GE: Europe must speak with one voice on energy efficiency

Horst-Tore Land.jpg

EU countries must be consistent in the energy-efficiency measures they implement, because a fragmented Europe could lose ground in the competition with other global players such as China, GE's Horst-Tore Land says in an interview with EURACTIV.

Dr. Horst-Tore Land is a director for the Ecomagination programme of General Electric  International for Europe, Middle East and Africa. In 2004, before joining GE, he created PEMEAS Fuel Cell Technologies, an alternative energy company, through a venture capital backed spin-off. PEMEAS was then acquired by chemical giant BASF SE. He spoke to EURACTIV's Ana-Maria Tolbaru.

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Do you think the US is way ahead of Europe when it comes to energy efficiency services or to 'ecomagination' solutions?

The big difference is that with the United States there is no energy policy or federal regulation on a federal level, which would be comparable to the 20/20/20 targets. It doesn’t exist on a federal level.

Many very important legislation and regulatory initiatives do exist on a state level, like in California – there you have many very important regulatory initiatives on a state level.

That’s the biggest difference. Here in Europe we have very well articulated targets – the 20/20/20 targets are the most tangible and immediate targets. And I think in Europe we are more thinking about how we will execute. What do we have to do to reduce the carbon footprint by 20%, how to improve our energy efficiency by 20%.

That’s a difference. Certainly from a political perspective the debate is a little bit different. I would not say that the US is ahead of Europe. Not in any shape or form. Some people would probably say that as far as the regulatory process on a federal level is concerned, Europe is a little ahead of the United States.

Do you have competition from Chinese companies when it comes to designing innovative products? For example that sell them at a much lower cost?

Chinese companies are incredibly successful. You see this in the solar space. And, of course, it’s well known that some Chinese companies have very aggressive pricing policies.

But our business has still performed very well in spite of competition from Chinese companies and other competitors because we are offering world-class products at a competitive price and that makes us grow and grow quite successfully. This is a commercially very successful company, but, absolutely, competition from China is very significant and, in certain industries, the so-called clean-tech space like the solar industry, the impact of Chinese companies on that sector is fairly dramatic. You only have to flip some newspapers in Germany to see what kind of adjustments German solar companies have to go through as a result of competition from predominantly Chinese companies.

If you support resource efficiency, and the resource efficiency roadmap, and probably it will come with legislation, don’t you think that some companies fear that that will make European industry less competitive? And that it will favour Chinese investment?

I think, ultimately, it’s pretty straightforward. The more an industry, company or an economy is using natural resources in a more efficient way, ultimately it’s more competitive. Because you are just creating more economic output with less input as far as raw materials are concerned.

I think it’s more a question of whether this resource efficiency is the result of a regulatory process. Some companies are simply concerned about not having a level playing field, in the sense that they are saying “we have to invest into technologies and assets in order to become more efficient, and our competitors are not forced to do this."

That can be a very valid point to make. But, ultimately, we certainly believe that there is this very strong economic force behind this that any company irrespective of where the company is, would look at the volume of raw materials they are buying and would say: “If we could get 10% more efficient we would get 10% more economic output out of this using 10% less raw materials that makes us from an economic perspective more competitive.”

So legislation plays a big role, and in particular about the timeframe and measures and targets, absolutely, we would certainly advocate to have as much consistent legislation across the different economic regions of the world. But ultimately I think there is also a strong economic force behind this.

There is a good dialogue particularly between the Commission and political stakeholders, as well as industry and I think that ultimately everybody is going to line up behind that whole concept. The strategy is to become more efficient, reduce natural resources and as a result of this become more competitive.

It’s always about balance. Any kind of legislation has to strike the balance between what it wants to accomplish from a policy perspective and the potential impact on economic activity.

Do you see any problems with the system of measurement in the way we measure the demand for energy or the way we measure energy efficiency, we have a lot of gaps to fill?

Data generation is very important, absolutely. The integrity of data is very critical to any kind of assessment process. And, of course, you can use different methodologies. Our point of view is that we just have to make sure that we stay consistent if we agree on one particular methodology to generate those data, then we will stick to this so that we don’t have a lot of variation across Europe, because that creates a very fragmented approach.

As seen from an international perspective, it’s also important for Europe that we really stick to the concept of a common market. That we present ourselves as Europe in our global debates, and that we try to avoid as much as we can to have more country-specific measures being put in place in country-specific legislation.

A good example is the case of electric vehicles. If we want to support a whole lot of electric vehicles across Europe, we need some kind of European standards for this. It’s not going to help me if I buy a Nissan Leaf and just have to carry four or five different chargers if I’m travelling across Europe.

And, if I have to drive from Germany to Belgium, or to France or to Spain, hopefully they will all use the same charging equipment. And that’s important. That’s a request we have to policymakers. That we agree on uniformed standards, consistent standards, methodology and generating data across Europe because that helps Europe to really be a common market. To present ourselves as one voice in the global debate. That would certainly also help the entire concept of rolling out products which help the environment, but, on the other hand, also help us stay competitive.

What do you think will happen to the smaller or medium-sized companies? They will have to compete against the big ones, and it’s probably going to be tough. I think products like the ones you have don’t come cheap and what do you think will happen to those smaller companies? What solutions do you have for them?

