Energy Transition Now Podcast – Episode 30 “Achieving Sustainability in Offshore Wind”

David Linden [00:00:06] Hello, everyone. I’m your host, David Linden, the Head of Energy Transition for the Westwood Global Energy Group. And you’re listening to Energy Transition Now, the offshore wind miniseries. The offshore wind industry has a key role to play in creating a more sustainable energy system. And if you’ve listened to our last few podcasts, you’ll be very familiar with the huge growth ambitions of this industry. But the scaling of offshore wind will generate more carbon creates a greater demand for materials that need to be sourced from around the world. And bigger wind farms will also have more of an impact on the marine environment. So a fundamental question the industry needs to ask itself really is how do you scale while also maintaining your sustainability credentials? To discuss the theme of sustainability in offshore wind. I’m really pleased to have Maximilian Schnippering, the Head of Sustainability at Siemens Gamesa here with me today. Maximilian, a warm welcome.

Maximilian Schnippering [00:01:15] Thanks David. Really delighted to be here today with you. I think the energy transition is one of our greatest challenges that we currently work on and make it a sustainable energy transition. Really keen to discuss a little further today what we can do with you.

David Linden [00:01:31] Perfect. Thank you so much, Max. You know, I’m very keen and interested in this topic because it’s something that sometimes people forget about when they’re saying, well, it’s already a renewable energy source, so why are we talking about sustainability? So hopefully this will open some people’s eyes a little bit. Okay. So let’s start with some of the basics, as I usually like to do on these podcasts. But, you know, the opening sort of thought process here really is how sustainable is today’s offshore wind industry? What are we talking about as an industry?

Maximilian Schnippering [00:02:06] Yeah, that’s a really good question because for us it’s always important that we keep the right perspective. When we talk about the wind industry and in general, we can already see that wind has become, from pricing perspective, a very competitive energy source. But also if we look at the carbon footprint, that one kilowatt hour of wind is at the end also producing somehow. And the analysis is showing that like for one kilowatt of energy produced by a wind turbine, we roughly emit something like six grams of CO2. And if we compare it to the conventional coal based power plants, then we see they usually emit around 900 grams of CO2 per kilowatt hour. And this is this massive difference that we see here, resulting also in very low energy payback times where we talk about 6 to 8 months to gain back also to energy that has been used by producing through wind turbines, not one generate generators always relates to the question then ultimately, does this mean we can opt for an early retirement and a sustainability feel to the wind industry? No, because there are still impacts that we need to work on ultimately. And yeah, I think that that’s the fundamental difference which makes it so interesting and is really important for each analysis that  that we are driving. We need to consider the different lifecycle of a wind turbine compared to conventional energy systems, but you can see that the lifecycle is quite simple. It’s the raw material extraction and processing into products are pre-products, the installation of the wind turbines, then there is this long use phase and then the decommissioning at the end of the life. And for the wind turbines, the main impact is something that we see at the beginning of the lifetime and that’s something where we need to work and where we need to focus on to also further improve. Because yes, we also have environmental and social impacts, even though comparatively low, but we need to work on that and address that.

David Linden [00:04:15] Gotcha. Okay. Okay. So, I mean, it’s an interesting point because essentially you’re still building something. Right. You’re still constructing something. And people sometimes forget that everything you essentially do in this in any industry is your manufacturing. And so the question is this how’s that manufacturing process, I guess, completed and how sustainable is that process in itself? But specifically, you know, you talked about the life cycle and the kind of the whole, you know, installation to the decommissioning, essentially a process. And you said it’s at the start, but can you be maybe a little bit more specific within that? So we’re talking about, let’s say, is it the vessels that are really the, I wouldn’t say the problem, but are we talking about the vessels? Kind of the key thing here. So all your efforts should be on the vessels or if you were to break it down a little bit, where is that kind of the hot spot here that we’re talking about?

