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August / 2021

#020: Desert Energy – CEO Of Dii Desert Energy Cornelius Matthes

Over 80% of the world is still powered by fossil fuels like oil, natural gas and coal. The Middle East and North Africa are home to over 90% of proven fossil fuel reserves. There is a shelf life on fossil fuels and limited availability means higher prices.

In this episode host Fran Racioppi is joined by Cornelius Matthes, CEO of Dii Desert Energy; the world’s leader in the development and enhancement of renewable energy. Fran and Cornelius describe how the world’s largest oil producers are becoming the world’s largest renewable energy providers, how green hydrogen is changing our lives and an initiative to link the solar and wind power generated in North Africa to Europe through a series of underground power distribution systems. Cornelius also provided his keys to successful product development, launch, scale and funding.

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About Cornelius Matthes

TJP 20 | Sustainable Energy

Cornelius Matthes is the CEO of Dii Desert Energy, where it is his mission to drive the energy transition forward and pioneer the field of energy from the desert, leading the world to 100% renewables! He actively invests in the renewable energy sector and has built several successful clean energy companies in the Middle East and Africa.

In 2015, he won the “Solar Pioneer 2015”, a prestigious award given to outstanding entrepreneurs who help to expand solar power in the Middle East. He also regularly speaks and lectures at universities and conferences around the world to educate people on the topic of green energy.

Cornelius lead and co-authored the creation of groundbreaking reports about green hydrogen and emission-free technologies such as the Dii / FES (Friedrich Ebert Stiftung) Green Hydrogen report or the Battery Storage report together with Arthur D. Little. He has served as a board member in over 10 companies and organizations and formerly led multiple divisions at Deutsche Bank Group.

Over 80% of the world is still powered by fossil fuels like oil, natural gas, and coal. The Middle East and North Africa are homed over 90% of proven fossil fuel reserves. Whether we want to accept it or not, there’s a shelf life on fossil fuels and limited availability means higher prices indefinitely and forever unless we make a change. In this episode, I’m joined by Cornelius Matthes, CEO of Dii Desert Energy, the world’s leader in the development and enhancement of renewable energy. From his office in Dubai, Cornelius works alongside leaders in the Middle East and North Africa to harness the abundance of solar and wind energy in the region and bring renewable energy to the rest of the world in an affordable manner.

Cornelius and I discussed business in economic evolution by describing how the world’s largest oil producers are becoming the world’s largest renewable energy providers. He shares the latest innovations behind green hydrogen in the near 100% clean and renewable process used to produce it and he provided a glimpse of the Desertec. Dii Desert Energy folds initiative to link solar and wind power generated in North Africa to Europe to a series of underground power distribution systems. As a serial investor and venture capitalist in renewable energy startups, Cornelius also provided his keys to successful product development, launch, scale, and funding. He even shared the detail behind his venture projects to bring solar power capability to the most remote regions of the Kenyan Safari. In 2015, Cornelius won the Solar Pioneer Award given to outstanding entrepreneurs who help expand solar power in the Middle East. He speaks regularly at universities and conferences around the world to educate people on the topic of green energy.

Cornelius, welcome to the show.

Fran, thanks a lot for having me. Warm regards from Dubai.

Energy and the ability to produce energy can arguably be one of the most important feats of human civilization. It’s critical to our survival, advancement and national security. Countries fight wars over natural resources and the need to protect them. The entire industries exist in the development and production of energy. For decades, energy has focused on fossil fuels, which we know are finite resources and we see this every day. That resulted in higher prices and more competition but in any industry, there’s risk in concentration.

In the energy industry, there’s a need to diversify away from a reliance on just fossil fuels. That’s where renewable energy comes in. You actually come from a family that has worked in renewable energy. That energy is replenished over and over again over time. There are the well-known ones, solar, wind and water but then there are also these rising stars, hydrogen, biomass and geothermal, which are on the front end of innovation and technology. This is the beginning of the supply chain because we haven’t even started to get into the end products like electric vehicles who use this energy to operate in a way that uses even fewer fossil fuels.

I think about Tesla or Ford’s commitment to making all their vehicles fully electric but the time is now to get involved and begin to make a change. That requires a lot of innovation, a lot of technology and a lot of costs associated with that. That’s where you come into the picture. To be honest, I did not know a whole lot about renewable energy until I started preparing for this conversation. By no means am I an expert at this point but I do drive a diesel truck. Although it’s low emissions and I get 30 miles to the gallon, it has made me start to think about energy consumption. This is a conversation that we need to have and I really do appreciate the opportunity to sit down and talk about this expertise that has been a passion of yours and your family for many years. 

Thank you, indeed. Energy is the basis of everything. It’s the basis of development for country energy infrastructure. It has important geopolitical implications. The great news is that the energy transition is now massively accelerating. 2020 has been about digging, a shift in terms of awareness on the urgency to do something against climate change. This translates into ESG investing. It causes a tectonic shift in financial markets. Banks will less and less provide money for fossil fuel projects.

Energy is the basis of everything. Click To Tweet

Proxy voting is the famous excellent case now where two additional directors were placed by, let’s say, an activist investor to finally transform sustainable businesses into sustainable energy. All of this makes us live in an exciting period. The good thing is, renewable energy price is much lower now than conventional energy and we have all the prerequisites. The technologies are there and the prices are low to join forces to drive the energy transition. Also, being based out of Dubai, which is one of the global centers of the energy transition makes me live in exciting times and in an interesting place.

