#32: International Energy Agency



Fatih Birol, executive director, International Energy Agency



I would expect that the next administration will give a big push to research and development, therefore innovation, therefore making several key clean energy technologies ready for the markets.

Fatih Birol: My name is Fatih Birol, I am the head of the International Energy Agency in Paris.

Robert Armstrong: Thank you, it’s great to have you on today. Before we get into a conversation about the clean energy future for the world, I thought I would just ask you a few questions of a more personal nature, just to let the audience know a little bit more about you. Let me start with a question about you and your position in the IEA. I understand that you’re the first person who’s ever led the IEA after rising through the ranks. You started as a young analyst. What has that transition been like? Do you miss being an ordinary staff member?

FB: Thank you very much, Bob. You are right. I am the seventh head of the IEA. We are almost 50 years old, International Energy Agency. Before me, we had distinguished heads of the IEA, mainly coming from the capitals of the IEA member countries. Just before me, we had the former Economy Minister of Netherlands, but I was very fortunate, Bob. I started as a young analyst, as they call it a number cruncher, and doing very junior work. I was lucky enough—20 years after I started to become the head of the IEA, elected unanimously by all IEA member countries. Once again, I was reelected only one year ago and still continuing. I was a young analyst, enthusiastic at that time, 25 years ago. I am still enthusiastic and the head of the IEA and still young, I can say.

RA: That’s great to hear. Did you always know you wanted to work in energy back when you were a student? I think you were an economist by background. As you were studying economics, did you have your heart set on energy?

FB: I studied both engineering and economics. In fact, my dream job was being a football player and I didn’t go far there, but I still love football. Then after finishing my engineering degree, I started to make some movies and I was assistant director of several movies. I shot movies myself. Then after having no money left, I started to look at what the other real-world options are, and I ended up being energy economist and I am very happy what I am doing now. Both football and cinema are great patients for me still.

RA: I know in normal times you do a lot of traveling. I’m curious, in the face of Covid-19 and the crisis we’ve been living through globally, what are the biggest personal challenges you’ve faced because of this lockdown and travel restrictions?

FB: I miss human contact. I think many of us have the same challenge. Through these webinars, telephone calls, they are also, of course, good supplementary solutions, but I miss human contact, to talk with my colleagues, my friends, to have a chat with them, joking with them. Without seeing the body language, without having a real contact and not being able to having a cup of coffee together or a glass of wine, it is really not so funny, as they say, the life. I miss it very, very much, more than traveling. The human contact, I miss it very much. I hope that we go back to those days as soon as possible. Of course, I also miss to visit my daughter. She’s in Washington, D.C. I cannot fly over there. My mom, who is in Istanbul, I cannot visit her as well. These are big challenges.

RA: Our listeners can’t see it, but it looks like you’re in your office at the IEA. Are there many others in the office? Is the IEA getting back to normal now?

FB: Not yet. I would say 95% of the colleagues are working from home, but I come to office. A few colleagues company me just to have some institutional issues to look after them. I feel more at home in the office than I am at home, to be honest with you, because I spend a lot of time here. I have a very nice office. I am very fortunate, Bob. I have a very nice view of Paris. It’s a beautiful city, Paris, as you know. Therefore, most of us… I talk with my colleagues all the time. They are also looking forward to come to office and have our normal life in the office. Hopefully sometime soon.

RA: I know one of your great strengths, and you have many great strengths, but one of them is that you seem to be an eternal optimist. One of those aspects is that you seem very optimistic about the world’s clean energy future in spite of the Covid-19 crisis we’re going through right now. Could you tell us a little bit about what underpins your optimism?

FB: A few reasons. One of them is, as you know, Bob, I work with the governments around the world closely every day, talking with the minister of India or Canada or Japan or UK. After so many years, I feel that there is a growing political momentum and this political momentum… also the recent developments in your country, Bob, I think it will give a very strong signal to investors where the direction is, where the future of energy is. This is the first reason why I’m optimistic.

The second reason is that several technologies, especially renewable technologies are becoming cheaper and cheaper. They are cost-effective. Ten years ago, solar was a romantic story. It is not anymore romantic story, it is becoming… in terms of investment, it’s a very lucrative investment opportunity in terms of energy, so is wind. I expert offshore wind also will go down; the costs will go down soon. This is the second.

Third, there are technologies which are not ready for the market, but there’s a lot of momentum for those technologies, ranging from carbon capture and storage to hydrogen, from hydrogen to batteries. I see that there’s a momentum coming for those technologies as well at different stages. It is not for the governments, but I have another hat, Bob.