Maximilian Schnippering [00:05:16] Yeah, very good. Yeah. For the sustainability freaks out there, I think that the greenhouse gas protocol is a good, good approach to get a first view on how also best managed to carbon emissions at build transparency and very simple you divide into scope one, two or three emissions and scope one and two under our own control, while scope three upstream downstream supply chain emissions over the whole value chain. And if you take a look at wind turbine manufacturer, specifically the Western OEMs, then for all of us it’s quite comparable to that. We have a very, very low scope one footprint and scope two footprint all our own. But more than 90% of our carbon emissions are related to our supply chains and also the lifecycle is showing mainly to the upstream supply chains. So what we also did then is that we took a closer look out of this corporate carbon footprint. How is it now related to the product and production process steps and the like and what you could identify that. And if you take our wind turbines, then roughly 40% of our carbon footprint for the wind turbine is related to the tower, 30% to the blades and another 40% to the nacelle, ahh 30%. Yeah. And you can see already that the difference in complexity in here, because the tower mainly consists out of steel, the nacelle fibres, resins and then you have some additional components but they come with the biggest impact at the end. And then in the nacelle you have hundreds of products. So it becomes a little more complex. Also, if you want to manage the decarbonisation efforts ultimately, and if we take it then again from it from another angle for the different products, you also can see that for the tower it is steel and also for the nacelle mainly steel that comes with, with main impacts. We also see in the nacelle some other aspects like rare earths for example, or copper wire, for the blades it’s mainly the resins and the fibres again that come with the highest environmental footprint that we need to work on and, these analysis are really helpful because in general, the wind turbine consists out of roughly four or 5000 different products, if you want to build it. And with less than 50 products, you can address more than 80% of the wind turbines carbon footprint. So Pareto would be super proud of us breaking the 20:80 rule. We will bring it to 1:80 here. So this gives us complexity, but then massively for us ultimately again. So we had to focus on.

David Linden [00:08:09] Okay. Wow. Yes. I mean, it is fascinating, actually, that you, me, not many people really realise the kind of diversity of what we talk about here. We often talk about steel. I think when we first had a conversation, it was, you said, something around sort of 6% of global steel demand or so is actually driven by something like the offshore wind industry when people seem to say, “Oh, well, this is a massive industry”, and you can correct me if I get that stat wrong, but it’s a small portion. Of course it’s going to grow. But people often talk about steel. But hang on, hang on a minute. There is, as you say, there’s all these resins like this pool of 5000 different things to think about, different materials that we need to consider here. But if you focus on 50 and steel is any one of those. You know, that’s interesting, you can focus on 50, you get to solve 80% of the problem that we’re talking about here. So just I mean, just to get your perspective on that. One, offshore wind is still a small portion of the overall global kind of picture. So let’s not forget that apart from its credentials around being able to get a good payback time, it is still a small portion of overall pie, but still it has a very complex supply chain and complex sort of mixture. So it needs to work across a hell of a lot of different kind of supply chains essentially to be able to solve this problem. Is that, am I kind of representing that correctly?

Maximilian Schnippering [00:09:30] Yeah, absolutely. I think it’s really important for me always to flag because this was a major analysis that we did, that even though we have really ambitious build-out targets and by the way, we need to quickly transfer them into order entries so that we can ramp up also the required supply chains. But even though we have these high targets, we are still fairly low off-taker out if we go down to the material markets. So if we take a look how much steel is produced in the world or how much copper and aluminium, we are very low off-taker, which makes it very difficult also for us to act on these markets because they are often quite saturated, found in traditional industries and tend to be succeeding in this competition to secure the capacity and the quantities needed for our industry is not an easy task for us and also to secure it at good costs. Right next to that. Also having the sustainability focus, it’s really difficult to at the same time getting access to the quantities we need, but also to transition some industries to become greener, like, for example, the steel industry and getting access to green steel for our turbines.

David Linden [00:10:48] Okay, let’s come back to some of those, I am going to call them challenges because there’s obviously an opportunity in there as well. Right. And, and maybe just to start off with, it’s worth talking about. Okay, It’s good you’ve done the analysis. It’s good to understand the impact of the industry. I mean, there is the kind of the scale of the impact and the breadth of the impact is really good to understand and hopefully visualise for some folks who are listening. So why are we even talking about this element of sustainability in offshore wind then if it is a smaller portion of the overall pie, are you, are you getting essentially regulators knocking on your door going, why are you not doing this or is this the right thing to do, which hopefully we should all be saying anyway in some respects, or is it actually a competitive advantage that you get out of this? And sorry if I’m sort of taking the words out of your mouth before you’ve even started answering the question there. But you know, what’s really driving this is? It’d be helpful to have understanding.