Let’s talk about Dubai because you are living in the center of the world for fossil fuels in Dubai but you’re running a company that is focused on renewable energy. Having spent the majority of my career in the military in the Middle East and North Africa, I can say that there is also plenty of sun and wind but this is where fossil fuels live. Renewable energy has taken a front-row seat for the governments of that region over the last several years. The UAE has allocated over $163 billion to meet a goal of 50% of its total consumption needs to be in renewable energy and a little bit of nuclear by 2050.

Crown Prince Mohammed Bin Salman of Saudi Arabia has announced that Saudi Arabia will generate 50% of its energy from renewables by 2030. They’ll also plant ten billion trees in the coming decades. The Saudis have also launched the Saudi Green Initiative and have positioned themselves as, “The global leader in forging a greener world.” If we start at the broadest level, why is renewable energy so important to this region of the world? When in many areas, the joke is that you can dig a hole anywhere and you’re going to find oil.

Looking back, when we started to promote to do all the groundwork that first solar and wind projects can happen here in the deserts of North Africa and the Middle East, that was a tough one. There was fighting against so many obstacles but it has been amazing to see what has been happening over the last decades, particularly over the last few years because maybe ten years ago or so when we came out with Desert Power 2050 in 2012, optimistic estimates on the cost of solar and wind energy in 2050 were already achieved before 2020.

We have such a massive acceleration of the learning curve. This big buzz about renewable energy and green hydrogen is obviously mainly down to economics. In Saudi Arabia, the latest tender was exactly $0.01 per kilowatt-hour. The latest wind tender was below $0.02 per kilowatt-hour. This is a fraction of the conventional generation. This is almost free energy and definitely an important implication for the energy systems here and transforming.

Obviously, the main revenues coming from oil and gas and there are most of the jobs in the sector but in particular, the UAE has done a great job in diversifying the economy already over the last decade leading and pioneering initiatives with some of the world’s largest solar parks, which are already operating. Saudi has been a little bit later, moving and maybe starting in a series manner years ago. I’m impressed by what Saudi has achieved in a short term, the first big projects are online and the first largest green hydrogen project in Neom, for example.

The ambitions of Saudi and the actions are bold and I don’t have any doubt that Saudi rapidly transforms from being one of the largest oil exporters to one of the largest green electrons and green molecule exporters. I will explain why green molecules, meaning green hydrogen and derivatives, now offer much more than just renewable energy. The possibility to store huge amounts and export terawatt-hours of green energy to the world markets.

Saudi Arabia is looking at the entire supply chain. They’re not only looking at the front end and top end of the supply chain in energy harnessing from renewables but they’ve also made massive investments in companies like Lucid Motors, a competitor to Tesla and the development and innovation of the battery cells for those types of vehicles.

That’s a priority of Saudi Arabia to diversify the economy. Neom is a lighthouse project. It’s a pillar of Mohammad bin Salman’s vision in 2030. Neom is not only about renewable energy, it will be powered entirely by renewable energy but it’s about sustainable water, desalination all powered by renewables with zero crime. It’s about evolution in mobility. It’s about creating industrial sectors jobs in future fields like batteries and hydrogen. This comes down from electrolyzers to applications like fuel cell busses and fuel cell trucks. There are so many things and we’ve come out with the joint report on the potential of green hydrogen in Saudi Arabia, UAE and Oman where they analyzed the job creation potential. We concluded that up to a million jobs can be created in the field of hydrogen. This is obviously important. It’s probably the most important aspect at all for future prosperity and stability to provide future-proof jobs.

I want to get into green hydrogen because it’s a fascinating concept. It’s an innovative renewable energy source that has come to be but before we get there, I want to ask about Dii. I want everybody that’s reading to understand exactly what it is and then have you speak about it. Dii’s mission is, “Zero emissions.” You say, “We seek to change the entire energy system starting with various forms of renewable energy generation, transmission and transportation, flexible demand, new technologies and innovation on power fuels, storage facilities, eMobility and smart cities.”

You’re also sponsoring projects in things like solar rooftops, hybrid wind and hydro installations. There are also initiatives that Dii is involved in that number over 1,000, almost 1,300 renewable projects in the Middle East and North Africa region alone. Can you talk a bit about Dii? What is the organization? Where did it come from? Who’s involved? How did you get involved? What’s going on in their vision to create zero emissions?

Dii is quite an adventure, I have to say. In 2009, Dii was launched with a big bang in Germany. Every second person on the street would probably know about Desertec and Desertec Industrial Initiative. It’s what Dii stands for. This was launched in 2009. The idea was to harvest the huge solar and wind potential in the Sahara and the Middle East in the deserts and bring part of this energy to Europe with high voltage direct current lines, long-term transmission cables and subsea cables. That was the original idea.

This was launched as a big industrial consortium originally started by Munich Re, Siemens, Deutsche Bank and some of the big utilities, for example. I ended up completely by accident. I’ve been in Deutsche Bank for almost ten years before joining Dii as one of the first employees. The coincidence was that in Deutsche Bank, I’ve dealt with funds on climate change and renewables so I had a bit of a name already. I was the guy pushing in a passionate manner for renewable energy initiatives within Deutsche Bank.

