Ep. 58: Stronger Together: Collaboration and Conversation as Strategy Across GE Vernova

Speaker A: The GE Vernova technology portfolio fundamentally covers every type of technology that's going to be required to get to net zero, whether that's through electrification or decarbonization or a combination thereof.

Speaker B: Good day everyone and welcome back to Cutting Carbon. I'm your host Jeff Goldmir and I'm joined by my co host Brian Gutnik. Brian, good day.

Speaker C: Good day Jeff. As always a pleasure to be with you and continue in the dialogue.

Speaker B: Yeah, we have another great guest and great conversation for today. Today I'm really thrilled to welcome Heather Chalmers. Heather is part of our new strategy organization here in GE Renova and really excited to have her be part of this conversation. So Heather, I want to jump right in. Recently you were part of the new era of energy events that GE Vernova uh, hosted and we did two of them. We did one in the UK in London and one in Calgary up in Canada. I'm hoping maybe for those of us who weren't in the room you can tell us a little bit about the events, the who, what, where, why, how if you will.

Speaker A: Great, thanks Jeff and Brian and it's wonderful to be back. I had the opportunity to participate in your show, I would say just over a year ago to talk about Canada. So uh, what's old is new again in terms of. We called these the new era of energy events and you're correct, we hosted the first one in the middle of June in the UK and then just recently had a second one in Calgary, Canada. And the purpose of these events were to bring together leaders in the energy transition ecosystem. Leaders who could affect change and create a forum for very candid, transparent, honest dialogue to discuss what's working and also discuss areas of opportunity or challenge that as a team we could try to tackle together. And for G.E. vernova I see we're in this really unique position as ah, a technology provider across the continuum of technologies that will be, you know, required to, to meet the energy transition trilemma. And you hear us say it all the time, sustainability, reliability and affordability. But we also have this responsibility to be this convener and honestly it's a privilege to be able to do that. So that was the purpose. The other thing I would share is that certainly in the UK what we were solving for there was perhaps a little bit unique and different because it was through the, the lens of UK's energy transition goals and their starting point. And then certainly when we turned to Calgary we pivoted and we focused on areas that were important to Calgary and Canada's Energy transition needs.

Speaker B: Great. Are there any consistent themes? Obviously you talked about, there are some differences between the Calgary and UK events that get different starting points in the energy transition. We'd love to hear about that as well. But what were maybe the consistent themes that you heard from your audience and speakers at those two events?

Speaker A: Absolutely. The first is permitting and the opportunity for more regulatory harmonization. The second one was how you can use clusters or hubs to scale and accelerate energy transition projects. The third was around certainty in the certainty required in a number of areas in order to move forward via final investment decisions, let's just say, on these large projects. And finally would be the grid. That is another consistent area of focus, regardless of the geography.

Speaker C: Perfect. So, Heather, why don't we kind of tackle each one of those and drill in a little bit deeper, maybe starting with the first one you mentioned around permitting. What did you hear from our customers regarding their challenges with permitting?

Speaker A: The concern there is the lack of time and then in some cases maybe not understanding the process or the process not being as clear as it could be. But I would say mostly the majority is on time. And here's how I would elaborate on that. If climate change is the goal or we're trying to mitigate the risk of climate change impact via energy transition, we can't have permitting take 10 years to do. Everybody will miss their targets. Whether that's our 2030 goals in Canada of, uh, between 40 and 45% emissions reductions or a clean electricity standard by 2035. We have to find places to do things faster. And it starts with more transparent dialogue and at the federal level, the province or state level and the local level to find places where we can speed things up or not duplicate efforts along those different continuums. There was one consistent theme I heard in both the UK and in Canada, and frankly, in the case of the event that we did in Calgary, we had representation from Australia and the US as well as Canada and the uk and they are also struggling with this as well. So nobody has cracked this nut per se.

Speaker C: Heather.

Speaker B: Ah, as we think about some of these themes, I wanted to talk maybe about the cluster or hub concept. And that's a model we're hearing not just obviously out of the US but we're hearing that from multiple countries. So what were you hearing about that concept from those who attended the events?

Speaker A: Great. In the events we talked about clusters and hubs using carbon capture and sequestration, hydrogen development and small modular nuclear reactors as springboards for this conversation. And there is an opportunity with clusters and Hubs to de risk these large projects. Whether it's de risking the technology, whether it's de risking the large investment that's required over multiple parties, whether it's de risking the actual how these deals get papered in and of themselves. Like there's a number of different ways, but there was a shared belief that clusters are going to absolutely be needed in order to accelerate and scale energy transition related projects. And I would say specifically to those where you've got a first of a kind technology risk. And I'll give you one example, small modular nuclear reactors. Ontario Power Generation is going to build the Western world's first smr. And they are using what's called an integrated project delivery model that includes four major stakeholders to share both the risk and the reward of this project, not just for the first smr, but they see that ultimately translating over the four that they'll build on one site. So that's just one example. I know Australia is looking to do that in hydrogen and then the UK in particular around carbon capture and sequestration. And similarly when you think about Alberta, the Pathways alliance, which is the largest oil and gas providers in the province, all coming together also to solve for carbon capture and sequestration.

