In this #LØRN podcast Silvija talks to the director of Energy Transition Outlook at DNV, Sverre Alvik. Alvik explains how DNV works with efficient climate strategy and how the Energy Transition is creating new business opportunities and business models. They talk about the energy transaction outlook forecast (ETO), what it means, where the project comes from and why the most obvious solutions are also the hardest.
With Sverre Alvik and Silvija Seres
Velkommen til Lørn.tech -en læringsdugnad om teknologi og samfunn med Silvija Seres, og venner.
SS: Hello and welcome to our Lørn conversation. My name is Silvija Seres, and my guest today is Sverre Alvik, who is a director of the energy transition outlook in DNV. Welcome, Sverre.
SA: Thank you.
SS: I'd like to say just a few words about the series before we get into the pudding of our conversation. Basically, this is an inspiring and informal chat focused on sustainability as a growth engine and as a business model and Lørn is doing this series together with DNV, your employer, but also, the Norwegian commercial school "NHH", who plans to use it as background reading for one of the courses on the topic. With that said, I would just say another two words about the style of the conversation. So this is not a debate and this is not a lecture. This is not even an interview in the traditional sense of the word. This really is a two-way conversation between two interested and interesting people and I will be probably interrupting more than I should, but it's just because I'm really excited about what you're talking about.
SA: Okay, that's fine. Yes, that's fine. I look forward to that.
SS: So Sverre, let's start actually where we always start, and that is who are you, and what has made you so? Tell us a little bit about the person.
SA: Yes. So my name is Sverre Alvik. I have been living in Norway most of my life, although I had a couple of shorter stays abroad with DNV. I have worked in DNV my entire career for 23 years after finishing my University degree in Trondheim as a naval architect, and in the end, I've worked with many different business areas and industries: in Maritime, in oil, and gas, in the renewable energy. And then the last six years I've been heading up group research on the energy transition.
SS: Everybody in DNV, by the way, has worked there for 20+ years, looks like they are 30, and are super proper in every sense. Quiet, confident, technology gentlemen. So do you have any weird hobbies?
SA: I have been scout patrol leader for 20 years. I think it's important and maybe it's also in line with the DNV to give back something to do more than yourself. So, not only build your career but also give back to others. And that's why I engage myself in a number of areas, also outside work.
SS: So as in boy and girl scouts, and you help them go on trips?
SA: Yes, for example arranging summer camps or bring them to the forest and help them make a bonfire and sleep out in the cold winter nights and all that.
SS: Oh, I have to send my kids to you! I'm a very urban fed girl from the south of Europe and I never really learned fully how to use this amazing Norwegian nature, so I guess maybe I'll go on your trip as well.
SA: Sometimes I try to bring my international colleagues also into more exciting parts of Norwegian nature and that can be an entertaining experience. But I think also very rewarding.
SS: Yes, you need to learn to love both the cold and the rough. But I guess what you get back is like a million times more. So, Sverre, I want you to tell us a little bit about DNV as well. We already had a chat with Kenneth and Luca about data platforms and data assurance, but we didn't really talk much about DNVs history. Could you tell us a little bit about what's the company about and where does it come from?
SA: Yes, okay. The company has a very long history of 150 to 160 years almost. It started as a ship classification society, where all ships needed to have a class in order to get insurance from various companies. So we were established in the 1860s dividing the ships into classes, A B, C, D or 1, 2, 3, and 4, depending on how good they were. And that's how we got the name as a closed society, which is still a hundred and fifty years later our biggest business area: Maritime, with the 30-40% of what we do. So this is how it all started, and it started in Norway, but it moved very soon abroad. We have had people in China, for example, since the 1880s. DNV is a very international company, still headquartered in Norway, but with 10,000 of our 12,000 staff work outside of Norway and while Maritime still is important, we also have spread a lot into, in particular, I would say energy, but also certification. We have one of the world's largest management system certification companies and know everything within the digital and software and new business models.
SS: So in my head, it's something born from the naval and Maritime sector but now very active in, as you said, both energies, oil business, now spreading into Health, and everything is connected with some sort of a quality assurance, which has a completely new meaning now in the digital world as well.