The first chairman of Dii happened to be a top engineer in Deutsche Bank and the former CEO of Deutsche Bank, Italy and I was heading Deutsche Bank’s Asset Management Division at that time in Italy. I was approached about whether I might be interesting to meet the CEO of Desertec at the time and this has been changing my life. I decided to leave Deutsche Bank to basically join a startup company but this has been an opportunity and the fascinating journey to be involved early on in this energy transition. I would call it almost an energy revolution.

In the first few years, the mandate was to create the ground to enable solar and wind projects to work for the right regulatory framework, which make projects bankable to bring together different stakeholders and it was a highly complex endeavor and highly political for different interests of different companies for specific technologies. It was a highly complex project from a political point of view having so many different countries involved but this has been a big learning case for me personally for all my life. I’m grateful for all these exciting times.

From Desertec 1.0, the consortium developed over the years to Desertec 3.0. It went through ups and downs in different resets but over the last few years or so, there was a big revival with our new mission, Desertec 3.0, which includes green molecules, meaning green hydrogen and different derivatives alongside green electrons so renewable power being the prerequisite. That was the journey but we are still around and we are a public/private sector, a network of networks. We are a think tank. We’re doing studies here. We’re helping the government to find the right way as a neutral advisor, impartial advisor and a little bit behind the scenes but we have a serious group of industrial partners with well-known names internationally from renewable energy investment. This opens us interesting doors and gives us the power to move the energy transition here.

Let’s talk about the pluses and minuses, the goods and the bads of Desertec, Dii and this rise and fall that you alluded to. The story here is important. It’s a story of your own personal resilience of keeping true to the mission, keeping the pace on this thing and staying invested and involved. In 2012, you referenced Desert Power 2050, which answered two critical questions. One, how can the Middle East and North Africa supply their growing economies with secure and affordable electricity? Two, how can the EU reach its ambitious climate action goals in a way that was both sustainable and economic?

Desert Power 2050 crafted by Dii was in order to address energy needs in the Middle East and North Africa but then also energy needs in Europe. Dii believed that these challenges can best be addressed by moving beyond the currently predominant view of the two regions as separate entities. Indeed, Europe, Middle East and North Africa are not just neighbors tied together by a long history of trade and cultural exchange. In a world of renewable energy, the EU, the Middle East and North Africa should be viewed as a single region.

A 100% renewable energy based system is possible. Click To Tweet

More granularly, some lofty goals were put on a combined EU, Middle East and North Africa power system in which Europe could reduce CO2 targets by 95% with 20% of their electricity coming from the Middle East and North Africa. Europe would save $33 billion annually and then the cost would go down to about €30 per megawatt of power if it was imported from the Middle East and North Africa. The Middle East and North Africa countries on the other side would be able to supply their own energy needs through solar and wind resources and then they would then be contributing to 50% CO2 reduction.

At the same time, the benefits to the Middle East and North Africa could be exports upwards of $63 billion a year and then both regions would have a 40% drop in the marginal CO2 emission from the power sector. I threw a lot of stats out there but it’s important to contextualize that there were some lofty goals in this and it challenged the notion that these were two separate areas of the world but in fact, they were one. This became known as the Desertec Vision. Could you talk more about that Desertec Vision, all those stats I threw out there and what does that mean for the energy consumer? Why was this concept so transformative when it was first introduced in 2012?

In Desert Power 2050, you might argue quite ahead of time in terms of pointing towards a near 100% renewable energy system. Over the years, increasingly studies came up point towards 100% renewables but it’s nice to look back. We basically proved in quite a scientific work that a 100% renewable energy-based system is possible. It is good from an energy security point of view. It’s a game-changer for climate change and, on top, economically convenient and creates a huge amount of future-proof jobs.

The whole work leading towards Desert Power 2050, we had sixteen single working groups on different generation technologies. We looked at the development, the cost learning curve, the expected decrease in cost for solar photovoltaic energy, concentrated solar power and wind energy as main technologies. We performed a number of energy system and grid studies in different countries with reputable organizations and also with the help of some of our associate partners and shareholders. Some of them being National Transmission System operators like Terna from Italy or Red Electrica from Spain.

We looked at the regulatory framework, which is necessary. We’ve looked at storage, which in 2012 was at a completely different price point. We conducted way complex modeling with the help of our partner, the Fraunhofer Institute from Germany. We did complex modeling of demand, supply side and hourly load curves with different scenarios on how to section energy system could evolve. We showed that combining this region and connecting this region mainly the HVDC subsea cables at the time with increased electrical interconnections create positive mutual dependencies and joint opportunities with the results that were mentioned before.

In this sense, it was pretty much ahead of time. Now, we have green molecules on top which in addition to subsea cables with HVDC technologies, we’re then able to connect via pipelines, for example, and transport green hydrogen via pipelines even more flexible via ships. We have the additional aspect that you can store huge amounts of clean hydrogen in underground rock formations like in salt caverns or even in depleted oil and gas fields. This is a game-changer as well because it bridges the huge gap between summer and winter loads. All of this together flows nicely now towards an accelerated energy transition. Looking back, it’s still pretty actual even though the price points are quite outdated and even optimistic projections would have been far on the cut. We are now much lower than optimistic estimates for 2050 which is amazing news because this alone is the biggest accelerator for the current energy transition.

One of the reasons why the energy conversation has come front and center and the Desertec Vision was born was from this concern that the population of the Middle East and North Africa was growing faster than the EU. It was in the interest of the region to replace the reliance on volatile fossil fuels with some level of sustainable power systems. There’s then this real denotation and the whole premise of Desertec was that Europe could source energy production from the deserts in the Southern shores of the Mediterranean and then push that up into Europe.

