Sun, wind and gas – that's all we need.

A discussion with Jürgen Fuhlrott, the chief strategist of Open Grid Europe, about perspectives and prospects


Welcome to the roof of Open Grid Europe. Up here we can enjoy the view and discuss the future as we do so. What comes to mind when you hear the word “future”?
For me, the future is about movement and change. I, and indeed people in general, have the power to influence the future; sometimes positively, unfortunately sometimes also negatively. “Future” is a relative term, because as we all know, today will soon be yesterday. If we keep one eye on the past and learn from it, then we can make the right decisions for the future. One thing’s for sure: the future will be tremendously exciting.

When you think about the future, are you thinking more about five years ahead, or ten, 25 or even 50 years from now?
That depends on the topic to a certain extent. For example, we look at market developments and the regulatory framework and think about how things will change, or how we will develop them. In this sense, it tends to be around two to five years ahead. However, we are also looking at our product, i.e. what we transport. How much longer will natural gas continue to play a role in the energy mix and will it play a significant role? Here, we’re thinking about ten or twenty years ahead, or even further.

Do you think Germany is a future-oriented nation?
In all honesty, no.

Why’s that?
I base my answer on two things. If I consider the political side, then I see that most politicians only think up to the next election. If I consider the economic side, it’s clear to me that many business leaders only think up to the next quarterly figures.

I believe such timeframes leave no room for future-orientation. The future is not a sprint, it’s a marathon. Decisions have to be taken that will endure beyond four years. That’s why I say no.

Is there a topic that you regard as positive in relation to Germany and the future?
I find it hard to identify any of the most crucial areas where we as a country are following a consistent path. One example that I’m very concerned with personally right now is refugees and refugee policy. On the one hand, we create space for people from war zones who are in need of help, yet on the other hand, we are sending back people who came to Germany from the Balkans some years ago because their countries are now considered safe countries of origin. To me that looks as though some people need to be sent home to make room for others, which is certainly not quite the case.

What’s missing as far as I am concerned is the bigger picture, for example the overview of demographic development. The global population is growing, but Germany’s population is declining, and according to estimates will decrease by five million in the next twenty years. The current situation presents us with the opportunity to integrate young, motivated people, which, as things stand today at least, is not yet happening. I see this as a key area where there is a lack of future orientation.

What are the other crucial social topics that need to be tackled in Germany?
Relevant topics are the energy transition, nuclear decommissioning and CO2 reduction. I also think too little attention is given to the question: “How can I bring about world peace?”

Let’s move on from Germany to talk about Open Grid Europe. Is Open Grid Europe a future-oriented company?
Yes. We keep a close eye on the issues that affect us: the energy transition, regulation, market development. Also questions such as “What are the developments in Germany? What are the developments in Europe? What are the developments in the area of gas?” We have established a strategy with the four pillars of “innovation, security, growth and optimisation” that takes these very factors into account.

Open Grid Europe is future-oriented as a company; we have identified the relevant themes. Naturally, though, there is also resistance to be overcome in order to really move forward in a way that is consistently future-oriented.

Could you please just define for us what “future-oriented” means to you?
Being future-oriented means, for example, recognising the direction developments are taking. In areas such as regulation and market development, for example, we can draw conclusions as to where we’re headed – also by scrutinising our activities, in other words what we’re doing and what we’re producing. “Will that be significant in the long term and if so, what does that mean for us?”, “What can we do to ensure it remains significant in the long term?” In principle, we are a “one-product” company; our product is transportation of natural gas in pipelines. This issue should motivate us. Will the product be around tomorrow? Will I perhaps substitute natural gas for other gaseous substances so that I can continue to use my infrastructure? Do I need to develop other areas of business that operate alongside this core product? That’s what future-oriented thinking and action is all about.