SA: Yes, that is right. So, safeguarding, quality, and risk management, you could say is one way to see DNV. The other dimension which is very important is the purpose. Safeguarding life and property was the start, and since the 1960's we have had safeguarding life property and the environment. This driving force of something bigger than us and to help something more important than DNV itself to safeguard life, the environment, and the property of our customers, that is the driving force of the company itself, and of us employees working there.
SS: And what I really love about the whole company starting from Remi, the CEO, and all the way down to the full 12,000-13,000 employees across the whole world, really is this forward-leaning hunger to tackle these problems. Remi has been talking about decarbonization before most people had any idea what that meant and he's also been talking about digitalization and disruption related to these two things at a time where it still wasn't all that fashionable to bang on about the environment when you talk to corporate CEOs, etc. And I think that DNV has been a part of the driving force from moving the topic of the environment as a goal and as a business, both, with the techies, the politicians, and the business people. One of the things that I'm most impressed by is your ETO. So I'd like you to tell us a little bit about where does it come from, and how does it connect to DNV's perspective.
SA: Yes. Our ETO, or Energy Transition Outlook, is DNV's own forecast of what the energy transition will look like over the next 30 years.
SS: Stop! I have to ask you, what does Energy Transition mean?
SA: Energy Transition can mean many things. What most people think of when they hear Energy Transition is to move away from fossil fuel over to renewable energies instead, but it also entails some number of other things, for example, the electrification of the society, and there are elements of digitalization in there. There are minor or smaller energy transitions within the bigger one, for example, moving from or into Shale gas, instead of a more conventional type of gas and all that. But the bigger meaning of it is to move away from the traditional fossil fuel over to renewable-based energy.
SS: So now back to DNV, where does it come from this whole project?
SA: Strategic research and longer-term research is important for a company with a hundred and fifty years of history. So we cannot only look at the next year's business cycle, but we also have to look at the long-term trends and in the end, we have a dedicated group division focusing on the longer-term trends. At the start of the new sustainable development goals in 2014, we agreed to form a project looking at what is the likelihood of reaching the sustainable development goals. We started actually doing a very wide study on that called "The Future of Spaceship Earth", and while that was a success from an attention point of view since it was presented in the UN General Assembly by our CEO, the previous CEO before Remi, it also was a little distant from business because one thing is for a group research unit to do the research itself, and another is to do it on things that colleagues work with every day. And while sustainability is a driving force, it's not what our colleagues worked directly with, at least, wasn't that in 2014. So then we said that this was a very interesting focus, but instead of looking at the wider sustainability, let's instead concentrate on something which DNV has a core business, meaning energy. The 70% of what DNV do is related to energy in one form of the order and we have thousands of colleagues working with that, so, instead of having the very wide focus on sustainability, which is hugely important, but is all sparkly outside the areas where DNV has strong knowledge, for example, on hunger, or equality, or others of these topics like Health, that were at that time relatively small topics in DNA, but energy, it was core business. That's how we moved into a dialogue with the new CEO, Remi. Let's make instead of a forecast of what the energy future will look like. This is, or was at that time even, already a crowded field, we had AI, we had BP, Shell, and a lot of the oil mages and other players coming with their transition. But, who should be trusted? If you ask an average DNV employee what does the future of oil looks like? You get dramatically different answers depending on whether that colleague was working in the oil and gas business or whether it was working in the renewable energy business. So, having a more coherent story from the DNV side was needed. Based on that, we formed a Research Unit and started to recruit people that could help with modeling and publishing or view the future of the Global Energy System.
SS: Sverre, I have to say I really admire the outcome and you have corrected me already indirectly in this conversation: it's not a report, it's a forecast, and that's an important distinction. Also what I love about it is that it comes with some concrete positions for the future. It says something about what you believe will be the trends, the speed, and what can be done in order to correct and justify. So tell us a little bit about where you think it's going and what's the most important thing we should be doing?
