Olof van der Gaag: 'A Project Developer’s Mind-Set Accelerates the Energy Transition'

What is your personal motivation for getting so involved in this sector?
‘That is obvious. As I was scrolling through the news this summer after my vacation, I noticed that at least three out of four news articles were linked to the energy transition. Extreme floods in Pakistan, forest fires in southern Europe, precipitation shortages in the Netherlands – an array of climate disasters. For too long, everyone thought that this was something the next generation would be faced with, but it turns out that these issues are affecting our generation as well. There is also the war in Ukraine and the resultant effect of individuals and businesses struggling to pay their energy bills. These events are all related to energy transition, and indicate how urgent the transition has become. I want to help solve those problems and contribute to this major social change.’

Where do you think the biggest shift is taking place within the energy transition?
‘I think the biggest shift is an economic one. There is a simple law that I call ‘the law of appliances’. This law applies to almost all devices: The more you sell, the cheaper and better they become. The DVD player was extremely expensive when it first came onto the market, but with time you could buy one very cheaply. The energy transition also involves a wide range of appliances, such as solar panels, wind turbines, heat pumps, infrared panels, batteries, electric cars... The same law applies to these things: The more you sell, the more affordable and better they become. An economic advantage will naturally follow for any renewable technology that reaches a certain maturity. Renewable energy is ultimately economically and technologically superior.
The great thing is that many parts of the energy transition can be objectively measured. You can calculate how many kilometers you can drive per kilojoule of energy, for example. And then it turns out that with the same amount of energy you can drive many more kilometers with electric cars than with gasoline or diesel cars. If you look at it purely objectively, from a technical or financial perspective, you know that electric is superior in the final analysis.’

What do you think is the biggest obstacle?
‘Five years ago I would have answered this question in a different way. Back then, I would have said that political and social support was the biggest obstacle. There is still resistance, of course, especially to specific projects in people's immediate environment, but in general I think there is an enormous amount of support for the energy transition. I find myself in discussions about the energy transition constantly, but I never find myself in discussions about the ‘why’ question anymore. Nowadays, all discussions are about the ‘how.’ There really has been a shift there.
The big challenge for the Netherlands is that we have been putting this off for 25 years. We were never in a hurry, we had gas in Groningen, so why should we have been? The largest obstacle now is the lead time for projects, which in the Netherlands is enormous. Almost all projects can be built in two years, no matter their complexity. An offshore wind farm 60km off the coast? Built in two years. A complex high-voltage substation? Done in two years. A green hydrogen plant? We can build it in two years. In fact, everyone takes two years to build anything. But the processes around it are long and onerous. It often takes eight to ten years to organize all the permits and policy processes. That is no longer compatible with the pace required in an acute crisis, and this has to change.’

What is the solution, in your opinion?
‘I would advocate more of a project developer’s mentality. Market players need to make agreements with governments and civil society organizations on how they are going to tackle projects, with clear deadlines and clear time frames. If you can build something in two years, it has to be finished in two years. So let us agree on a time standard: two years of talking, two years of building. And then start counting backwards to figure out how to structure the process in a way that ensures everyone is heard and all interests have been considered. But in such a way that progress continues to be made.’

The companies affiliated with your organization are undoubtedly consciously concerned with the energy transition. What about the rest of the Dutch business community?
‘Well, I still see opportunities for improvement. Although I must say it is much further than five years ago. Back then, people thought it was just an exotic idea to strive for a completely sustainable energy system, and even more so to set a deadline of 2050. That idea has now become more mainstream. I do notice that companies are still unsure about the next steps. They do not really know what role they should or could play. And as long as that is unclear, many companies seem to opt for ‘when in doubt, leave it out’.’

I have noticed that many executive boards and supervisory boards actually have an intrinsic motivation to do the right thing, sometimes even faster than imposed by climate agreements and governments. So where are these companies that are still unsure?
‘These companies can be found in every sector. Companies have difficulty deciding what to focus on and what exactly they are responsible for. I realised that there is a difference between corporate social responsibility and corporate community engagement. Doing business responsibly involves eliminating your own emissions – the emissions from your own chimney, i.e., Scope 1 emissions. In general, this is going quite well in the Netherlands. The problem is often further down the chain, with Scope 2 and Scope 3 emissions, i.e., emissions from suppliers and customers. There is still a lot of progress to be made here, although there are hopeful initiatives. Wind company Ørsted has decided to request all its suppliers to use 100% sustainable electricity. Energy company Eneco has said it aims to be completely climate neutral in Scopes 1, 2 and 3 by 2035. Remember that Eneco still supplies gas to people with central heating boilers. That will no longer be possible in 13 years’ time. It is happening incredibly fast.’

