Renewable energy has the future, but the industry has to do all it can to drive down costs. Technologies like offshore wind and energy storage, but also smaller scale renewables, are still “quite expensive”, says David Walker, CEO of DNV GL-Energy, one of the four business units of DNV GL, the new certification and consultancy giant that emerged last year out of the merger between DNV of Norway, GL of Germany and KEMA of the Netherlands. Walker, who used to run the petroleum operations of BHP Billiton in the North Sea, the Middle East and Australia, believes the renewable energy sector can learn a lot from the oil and gas industry, with its strong focus on cost control. “Offshore wind should set itself a target that it will become cheaper than nuclear.”
David Walker (57) made his own energy transition in his career. Having started as a geologist for oil company Amoco, he went on to become President of the petroleum operations in the North Sea, North Africa, Middle East and Australia of the Australian mining conglomerate BHP Billiton. In 2007 he joined DNV to further develop the Norwegian company’s energy business, which at that time consisted of a mix of renewable energy and oil and gas activities. Last year, he became CEO of DNV GL – Energy, which he says is the “largest renewable and energy efficiency consultancy in the world” with 3,000 energy experts globally. Oil & Gas is now a separate business unit within DNV-GL.
However, according to Walker what is most striking about the energy world of today is not so much that it’s in a transition from fossil fuels to renewables, but rather that it has become more and more integrated and interconnected. The World Future Energy Summit in Abu Dhabi that took place on 20-22 January, and where we interviewed Walker, is a case in point. This annual mega-event focuses on renewable energies, but all the big oil companies are present as well. Abu Dhabi itself uses its huge oil income to invest in – and promote – renewables. To Walker this makes perfect sense. “Their domestic oil and gas resources are declining. The associated gas they produce is used more and more for enhanced oil recovery. This means they have to import gas for electricity generation – or cut consumption and look to alternatives. Which means: shift to renewable energy and energy efficiency. The latter makes much more sense.”
The increased interconnectivity in the energy world means that businesses or policymakers cannot treat issues in isolation anymore. “We advise 25 governments on market design”, says Walker. “They need to know what the impact of regulations is on technology, but also vice versa, what the impact is of technology on regulation. They need to know in detail what happens if renewable energy becomes a larger part of the national energy mix. And so on.”
Walker notes that thanks to its mega-merger, DNV GL now has a huge knowledge and experience base to draw upon. “To give just one example: the renewables experts of GL now have access to 500 KEMA specialists on and grids. Together we are able to offer a broad, integrated view on complex energy issues such as the integration of renewables into the grid.”
He says it is impossible at this point in time to predict which technologies and market models will be the winners and which the losers. “There are so many emerging technologies, business models, policy choices. They all influence each other. For example, if you ask me how disruptive the growth of renewable energy and energy efficiency will be for incumbent utilities, I cannot give a generic answer. It depends on the country, on the approach the utility it takes, what kind of market it operates in, etcetera.”
This is also why DNV GL is pursuing “multiple tracks”. “Obviously we support renewable energy going forward. At the same time we understand the importance of gas as a transition fuel. Our Oil & Gas unit is a sister company of the renewable energy unit. Also, in transmission and distribution we see there is a trend towards distributed solutions but also a trend towards more interconnection. Again, we look at both tracks. We also do research on many different types of storage – distributed storage, utility-scale batteries, power to gas. We even have a large flywheel in Arnhem. And there is energy efficiency of course. We have developed design concepts for many zero-energy buildings, all on the basis of existing techniques. Customers are very interested in that.”
When it comes to retrofitting for energy efficiency in existing buildings , in addition to the problem of split incentives (e.g. between owners and tenants of buildings), Walker notes that some new technologies are still “quite expensive”. “It’s very important that we continually drive down costs.” The same applies to some forms of renewable energy. The cost of solar PV has dropped “dramatically”, says Walker, but for example offshore wind, in which DNV GL is active, is still “very expensive”.
Walker believes that it should be possible to drive down costs in offshore wind by about a quarter to a third. This can be partly done through bigger turbines and scaling processes, but there are limits to that. With his oil and gas background, Walker knows “there is also a lot to be gained in installation, cabling, interconnection, maintenance. We can learn a lot from the offshore oil and gas industry.”
Offshore wind developers should ensure that wind is “cheaper than nuclear power”, says Walker. “Right now it’s still more expensive. You cannot expect offshore wind to be cheaper than onshore wind or solar, but you could beat nuclear. That’s achievable.”
Cheaper and easier
Another very important way to cut costs is by increasing interconnection of electricity markets, says Walker. “This process is stalling somewhat in the EU, which is not a good development. If you can transport Spanish solar power to northern Europe or wind power from the North Sea to southern Europe, you need less investment in generation. It’s also an easier and cheaper option to increase security of supply.”
Electricity interconnection is not just an option for Europe. It would also be a good solution for the Middle East, says Walker. In Africa too interconnection is taking off. “The technology is available, but the political will also has to be there.”
Increased interconnection will also enable a higher integration of renewables into the grid. How far does Walker think this integration can go without causing serious problems, e.g. in a country like Germany? “I can’t give a specific number on that. But in Germany they have interesting incentives now around storage, so consumers can help smooth loads and shave peaks. They recognise the problems and are taking steps.”
On 12 September last year, DNV (Det Norske Veritas) of Norway– which in December 2011 had acquired the Dutch consultancy and certification company KEMA – merged with GL (Germanischer Lloyd) of Germany to form DNV GL. This is now in its own words “the world’s largest ship and offshore classification society, the leading technical advisor to the global oil and gas industry, and a leading expert for the energy value chain including renewables and energy efficiency.” The Oslo-based group, led by CEO Henrik O. Madsen, is also one of the top three certification bodies in the world. It operates in more than 100 countries with 16,000 employees. It has four major business units: Maritime, Oil and Gas, Energy and Business Assurance. The Energy division is based in Arnhem, The Netherlands and is led by David Walker.