Maximilian Schnippering [00:11:47] Yeah, that’s a really good question and it’s a really complex one. So what we see in general is that there are three pillars that drive the action and they are closely related. So we can see that the finance community and investors are focusing heavily on sustainability and therefore a lot of money is flowing currently into renewable energy, but also in green technologies around the globe. And this is changing massively the game. Next to that we see that regulation is kicking in and making CO2 a measurablecost parameter, and I think that’s something very important to quantify also these external effects that were always for free or better over the past decades, but did have an impact on us, on the environment, on social life, on so many aspects and we need to quantify it because at the end too much CO2 means also that we are not treat the resources in the way we should and carefully utilise all the potential. We have also the different resources on materials next to the devastating impact assessment on climate and catastrophic events resulting from there. Nevertheless, from regulation, we see now a lot of movement like specifically in the EU with the critical Raw Materials Act in place with the revision of the EU ETS, with the introduction of the carbon border adjustment mechanism to make CO2 footprints a measurable criteria in sourcing decisions and also in general capital allocation. I would say also when we talk from the finance perspective and this is now streamlined along the value chain and making it more and more also for our industry relevant in terms of on the one side costs, that hit our value chain, like if we want to give an example, if we take to the revision of the EU ETS, it includes now maritime transport emissions. So whenever we have vessels or ships going within the EU or from outside the EU into the EU, we will need to pay additional taxes for CO2 related to those trips. And this is something then where we need to closely follow up to manage our costs accordingly. While second also we see increasingly the reflection of CO2 footprints in auction requirements. If I remember back one of the big auctions in Denmark, also Germany and in different countries, everyone was quoting the same price. And then the lottery decided to build the windfall. And we see now that if ceteris paribus, all other parameters are equal. Sustainability should be also a decisive parameter that decides which turbines comes with a lower footprint. And we see now for many countries that they are introducing the sustainability criteria to foster not only the energy transition but also the green transition of the supply chains and industries associated with the energy transition.

David Linden [00:15:06] Yeah. So these sort of non-price factors that are making their way into auctions of the EU now also allowed I guess, they have not been mandated 100% but they’ve allowed it to happen up to a certain percentage. I think it’s 20 or 30% that as you say, regulators are adopting and sort of seeing as in the value add. Okay. Very interesting. And just quickly, it’s interesting, when the critical Raw Materials Act is something people then often talk about, I find the least. And just briefly, you know, what does that require for individuals to do what? What’s the kind of a burden? What’s the kind of thing that’s trying to regulate as such in this case?

Maximilian Schnippering [00:15:51] Very good. Yeah. The critical raw material act is the vehicle to on the one side drive transparency on raw material flows and material flows and on the other side also ensure that no dependencies are placed. And whenever we look at green technologies, renewables and electric vehicles and the like, if we look at those value chains, then we can see that the lower we go. So over the different tiers in the supply chain, we will identify that many of the components and products and raw materials and processing of raw materials is not conducted in the EU, and the EU has very limited capacity to do this at all. And specifically, if we look at the beginning of the value chains when it’s mining and processing, there are high dependencies on a selection of countries only, and the EU is now thinking what’s the best approach to take it? And the first step where the raw material act is really important is to drive transparency so that we get an understanding how dependent are we on specific supply chains and raw materials behind it? Because it’s very difficult for companies if you are an OEM, manufacturing components together to say, where are the raw materials from this component coming from? Because there are sometimes four or five different tiers between you and the raw materials, and you need to investigate and have a good due diligence and place as a company to find this out. And to give you just an indication, we have like 20,000 suppliers and these thousands of products. Again, this is massive network of supply chains. If we go also behind the different tiers of those suppliers and data, that would be very difficult to handle. So the Critical Raw Material Act is forcing a little further now that we work on that, the Critical Raw Material Act is also looking into setting thresholds of production volumes that we would like to see in the EU for the raw materials for the processing capacity. And it’s very interesting because if you look at different countries in the world like the US, China and the like, they also don’t have all the mining in their countries, but they have very heavily also invested in processing capacities. So diversifying raw material supplied by our foreign direct investments from different countries while also having some mining and raw material operations in the EU is the first step, but only a limited step. But then going further into the processing capacities will be a major game changer for the EU also to secure the volumes needed for the different green transitions that we are working on here. And this is a massive challenge because for many of these activities we don’t have to know how currently in Europe. So we need to pick it up. And also if we want to build it up, for example, if we talk about rare earths so that there’s a list of critical raw materials that are covered, and as in this act and rare earths are one of them and they are, for example, very relevant for us, for our magnets, it is also the goal how can we make this as sustainable as possible from the mining activities, from the processing activities, because there are environmental impacts also associated to rare earth mining. And I think this Critical Raw Material Act is a good first step, but it’s also a major exercise where the governments will need to work together so that we bring the requirements from the macro perspective into the companies so that we really can act on it.

