Legislating for the age of renewables

Welcome to the latest series of the DNV Talks Energy podcast, hosted by Mathias Steck, Executive Vice President, DNV – Energy. Each week, we will be joined by the world’s leading energy experts to discuss their insights and opinions on how governments, business leaders and wider society can help accelerate the energy transition.

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Legislating for the age of renewables

With climate change now a global issue, legislation is increasingly being introduced to ensure countries remain committed to lowering their carbon footprint. In this episode, Dr Matthias Lang, Partner at Bird & Bird LLP, explores the role the legal sector is playing in the global energy transition, including how regulation can act as a technology innovation enabler.

As outlined in DNV’s Energy Transition Outlook 2019 report, the world needs to see “extraordinary policy action” if we are going to meet The Paris Agreement goals by 2030. Matthias explores why lawyers and policymakers should be supporting public and private sector businesses in understanding that change can be introduced efficiently at the same time as delivering positive results.

Read the transcription of this episode here

Transcript:

NARRATOR Welcome to the DNV Talks Energy podcast series. Electrification, rise of renewables and new technologies supported by more data and IT systems are transforming the power system. Join us each week as we discuss these changes with guests from around the industry.

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MATHIAS STECK Welcome to a new episode of DNV Talks Energy. My guest today is Matthias Lang, Co-head, Energy Digitalization Group of Bird & Bird. Welcome, Matthias.

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MATTHIAS LANG Happy to be here, Mathias.

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MATHIAS STECK Matthias, before we start to talk about entrepreneurship, regulatory frameworks, funding of innovation, how legal and laws can help the energy transition, it would be great if you could give us a bit of a background about Bird & Bird and yourself.

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MATTHIAS LANG Yes, happy to do so. My name is Matthias, and I'm a partner at Bird & Bird's Energy and Utility Sector Group, I'm the Co-head, as you mentioned of the Energy Digitalization Group, which I actually started a couple of years ago, because my firm we’re about 150 lawyers in the energy sector out of the 1300 or so that we have around the world, and we also have about 450 tech and comms lawyers.

I've been working in the energy area for quite a while, and I noted the trend starting several years ago. I started to get my dear partners and colleagues together, and said, well, there's something happening in this area. So, we created the Energy Digitalization Group, my Co-head, Ronald Hendrikx, he's actually a partner in the Tech and Comms Group, started and did the smart metering rollout in the UK.

So, we said, okay, let's see how we can develop this further, what's happening in the area and how we can combine the knowledge that we have in the firm. Because the firm itself is really about how technology is changing industries, and there's a lot of legal work around it, and we like to do that kind of work. It's a bit techie, I suppose, but I think there's a lot of interesting things to do, and that's what we enjoy doing.

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MATHIAS STECK Yes, it's great to get a law firm's perspective on this. Let's start with the entrepreneurship in the energy sector. Do you see that the sector is entrepreneurial and innovative enough to respond to the climate emergency we are discussing? What kind of entrepreneurial spirit do you see within the private and public sector among energy businesses and policymakers to bring new ideas and new ways of working to life?

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MATTHIAS LANG I think there is a lot of entrepreneurship, and there is more than enough, actually, around. I mean, the energy industry is big. When you look back, historically, it has always been an industry that is involved in technology. It is technology, it is entrepreneurs making it work, and it's very much a mix between private initiative and public. You have certain public service elements, you have the networks, you cannot replicate easily, so always, the two have to work together.

We're currently seeing, as part of the energy transition, is that you have different roles of companies trying to bring new things. On the other hand, you have the state as the enabler to do that, and there is a lot of things happening in the private sector and in the public sector, and there's a lot of money involved in it as well, and a lot of good things that need to be done. So, I think, yes, there is a lot of initiative out there. It's a question of getting it organized in a way that it works reliably, quickly, so that the energy transition will actually take its course.

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MATHIAS STECK A transition always comes with barriers which have to be overcome. I would be interested in your view, Matthias, how law firms can actually help to build or dismantle these kind of barriers that we need to drive the energy transition forward, and given the policy frameworks currently in place, how much of your work is spent tackling barriers, or helping to influence the energy policy?

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MATTHIAS LANG I think, yes, there are barriers, I suppose, but I'd prefer to look at them as regulations. This is a regulated industry. The energy industry is regulated, needs to be regulated, because of certain peculiarities in the industry that not everybody can just go out and supply power to everyone, and then it works or doesn’t work. We just need to make sure that it actually happens. There are certain monopolies that you have, that you need regulation on, and you need to identify areas where different companies can do things, so it actually works towards the common good.

So, these barriers are the regulations that you have, they can also help as guidelines to help companies along. So, regulation often is an enabler of new technologies. When you look at renewable energy, there are state support systems in place, basically everywhere around the world. They differ. Well, they're barriers when you don't really know how to work with them. They are enablers when you know how to do that.

So, of course, I spend a lot of time with these rules, barriers, guidelines, and that's my work. But I and we think that the way forward is to make these things work to actually get the energy transition to move. And I think that's the key part. Very often, it just involves talking to the people who are setting these rules, how they can be improved.

I think that's one of the key parts, that what we've seen is that the energy transition is moving so quickly that you cannot set a rule, a barrier, or an enabler at any time and just leave it there for 10, 20, 15 years. You just put it in there, see if it works, and then if you need to change it, you change it. That's what we do.

We sort of - I think we're moving the goal posts every now and again so that the ball flies into the right goal. So, yes, I spend a lot of time doing that, but I - very often, I don't see the barriers necessarily as barriers, but areas or guidelines that will help people along.

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MATHIAS STECK Right. In our DNV Energy Transition Outlook, we come to that conclusion that one important driver for the energy transition is extraordinary policy changes. Where would you see these most likely to happen?