I am the chair of the Davos, World Economic Forum on Energy. I talk with the business leaders. I see that many companies are positioning themselves for the next clean energy technology to come, and their portfolios are redesigned.

Putting these three things together, growing political momentum, getting cheaper renewable and other mature technologies, and seeing a lot of strong science about the technologies that we need badly in the next years to come, but not ready for the markets, all of these three things together make me really optimistic.

RA: That’s great. Alongside of those positive trends, what are some of the big challenges that we’re going to need to overcome to get to a clean energy future?

FB: I think for me, the biggest challenge is that the world, especially advanced economies, do not get yet that the biggest part of the efforts need to take place in the emerging world, because a big part of the emissions will come from Asia, will come from Latin America, Africa, where the clean energy investments need to take place. When I look at those countries, there are serious investment risks now, and neither the monetary nor the financial options are there to respond to those risks. I am really cautious to be optimistic about the developments in the emerging countries. Because, as we all know, Bob, I’m sure you know much better than me, one ton of emissions going to atmosphere from California, or from Jakarta, or from Paris, or from Johannesburg, it has the same effect on everybody.

Therefore, we need a global effort there. I am worried that those efforts may not be as strong as we would like to see from the emerging world.

Therefore, I made in the IEA a priority of our efforts to accelerate the clean energy transitions in the emerging world.

RA: As you look ahead, are there chances to put together coalitions that can help us go faster? How do we bring the developed world together with developing countries to make this faster?

FB: Yes, this is very important and we know that today more and more countries around the world come up with some pledges to having a net zero for 2050. Europe has started, UK came on board, Korea, Japan. China came up with a plan as well. Canada, maybe soon United States. Now, they are building architecture, as they call it, the climate policy architecture, but what I would like to see is that in order to reach those emission reductions, I would like to see which credible energy policies will be put in place, so that we can achieve those reductions.

For example, Japan, I was just talking with the Japanese minister. Japan has a 2050 net zero emission target. I would like to know, offshore wind, for example, very important option for Japan, how much offshore wind will be deployed in Japan to reach those targets and what kind of fiscal incentives, regulatory designs will be made in order for Japan to accelerate the offshore wind deployment so that we reach that. We need to know what kind of energy policies—credible energy policies—will be put in place.

As I always say, there are a lot of architecture of– they talk about the climate change, I think there is a need for engineers here, in addition to architects, in order to see what kind of real energy policies will be put in place. This is my preoccupation and we are trying to bring a group of governments, business leaders, financial institutions together, in order to accelerate the clean energy transitions.

RA: I know one of the things you’ve done as executive director of the IEA has been to bring more emerging economies into the fold. Has that been driven by your realization that we have to get these countries involved in climate change in order to meet climate goals for 2050 and beyond?

FB: Exactly, because when I took office, the IEA countries’ share in the global energy consumption was about 40%. In the last five years, we had China, India, Indonesia, South Africa, Mexico. Eight, nine countries are now part of the IEA family, because the action, if I may say so, is there. The energy demand growth is there, investments are going there, emissions are coming from there. Without engaging with them, without working with them, we have no chance whatsoever to reach our energy and climate goals.

It is the reason I came up with a strategy at that time, I call it opening the doors of the IEA to emerging world. We opened the doors and a few years ago IEA was called as the rich man’s energy club and I am happy that nobody calls us anymore that way and they call us now global energy authority, which I really prefer.

RA: I think that was very foresighted to bring in these developing economies because I agree completely with you.

FB: Bob, if I may, I got the support of many ministers of the IEA countries at that time. One of the strongest support came from one of your fellow colleagues, Secretary Moniz, who was the Secretary of Energy of United States at the time. I got a lot of support from him. I just wanted to mention this as I talk with the MIT now.

RA: Thank you for saying that. He’s a great colleague and, of course, he was a great Secretary of Energy. You’ve talked on a number of key technologies, you mentioned solar and how that’s expanded and has become a cornerstone of decarbonization, you talked about wind, both onshore and offshore. To go with that, we’re going to need a lot of infrastructure to tie it together, to move energy from where we have wind resources or solar resources to where demand is greatest. I wonder if I could get your thoughts on what are some of the big infrastructure challenges, and how that varies around the world between developed and developing countries.

FB: There are, of course, several challenges, but if I have to pick up one– when I look at the trends, I see at least two important trends, which can justify the point I choose. One of them is the renewables are growing and the second one is maybe a much broader trend; the electricity is future. Electricity is growing very, very strongly and not only in terms of the lighting, or the industry, it is going beyond that. It will go to transportation sector soon, and maybe later on heating homes, and many things around the world.