David Linden [00:19:53] Wow. Okay. Thank you for that. That’s really interesting because, I mean, so if listening to you there and so it’s fascinating because you’ve got kind of, you know, financial investors, etc., looking for sustainable investments. Right? You’ve got regulation. So that’s your EU ETS your CBAM as well, of course. So your Carbon Border Adjustment Mechanism and the Critical Raw Materials Act and the kind of I mean, but almost sounds like a whole, I know its about transparency maybe initially, but it sounds like a wholesale upheaval of that whole supply, essentially supply chain associated with that, which is fascinating. And then going all the way around sort of the auctions and trying to create a sense of differentiation driven by sustainability within that as well. I mean, that’s a yeah, there’s a lot of drivers going on there in terms of why you should take this seriously. And I guess, you know, we don’t want to dwell too long on this subject, but what are there also, therefore opportunities? And by that I mean opportunities to say I’m doing this and therefore I can differentiate myself and, you know, choosing the sustainability route, being, being maybe ahead of the curve, almost, not just following regulation has also a benefit in the sense of the industry as a whole is seeking this. And so the opportunity over and above what you’ve got here is a point of differentiation as well. I mean, does that ring true with you as well, do you find?

Maximilian Schnippering [00:21:22] Absolutely. I’m extremely convinced that nothing is able to hold back the green transition and all the industry what we are needing currently and what we see here is that sustainability is no longer a nice to have and let’s have some policies in place and some procedures and then everything will work out somehow. Now sustainability becomes really the centre of many business decisions now, and what we see is by enabling now, making sustainability a competitive factor, by giving it a price and by reflecting it into auction requirements or tender requirements. We can see that there’s a possibility to differentiate, like I mentioned, also with the auction, where a lottery that decided, and now going forward, more sustainable solutions will be the ones that are higher in demand. And we can see this by and by as some of the technologies where we have been working on, like the recyclable blade or the greener tower. Those are topics that come with additional costs because it’s a new thing that we all work on in the different industries. And it’s a kind of premium product. But if we want to get greener footprints of our products, we need to invest into these greener technologies. And we see that the customer appetite for this is heavily increasing and therefore this is now a right pull through the value chain that we also meet.

David Linden [00:22:59] Okay. Yes. I mean, I think it goes without saying. It’s been an interesting few years for turbine manufacturers in general. And this is probably, you know, another layer on top of that complexity. And the question is, how do you how do you play in the space remain relevant and and competitive? Okay. And more broadly, then though. When you’re thinking about this space then and you started to talk about we sort of touched on this a little bit already, but when you’re thinking about a sustainable supply chain as such, what are we therefore saying it takes to make that happen? Yeah. What in you’re mind needs to happen for that kind of sustainability to filter through.