Well, the technical and commercial solutions we have for them are pretty much the same as what we offer to the larger companies. An industry structure – and that of course does not only refer to energy services always – has big players and small players. I think it’s important to really find the right position for a company.

Small companies can be incredibly successful, for example, if they have particular expertise serving costumers in a particular geographical location. We have this in Germany where we have the concept of ‘Stadtwerk’ which are basically utilities which are very, very successful. We have many of them in Germany. On the other hand we clearly have big utilities which are all equally successful, so again it’s not an 'either or'.

I think it’s more about understanding precisely costumer needs and then developing the right business strategy to address those costumer needs and that can be very successful for a small company as well as for a big company.

The big company sometimes has a bigger balance sheet and has it somewhat easier to raise capital for future investments, but that can be addressed with appropriate measures for small companies, too. I don’t think that we will ever end up in a system where you only have small companies or only big companies. I think there will always be a co-existence. It’s just important that each of these companies really define their positions well as a result of ‘what do my customers actually need and what do I have to provide for my customers?’

So I guess you have to be a bit more focused?

Yes, focus is definitely… that’s the right word. Focus is incredibly important. Sometimes that’s a challenge. There are so many opportunities that you are never running short of opportunities. It’s more a question of where do we focus in order to make the biggest impact. And having a focus business strategy is certainly always a good idea.

There lies a challenge to get people into energy efficiency. Do you think eco-imagination has that at heart? Are you trying to make energy efficiency more visual?

It is very much about outreach. Outreach to individuals, to customers, to companies, and as you have said it should not be just a one sided equation. Energy efficiency has two elements. As you pointed out one element is the demand side. For example, installing very efficient GE lighting technology in a school in Hungary, that of course reduces the energy consumption of the school and is a prime example of how you can really reduce the demand for power by installing more efficient technology.

But on the other hand, we also feel there is enormous potential on the energy efficiency of the supply side. Because if you do this right you can make big progress towards accomplishing the goals particularly set by the Commission by just making sure that the energy efficiency of the supply side improves.

And this is not an 'either or', this really goes together.

But of course, individuals have to somehow adjust their behaviour because driving an electric vehicle is slightly different compared to driving an internal combustion engine. You no longer pull up to the gas station. You charge them at home. You probably have to think about when is the best time to charge. You have to put thought into it, and these are absolutely changes required on the behavioural level of individuals and households, but we certainly believe that this can be accomplished by a combination of economic measures and by outreach and educating people about the benefits.

And I guess that’s important also because they have to pay a bit higher prices for their electricity bills than usual?

Well, that ultimately depends on many elements. Let’s take an example from the United States. With natural gas prices being very low in the US, the switch let’s say from a fuel like coal or possibly just crude oil-based heating to natural gas can sometimes give them a cost advantage.

So, it’s not a given that the utility bill always needs to go up, but I agree that with all these investments that are needed into power-generating technology, on the demand side, it is probably likely that over time the utility bill is going to get higher.

But this is not only a result of these investments, it can also be a result of higher fuel costs.

How can you help cities or municipalities to improve their energy efficiency if they want to start with a bottom-up approach… Probably they would have to apply for EU funds or get some money for that?

This has different elements. As far as the funding is concerned each situation is different. There are clearly different funding mechanisms on European and national levels.

As far as our role is concerned we can certainly help them to understand what kind of positive impacts they would get from installing certain products, using certain products.

That can range all the way from installing highly efficient, low power consuming lighting technology all the way to looking to the possibility of replacing existing power generation, power station, with a more efficient power station, upgrading the grid, using more renewables… there are lots of options communities can consider.

As partners we can certainly provide some insight as to what is going to create the best environmental and economic benefit for them depending on the various choices they have. We can certainly talk to a community about what is more favourable. Putting in a gas energy or putting in a solar installation. Putting in a combination of wind with a gas engine. These kind of conversations we can have and we can provide suggestions and proposals about what to do and show the trade offs, economics and environmental.

Do you think it’s more efficient to start locally and not to wait for EU legislation?

I wish there was a simple answer to this question.

Anything that makes us move towards a system which is more efficient in using natural resources … and that’s not only fossil fuels, it’s also water and a wide range of natural resources, the land, the soil… anything that moves us closer to this… and improves efficiency of how we are using these natural resources, but on the other hand also protects and maintains the competitiveness of industries, our customer base, the European economy, I think is good.

So you support the 1.5% end-use energy savings target in the Energy Efficiency Directive?

Yes, we are supportive of specific targets. Obviously it’s not up to us to set those targets. We are very much in support of having binding targets. We believe there should be a little bit of flexibility about how to accomplish those targets, because that’s sometimes country-specific. Country-specific situations have to be taken into consideration, but we certainly support those binding targets.

Ultimately, it always depends how specific regulations and ultimately how it’s put in place. But as I said earlier, we have a preference for binding targets. We think that this is at least from our perspective probably the best way of accomplishing the underlying objectives of this directive on one hand to reduce the carbon footprint and environmental footprint of the power industry and on the other hand also to improve efficiency and of course make sure that these companies stay very competitive and can serve the customers.

Will binding targets stimulate investment?

I think so. Binding targets will ultimately stimulate investment.

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