Now, when I look at these two things, I think one issue that we don’t talk much in the energy world, which is critical for me, is the laying down and strengthening the grids, electricity grids around the world. Having smart grids, and linking the energy consuming, energy producing regions of a country, or between the countries, building those power grids will be important, including the United States. How do you bring the sunshine from one part of the United States to the other part of the United States, is a key issue.

Therefore, building grids, not only in the United States, but within Europe, in Asia, will be critical. I think if I have to pinpoint one key infrastructure challenge, it is the grids, which unfortunately doesn’t enjoy a lot of attention from the policymakers around the world.

RA: Let me go back to the brief remarks you made about Secretary Moniz and working with him back in the Obama administration. We have a new administration coming in, in January in the US. I’m curious about your thoughts on how you might want to work with the new administration as the IEA and what do you see as opportunities.

FB: For a moment I was scared that you will ask me who will be the next Secretary of Energy United States, which I have no clue, of course, but what is my expectation from the next US administration is the following. First of all, if the next administration implements what they said before the election, namely pushing the climate agenda strongly together with the energy security, I would expect that this will give a tremendous political momentum around the world.

It will affect the investors in Japan, it will affect the decisions made in Jakarta, it will affect everything. This political momentum creation, this is number one. Number two, I would expect another thing which is, our numbers show that… we all talk about the reduction of emissions to reach net zero in 2050, big emission reductions, our numbers show that 50% of those reductions will need to come from technologies which are not ready for the market today. We have, of course, solar, we have, of course, wind, we have efficiency, and so on but 50% need to come from technologies which are not ready for the market.

Which means that the magic word for me here is innovation. When I think of the innovation and clean energy, energy, technology, innovation, United States has been the undisputed leader years and years. Now, I would expect that the next administration will give a big push to research and development, therefore innovation, therefore making several key clean energy technologies ready for the markets.

Hydrogen. When I look at, again, the solar, how the solar costs went down, it happened because many governments gave a push in the beginning and here, to see the US leadership in hydrogen, carbon capture and storage, maybe small modular reactors, this will all help. Therefore, this is the second area I would expect. Thirdly, I hope we will have a Secretary of Energy from United States coming to IEA ministerial meeting, and saying nice things about how important the international energy cooperation is, that we all need to work together.

No country is an energy island, we have things to learn from each other, we have things to share with each other. I really hope to meet that Secretary of Energy sometime soon.

RA: It’s good to see you keep your optimism and that this refocus on innovation, I’m reminded of the Paris Agreement, where Mission Innovation was one of the major themes there and the commitment by, I think, 20 countries to increase their spending on basic, or fundamental energy research. I’m happy to say that, I think, the U.S. has continued to do fundamental research in energy and increased that spending, but I think as you point out, we need to move those innovations and those fundamental science discoveries into the marketplace, where they can be deployed to actually reduce emissions.

CCUS is one of the technologies you have mentioned, that’s a technology that we’ve had in place in the sense that we know how to do it. It obviously costs more to capture CO2 and sequester it than it does to emit it. That suggests that we likely do need a price on carbon. Do you see opportunities there globally for some way to price carbon, whether it’s a price itself or a cap in trade system?

FB: In Europe, there is only the price on carbon, in some parts of the world there are such applications, but to see an international carbon price in order to not have a leakage there, seems to be very efficient, but politically very, very difficult. Therefore, I would again, look at the governments to find different ways. For example, 45Q, the tax credits, is a very good move from the United States. Norwegian government, UK government are putting a lot of efforts on the CCUS.

In my view, Bob, I have no love or liking any technology. I have the same arm length to all of them, but when I look at the numbers, in the absence of CCUS to reach our climate goals in 2050 will be all but impossible, because of the legacy issue we have, the lock-in infrastructure we have. Looking at what is happening in Asia, today coal is still 38% of the global power generation. Cement industry, iron, steel, all of them, they require a technology such as CCUS and this is a very important technology.

I know that from the announcements before the election, the next administration made clear that CCUS will be one of the key technologies they will look carefully, which is a great hope for all of us.

RA: Good. Those are very interesting and helpful thoughts. It’s always good to talk to you, Fatih, because of your optimism and because of the extraordinary breadth of your understanding of the global energy system coming out of your work with so many countries around the world. I thank you once again for sharing your insights with us. I look to have you visit us at MIT when travel bans are lifted, and you can start to move around the world again, because I certainly share your loss of human contact. I think that’s an important piece we want back.

FB: I thank you very much, Bob, for this opportunity and it would be a great honor and a pleasure to come over once again to MIT to see you, to see other colleagues and to talk and discuss with your students and your colleagues. It’s a great pleasure. Thank you very much.

RA: Great. Thank you.

Policy and economics

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