Maximilian Schnippering [00:23:50] Very good indeed. Yes. As I mentioned also a little earlier, it’s like we have this challenge of this massive complexity in our supply chain with the 20,000 suppliers that we need to work with. So what I’m. Implementing what we think is the right approach to manage this complexity also is a differentiation between the supplier level and the product level. And this works in two ways. If we talk for exampld take decarbonisation, then again on the supplier level, we ensure with all our 20,000 suppliers that they follow the same decarbonisation pathway as we are doing, so that they follow the science based target initiative and aim to decarbonise also their own supply chains until 2040. So that in that regard we would see long term incremental improvements and decarbonise supply chains until 2040. This is our responsibility as a procurement organisation also that we can ensure to live up to our commitment here. Right next to that. It’s an important step to be under, to be decarbonised until 2040, but we can see our world is bleeding and we need to we need to move a little quickly and a little more quickly in some areas. And therefore, if we consider now the perspective from the product level, we again identify high impact products like the 1% out of the products that make up 80% of the footprint and with the suppliers for these products. So 50 products, you maybe have four or five suppliers for the different products, but those suppliers, you work very closely on developing green alternative solutions. And by this you would be able to achieve more disruptive short term achievements. Also, and this is something you can also see like in our solutions for the recyclable blade or the greener tower, that’s our if we take the greener tower so we don’t need to decarbonise now the whole steel industry by tomorrow, but we need to start this option building also for our customers that we have suppliers also in our portfolio that now can deliver already greener solutions. And these disruptive improvements will come with additional costs because it’s the technologies where we need to invest. While over the long run until 2040, again, these technologies will be the default option at a certain point in time in line with our decarbonisation pathway either, but by but by looking at both perspectives at the supplier level and also at the product level, we can take out the complexity and focus where it really matters to ensure. And it’s the same approach. We also follow, for example, for due diligence, which is another very important topic where we see on the supplier level. For us it’s really important that all our 20,000 suppliers follow our code of conduct and implement the right governance mechanisms, the right policies, procedures, targets that they can manage sustainability well, while they are also then again, products and materials where we say here is important that we go deeper, like for rare earth or copper, where you can say human rights violations are more likely. So we need to be a little more diligent here to identify potential issues. And here we cannot stop with our direct tier one suppliers, but we need to go deep along the chain of custody and identify how the suppliers, people in the supply chain network handle our sustainability requirements to ensure that there are no adverse impacts related to our activities. And this is helping on every level we could take now. Now more sustainability topics. But this viewbetween supplier and product helps to drive to the manageability.

David Linden [00:27:48] Okay. And focus, I guess within all of that is important as you’re trying to manage a lot of complexity. Okay. But very interesting. I like that a lot. It sounds like, you know, I mean, you also have, as you say, a science based target. You also, I think you without going for climate positive, I believe in it. If I recall correctly, in terms of your impact, which is above and beyond what a lot of players will say that they’re doing in terms of we’re trying to be carbon neutral, if that’s the right phrase. Or net zero is probably the right phrase to use here by 2030, 40, 50, whatever it might be, or you’re looking to be climate positive as such, which is also about having a positive contribution to society. But then achieving that needs a close collaboration across, you know, the supply chain that’s supporting you, but also developing some of those disruptive products. You mentioned it comes at an additional cost. So I had one question around, so who’s actually showing interest in this then? Because you obviously have customers and it’s not about maybe naming names here, but I’d be interested to hear a little bit around. Okay, So who are you having to work with and are you finding them to be quite receptive to this? Because you’re being very open and honest about what this requires? And also maybe what are some of those disruptive products? Right. So what are we talking about here? Is this, you know, a new microchip or is this a, you know, a different design or something so useful just to maybe get a little bit more insight around, okay, what is a disruptive product for you and how are you finding the reception from your customers around that in terms of rolling out?