How do you think companies could be supported?
‘They could be supported with something that the government is already doing much of: Offering customization. I was recently at the Rotterdam Port Authority. The Port of Rotterdam accounts for 14% of national CO₂ emissions, which might shock you, but it is actually an advantage that such a large percentage of national emissions is concentrated in one place. It means that with intense focus it is possible to address much of the emission problem.
The same goes for Tata Steel in North Holland, which is the largest emitter of CO₂ in the Netherlands. From an energy transition perspective, it is great because you can very specifically explore with Tata what is required in order to make that company the greenest steel company in the world. The answer could be: Let us build 400 wind turbines at sea and use the electricity generated from those to help the company into green electricity and green hydrogen. In my opinion this is how the government should help companies through the transition. We may well apply some pressure, because transition is not optional, but on the other hand we will have to take an honest look at what those companies need. Speaking of Tata, to become a green steel company it would require a very thick electricity cable as well as an enormous pipe for green hydrogen. These are corporate and not unreasonable prerequisites that I believe Tata Steel is entitled to demand from society in return.’

So you are actually proposing a kind of pact between the government and the business world?
‘Yes, I would argue for more control from within the government – a little more industrial policy than we are used to in the Netherlands. Until now, the Netherlands has been more concerned with generic economic incentives. The main instrument for the energy transition is now the SDE scheme, the incentive scheme for the stimulation of sustainable energy production and energy transition. It is an economists' dream: A competition of all against all others and the one who achieves the lowest cost per ton of CO₂ emission prevented, wins the cash. It is an economically sound idea, but it does not provide companies with sufficient guidance.’

What is your advice to companies and organizations that are still unsure about the best approach?
‘Do not wait – devise a proactive narrative, also for the government. I think we are still at a stage where the government is very happy when companies come forward to help solve the problem. I think the government will support those companies generously. But I also believe the time will come when this changes and the government will take control and direct: This is how we are going to do this. If you are quick, you still have a chance to get the right preconditions.’

You mentioned before that all sorts of geopolitical struggles are having a major impact on the energy transition. Due to the war in Ukraine and the related gas crisis, coal-fired power plants are once again running at full capacity... Are you not afraid of a relapse?
‘I am, on the contrary, positive. I think the common effect of the current crisis is that people are losing faith in fossil energy. For many years, I sat in discussion panels where  fossil energy was accepted as the the reliable, stable, solid, predictable and low-cost form of energy. Renewable energy was yet to prove itself. Now, exactly the opposite is happening. I think many parties still underestimate the psychological value of this. Nobody doubts whether the wind will blow in the Netherlands in the fall. Nobody doubts whether the sun will shine again in spring. Sure, there is a certain degree of fickleness, but it is a predictable fickleness. Geopolitics, on the other hand, has an unpredictable fickleness about it. Make no mistake: Companies and individuals who have already made considerable progress in the transition are barely affected by the energy crisis. People with well-insulated homes, solar panels and heat pumps are barely affected by the rise in energy prices. Companies such as NS and KPN which concluded PPAs, or long-term power contracts, with wind farms, are not affected by the increased energy prices. Parties that are trendsetters in sustainability are suddenly no longer considered to be tree huggers – they are the winners.’

What are the main goals you want to achieve in the short and long term?
‘In the long term, a fully sustainable energy system. In the short term, that we emerge from the current crisis to an improved situation. That we really ended our dependence on Russia, that energy bills for individuals and businesses are affordable again, and that we managed to eliminate a significant volume of CO₂ emissions. I think that this can be  achieved within two years. But it does mean we have to accelerate a number of things.’

Such as?
‘Companies have to interact with the government far more, and government needs to do a number of things. First, it needs to systematically ensure that the sustainable choice is always more affordable than the polluting choice. That is a very simple principle which government has to be consistent in implementing. If there was no urgency, this would have been sufficient, as the market would fulfil its role. But we are under pressure and government will simply have to set deadlines for certain things. For example, I think government should set a cut-off date for central heating boilers. I think there should be a cut-off date for power plants emitting CO₂. I think – and not all Management Scope readers will appreciate this – government should announce that company vehicles have to be emission-free by 2025. If government sets clear deadlines, businesses and individuals will know where they stand and which targets they need to work toward. And that will work if the first condition is met: That government ensures the sustainable choice is consistently more competitively priced than the polluting one. That will be crucial for any strict policies that may be imposed.’

This interview was published in Management Scope 09 2022.