This created some controversy that we can talk about but you’d mentioned 2050. It’s come up in a lot of the research that I’ve done and seen from a lot of different organizations who are looking at renewable energies. 2050 seems to be a big target on the wall whether you’re talking about the rise of electric vehicles and the investment that companies like Ford are making that or you talk about government initiatives in the Middle East. Even the US has put some 2050 targets on renewable energy use and mandates behind that. What is the 2050 mark on the wall that has been put by industry organizations and governments?

2020 saw a wave of announcements on climate neutrality. Some were 2050, 2040 or 2045. Germany anticipated climate neutrality from 2050 to 2045. In some countries like China, it’s 2060. It’s important to have ambitious long-term goals but more importantly, it’s the roadmap to reach these goals and intermediate ambitious targets. For us, for accelerating all measures to prevent the catastrophic consequences of climate change, we need to massively accelerate things in the decade of 2020. It’s all about what will be achieved by 2030. This is an important message.

This 2020 decade will be the decade of positive disruption in many ways. Solar and wind have now a price point and the technology is there. In 2020, 90% of the new capacity for electricity generation is renewable. This is the evolution. Nobody would have expected this. The International Energy Agency is saying that this is more of an organization of the old energy industry that from 2022, no new oil and gas projects should be conducted.

This is a completely new world. This focuses all our efforts on this existing decade and we will have a massive disruption with electric cars. Even General Motors and big names of combustion engines are already declared to phase out the internal combustion engine by 2030 or 2035. This is another example but with green hydrogen, this will impact all different sectors. For mobility, diesel trains will be replaced in Europe, the US and maybe in the region here by fuel cell trains. There will be, particularly in the long haul sectors, a lot on hydrogen and in the shorter on electric trucks. It’s the same on the bus side.

It is all complimentary. It is not eMobility versus fuel cell mobility. It is all helping each other. It is important to think about energy systems. The energy transition is a complex kind of animal but there are so many interesting facets. It’s important to reiterate the message that technology is there now, prices are there and for specific technologies, some support by the government needs to happen, particularly from a regulatory point of view. There then will be quite a significant acceleration of the energy transition in this decade. We then hopefully deliver most of the way towards 2050 already by 2030. This should be our goal.

Leading the disruption in renewable energy is this green hydrogen movement. I didn’t know anything about green hydrogen until I started researching it and thinking about how we’re going to have this conversation. Dii is a leader in the research and development of green hydrogen initiatives. They’ve led the Middle East and North Africa Hydrogen Alliance. It’s really taking the stage. There’s the European Green Deal, which has stated that by 2024, the production of green hydrogen should increase to 1 million tons per year. By 2030, the production of green hydrogen should increase to 10 million tons per year. From 2030 to 2050, they’re putting a very nebulous number on it in the EU is saying that green hydrogen should be produced on a systemically relevant scale.

They can decide what that means when you say the systemically relevant scale but there are ten EU energy companies that have come together on the development of green hydrogen. There are ten countries that are making financial commitments and setting goals for its use. Portugal pledged $8 billion through 2030 for the development of green hydrogen. WindEurope CEO Giles Dickson said, “We cannot electrify everything. Some industrial processes and heavy transport will have to run gas. Renewable hydrogen is the best gas. It’s completely clean. It will be affordable with renewables being so cheap now.” The US Energy Secretary has pledged a goal of $1 per kilogram of green hydrogen. Can you describe what is green hydrogen? Why is it popular? How’s it created? What do we do with it? Why is this concept now transforming the industry?

Hydrogen went to ups and downs over the last few decades. Hydrogen is nothing new. Water electrolysis is nothing new and has been conducted for many decades. The game-changer of green hydrogen is the extremely low-cost renewable energy. The price per kilowatt-hour, for example, for solar photovoltaic or for wind energy as outlined before is below $0.01 now in the region here and below $0.02 for wind. This is the game-changer because green hydrogen is nothing else than converting water via electrolysis to hydrogen and oxygen. You end up with hydrogen that could use 100% by renewable energy.

The hydrogen itself is not so easy to be stored and transported. You can do it with wire pipelines, you can liquefy it and there will be more and more technologies enabling this. The beauty of hydrogen as an energy vector is that you can convert it to other forms of green molecules. For example, to green ammonia, NH3, methanol, green methanol and e-fuels so you can produce synthetic kerosene for aviation out of green hydrogen. This is indeed one of the things which are huge as well.

There is huge flexibility of this vector green hydrogen. Also, when we look at the energy transition and not only at the power sector, at industrial applications, for example, it goes on mobility. It goes even towards heating and cooling or residential applications. Hydrogen will play an important role in many different parts of our lives in the future. To give you a few concrete examples, steel needs to defossilize. Steel represents approximately 7% of global CO2 emissions and we’ve worked with Thyssenkrupp, a major steel producer from Europe and indeed in Duisburg, Germany, Europe’s largest steel plant. This needs to defossilize to have a future at all. It’s the only way in the framework of the European Green Deal. It is a matter of survival.