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MATTHIAS LANG Well, it's difficult to say for a lawyer where the policy changes are most likely to happen, because policy changes are policy changes, and they are also often driven by democratic developments, by region developments, or by incidents, like the Fukushima incident that changed energy policies. So, these things are difficult to predict.

I think we've seen that with the Paris agreement, there was an alignment of interests in many countries to do something against climate change. There are countries that are not so excited, at least at this time, because of the government, to work towards that way, and there are other who do it differently. I think most countries are aware of the fact that climate change is happening, that they need to do something about it, and there is a debate how to best do it.

I cannot really tell you which is the most extraordinary change that's going to happen. I think a key element in energy is that you need to live with the laws of physics. They haven’t changed, as much as politics sometimes want to change it, you can't change it. You need - when you talk about electricity, you need to generate it at exactly the same time as you consume it. Well, including - if you want to store it, then you need to find a way to store it, but still, it needs to happen at the same time. So, this is something that we need to deal with, something with intermittent generation from renewables. It's a challenge, and the more renewables we have, the bigger the challenge will be.

So, I think to some degree, we're all hoping that storage, energy storage, is something that is going to be developed in a way that we can, in a commercially viable way, use it very soon. I think there are some promising elements, but then again, we just need to find ways to deal with it. I think one of the jobs of the lawyers to do that is to help people establish rules that these things can develop in an efficient way.

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MATHIAS STECK You mentioned already, differences from country to country, and Bird & Bird is a global law firm, you are used to work across different jurisdictions. With that global perspective that you have on laws and policies, how aligned are energy policies around the world, and do you see the need for more alignment to address the same global challenge we all have?

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MATTHIAS LANG I think an important element is, it's a global challenge. So, we really need to have a global solution for it. But every global solution needs to start locally, and it is not necessary to have all local solutions aligned in a really straight line. There is some benefit in having diversity, and people trying out different things, and where you, in certain regions, certain countries, you try out something, see if it works. If it works, you can take it to another country, maybe improve the idea, and take it forward.

So, as long as people agree that we need to something about CO2 emissions and actually act upon it, not only just say that they're doing something to reduce CO2, but implement policies that actually help doing it, that is good. There may be different ways to do that, different approaches, and people may have very strong feelings about the different approaches that people take.

But what we see in the different countries that we have, we have often ideas, discussions moving around from one country, or one region to the other, where originally, in one country, they say, okay, yes we're going to start with renewables now, we're going to do wind or something. Then someone says, no, we're not doing that yet, it's too expensive. Then a couple of years later, the other country comes along and says you do that.

So, it doesn’t necessarily have to all happen at the same time, and we can build on the experience in the different countries. So, yes, alignment is good, but diversity is also good.

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MATHIAS STECK I'd also like to talk a bit about innovation. Innovation thrives on access to markets, but innovation often needs funding as well. Are we giving enough state aid to help develop and deliver new ideas and new ways of working in the energy sector, and how does current funding match up to the climate emergency we are now facing?

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MATTHIAS LANG It's one of the big debates, how much state support you actually want, and how much you can leave to markets. Once you have state support, how do you change it over time? I think it's one of the key elements. I mean, Germany tried out the Renewable Energy Sources Act with feed in tariffs. It's a fairly costly way of organizing things, but it delivered results.

Now, what is the right level of support that you have? I suppose, if you're a very wealthy country, you can afford to spend money on something, and then if it doesn’t work, well, it was just something that didn’t work, and you're less well off than you may have been beforehand, but it doesn’t create a major problem. There are other countries that cannot afford to pay for certain experiments that other countries can do.

So, state funding is important, it's like, say, regulation, it's an enabler to get certain technologies off the ground. As a lawyer, I like to work with that sort of system. When you look at different regions, there obviously are some legal restrictions, what you can do.

You mentioned state aid when you asked the question, which is, when you look at it from the European point of view, obviously, a legal term, and state aid needs - well, there's a strong legal framework that's European Commission supervises what member states can do. The Commission is currently in the process of reviewing the state aid law guidelines for energy, to see what member states can do going forward.

So, again, it's an area where you have to strike the right balance. There's always someone unhappy with the amount of state support that you have. Either it's too much, or it's not enough. I think what we've seen in the energy transition that state support schemes can do a lot of good, but what's also very important in state support schemes is that you adjust them over time. Because, again, as technology evolves, the cost basis changes and the state support schemes need to change. So, to free up money to develop new things, you also have to reduce it in other areas.

I think that's a very important part that the countries are trying to get right. As a firm, we were working on many projects where we tried to assist clients and governments how to strike the right balance.

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MATHIAS STECK Great. Matthias, I have one last question for you. Finally, what is Bird & Bird doing to harness the new collective focus on climate emergency to progress the energy transition?

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MATTHIAS LANG We're working on so many ends of that, I cannot really mention them all. We are working for many clients on all sorts of different aspects on that. There are individuals who also work in private initiatives, outside of their legal work. There are people who teach courses at university to do that. So, there's a multitude of things.

Technically, as a firm, of course, we're advising governments, public entities, private entities, individuals, on various aspects of the energy transition, and I think it's a very good thing to do, and I always enjoy working in this area, and I see when I have new lawyers coming to join me who are excited about this area, who think this is an area worth working in. I very much agree with them.

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MATHIAS STECK Thank you, Matthias, for these insights, and thank you very much for listening. That was Matthias Lang, Co-head, Energy Digitalization Group, Bird & Bird.

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MATTHIAS LANG Thank you, Mathias, my great pleasure.

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NARRATOR Thank you for listening to this DNV Talks Energy podcast. To hear more podcasts in the series, please visit dnvgl.com/talksenergy .

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