SA: You're right. This is not just a report, it's not a range of scenario, is a forecast, and of course it's quite daring to go out and say that this is the forecast of the future because we don't know the future better than other forecasts that look at this, but we choose to put our head out and say that this is what we believe because not all futures are equally likely, and if you say that everything is uncertain and it could be that we are going towards five degree global warming, or three degrees, or one degree, then you're confusing the decision-makers because what we want to do is to give people a realistic view on where we currently with the momentum we see, with the expected policies, economic development, technology development, will be ending, and then we could use that to say whether we are in the right direction, or what gap we need to close in order to move from where we're heading to where we would like to be heading, because unfortunately, we are not heading to where we would like to be heading.
SS: Before we go there, when you do this forecast, basically, you're also playing on some of the DNV strengths, which are many technology areas. You have some of the best Engineers across fields such as maritime, energy, materials, networks, oil production, and it's by combining their understanding of the new technology as well as you are creating this forecast, right?
SA: That is right. One thing is that we have a dedicated Research Unit looking at this. Another one is that we involve more than a hundred colleagues from around the company and that are experts on battery storage, gas subsidy developments, or high voltage grid, and also we have dozens of external experts because DNV is not an expert on all parts of the Energy System. There are things like coal extractions, nuclear, or others, that we are hardly entering at all, and then we need some external expertise as well. So, we use all that in order to have a technology-focused forecast, and as I think you started with, DNV is known, expected to have a good technology overview. Then the most difficult part is maybe not technology development, but policy development, because who could say what the carbon price will be in Latin America in 2040? It's impossible, but we still have to make a guess or an estimate or an assessment because that is part of the energy system as well. So the policy is really the most challenging part. We have all costs involved, policy experts on this as well, but we also need to dare to do an assessment and an estimate of this.
SS: Take us a little bit back towards where we would like to go and where we are probably heading. You are using a very well-known term, the Paris agreement, but I think too few people know what exactly it says. So, what is the core of the Paris agreement?
SA: Yes, we found that it's reasonable to do not let DNV define where we would like to be heading, but rather let the UN and UN's Environmental Organization do that. This conference of parties, which takes place every year since 1992 onwards, and the next one being in Glasgow in November, was the Paris agreement formulated in cop21, in Paris, in 2015. And that term to read, or to limit man-made global climate change, to limit global warming well below 2 degrees striving towards one and a half. That was the term from the Paris agreement, and that has been accepted worldwide ever since as where we would like to be heading. And since then, there has been even increased focus on one and a half. There was a special IPCC report in 2015 illustrating the big difference between reaching one and a half compared to 2 degrees, and why this is important for Humanity. Since then, there has been a lot of what we call "Net Zero pledges", meaning to have zero emissions at a time in the future, normally 2050, as being in line with this one and a half degree target.
SS: Can I ask you very quickly, because we have to go back to this difference between 1.5 and 2, and what do you think is the more realistic scenario. This "Net Zero pledges" I see them all over the place, and also by companies and organizations that would traditionally have seen themselves outside of this scope, maybe 12 months ago, so something good is happening. The question is, is this enough?
SA: Yes, there is an increased focus on taking responsibility for reaching a sustainable future, meaning or termed as a Net Zero emission future because the global temperature will continue to increase as long as man-made climate or greenhouse gas emissions are above zero, and that means that you need to reach Net Zero sometime in the future in order to limit global warming or stop global warming.
SS: What does Net Zero mean? I mean your people will still be flying, driving, or the office is going to be heated, so, how do you make it zero?
SA: Yes. First, zero doesn't mean gross 0, so it could be that you could still consume some oil and gas, but then you need to have negative emissions that counter these positive emissions so that the sum of these is 0. Of course, the Energy Services that we all request in transport, heating, cooling, light, or whatever it is consumer goods, need to be still produced, but then if that comes from renewable energy it doesn't cause emissions. So it's the fossil consumption of oil gas and coal that are causing these man-made CO2 emissions and it's some of these the positive emissions from coal, gas, and oil and negative emissions from capturing it and storing it in the atmosphere from forestry or from capturing CO2 directly from the atmosphere that needs to be zero, and ultimately you wanted to go below zero because then you can start to reduce Global temperature again.
SS: Okay, thank you.