Maximilian Schnippering [00:29:29] Very good yeah. If we take a look back a few years, then the wind industry was mainly driven by costs, lowering the costs to become a very competitive source of energy. And I think this was very successful now over the past years. But it also came with some problems of not having the right focus on very diversified supply chains, very sustainable supply chain. So this is now more in the focus as it was before. And I think it’s it’s the natural next step. Also, while making wind industry competitive one of the most competitive energy sources now making it even further sustainable than it is already. While, if we now see the changes in the auction requirements. So over the past two or three years, let’s say that dialogues with our customers have significantly intensified when it comes to sustainability and how we could offer sustainability features to our product. So on the one side, it’s then the wind turbine and how can we lower for the wind turbine carbon footprint, increase recyclability rates and alike, how can we ensure proper due diligence in place and many different aspects ultimately and we can see that that does appetite from the customer side is significantly growing because on the one side, also our customers, most of our customers believe that this is the right thing to do to so we can see from the commitments our customers are externally giving. And we now see also the change in the policy making to enable our industry to compete on sustainability criteria. Because if you have the pure cost focus, the less sustainable product is likely to often succeed. So therefore we are really encouraged to have a proper measurement of the impacts and also quantification of, the impact so that we can make them a a monetary factor in the overall calculation here. And we see now that that this appetite absolutely to help our customers, that we see the regulatory framework as more and more in place for having the sustainability playing field let’s say also here and if we talk about some of the solutions that that we bring to the customers as features now to allow themselves also to differentiate as part of their auctions, again, and their bits, then the recyclable blade and agreeing that our two flagship solutions which tackled two of the main problems of the wind turbine. So that’s all of you are probably aware that there was still are some challenges in the recyclability of the blades. While with our new solution we are now able to more easily decompose also the blades at the end of life and bring it back into its original materials so that they can be reused again. And that’s something where we’ve been heavily working on and where our solution is really a game changer. And similar for the greener tower, where we also now work heavily with our supply chain to identify partners to help us producing steel with a lower footprint. And if we took it, if we take a look at a greener tower then the greener steel that that we get here already from our suppliers, it’s reducing the impact of the tower by more than 60%. The carbon footprint of the carbon footprint does a significant improvement. And if you remember, the tower was also one of the most single the single most contributing components to the carbon footprint of our wind turbines. So therefore, it’s really also a massive impact that is helping us on the overall share to bring down carbon emissions. And we see other products where also these disruptive improvements are ongoing and some are already in place like SF6 switch gears that we are using for our offshore turbines SF6 is one of the most harmful greenhouse gases also available. And we also see big improvements on the magnets side for reducing and phasing out heavy rare earthers ich come with the main carbon footprint from the rare earths side. And these improvements are really helping now to further make our wind turbines a greener product.

David Linden [00:34:27] Perfect. Okay, so these are your kind of incremental disruptive solutions that we should assume are essentially just going to get better and better and better as the industry works through what the requirements are, what regulations in place, what we’re trying to achieve.

Maximilian Schnippering [00:34:43] Absolutely.

David Linden [00:34:45] Fabulous. So so we’ve touched on this, right. And that is an important one just to recognise you’ve talked about. A couple of things around the challenges of actually achieving this. And, you know, nothing comes without its challenges. Right? And the last podcast before this was about how you deliver on Europe’s offshore wind ambitions, for example. And then there’s a whole range of things around market models and cost and cooperation and auctions and things and all these different things you can talk about and they’re all being talked about and slowly dealt with as we go. But in this space specifically, you know, it is relatively heavily regulation driven initially, right? There is a customer demand for it, but everyone’s trying to sort of incrementally push things forward. And at the same time, this industry, as you kind of said, it hasn’t got the purchasing power or it has got the purchasing power, but it isn’t like the big fish in the pond. It’s a little fish trying to make a change with maybe with others or so. So what is it that you find creates the challenge around making this industry more sustainable? Is it just it’s complex and difficult and we’re too small? Or are there other things in play here as well to think about?

Maximilian Schnippering [00:36:05] Exactly. Yeah. As you rightly say, we are still quite small off-taker from many of the traditional markets and products that we are utilising into wind turbines. And therefore one of the biggest challenge is the cost and capacity availability in the market. So those are really drivers that that we need to incorporate. And if we take a look at the cost, then for us really important we need to decide also as UK is Europe, how do we want to build up our supply chains and how do we want to work with the OEMs together? Do we want to have purely cost focussed supply chains? And then we will always opt for a low cost country. It’s most likely that available and have a cost competitive advantage. Or do we want to work in more sustainable terms, more diversified terms, then we need to make this also a parameter in the decision making. And yes, we have this really promising outlook of growth in our industry, but the growth that we see is also twofold. So on the one side, it’s growth in terms of we want to build more and more turbines, but next to that also turbines become bigger and bigger. So if we talk about capacity and availability then. There is only very little suppliers in Europe to-date available that can produce the really big gear parts castings that we need for our turbines. There are also very limited suppliers in Europe available that can do the very small parts like screws, nuts, bolts and the like. So there’s a lot of missing supply chains available somewhere else. And also there’s a lot of fight for capacity with different industries. If we look, for example, at carbon fibre. We’ve been all what we had anticipated to be also a growing off-taker of carbon fibres in the future, specifically for the very long offshore blades. But also aerospace is getting into the carbon fibre market and the quantities and volumes will be much bigger than for us. So it will be again, difficult how to compete on these markets and therefore getting access to the quantities needed. That’s really one of the big challenges and also getting existential, the sustainable products thereof, because in our industry it’s not so easy like like for the industry to pass on additional costs to customers because we don’t have we are far away from the end customer ultimately. We have our customer who again, we need to deal in this market that is not like you buy, I don’t know, a bottle of apple juice where you maybe can differently work on your pricing scheme then so that makes it really difficult in our industry but something where you still and see and I would always come back to my statement I made earlier that nothing will stop this great transition here and the pathway we are on because you really can see that if we want to be successful also going forward as Europe, as UK, we need to transition to greener technologies to differentiate ourselves by more sustainable products compared to cheaper products.

