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Interview with Jean-Marie Dauger, Chairman of the World Energy Council

Interview with Jean-Marie Dauger, Chairman of the World Energy Council
24 . Aug . 2021

Jean-Marie Dauger is the Chairman of the World Energy Council. Dauger has served several positions within Gaz de France, including Chief Operating Officer, and since the merger of Gaz de France and Suez, with GDF SUEZ, then ENGIE, as Former Senior Executive Vice President in charge of the Global Gas & LNG Business Line, one of the five business lines of the ENGIE Group.

The restriction imposed by COVID-19 has caused a decrease in energy demand. How do you think the market will react in the near future? In the post-emergency phase, what could the sector look like?

Incertitude is still high on the way to return to “normality” and even more so that it may differ substantially from one region to another. The WEC is presently exploring, with the community of its members, various possible scenarios that will be completed in the course of the next weeks to come. Of course, economic and the sanitary situations will be key. The drop of GDP, because of the COVID-19, has been second to none in the recent history (and thus its consequence on the level and the structure of the energy demand) and the virus is still active in some regions as second waves of the pandemic cannot be excluded. Public interventions will be crucial for economy (and social impact) and it may take a long time before a vaccine is made available (if ever) at a large scale. In this context a clear majority of our WEC members (more than 3000 members in 90 countries) share the opinion that recovery will take a long time, namely more than a year and possibly much more. On the short term, two items will focus attention: resilience and digitalization.

1) Resilience of the energy systems will be reassessed in respect both of the impact of large pandemic (in general major disruptions) and of the excessive dependence on some elements of supply chains. Responses will take time to be implemented but a reduction of the global interdependence by production relocation for some value chains will gradually be favored.

2) Most of the energy companies also indicate that acceleration of the digitalization of their systems will be one of their priorities in the next future. But, more fundamentally, the COVID-19 may reinforce trends that were already dictating evolutions referred to as the Energy Transition.

Thus, the questions are a) will the COVID-19 accelerate the Energy Transition and b) what opportunities does it open for post-COVID energy policies? It is largely accepted that, post COVID, there will be no return to the former normality but to a “new normality”. This new normality will be characterized by more focus to resilience, more digital and electrified energy systems, stronger push towards decarbonized society et energy usages, emergence of less centralized organization as well as consumer centric-systems, and even a noticeable change of consumption and life style. There are some good reasons to think that the COVID crisis may be an accelerator of the transition in particular because of public opinion inclination and because of growing intervention of governments (see the European Green Deal, indication by some governments that financial public sup – port will prioritize project favoring emission neutrality, …). However, important conditions need to be met for this to happen, in particular:

a) Before the pandemic, volumes of estimated investments needed to meet the future energy demand were extremely high (in excess of 700 billion USD per year only for electricity generation). Acceleration of the energy transition will increase that number substantially. Will the energy companies (and the national budgets) be able to finance such efforts is far from being granted as many incumbents have been severely impacted by the pandemic episode? Incidentally, it could be anticipated that this situation results in several corporate restructuration and reorganization within the energy sector.

b) Given the level of uncertainty on many of the issues regarding the future energy picture (technology, pace of change, social acceptability, …) regional and global cooperation would be highly desirable to reduce the risks and share the financial burden of the transition. Whether conditions for such cooperation can be met in a period where fragmentation of the international relations and the level of conflictuality (trade war between China and US, political instability, emergence of new actors, dramatic impact of economic drop on the developing countries, immigration…) seem to increase.

c) And finally, as WEC COVID-19 last scenarios show, the human quality of the ambition and trust will be a determining factor for investor, governments, and increasingly other stakeholders to rethink resilience, enable sustained behavioral changes and move away from quick win agenda to a structural analysis and cooperation shaping the energy agenda for the future.

As a neutral and engaged platform, WEC is committed to bring its contribution to make this transition possible for the benefit of all.

The post lockdown debate concerns measures that can stimulate recovery and favor economic development. To exit the crisis, from many quarters comes the indication to focus and invest in renewables. What is your opinion on this?

COVID-19 or not, the world seems not to be on the trajectory set by the Paris agreement and in most of the reasonable scenarios the Paris objectives appeared difficult to reach at least in the expected timing. It was also clear that the substitution of coal and oil for power generation by renewable or nuclear sources would not even be sufficient in the long term and that, in any case there is limitation into the electrification of the global mix as well as to renewable as a single option. Investment in renewable therefore need to be boosted significantly especially given the level stated in the last two years. For that reason, support by public policies are largely welcome particularly to those of the non- fossil fuels which have reached or are close to reach economic competitivity. How to implement such sup – port policies have to be decided on the basis of local contexts but social and societal dimension of one instrument or another must be carefully scrutinized to ensure social and local acceptability.

At the same time, it must be reminded that a one-sided solution is a risky one. It is why even if most of the power generation can be decarbonized, if the peak oil will probably be reached in the course of the next decade, it is also clear that the role of hydrocarbon (oil and natural gas) will be maintain at a very high level still for the many years to come. As a consequence, it is also of the upmost importance that investment is maintained at the necessary level to produce such oil and gas as needed but even more to favor all the ways to “decarbonize” the oil and gas usages (carbon capture and storage, improve efficiency, net zero emission process, ….). In a word, there is not one given solution but a mix of solutions that needs to be put in place with a systemic and realistic vision.

A recent analysis by CESI shows the need to implement, even more quickly, the imperative flexibility measures in managing a system with high penetration of renewables, especially from a COVID and post COVID-19 perspective. In your opinion, what are the most urgent investment to be made in the electricity sectors?

More generally there are some important clarifications to be made to identify the future outlook of the energy picture. I mentioned earlier the necessity to further explore the ways to “decarbonize” the utilization of oil and gas. For the expansion of electrification as well as of the share of renewable into the power production the most critical bottleneck is the development of adequate technology for the storage of energy. In addition, as the share of renewable increases, as the emergence of de – centralized power production grows and as the role of customers (or “prosumers”) become a reality, there will be a need for an adaptation of networks regulations as well as adaptation of the networks (transmission as well as distribution) operation (further digitalization, new commercial instruments, …). The role of hydrogen should also be clarified for the future given its potential role in sector that are not easy to decarbonize including but not limited to the mobility one. In the above topics, there is room for public policies to favor R&D and support investments. I cannot but conclude by reminding that a very significant part of the world population (more than a billion) has not yet access to a modern source of energy. There are solutions and opportunity to bring to those populations’ solution adapted at their need un – der the form of clean and sustainable energy form. It should be also a priority for the investments to be directed towards them since it is not likely that an energy transition that would not moderate or remove the inequality it may create can be a successful one.

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