What you can do is you can substitute cooking coal in a new so-called direct reduction process with hydrogen. There is a perspective to produce completely climate-neutral steel. This is obviously huge amounts of CO2 emissions and other emissions we are talking about as just one example. Ammonia is actually the main usage of hydrogen now, which is, as the majority produced the steam-methane the reforming of natural gas. It would be important to defossilize this as well as fast as possible. Replace gray hydrogen as fast as possible with green hydrogen. For ammonia, you can convert the hydrogen in a process called the Haber-Bosch process, which basically uses nitrogen from direct air capture and then combines the nitrogen with hydrogen and you end up with ammonia.

We need to massively accelerate things in this decade to prevent the catastrophic consequences of climate change. Click To Tweet

Ammonia is needed for fertilizers and there are huge amounts required. All of this ammonia could be produced by solar and wind energy. A country like Morocco, which has the world’s largest phosphate reserves is a big producer, if not the largest one, of phosphate fertilizer. Morocco is importing 2 million tons of ammonia per year, which is almost equivalent to $500 million. Morocco could completely replace this dirty imported ammonia with domestically produced green ammonia. This alone is approximately a 6-gigabyte opportunity and add a few other things for mobility, maybe a refinery and you end up with more than the entire power sector now.

The sheer size is huge and with the variety of applications, I’ve given a few concrete examples. 2020 was a bit the year of hydrogen, globally speaking. Goldman Sachs came out with a report calling hydrogen a once-in-a-lifetime opportunity with potential for $12 trillion investments by 2050. All of this gives you a flavor on the sides. This is why the Middle East is in a massive transformation. North Africa sees something really big, probably similar to when oil was discovered decades ago is happening. This will be a massive transformation but the Middle East has a huge opportunity because there’s extremely low-cost solar energy and wind energy and abundant space. Moving quickly the countries can get fit for the future and avoid negative geopolitical implications. We’ve come out with a report at the end of 2020 on this. This has the potential to massively redistribute even power here in the region.

This requires a tremendous consortium of organizations, companies, people and different groups that are involved in renewable energy and not in those groups too. You talked about some of the political support that’s required. There’s a lot of effort on your part that has to go into building this consensus, building this group and bringing everyone together. There were some things that you referenced that were learned out of Desertec 1 into Desertec 2 and 3, which is the drive for renewables and then the drive for green hydrogen.

In the early years, the project was mainly focused on how to get electricity for Europe. Over time, we learned many things. First of all, “To put countries of the Middle East and North Africa at the center, look at the benefits of the countries themselves, focus on the creation of jobs, the fundamental socio-economic factors and have the countries involved.” Can you talk more about the development of this consortium as the leader and as the person in charge of this organization? You have this vision. You see where everything is going with regard to the green hydrogen and the need to develop this in this region of the world but it can’t be done in a vacuum. How are you going about developing this team and the broad support that you need to push these initiatives forward?

Indeed, we learned a lot and we are still learning every day. Some of the important learnings over the last decade were that the first idea coming with a big industrial consortium from Germany and Europe might have been almost a little bit frightening. The countries didn’t feel involved in a first step. Some were even a bit hostile at the start. The important learnings of the first few years were to be in the region and spend time with the team talking to people.

Personal relationships and a personal dialogue have been the basis of all trust. We’ve been building over the years. The idea is just harvesting solar and wind resources for the purpose of exporting this to Europe. Also, from a simple market perspective, it hasn’t been well thought through or, if not to say, unrealistic. It is clear that the country is want to first follow progress with their own development and their own energy transition, jobs and value chain needs to be created locally. First of all, more than Europe, which almost has an energy surplus or had a few years ago.

Electricity needs to be delivered to the countries and indeed the countries went through a transformation, even the Arab Spring happening in parallel. This is the biggest learning that the countries need to be put first and we need to help the countries here on the ground for the energy transition to guide them and to bring and fork the right partnerships with Europe and internationally. That’s what we’re doing with inter-governmental talks and cooperation we’ve established here between Europe, Germany, the region and other countries. This is the most important thing.

Over the years, it is all been a matter of personal relationships. It’s all a people’s business. Our slogan has been, “Connecting people, connecting continents.” What we’ve been doing is we’ve been working on the ground with many different stakeholders from the government, private sector, universities, science and research, even a bit with the civil society to guide people from the same point of view, what is required, what is necessary and what the possibilities are. These are just some of the learnings here.

You mentioned cost a couple of times in the conversation so far and the actual price of the development of renewable energies has, to this point, been somewhat of a sticking point. It’s the basis because you can do anything in the world if you can’t afford to pay for it. We can make that argument all day long but the cost is a big factor in the development of these energy sources and the production of innovative technologies cost tons of money to create let alone to distribute it. There’s also the high cost of the equipment involved in actually developing things like green hydrogen. On the downstream of the end of things, different engines in order to process green hydrogen versus gasoline or diesel require different equipment.

It’s not the same engine that does all three of those if you’re talking about a car, truck or a bus that you referenced. Industry data from Wood Mackenzie shows that, “The challenge is that big electrolyzers are in short supply and plentiful supplies of renewable energy still come at a significant price compared to more established production processes, electrolysis is very expensive so the market for electrolyzers has been small.” Also, green hydrogen is something that is also difficult to transport and store. It’s somewhat volatile especially at certain temperatures. Can you talk about the costs that are involved in this? What’s driving costs down especially when you look at production and distribution? How do you continue to gain support in order to continue to get these costs to go down?