SA: So, Paris agreement. They said let us strive towards one and a half and let us at least ensure we have been well below 2 degrees. That is the goal. And we are not heading there if the business as usual is going on. If we continued to emit carbon to increase emissions year by year, as we've done for the last decades, we would probably end up somewhere around 5 degrees global warming. That is no realize that will not happen. I think those worst-case estimates that nothing is happening, that people don't care at all, that is a foregone sort of scenario.
SS: And that's great news because five degrees would really be a catastrophe for the basic survival of humans.
SA: Yes. Five degrees would have been really a catastrophe, but also where we currently are heading, like somewhere between three and four degrees, and that is also really a catastrophe.
SA: The most important one being is these large parts of the planet that are uninhabitable for humans, and of course, for other species living there.
SS: I just need to be silly now but basically no amount of air conditioner can fix this, because we can't produce food basically under these new conditions.
SA: Yes. You would create climate refugees that cannot live where they currently live because they cannot produce their food and they cannot live in the environment of extreme climate due to the humidity and the heat itself. Even with the important food, they could not live, of course, they could live indoor in an artificial environment, but that's not life, and you can't afford it either. So, the first consequence is probably that large parts of the planet would be inhabitable. And there is a lot of other consequences of endangered species and other things that would make the planet very different. Of course, the planet itself will survive, Norwegians would probably survive, and rich people around the world could survive, but IPCC is estimating that every degree of global warming above what is called dangerous, meaning 2 degrees, could give 1 billion climate refugees.
SS: And we haven't even opened the topic of what this means politically.
SA: Yes, of course. It sounds extremely sensitive. Many of the conflicts we see in the world already today are climate-related and they have fought on water and agriculture land and whatever areas. But if every degree means a billion refugees, that means that every decimal, every tenth of a degree, means a hundred million. Every decimal counts here. It's not so that it's something magic about one and a half or two degrees. If you can reach 2.2, instead of 2.3, it's much better. If you can reach 1.8, instead of 1.90, it's much better. That's why all individual actions down to the individual level, really count, because they are all a part of the bigger future. But, where are we heading? Well, our estimate based on our model on the expected economic technology and policy development heads us towards 2.3 degrees. So, that is not business as usual, it's much better than that, but it's not the Paris agreement target, is much worse than that. We are heading towards something, to a direction where we would not like to be heading. And this is the next part of our work. One thing is to forecast where we are heading. Another one is a tendency to help the world to be prepare. It's climate adaptation, that is sort of the inevitable, the extreme weather, the sea level rise that will come in any case, but then also to mitigate to avoid it from happening. So we need to do both.
SS: Mitigation doesn't mean going down to 1.9, it means more like helping people. Or what can you mitigate?
SA: Adaptation means that you adapt to the future that you cannot change. So, if you're a builder, you don't build houses in areas that can be flooded, or you strengthen a sort of things for more severe weather, floods, and other things, or moving people away from the most vulnerable area, that is adaptation. And then mitigation, that is about prevention, so you could prevent things from happening, prevent the climate change from happening in the first place.
SS: So, you're still hopeful that there are things to be done even to the 2.3 degrees, by the use of, let's say, new technology. So, if we all started driving electric cars and if the heavy transport became electrified, those are the sort of things you believe could still move the needle to where it needs to be.
SA: Yes, some of this is already included in the forecast we have because, as I said before, the 2.3 degrees is not business as usual. It's with a lot of momentum already, but beyond that, there are further things we can do, and they range from individual behavioral changes to further technological advancements, to policy enforcement through everything from carbon taxes to building standards and fees, etc. So there's a huge toolbox that needs to be used by society. Authorities, of course, immensely important role, but also businesses like us, the finance industry, and individuals have a role in this because it's so challenging to reach this Paris agreement, that there's a lot of momentum that needs to happen at the same place. And the sad thing is that every year we sort of move further away because if we were to reduce, or if we were to reach the Paris agreement in 2015 when it was established, then it was challenging but since we have the last six years moved in the wrong direction, it's even more challenging. It's very tempting for companies, countries, and others that set goals that they set long-term goals. They set the Net Zero 2050 goals but it's much harder what should be done the next five years: being a 2-2 elections, individual wallets, company PNLs, or whatever there is.