Speaker B: Just a quick follow up, Heather. I totally get by bringing multiple parties in together in this model, you're sharing both, let's say the financial risk because the burden is less per party, they're having a better understanding of technology risk. But I also see that many of these clusters or hubs really almost end up being a private public partnership, that there seems to be some level of government engagement, whether it's at the state, provincial, federal level that makes those possible to help, kind of whether it's de risk commercially, de risk financially. But it seems that these large first of a kind projects do need some amount of, I'll call it just government sponsorship.

Speaker A: I 100% agree. And that sponsorship can take different forms depending on the technology, depending on the tools that have been developed in that jurisdiction. But these clusters that come together play a role in helping the governments develop the right tools to incent the right behavior that then leads to the right infrastructure being built out.

Speaker C: Great. Heather, you mentioned that the stakeholders, uh, were also looking for increasing certainty around the energy transition. Can you maybe share some examples of what types of topics were they concerned about from a certainty standpoint and maybe why was that important to them when

Speaker A: you talk about certainty? We had the opportunity to have a wonderful panelist join us. And I can say this with attribution. His name is Scott Thong, um, and he is the president and CEO of Berkshire Hathaway Energy. And he said that uncertainty is our kryptonite. And I thought that one sentence did a terrific job of encapsulating what these large infrastructure projects were dealing with. And two examples were discussed in multiple different ways, but one is on the policy kind of regulatory side of certainty, and then the other one is more directly tied to the funding. And on the policy side, if there isn't certainty that the rules are going to outlive, uh, a political change, then that creates too much uncertainty. So whether that's, you know, in Canada's case, whether it's the carbon tax regime or the clean electricity regulations and what those mean, very practically, if there is uncertainty that they could change, companies will wait to make these large investment decisions. And in the case of, you think of Canada, you think the US and the uk, all three countries in the next year to two years are facing an election process. So that is very top of mind. The uh, second one is, and this is maybe more unique to Canada than the U.S. where in Canada we have taken more of a stick approach to the energy transition versus in the US it's more of a carrot. And the carrot in the US is a production tax credit. So if you produce carbon and sequester it, you get paid to do that. In Canada it is a tax. And so while the carbon tax is known and there's a number associated with every year going up to $170 by 2030, if you can't monetize that carbon tax, then the revenue side of many of these large projects, it's very difficult to get investor appetite. And so we are actively trying to figure out a, uh, way whether it's through carbon contracts for differences or some mechanism to monetize a carbon price. And so these are just two examples of uncertainty and using a couple of the differences of different jurisdictions to illustrate what these large companies are dealing with in order for them to be comfortable making a final investment decision.

Speaker B: You're listening to Cutting Carbon. If you're interested in learning more about today's topic, please check out our show notes. And if you like what you hear, subscribe, wherever you get your podcasts. Alright, let's go back to the conversation. And Heather, I'm curious. As we think about that latter example, obviously certainty is important and knowing that that policy will be in place for multiple iterations, multiple election cycles, giving comfort and the ability for businesses to make that long cycle investment. But it also sounds like what we're Talking about, and we talk about monetizing, it's how to turn these payments or how to flip this around and create a revenue stream out of that. If we're capturing carbon, is that captured carbon? Is that a CO2 credit that can be turned into a revenue stream? How do you turn this negative into. Into a positive business scenario, I think is what you're describing.

Speaker A: Absolutely. I don't know if we want to go down here, but the whole carbon markets regime M is a very nascent system, phenomena, whatever you want to call it, that is new. The world is figuring this out. And it also adds a certain level of uncertainty to all of this at this particular moment in time. So while we're trying to incent these large, very expensive infrastructure buildouts that cost so much money in an environment that hasn't reached a maturity that provides that certainty of backbone of the fundamentals that go into making those projects viable.

Speaker B: And here's where I see a lot of a web of these themes that are. They're not independent of each other. We just talked about hubs and clusters and that private public partnership and de risking, obviously, with these first of a kind. Having that partnership to help de risk around some of these issues, around certainty can help as well, because you can get past that maybe on a first project. I know in the US between the ira, the Inflation Reduction act and the Infrastructure act, that's what the DOE was intending to do. Not just to incentivize first projects, but to create enough momentum that the second and third and fourth projects could happen. Interesting.