David Linden [00:39:42] Yeah. Okay. I think that’s an important factor going forward. But it is also interesting maybe telling the type of conversation we’re having, and you’ve reinforced it a few times around Europe, UK, Europe, etc.. We talk about this geographic focus of what we’re talking about and obviously there’s different reasons for that. But is this something which is a European thing and the rest of the world’s going to go, You know what? I just need cheap, renewable electricity, essentially. Right. And, you know, let’s say you’re a developing country somewhere across the other side of the ocean or the world, sorry, in general. And your targets that you’re trying to reach a big and you haven’t had decades worth of experience. And so your focus is very much just on maybe jobs and renewable electricity. That’s your focus. And so the whole sustainability agenda so much further down that it doesn’t get the same limelight. So. Yes, I see it in Europe. It is obviously heavily regulation driven as much as the right thing to do, climate targets, all those different things and the opportunity to have a competitive advantage as well. Is the rest of the world thinking about this? Is it following? Is it is it lagging? What’s what sort of your kind of perception there?

Maximilian Schnippering [00:41:13] Absolutely. And it’s maybe let’s very briefly touch also if we say the most sustainable supply chains and products come at additional costs, then that does, at the beginning, this always sounds a little bit frightful, but we are not talking about massive costs here, right?. So if we take a look at the price of electricity, so at what cost? The wind turbine can produce that kilowatt hour of electricity, then we are at a few cents. If I look at my electricity bill lately, there are $0.40 or $0.50 in place for kilowatt hour in Germany. While, if we put some additional cents to the market, I think we will be very likely able to ramp up and build up very healthy, sustainable supply chains to reflect also the needs. Our environment and our world has for a sustainable energy transition. While yes, on the one side, key focus is on Europe currently, and I think a good reference. What we also see was the latest G7 summit that took place so that you can see a range of countries for whom it’s also really important to focus on the sustainable energy transition and drive for sustainable energy transition. And there are more countries than those nations here that are also focusing on that. So I think, again, as mentioned, nothing will stop the green transition. And if we want to have a competitive product somewhere in the world as Europe, we will not succeed by having a cheap product. We will also not succeed in the US by having the cheapest product, because then there will be low cost countries that that would take care of us. But we will see we would succeed with sustainable products. And that’s something we are also. The appetite is not only in the EU, but we can see increasingly also in other regions because the energy transition ultimately is not only a European thing, it’s happening everywhere in the world because the electricity wind turbines can create will be so cheap that it is again helping then other industries in the different regions also to decarbonise and become more competitive.

David Linden [00:43:41] And it’s very interesting that I think the first podcast we did in a sort of mini series on offshore wind we had with the World Bank and the World Bank is obviously trying to push new and also support, I should say, new countries to recognise the value that offshore wind can bring to their countries. And often the discussion isn’t just about what’s the potential, how cheap is the electricity, what can I do? But it’s also how do you make it, you know, essentially with a recognition of the local community, whether it’s all about fishing, which is maybe a core community that’s there, or the marine life which needs to be protected and all those different elements. And so interestingly, this industry is almost ahead of some others in the sense of the environmental, social, etc. side of things is being considered at a very early stage. And if you think about non-price factors that used to be a thing that was here or there in Europe, etc., that’s now starting to become a more common part in leasing rounds around the world as well. So interestingly, no matter what your word sustainability kind of encapsulates, it can be seen a little differently from different people. But in terms of the that kind of agenda that’s being considered much earlier on around the world, and maybe for all the technologies, all the infrastructure that’s being built because of that potential impact it can have, but also the recognition of the benefits it can bring as well. So it is quite, quite interesting from that perspective, and I think that reinforces your point. Hopefully.