Your definition of “future-oriented” relates closely to being proactive. Is that in itself a contradiction for a company or a stakeholder in a regulated environment, which is essentially reliant on the decisions of others?
This is the very question we asked ourselves when we developed our corporate strategy. Does a regulated company even need a strategy? The answer to this is as short as it is easy: of course we do! Regulation certainly has a significant impact on our business. It determines such matters as “How is network access organised?”, “How are earnings regulated?”, “What are we allowed to earn?”. Yet regulation does not give us answers to questions such as: “How do we implement collaborations?”, “How can we develop our market further?”. We need to answer questions like these ourselves. Neither does regulation answer such questions as “Will the product we transport actually continue to be used and what action can we take here?” This is where we need to act ourselves. Waiting and hoping that the other stakeholders in the value chain will act is the wrong thing to do.

There are various different time horizons when looking towards the future. Let’s start with five years. What are the trends or opportunities over the next five years? What are the questions we as Open Grid Europe simply have to address?
Regulation is a key topic we cannot fail to tackle; the energy transition is another. And then there is the big question of our product. With natural gas as a product, however, we’re talking about periods of ten to twenty years, even though the course must be set for these issues within the next three to five years. What this means for us specifically is that within this timeframe we need to argue the case for natural gas as complementary to renewables, promote it accordingly, communicate the message and anchor it in the right places. Now is the time to act on this topic.

So, natural gas as a partner to renewables! Is that a role that is really justified, or is that merely wishful thinking on the part of those representing the natural gas industry?
A bit of both, I think! Proponents of other energy carriers would no doubt say it’s wishful thinking. But we also have to bear in mind that sun and wind cannot provide for us alone. They need to be supplemented. Nuclear power – at least in Germany – is a definite no-no. Coal and oil are major CO2 offenders. So when it comes to the cleanest possible means of supplementing renewables, gas is a good option. My personal slogan here is “Sun, wind and gas – that's all we need.”

Is the role natural gas can play in the energy transition merely an interim one?
That’s a good question. The real challenge of the energy transition lies in finding a way to store electricity. As far as mere quantities are concerned, we have enough wind and sun to cover our energy needs, but not always in the way we need them. If we can manage to store excess energy from sun and wind, then we will still be able to put the lights on during cold winters. Yes, maybe gas counts as a “transition technology” here. But if we are able to ensure storability via gas, via hydrogen or via artificial natural gas through methanisation, then we’re talking about a long-term supporting role that enables us to continue using our infrastructure long into the future.

Do you go through scenarios regarding what Open Grid Europe will have to do if we don’t manage to establish “methanisation” as a lasting component of our business model?
We need to set ourselves up as broadly as possible; we need to have a plan for the future. The basis for this is the right answers to questions like: “Will we be able to maintain natural gas production in today’s order of magnitude?”, “Will we discover that gas cannot be made available long-term in this order of magnitude?”, “Are there alternative products we could transport with our pipelines?”, “Which other areas of business could we tap into?”. Think-tanks are firm fixtures in our company. They look at future topics and questions, such as: “Is LNG as a liquefied gas a potential substitute we could work with even if it is no longer transported in pipelines?” In my view it would be grossly negligent to have no plan B.

Our original product is the transportation of natural gas. Earlier you hinted that it may not necessarily always be natural gas. Are we as Open Grid Europe therefore not actually reliant on one product alone?
As things currently stand, we transport natural gas in our pipelines. However, we also talked about the conversion of excess electricity into hydrogen (methanisation). Other gaseous substances can also be transported in pipelines; the infrastructure is the same. That represents an opportunity for us.

One important question for us, and one which is crucial as far as the future is concerned, is: “Is there enough natural gas?” We now know the answer to this is a resounding yes, so is there really any pressure on a company like Open Grid Europe with regard to further development? We don’t need to worry about it running out, so why do we need further development at all?
If natural gas is recognised as a partner in the energy transition, then that is further development. Further development also involves positioning and advancing that topic. Whether it will actually come to that is something we cannot yet judge with any certainty. For this reason, we need to consider how we can develop further if the natural gas business declines, how we incorporate other substances into the pipeline or how we develop other areas of business.

I agree that a change in awareness is already an example of further development. Ultimately, though, action is what counts. Will be able to come up with something specific?
We still have time, because the fundamental decision about the energy transition and its implementation has not yet been taken. But time is tight.