SS: So this is where I want to pull in two things and it's actually business and politics. One of the quotes I remember best from the ETO a year and a half ago was that you are technology optimistic but regulation pessimistic. Basically, the technology to fix this is there and it's possible but it needs to be incentivized. It needs to be pushed through with regulation in a way that politicians are not comfortable doing yet. My hypothesis here is that this is the same problem we face with all kinds of other demographic problems, health, challenges, polarization, and so on. And it has to do with our requirements to our politicians, and perhaps even to business leaders as well to take on a task, that they are traditionally not doing. It's an incredibly complex area that they feel that they don't have enough understanding of this, and therefore, it's easier to postpone this and just talk about the close and the obvious. So we end up with really paradoxical politics where people really don't want to pay more money for driving through cities, while we really need to get people to drive lessened and perhaps to drive cleaner. So, what can we do to move from being "regulation pessimistic" to maybe being "regulation opportunistic"? You mentioned something like: "put taxes on the stuff that's bad standardized, maybe make people aware of the effects of what they're doing". What do you believe should be the most obvious things in this toolbox?
SA: Some of the most obvious things are also, the hardest ones. I mean, there has been known for decades that a Global Carbon Tax would be a very effective recipe, and if you put it high enough, you would need much else because people would buy them and companies would adopt if they had to pay the full externality costs of missions being several hundred dollars per ton of CO2, but it's also so difficult that you need to sort of a maneuver around it and clever politicians need to sort of reading their electorate. We need politicians that dare to sort of doing the unpopular things, and in hint site, they can be rewarded from that. We have seen that before in Norway, for example, there was a lot of examples of this new great law, the smoke law that came 10-15 years ago, and it was very unpopular, but on the inside everyone has praised the government that did it, it was still a very good thing for both health and even business.
SS: For our international friends, basically, Norway made it exceedingly hard for people to smoke and it ended up being one of the most smoke-free countries in the world as a consequence of this. But the discussion was, of course, if the government should interfere or not, and we saw similar discussions in the light of pandemics now, and many other areas, like the use of punishment in terms of speeding and not use of car belts, etc.
SA: Yes, and then the big dilemma and difficulty with climate change is this tragedy of commons, in which your own influence is so minor on what happens on a global scale but still it's needed. We need a combination of sort of daring politicians, but also clever maneuvering from the finance industry, from individuals, and companies on this. We have moved a little, I wouldn't say we are policy pessimists, we are more policy realists, and we cannot in our models all over just create everything to happen by strict policies, as that's not happening in the world as a whole. We do see, especially in the EU, I would say, that things are moving fast and in the right direction, and then we see a lot of mixed signals from elsewhere. Of course, there is a lot of will in the U.S. at the moment, but it needs to be into real politics and not only nice words. We see mixed signals from all over the world because climate change this competing with a lot of other challenges in the international arena as well.
SS: So, back to companies just for a moment, Sverre. From what we see on the sidelines it seems like it's a necessary employer strategy. Young people want to work for a company with a plan, and whether it's a Net Zero by 2050, or whether it's being active against one of the 17 SDGs, it's necessary a talent policy. DNV is a company that actually does quite a lot of these things especially related to the field of energy, so, could you give us a couple of examples of how can a company concretely both do good and do business related to the climate?
SA: Attracting the right people and retaining those you have is important and probably even is more difficult today than it was before because people are more likely to change careers and to change employers. So, we and all companies need to fight and be attractive on the international and national scene and DNV is both by publishing reports like ETO itself and by the way we are working with our customers around the world trying to attract people by demonstrating that we contribute to something important, that the work we do make a difference, that we support the global oil majors, for example, in the strategy to turn into energy companies, and that we want to make a change as a company as well as individual.
SS: Very cool. I love your quote. You propose there is no planet B, but do you think what you're preaching is plan B or plan A?
SA: It's not my quote but it's a very known one. I admire these youngsters that demonstrate, I think that gives us a lot of reason for hope, that you see the kids from school, they go with these banners that there is no plan B. I mean plan A is status quo to a large extent and that's what we need to change. We need to change plan A into something sustainable because plan B and planet B are not good enough. So the whole thing here is about changing plan A into something sustainable.