Maximilian Schnippering [00:45:15] Absolutely. And I mean, it also closes a little bit the loop. If you again, take a look at the financing perspective here, because for many devloping countries, it’s very difficult to get good access to capital to build wind farms. And if you look at impact investors and investors with an ESG or sustainability focus, again, greener, more sustainable products will help maybe also to attract capital more easily in some of these regions where it’s currently very difficult to invest in wind farms.

David Linden [00:45:49] True. And I guess one of the other factors and we’ll start to draw to a close after this, Maximilian, I promise. But the other factor here is, of course, is who’s willing to recognise that sustainability angle, that ability to accept, you know, external finance and drive forward their renewable industry will be different in different parts of the world and of course, some will still go for costs. Essentially, you’ll still see parts of the world where cost will be the prime driver. And, you know, there’s been much discussion about turbine manufacturers from around the world expanding, exploring the rest of the world themselves. And they will get inroads in that. That’s quite normal. That industry’s big enough. It’s growing significantly. So it will be interesting to see how that dynamic evolves and how therefore different turbine suppliers will evolve and position themselves as they go forward. And I’m sure Siemens Gamesa has a has a good strategy for that as well. But it’ll have quite an impact I think how things evolve. All right. Final question. Bit of an open ended blue sky kind of thought process, but it’s useful just to end on something that if you were to look at all the things you’ve discussed and the opportunity that’s out there in your mind and of course this doesn’t have to be factual really, but more kind of a how do you see the industry evolving? When are you kind of thinking, When can we really achieve a kind of full zero carbon? Let’s say net zero has a kind of offshore wind industry. Is that something that you see in your lifetime? Let’s just say let’s be extreme about it, or is this something which is still maybe, you know, it’s going to be some real progress being made, which will be incremental, It’ll be important, but you still have a way to go before you have a real, truly sustainable net zero circular kind of offshore wind industry.

Maximilian Schnippering [00:47:40] That’s a really difficult question, David.

David Linden [00:47:45] But, I mean, what is your gut? What is your gut tell you, I guess, is the kind of the you know, you don’t have to answer it from a kind of factual based thought process. But in general, I mean, do you see the momentum I guess that’s driving it’s there. Yes.

Maximilian Schnippering [00:47:59] Yes. And it’s it’s been super interesting to see the development now over the past two, three years or so. And so much has happened, which I did not expect to happen that early. So I’m currently looking at having a very sustainable turbine place much more early than I thought. So I think we will see first turbines that are fully recyclable and close to zero carbon emissions, but will be able to be easily net zero carbon emissions by the end of this decade. So I think this it’s not many topics that are holding us back, technologies are there. We need to invest now. We need to see investments anyways to complying with to build our target demands at the end. And we will see that more and more investments will directly go into greener technologies because otherwise, if you, let’s say like a steelmaker, invest in a traditional steel making plant. It will soon have stranded assets because the demand for greener steel, for greener technologies is significantly increasing. And therefore, I think end of this decade we will not have all turbines decarbonised and fully recyclable, but we will be able to produce them if they provide the right value also to the market.

David Linden [00:49:24] Absolutely, Yeah. The market I’m sure will will help drive some of that. But wonderful Maximilian. Thank you so much. I think I had a great discussion there. Really appreciate your time, you’ve taking to answer all the questions. You know, I think just listening to you, it sounds like sustainability is definitely going to have a very big impact in terms of how the industry will eventually evolve, you know, where products will be focussed and you know, how the industry is going to balance between, you know, as you say, kind of essentially cost and sustainability. And you could do both. Right? That’s not the question here. The question is how do you balance between the two? But it is certainly going to have an influence on how the industry is going to evolve. So thank you so much for sharing your thoughts with us today.

Maximilian Schnippering [00:50:07] My pleasure. Thanks, David.

David Linden [00:50:09] No problem at all. And thanks to everyone for listening. Hope you enjoyed it as well. Please make sure you subscribe. Give us a good rating and share with your friends and talk to you next time. Thank you.

 

 

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