Speaker A: And absolutely. And Ideally by the 2nd, 3rd and 4th, you've learned enough that you're starting to already see that cost curve come down as the technology matures and you continue to de risk the first of a kind elements of these large projects.

Speaker B: Ah. And also hopefully giving investors that sense of comfort that the technology works. And so there is a return on investment and it opens up the doors for future investment on those next projects where maybe the government isn't going to provide that first of a kind subsidy and they're looking for the investment community to step up.

Speaker A: Correct.

Speaker B: Good. So, Heather, the final kind of theme you mentioned was grid. Right. And we've talked about grid on this podcast multiple times. But I'm curious, what were you hearing from customers pertaining to grid? What was their specific. I'll say concern. Maybe that's not the right word, but what was their view about grid and the energy transition?

Speaker A: We'll put the permitting aside because that obviously was very germane to the grid discussion. As well, there was a few things that came up. Number one, first, there's a growing acknowledgement that you can solve for all the other things like the generation side or the decarbonization aspects of the energy transition, but in the absence of figuring out the grid, you're going to have these pieces solved, but in isolation. And the reality is it requires the system and the system is the grid. So this growing acknowledgement that holy smokes, we need to solve for this. So that's the first one. The second thing I would say is it can't be more of the same or how we've always done it with respect to the grid. And what I mean by that, it's not just about adding more poles and wires. First of all, the sheer enormity of uh, the grid investment that needs to be made is at a level that nobody honestly can comprehend and that's to connect renewable sources, whether that's offshore wind or onshore wind, you name it. But we have to move energy from places where it's generated down to loads very, very long distances. We also have to think about the two way nature of, uh, the electricity flow. It's historically been one direction and that is no longer the case. So how do we use different technology, different digital tools to do that optimally? And then the third one is just the nature of involving the consumer in the grid and doing a better job of helping you, helping me make more optimal decisions when we want to draw on power or use our lights or charge our car, you name it. But can we unlock productivity or efficiency in the grid by using different tools? So there's many different things that we're solving for with the grid of which is going to take a tremendous amount of infrastructure build out, as I said earlier, to the tune that we haven't seen in a very long time. And the last piece I'll talk about is how the grid has traditionally been funded. Does it necessarily work to incent the type of modernization and the solutions to achieve that in its current form. So how we pay for the grid or how utilities or otherwise get paid to make their investments, that model is no longer optimal to solve for the challenges or the solutions to meet the challenges that the grid is facing today, if that makes sense.

Speaker B: Well, I think about if I'm a consumer and I'm turning on or off a light, or I'm running my dishwasher, my air conditioning unit, do I understand the difference in the cost of electricity or the demand for electricity in a moment, would I be incentivized to change behavior. And there are places around at least the US that are doing that. You say, hey look, I shift certain loads till a certain hour of the day, I'll be contractually given a lower cost of electricity. So are you incenting people to change behaviors in that way? And it's bigger than that because you've got people who are really not wanting to take power from the grid, but want to put power to the grid. Well, you start adding all these different pieces together. And how does the grid typically get funded? Well, it gets funded by my taxes or a fee on my utility bill. But what if I'm, how I interact with the grid is changing? How does that change things? What if I've got a Tesla in my garage and at times power is flowing from my Tesla to the grid? It's a battery. Well, I'm getting value from that. But how is the grid being funded for that use? And so I think there's all these different new nuances about how the grid is being developed. It's not unidirectional flow from centralized power to consumers. It's this, I wouldn't call it bidirectional, it's multidirectional. It's these layers of micro grids and transmission and distribution and the whole model is being taken apart and rebuilt. And Heather, I think that's a great point of. Are we also considering the funding piece of it, not just the technology, but where does the investment dollar come from to make that happen?

Speaker A: The other piece I would add is these utilities of which I would say certainly in Canada's case there's been no incentive for them to take on any risk and their entire. It's a very risk averse culture for very obvious reasons. And now we're asking them to think about investments that challenge the very core of uh, how they've always operated. We can't underestimate the change management piece at the cultural level of everything that has to happen to the grid in order to enable these energy transition projects.

Speaker C: That's a great point, Heather. And maybe to build on that, some, as we think about that investment that's required and you think about the energy transition as we electrify and build out the investment and supply chain that's going to be required to do this build out not only for the total generation adds, but specific technologies, some of which are a very nascent stage, the scaling of those industries. Did that topic around supply chain and potentially some of the constraints or challenges come up in these discussions as well.