Cost is indeed a very important if not the main driving factor. If you look at the cost to produce 1 kilogram of green hydrogen, 2/3 of the cost is electricity, which is by definition of renewable electricity. Otherwise, it’s not green hydrogen. One-third of the cost is approximately is the electrolyzer. By the way, water is typically coming from desalination, which is a minor effect for the business case. It’s approximately 1% maximum in extreme cases up to 2%. It’s a necessity to have water, which is typically from desalination here but to underline it, it’s indeed a minor factor. The 2/3 on electricity has seen a massive cost degression already and nothing much more needs to be done. As of 2020, 90% of all new installed power capacity globally was renewable energy and 10% conventional gas. This development is extremely powerful. For this reason, the development will continue, it is extremely low already and it will come lower.

On electrolyzers, this is a well-established technology, particularly talking about alkaline electrolyzers but there are other technologies like PEM but it is also not rocket science. The 1/3 cost for electrolyzers needs to come down massively. I don’t doubt it will because this is compared to solar PV and batteries years ago. We are at a point in which even the biggest electrolyzer manufacturers have something like one-gigawatt annual capacity, which is pretty small, will be massively expanded to 10 gigawatts plus if not more. The current situation is, there’s a lot of manual assemblies. The whole process is lacking scale and this is the development to happen over the next few years. There is a massive industrial scale-up and a massive optimization required, which will bring down this 1/3 of the cost further and then combined with continuously decreasing cost of renewable energy. This will for sure make green hydrogen competitive with conventional fossil-based hydrogen during these decades.

Just to give you a number, Helios, the project in Neom in Saudi Arabia, which’s currently the world’s largest green hydrogen project in a very concrete development stage with targeted financial close in 2021 is projecting production costs of approximately $1.5 per kilogram by 2025. When it will be fully operational, this high combined capacity factor of solar and wind of over 70% and conventional hydrogen is somewhere in the range between 1 to 1.8.

It depends mainly on the differences in terms of gas prices because gas prices can vary quite significantly in different locations of the world and this would effectively make green hydrogen competitive. We’re not even talking about CO2 prices. This is quite a powerful development. Prices have more than doubled since 2020 in Europe. This is probably a thing that will have a significant impact as well because CO2 prices will make conventional hydrogen generation or conventional energy much less effective. This only accelerates the development.

Can you equate the price of green hydrogen to a gallon of gasoline for those of us who are not familiar with the different metrics that are being used? Is there a way to correlate those?

This is not an easy one. I was just mentioning a kilogram of green hydrogen versus gray hydrogen. It should be very soon in this decade, at least in sunny and windy parts of the world competitive, which means that hopefully fast, all conventional hydrogen and conventional ammonia can be replaced. This should happen as fast as possible. If we talk about, for example, at a gas station, if you have a fuel cell car that was probably the question you were referring to. The question is usually, “How many kilometers or how many miles per gallon can you do?” This is pretty difficult to compare because, in Germany, I can give you one example, electric fuel is approximately €1.5.

By the way, Germany has more than 60 fuel cell gas stations. Even now, you can drive as a fuel cell car all around Germany but a kilogram of hydrogen is €9.5. You need to look more at the lifecycle cost. This is where most car manufacturers are pivotable. The cost of a gallon of gas becomes irrelevant. What you do is calculate how many miles you go per year. You calculate how much a fuel cell electric car, battery-electric car or internal combustion engine costs. You then calculate this over the years with such a relatively low cost for long-range applications, which is complimentary to electric cars and particularly also for heavy-duty trucks and buses.

These fuel cell electric vehicles are competitive in the long-term but for different applications. I don’t have any doubt that this decade will seize a moment similar to the pictures on Broadway in New York. In 1910, you saw one car in the middle of many horses and in the 1920s, just ten years later, you saw the last horse between many cars. This is a good picture of where we will end up towards the end of this decade. Due to the combination of different factors now in the price point of electric cars, we will see the massive pickup but also fuel cell cars and others. This is one field in which you probably would see quite a revolution, which is good for our environment and is a huge business opportunity.

This decade will be the decade of positive disruption. Click To Tweet

Being at the front end of innovation like this is somewhere where you’re very comfortable. That’s where you excel. It’s not only a passion but it’s an expertise. You’ve been involved in a lot of startups. You’re an investor in several venture capital funds. You serve as an advisor and board member to several early-stage companies. You’ve even said, “You invest in young, innovative and fast-growing companies focusing on Africa and the Middle East.” You invested in nine renewable energy companies alone in 2020. You’ve led startups in this area, also from an executive position as well. Notably, Pawame, which was a pay-as-you-go solar home system provider which provided remote energy access to the most impoverished and remote regions of Kenya and Sub-Saharan Africa. It is an area of the world that is completely off any central electric grid and the work that I did in Africa for years.

All the electricity that we saw outside of the major cities was always based on diesel generator power and commercial facilities or kerosene, even in homes. Can you talk about Pawame? It’s a cool concept that was developed there. What interested you? More broadly, as an investor and an early-stage innovator in this sector of energy and renewable energy, what are you looking for in a concept when it’s pitched to you? How are you evaluating it and then looking at them and saying, “That’s something that can work.”

Thank you for mentioning Pawame. That has been a wonderful experience in Kenya, a country where I temporarily lived. I have a big passion and it’s a beautiful country. That was actually a great opportunity to help set up such a company, bring in the funding and lead this company from scratch towards a team of around 200 people in the first year between parts of the country. This has been a particularly exciting journey on the impact we could make. In Kenya, more than half of the people still don’t have electricity now involves a lower percentage when we started in 2016 but helping the poorest part of the population, the low end of the pyramid, people that have kerosene lamps.

