Read the full transcript of Gerard Reid’s talk titled “Welcome to the Era of Energy Disruption” at TEDxBerlinSalon 2024 conference.
Listen to the audio version here:
TRANSCRIPT:
So lovely to be here. I’m going to try and persuade you all that we’re going through a revolution, and that it is not a transition. Okay. We hear this phrase quite a bit, and I’m going to start by saying from my perspective, there’s four drivers. The first driver is solar technology. The second driver is batteries. And the third is what I call energy intelligence because I couldn’t think of another phrase. All right. And the fourth one is a country, and it’s China. Okay.
Solar Technology
So let me just start with solar. I want to say we have never seen a technology come to market as quickly. So if we just take the case of nuclear in terms of energy produced, we’ve just actually caught up with it in terms of solar this year. So in other words, there’s as much electricity generated this year from the whole solar fleet, which has taken ten years to actually develop, as opposed to the nuclear fleet, which has taken 50 years. Right.
The question is, why has that happened? Why it happened is it’s a semiconductor technology, right? It’s scalable. And what we’ve seen is technology improvements, which means the performances have got better and the costs have gone down right. And the second thing about it, it is easy to install. No offense. If we decide tomorrow we’re going to go and install a nuclear plant. Ten years later, we might get it finished. All right. If I want to put a solar panel and get electricity from it, it’s done in two minutes. All right.
The other thing is, I come from the finance world. Well, the finance world realizes it, too. What does the finance world doing? The finance world is putting its capital not into oil. It’s putting it into solar. Right. Last year, really, really big year. More capital globally went into solar and oil. That’s the first technology.
Batteries
The second one is batteries. And in particular, if you look, batteries have been around for 120 years. There’s been little or no innovation in about 100 years. We still use lead acid batteries, which were invented 100 years ago. And then came lithium ion. And lithium ion has changed our world. Right.
And the reason is, is because you’re going to get more energy out of a out of a kilogram weight of the battery. Number one. And the cost reductions have been enormous. Be really clear. None of the mobile phones that you have today will be there without lithium ion batteries. If you had a lead acid battery, I’m sorry, you’d be carrying five kilograms. It doesn’t work, right.
But it’s not just the digital world that we’re in, right? It’s also the automobile. And if you just look, you’re seeing record automobile EV sales across the world year after year after year. And there’s a big reason and it’s coming to Europe. And that is we have now got cost parity between the internal combustion engine and the EV. In China today.
Now that is a really, really critical moment because to run the car, it’s cheaper already and it’s more fun to drive. You can see where I’m going right. We’re going to go on electrified transport because it’s better and cheaper. Right. And I also want to make a point as well. It’s not just actually cars in particular, it’s scooters. If any of you go to South Asia today, 95% of scooters are electric. It’s only us in Europe here that go still drive around in Vespas and buy Harley-Davidsons. Right. Be really clear. Right. The world is not using it because it’s a better technology. It’s cheaper to run, cheaper to buy, and good for the environment. Right. So that’s that.
We then also have to look at what’s happening is we’re actually solarizing the world of electricity. This is California and this is just any day I could have taken any day. The yellow is what you see is solar production. Now what’s very interesting is the green production. The green is batteries. So what we’re doing is taking that solar power and putting it into a battery so that when the sun is not there, we’re using it, right? It gives you an idea where we’re going in the world that’s happening in California today. And it’s happening in a lot of markets across the world.
The other thing that’s happening is if you go and put solar panels on your roof today in Germany, you put in a battery. Why? Because the economics of it makes sense. Why would I sell it into the grid to buy it back at a higher price? Madness. I use the battery. Okay. Economics are driving this, not subsidies, right? That’s the second point.
Energy Intelligence
Next point I call energy intelligence. And energy intelligence is a mixture of different things. First and foremost is connectivity. You have to connect things together, right? You need to be able to control them from a different place. Second thing, power electronics, which we totally ignore. I’m going to talk about this in a second. Software and AI right.
And all of this means that actually you can manage electricity and power in a completely different way than before. Let me give you an example of power electronics, because we don’t think of it today.
We put solar on our roofs here in Germany, €1.50 per watt. That’s the cost. And by the way, you’re generating electricity at probably $0.10 a watt. That’s one third of what I’m buying from the grid. Okay. Balcony. Solar balcony. Solar is plug and play. I don’t need an electrician. It’s done in one minute. I can hang the thing anywhere and I plug it into a socket.
I have no installation costs. Guess what? You can see what suddenly happens. I’m actually generating power in Germany from my home installation at a price. That’s one fifth of the price that I’m buying it from the utility yet. Okay. You see where I’m going? That’s.
You know, we’re going to go do more and more of this because you can’t block it. Right now what I does though, which is very interesting, it also is about efficiency because there’s a huge amount of energy that’s lost in our system, mainly because we’re burning it and because we lose control of it. AI enables you to do that. It enables you to reduce actually, the inefficiencies in the system. So there are three technologies.
China’s Role
Let me move on to China. China is financing the energy revolution. It is not Europe and the US. It is China. Okay. If you look at the amount of expenditure they are putting into factories, into installations, it’s, you know, four times the combined amount of the United States and Europe put together. Right. Nobody is scaling any of these technologies like the Chinese solar, wind, EVs, batteries. They’re leading all of them. Right.
But not just the installation of these. They’re also leading the production of key energy technologies, whether it’s solar or the parts that go into a worm. A wind turbine. Or they go into an EV car. They lead all of them, and they also have access to all the materials, because they had a very clear vision of where the future is going to the next slide, more concerning, because we think here in Europe that we’re leading from a technological point of view and the Europe and the China is behind. Not true. Okay. Clean energy patents Chinese are way ahead of Europe and North America. And there’s a very good example here.