Our business involves depreciation periods of over 50 years. Politicians expect us to invest further on the one hand whilst, on the other, they unanimously call for a move away from fossil fuels. How can that work?
Here’s a counter-question: Does 100% renewable energy mean no more gas? I deliberately said “gas” and not “natural gas”. If I convert wind and solar power into gas as a supplementary product and then define it as “renewable” (because I have indeed produced it from renewable sources), then I’ve got a sound story and am also justified in continuing to use the infrastructure.

What projects is Open Grid Europe currently investing in?
We deal with matters relating to storing power, power-to-gas and natural gas in mobility. How can we bring more natural gas into mobility and displace fuel oil accordingly? We are looking into the question of how to introduce other gaseous substances to our pipelines. We recognise our mistakes, but I believe we still need to do a bit more and be more determined in pushing the right topics forward.

Specifically, however, it’s also about the development of technical solutions we want to make use of: demand-side management, power-to-gas. Which horse is Open Grid Europe backing?
Other concepts are LNG or small-scale LNG. It’s about tackling all these areas, because they are all going to help with gas going forward. Our tasks are to research potential and to develop business cases to be sure that we are backing the right technologies. Personally, I’m very convinced by LNG.

In the regulated business, are we only allowed to do projects when it is clear beforehand that they will pay off?
Allow me to rephrase the question a little differently: I would change “allowed to” to “want to”. From a regulatory perspective, we are certainly allowed to pursue other areas of business. If such other business is in any way related to natural gas trading, then we need to be careful because of unbundling regulations, but we are certainly permitted to pursue other areas beyond the transmission of natural gas via pipelines. So now I come back to the “wanting to”: you need courage to take a shot at something when there is a risk that you miss the target. You don’t necessarily have to start with the risks, which in a worst-case scenario could cost several million euros; instead you can start small and perhaps risk a few euros in the process, even if there is a chance it won’t work out.

How high is the investment budget – i.e. for R&D – at Open Grid Europe?
It’s clear to everyone that we need innovation to develop further, and that costs money. We are currently discussing how much we are prepared to spend on innovation.

Before, you mentioned the significance of political communication. Does that mean that Open Grid Europe should become more engaged in the political sphere?
We as Open Grid Europe should develop and argue the case for our own opinions on energy-related topics. And we’re on the right track here: already, we are well known in the political arena. After the introduction of Open Grid Europe, the first hurdle was making the name known; the second hurdle was positioning it in the political sphere. We are working on this continually and intensively. Over the last few years we have been visible in Germany a great deal; now we need to direct attention more towards Europe and the European dimension. It’s important to recognise that we don’t have to do that alone and, in the long term, we won’t be allowed to do it alone, or we might find ourselves a lone voice in the wilderness. We talk about the product and about the entire value chain and that begins with production, moves on to transport and storage, and then extends to the traders. All of these have a shared interest in speaking up for natural gas.

As a pure transmission system operator, do we have any way of influencing sales of natural gas?
We are not a trader, we don’t sell gas. But we can certainly create the prerequisites, on the one hand by supporting promotional measures for the product, but also by making the market attractive – the key concept here is the European energy market.

The European energy market will develop further, for gas and electricity; we’re keeping a close eye on it where gas is concerned. The next steps are heading towards creating cross-border trading points which will make the market more attractive and attract more gas. Attracting more gas means potentially developing price advantages and thus, in turn, generating more sales. We are observing this intensely, and we’re working on projects to develop the market area in which we operate in a European direction, even though we might feel resistance at some points.

I am convinced that the development of a core European market in which – thanks to its market potential alone – Germany plays a central role, will soon also be recognised on the political side as an important, sensible step for this country. The important thing when it comes to taking a first step towards Europe is finding the right partner. Here we will no doubt need to consider how future supplies of LNG can be better integrated into this market.

Quick-fire questions

Do you believe in the convergence of electricity and gas?

Yes.

What does your car run on?

Diesel.

What type of heating do you have at home?

Gas.

How old is the heating system?

Just over ten years.

Are you affected by the L/H-gas conversion?

Yes.

Does it worry you?

No.

Why’s that?

Because the gas industry will pull together to make it work.

Thank you for these insights and outlooks!

The interview was hosted by Alexander Land, Head of Communication and Energy Policy at Open Grid Europe, in the summer of 2015.