They spend a lot of money just on the kerosene but these lamps they have are polluting their breathing and kids wound their eyes while studying. Delivering a small solar home system, which costs such a household only $0.50 a day. Given the fact that Kenya is world-leading in mobile payments, 90% of people already have a mobile phone in Kenya. That is a wonderful opportunity with relatively simple technology to deliver a small solar-panel battery, some way powerful 150 lumens, 1 watt LED lamps. They throw out the kerosene lamp and it is such a massive improvement of a very simple family’s quality of life.

It’s been so rewarding to go out and to see the emotional reaction. Sometimes, people were crying that it’s their first time to have electricity at home. It was wonderful to see. It was such a concept. You could significantly improve people’s lives. Over the years, we’ve electrified something 20,000 households. If you multiply this with an average of five, it’s probably more than 100,000 people’s lives positively impacted in Kenya. The whole sector is very important because, in Africa, 600 million people don’t have access to electricity.

This off-grid approach is why I joined a second company in such a field as an investor. I believe in this field and I have a lot of passion. It’s quite a tough day-to-day job. There are so many challenges but ultimately, the results are simply rewarding. Similarly, I engaged in other startups in fields where you can really make an impact. One is a company based out of Dubai that started in complementing diesel generators with mobile solar fields and increasing the batteries. The mission is to make diesel generators completely obsolete. This company has grown to one of the leading renewable energy companies in the region and has done the first megawatt-scale of such project in the north of Nigeria. It has been an early deployer of batteries here and even done a floating offshore solar wind farm here close to an island in Abu Dhabi. That’s another example.

There’s energy efficiency and a solar rooftop that’s a German company. I’m on the board where we did solar rooftops in countries like Ghana or Mozambique, for example. That’s rewarding and that’s what makes me motivated every day to help young entrepreneurs, capable and motivated teams to drive the energy transition. I invested most of myself in all these companies because it’s simply the best way to make an impact and to help entrepreneurs. This whole solar field has been rewarding over the years. I’ve also joined Dubai Angel Investors as one of the early investors here, which is a micro-VC. We’ve launched Saudi Angel Investors. It’s also wonderful to see that, finally, in the region here, there’s a bit of culture for startups for young companies and a much more dynamic field compared to a few years ago.

When you think about bringing these products to market in an environment like Africa or the Middle East but primarily and for the sake of this conversation, somewhere like Africa or Sub-Saharan Africa, where there are many challenges, there’s poverty, climate, politics and economic challenges. It’s a struggle in so many regions to get food and water because the weather works against you in many different ways. How do you think about bringing these products to market? How do you build awareness where electricity doesn’t even exist?

From our perspective, we think about, “You build awareness by starting a social media page and put it on Instagram and everybody’s going to love it. You’re going to immediately make millions of dollars and everyone’s going to want your product.” You don’t have those capabilities in these regions of the world. In your evaluation of companies’ concepts, investment opportunities, when you think about scaling and bringing a product to market, what’s that thought process like?

First of all, you need to build good technology, a good platform and a capable team. The question is how do you bring this into markets? My personal experience is that everywhere you need to deal with governments, it needs to be slow and challenging. Concepts like pay-go-solar, off-grid power or sometimes rooftop solar and these kinds of things, which are not mega projects but perform an intake of power system and represent quite a sizable market. All these opportunities are probably the winning ones to go for in the first phase while it’s still parallel. Dii Desert Energy is the same thing. We move on to the big things as well.

On the startups, the key ingredient is going out on the ground with a capable team. Convincing and persuading people is a never-ending educational process and dialogue. In building these relationships, you need to be extremely persistent and you need to never let go. These things are probably the most important. I’ve learned to be persistent with many things in my life. For example, in mountain climbing, you never give up. There’s a distant summit somewhere and you do small steps. You continue and you never stop. At some time, you arrive on the summit and it’s a similar picture. There’s no golden recipe. It’s having a vision, being persistent, never giving up, believing in your capabilities and believing in the fact that you will achieve these objectives. This is the most important thing.

A product like Pawame also had a social impact variable to it too, which was exciting. It hits on what you were mentioning because not only did it provide energy access but it also created what they call the gateway to financial empowerment. The pay-as-you-go function allows the owners to build credit, which is unheard of in some of these areas. We know in the US and European societies that if you don’t have credit, you can’t buy or do anything. This social responsibility aspect and social impact response aspect were critical to the scale that you were able to achieve there. Can you talk a little bit more about that part of this program?

Microfinance is a challenging field. No bank would give such a typical person credit, which is our client in this case. What we do is you need to establish a consistent scoring process where you can make a sensible decision and select a client which has at least a good probability of payback the credit. We give them over a year or two, which is the typical period. According to traditional criteria, none of these people would be eligible to obtain a loan from a bank, for example. Ultimately, we built our scoring algorithm and we do it. Banks have non-performing loans. There’s a percentage of people that pay late or don’t pay at all. It’s a normal part of the business.