Yutong is the largest EV electric bus manufacturer in the world. Catl is the largest battery manufacturer in the world. And Catl just brought out a new battery, and it’s got a 1.5 million kilometer warranty on it right now. My Tesla does not have a warranty near that. It has a warranty of about 300,000km. So just again technology. Right.
Implications
So what does this all mean? What this means is we have a new world of energy. It’s very different in the world that we’re in. And I’ll start with the really positive thing, which is my view. The world is very close to peak carbon emissions. All right. bottom line. When China peaks, the world peaks. So the question is, when does China peak? China government plan is 2030. I’ll put money on it. That’s this year. Okay. It’s this year. And the reason is because the scale of electrification in that society and the scale of renewables ization.
Now, what happens if China peaks the world peaks, right? Because the world will not follow the West. They will follow what China has done. All right.
The second point I would make also is that electrification means that less raw materials come from the ground. This is very important. I hear this again and again from fossil fuel lobby. “Oh, there’s not enough lithium out there. There’s not enough copper out there.” This is ridiculous. There is. All these materials are there and you can recycle them. I cannot recycle that coal. Once it’s burned, it’s gone. Right. And then we have to try and take the carbon out.
Next thing. Very clear. We’re close to peak oil demand, right? You can see what OPEC does every few months. What they’re doing is they’re reducing supply because demand is not going up the way they expected it to. Okay. And the more you electrify, the more that happens.
I’ll also make a point as well. We will totally electrify our system. I call it deep electrification. That’s how you decarbonize. And the reality is all our digital devices don’t need oil. They don’t need gas, they need electricity . Okay. I have no electricity. You can’t do anything. It’s all about electrification going forward.
We will also build a power system around renewables. And the reason is it’s low cost. History of any form of energy transition over the last 1000 years. The lowest cost form of energy wins. And it’s not nuclear, okay? It’s not. It’s a niche market technology very, very difficult to install. Nobody’s built one in the Western world on time or on budget in the last 15 years. A finance guy not going to do it right. I’m not going to do it.
Next point I would say, is we’ll build a radically different system. The system was built for. We basically built power plants outside a city, bring it into a city and distribute it. Now we’ve got two way power flows. And guess what? So you’ve got EVs in there. You’ve got heat pumps. You’ve got storage. You’ve got heat storage. Suddenly it all changes and it’s all connected together. So we totally different system than what we had in the past.
I make a point about the global South. The global South will follow China. I’m going to use the example of Pakistan. So just to give you an idea, if we sat here two years ago and you asked me how much power will come from solar in Pakistan, I would have said a half a percent. This year it’s 10%. Just hear what I said. 10%. So 10% of all power. And the reason is, is because it’s so cheap and it’s at the commercial level. It’s at the residential level. They’re all doing it right. And that is what will happen in the Global South. They will not do what we’ve done. They will do things in a completely different way.
I also make a point as well that many of the incumbents will not fail. Volkswagen definitely has their Nokia moment. Whether they’re going to survive, I don’t know what I will say is that BYD and I give you an idea. The gross margins on their cars are 50% in Germany today, as opposed to 20%. Volkswagen. What that tells you is that costs of production are way lower. All right, so guess what happens. Volkswagen has to restructure or nobody’s going to buy their cars in the future because the Volkswagen ID4 is not as good a car as the BYD seal. So why would I buy it? Right.
Also, make a point as well. There will be huge resistance from incumbents, and incumbents are not just oil and gas companies. They’re not just the automobile industry is also an incumbent. They’re coming from an old world, right? They’re not coming from a new world. They’re coming from an old world. Right.
And I also make a point as well, that I would believe that there’s going to be quite a redistribution of global wealth. If you see any energy revolution we’ve gone through. Think of oil and gas at the beginning of the 20th century, Henry Ford, etc. , etc. it was all led by the United States. Now we have this being led by China. China realizes the importance of it, I don’t think in Europe and the US we realize the importance of it.
What I will say is positive surprise is going forward and the positive surprises are. I’ve seen so many of them in the technology area. It’s incredible. I will say, where the big surprise is going to be for me, it’s in storage. If you’d have said to me ten years ago, Jared, we’re going to elect a freight planes, I would have taught you you’re smoking dope. I’m not saying that today, and I’m not saying it because of the amount of brilliant people that are working across the world, innovating and doing research and development.
Seattle Chinese business 18,000 people in R&D. Okay, Northvolt has 4000 employees. That’s Europe’s number one battery manufacturer, which is on the verge of bankruptcy. Okay. How are you going to compete? Right. It’s R&D. That’s how you compete.
Conclusion
So what do I end with with this I say finally, my opinion. We’re entering a renewable era and that’s renewable era is full of opportunity and challenge. Opportunity is to China going, hey, we don’t have any technology in internal combustion engines. Let’s jump on electrification. Let’s dominate. Okay, challenge. We’re stuck in the old world with a whole pile of incumbents that prevent and block change. That’s what we’ve got.
And I would say to my last message, and this is as a European and this is as an Irishman living in Germany for years, that’s us. We’re sleeping. And my message to all of you in the room is, please, we need to wake up and change quickly. And for those who have not been to China, go to the country and see what’s going on and understand the competitor that we have there and their competitors, great for the environment.
But I’m concerned as a European, whether that competitor is just too strong for us. And that makes me concerned for our future generation here. So that’s my final words to you guys is please wake up and move quicker and lose a little bit of the arrogance. Thank you very much.