SS: And you say that it is a very all-encompassing and contradictory goal as well because we have a planet with 9 billion people expecting relatively equal redistribution of all the modern goods and trying to preserve the planet. I'm really fascinated by your recommended literature and Encyclopedia Si, say a little bit about that because I think we might have to go that way, actually.
SA: The sustainable development goals are an immense achievement in themselves but they're also contradictory in their nature because it's almost impossible to achieve especially if you look at those more human-oriented SDGs, which are good health, good food, equality, growth, livelihoods, and all that. And then you have the more nature-based ones which are about preserving the planet, preserving the ecosystems, the biodiversity, and all that. So, behind all this, there is partly a sort of optimism that green growth is possible and partly a sort of realism that you cannot deny the people on the world the goods that the rich people already have. There is something in this equation that doesn't sort of add up, and that is this green growth or the growth in itself. Especially those of us living in the rich part of the world, we need to find another measure for quality of life than increased growth and increased GDP. In this Encyclopedia Si from the Vatican, we have really dared to challenge what SDGs didn't manage: growth as a goal. Why should growth be a goal? Of course, growth should be a goal if you live in Somalia, you are a poor farmer, and you want education for your kids and food for your family. But for many of us and soon, most of us, growth is not a goal in itself, and that is the inspiration of this Encyclopedia. They dare to challenge the notion of growth.
SS: I think it's fascinating because it's really difficult to find the politician daring to challenge the idea of growth because they know that all that the electorate wants is to see that their children will have a better, richer, easier life than they had, and at some point that becomes unsustainable for 9 billion people. Who's going to get it, and who's not? I understand the international problems here, but it's almost like we need something more spiritual back in our lives that will help separate this a little bit from this materialistic growth.
SA: Yes, definitively. And I think we are to some degree starting to realize that, but we need to speed that sort of realization really up if we are to succeed here.
SS: But basically companies and people can contribute to this growth by learning, by helping each other, maybe by helping those people that are not close to them, but they need it most. So there are enough things to do, it's just that not all of it has to be measured and paid in the money.
SA: Fully agree.
SS: So, Sverre, we talked about the ETO, the consequences of it on business, etc. If we are concluding, if I asked you finally: are you a pessimist, an optimist, a realist, or an opportunist, on our ability to come to somewhere livable within the lifetime of our children, what would you say?
SA: I'm asked the question all the time if we can achieve the Paris agreement, and I say that we can, but it's extremely difficult. So, I'm somewhere in-between sort of an optimist and a realist. We can still make it and we should strive to get to do it because every decimal counts. I mean, it's so important and it's so much better if we almost achieve it than if we don't achieve it at all. We shouldn't be blind towards 1.5. We use that as an inspiration and then we should all contribute as much as we can as individuals through our workplace and everything else we engaged, to make a step in the right direction.
SS: I think what you said now is also super important. Every individual counts and every company counts. We don't do it just because it's good business, although that is good business in the short and medium-term, we do it because otherwise, it won't happen.
SA: Yes, we all have a part of the responsibility.
SS: Thank you.
SA: Thanks for the opportunity and good luck with the rest of the webinar series!
SS: Thank you so much, Sverre. And thank you for listening.
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What is your professional dream?
To be recognized as a person that advances the global energy transition and contributes to something amazingly important.
What is your project at work, and why it is important?
Responsible for DNV’s Energy Transition research and publications, important for both the future of our planet and humanity, our customers, and DNV’s own strategy.
Why is it challenging, and how do you build the culture around this work?
It´s extremely hard to forecast what will happen in the future. One thing is the technologies, where we have some degree of overview. Much more challenging is the policies and human behavior, assessing how they will develop. We research all these areas.
Are there any interesting dilemmas?
The tragedy of the commons makes individual behavioral change so extremely hard for climate change.
How does its relation to sustainability, in simplest terms?
All-encompassing, and contradictory for achieving both human sustainability and well-being in a modern world for 9bn people and still preserving the planet.
What are your views on skills for the future?
Digital, but also human understanding, as well as communication.
Do you have a favorite quote?
There is no planet B.
Samle deg med en venn eller en kollega for å se om du klarer å svare på spørsmålet nedenfor.
What do you believe we can put in our toolbox to go from a regulation pessimist and become a regulation optimist?
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