Speaker A: It did. And I would Certainly say whether it's at the GE Vernova new uh, era of energy vents or otherwise, supply chain is becoming more and more important as people start to appreciate what is going to be required in order to do these massive infrastructure projects. So as an example, just the people, the human capital aspect of it, and I use a very simple example pertaining to small modular nuclear reactors. Nuclear, it's in this renaissance or the beginning of a renaissance. But one could argue that certainly hasn't been the case for a very long time. And we don't have the number of students going to nuclear engineering or whatever those programs are to support the build out large small modular reactor, the refurbishment of existing nuclear power plants to serve the amount of work that's going to happen. So how do we work with governments and the education system to make sure that we're attracting talent and we have the class sizes to meet these needs? You know, that's a very simple example. Uh, never mind the trades that are going to be required to do these large projects or offshore wind. Think about these unbelievable ships that are required to bring the wind turbines out to the middle of the sea to be erected. There really is a system and so much of this has to be considered as we embark upon these, these large projects. And I think what we're seeing because of that is we're already starting to see areas of constraint or people are, what's the word I'm looking for, they see their um, foreshadowing, smartly so or rightly so, future constraints. The second thing I would say is around frame agreements, our customers are also doing their own review and looking at their risk and with respect to securing their supply chain. So we're starting to see this emergence of uh, I'm calling them frame agreements, long term purchasing contracts, you name it. But rather than go out to market project by project as they've historically done, they're prepared to award a book of business over 15, 20 years to have surety of a supplier, a trusted supplier for that period of time. The good news is for somebody like G.E. vranova, having that come back to the word certainty also allows us to make necessary investments, whether that's on the people development side or even the bricks and mortar of supply chain and where it needs to be. So I think this concept of long term purchase agreements or frame agreements work for both stakeholders in this environment. And then the third one I would say, which is certainly very top of mind in Canada and in Australia, is around the inclusiveness, the energy justice. But in our particular case it's around Indigenous reconciliation and making sure that first nations communities, of which most of these projects are being built on, are part of the stakeholder group as an equal partner. And that equal partner can take many different forms. Sometimes it may be as an equity, like taking an equity position. Sometimes it might be as part of the supply chain, sometimes it might take the form of us giving back to their local community in some other meaningful fashion. But they have to be a considered stakeholder in all of these projects, full stop. So those are kind of just another two areas that when I think about supply chain, where what's changing in light of the scale and scope of the energy transition project?

Speaker C: So, Heather, as you think about these events and these themes that emerged that were somewhat consistent across the two that we've done so far, what is it that excites you most about the opportunity for GE Vernova to help in this transition and and take some of these challenges head on?

Speaker A: I would answer this a couple of ways. The first thing I would start with is that we have a responsibility. Over 30% of the world's power is generated on GE Vernova technology. Today in Canada, it's actually close to 40%, I think the US it's over 50. The UK 35. So we have a responsibility to be part of the solution, number one. Number two, the GE Vernova technology portfolio fundamentally covers every type of technology that's going to be required to get to net zero, whether that's through electrification or decarbonization or a combination thereof. That puts us in a very privileged position, a very trusted position to work with governments or companies to help them solve their particular puzzle of getting to net zero in the most optimal fashion. So I come back to, yes, you're solving for sustainability, but you can't lose sight of the reliability and the affordability piece. And because we are, in a sense, technology agnostic, there is a level of trust and a level of collaboration that we can have with those key stakeholders and that I think others can't. And just those two things alone. Never mind. Coming back to the whole purpose of the new era of energy events where we act as this convener, this builder of networks to share best practices amongst key stakeholders within countries or across countries. This is a global problem. There are just a number of pieces that make me so excited about working for GE Vernova and this role that we can play as a true trusted partner with so many people to solve this lifetime challenge.

Speaker C: I love that how you articulated both having that responsibility, given the scale and the impact of our large installed base, but also that unique opportunity to convene with customers and be agnostic across what that solution looks like. So it's certainly an exciting time to be in the industry and part of this journey.

Speaker B: Heather, it's been wonderful to have you as a repeat guest on the podcast. A previous guest wanted to know, uh, how many visits you, uh, had to be on the podcast before you got a jacket. I don't know if we have an answer for that yet, Heather, but maybe if you come on a second or a third or fourth time, maybe we're gonna have a club going. You and Jay Wildman and Vic. So, Heather, it's been a real pleasure. Thank you so much for taking time out of your day today to share with us what you've learned from these global leaders who participated in our new era of energy events. It's been very insightful. Thank you so much.

Speaker A: Thank you. Thank you for having me.

Speaker B: On behalf of the whole team, thank you for our listeners. If you haven't yet subscribed, please do so. You can always send us a note with questions for Heather or any of our other guests@cuttingcarbon.com please check out our show notes, as always, for more information about today's episode. Thank you for listening. This is Cutting Carbon.