the EU is also trying to do so much. Right. So if you think about the taxonomy, the carbon border adjustments, you know, Reg Two etc., that’s a hell of a lot to get all those different countries to say, yes, this is the right thing.

Libbe Skovgaard-Petersen And even when you know something about an area, it’s still difficult to kind of figure out, okay, exactly what piece of legislation has an impact on this? Is it the taxonomy? Is it the ReFiNBOs? Is that the delegated act? Now, where should you read what exactly is requiring them? Some of it is then said, well, okay, we’ll do this regulation, but it needs to be defined by the national states. Okay, well then what does the national state want to do? So it’s super complicated and really difficult to follow right now.

David Linden Sometimes like the other thing is around incentive schemes and the support that you actually get from a government is there, there are some good schemes out there. But essentially understanding those and knowing how to tap into them is another issue.

Libbe Skovgaard-Petersen And the ability to get large enough chunks. So we see that to some degree, at least when it then comes into the national space, some of the chunks are cut down. So from a process that says, okay, well, you have, let’s just say €100 million, then instead of giving that all to one or utilising it to build infrastructure like pipelines or something like that, then you cut it out and give it to ten different projects. Then you get €10 million and have to fill in a lot of documentation on how that’s being used. And I think that’s kind of thinking that the P2X industry is still in a very innovation testing type of space and not thinking of it as we believe it should be thought of as an industry that’s ready to be deployed.

David Linden Very conscious of timing, I really enjoyed what we’ve been talking about, Libbe, but I think is a very positive story this right I mean I do really like the idea of how it’s evolved from ultimate the power sector to green hydrogen and you can use it to back up power. But hang on a minute. There are all these other uses and we’ve got to this really interesting industry, this concept, the power-to-x industry, which I do think is hugely positive. So if you are thinking ahead, you know, what is it, you know, if I was to listen to that, what is it that needs to be done ultimately to drive that sector forward? Is it governments saying, look, we believe this is the case and therefore we need to drive it forward and accelerate ultimately the regulations? Or is it just companies taking the belief and going for it? Right. Because in a lot of these things, it has taken other companies just to go, you know what, I’m going to give it a go. I’m going to go for it. And that’s what’s created the industry and the regulations followed. What’s in your mind’s needed here?

Libbe Skovgaard-Petersen And I think it’s a combination of those things, actually. I think it’s it’s a combination of governments. I mean, a lot of, for example, the offshore space that’s released through governments, they need to start releasing more offshore space so that we can create more offshore wind parks for energy, for example. They need to facilitate the build out of renewable energy, not necessarily through subsidy schemes, but just allowing for that buildout to actually happen. And then I think industry needs to lean out together and go together and build the value chain so everyone in that value chain will need to take some risk in order for this to happen. But everyone stands to gain on it as well. So it doesn’t I don’t think one player can make this happen. A collective of players can make it happen and the regulatory bodies can support that build out through different type of mechanisms, which could be infrastructure, it could be, and renewable energy goes out, etc..

David Linden Okay, so with the start of a very interesting journey, hopefully so.

Libbe Skovgaard-Petersen I think so. I think by the beginning of the sort of 2030, you know, this is going to be super normal. Our kids are going to be like the hydrogen pipeline. You know, this runs on methanol, that runs on ammonia. It’s not going to be this novelty that it is now. I think in ten years time, you will definitely see it as a really big industry.

David Linden Wonderful. Thank you so much for your time. I really appreciate it. That was a very enjoyable, I think just discussion on power-to-X and where it’s going. So I really appreciate you taking the time to walk us through that.

Libbe Skovgaard-Petersen Great. Thanks for having me.

David Linden No problem at all. And thanks, everyone, for listening as well. Hope you enjoyed it, please feel free to share it with your friends and like. I’ll talk to you next time.

 

 

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