In addition to that, step-by-step, building a long-term client relationship with this low end of the population enables people much more. What we are doing while providing credit, we are creating a track record of repaying in very small pieces this loan we are giving to the client. What you can do as the next step is providing additional microloans building on this track record. You could even think about providing microinsurance. These are the basic kinds of things in addition to energy access, lights at home so that the kids can study, improving the health situation, making life more efficient so that you don’t need to walk hours to charge your phone and these things. A combination of all of these factors can be transformational to provide for the people. It’s a step-by-step significant improvement of lives and going towards the middle class in society.

You referenced mountain climbing and achieving some of these things that you’re trying to achieve with regard to renewable energy would certainly seem like you are attempting to summit that mountain. What many people may not know is that you’re an avid and world-class climber, skier and alpinist. Whatever you’ve been involved in that space, what’s the next climb? What’s the next goal?

I have my passion like renewable energy for my family. My mom is from the Bavarian mountains. I grew up hiking, climbing early on and ski touring. I learned skiing while walking up on my own. It was the skis and not necessarily losing lift. Mountain climbing, I had the privilege to be one of the lucky ones to apply for joining the Special Forces of the German Army in the High Mountain Division. All the training required to become a mountain guide and also a sniper, which was a rewarding experience and making good use out of this compulsory year of the Army in Germany.

Even since then and even during my time in investment banking, mountains have been my passion. I’ve never given up. There are many friendships when you climb to crazy places. I love traveling as well. I had the privilege to travel to many different places and climb mountains. For example, during university, we went by car from Munich to Morocco to climb the highest mountain in North Africa with skis. We went to Iran in 2012 to climb the highest volcano in Asia with the skis or to the Elbrus, the highest mountain of the Caucasus. Those are just a few examples.

Even in the region, it’s wonderful because, in Dubai, you can go by car to Oman. There is the El Capitan of Arabia, the highest big wall of the Asian Peninsula, which is almost 1,000 meters. That’s a vertical climb, which has a nice side effect. Only a few people did it. You’re highly likely not to meet anybody there. That’s wonderful. We can regularly hike here. There are many mountains on my list for future challenges. The most important thing is that this is a wonderful way to focus on what is essential in life, nature, silence, respect for nature, knowing your limits and these things. It’s a wonderful thing particularly with friends. It’s also nice looking back and having survived many crazy skis on the north faces or crazy climbs. During the lockdown, I thought about many of these crazy experiences. I’ve been grateful to be still here and to plan for some more interesting tours in the future.

The impossible is possible. Everything is possible. Click To Tweet

I like your applicability to everything else that you’re doing in life too, which is that if you’re climbing the mountain, you consistently take small steps when you’re hiking and walking. There is no thought in your mind that I’m going to quit or stop these small steps. As you take them up and you fight through it, you continue to put one foot in front of the other. Eventually, you get to the top and you look down and say, “I did that.”

Every time, you think, “I’ve been on there. This is really impossible.” It shows you that the impossible is possible. Everything is possible. You have to aim high, be ambitious and believe in your objectives. The most important thing is to do it with a high degree of responsibility, knowing your limits, which is the key ingredient to survive and to be able to do future tours. In this respect, mountain climbing can teach you many things. Also, the wonderful friendships that I had with my climbing partners. I’m also glad that my family has adopted a passion for mountain climbing.

As we close out, I ask every guest about the three things that they do to be successful in their lives. I quantify it in this way. In World War II, the Jedburghs had to do three things to be successful every single day. They had to be able to shoot, move and communicate. Those are the foundation, the fundamental core tasks. If they did those things with precision every single day then it didn’t matter what other challenges came their way. They could apply focus to solving those other things. What are the three things that you do every day to set the conditions to be successful?

Communication is a daily part of my job. Managing a large network of networks and communicating with people is my day-to-day activity. I will tend to say that communicating is 1 of the 3. Two of the three is extreme persistence in everything I do. Not even in the most difficult situation, I would let go. If I’m convinced about something then I will do everything possible and I will never stop achieving this somehow.

Secondly, persistence and maybe sports. Sports every day is probably a basic ingredient for not only having a healthy body but it’s important for your mind. When you go for a jog, your mind wanders around and it can relax a little bit. You reflect on the day particularly sports outside that are connected to nature. That would be the third one. I never stop doing sports. Mountain sport is my main sport. This has been a constant and a factor to be successful in life.

We talk about elite performance on the Jedburgh Show. We quantify it in the nine characteristics of elite performance as defined by Special Operations Forces, drive, resiliency, integrity, humility, emotional strength, effective intelligence, team ability, curiosity and adaptability. When I think about what you’re doing, your work, what you’re focused on, I think about curiosity as 1 of those 9 that exudes your efforts. Curiosity is the quest for knowledge, the quest to learn more, the quest to uncover that which has not been discovered yet.

Renewable energy is the future. We’ve become reliant on fossil fuels. The world is changing. It’s a finite resource. Renewable energy will replenish itself every single day in our environment and regions of the world. You’re leading that industry and those initiatives. You’re driving that forward and figuring out how to move innovation forward, move the world forward and transform the way we look at and consume our energy. Thank you for sharing these complex topics with us. There’s so much excitement around renewable energy and the direction that we’re going. It’s affecting each and every one of our lives every day. Thank you for joining me on the show.

Thank you for having me, Fran. It’s a pleasure. That was an exciting conversation. The interesting thing is while you were speaking about these nine characteristics, curiosity was indeed this one. This is a great coincidence.

I nailed it.

You have to be ambitious, believe in your objective, and just do it. Click To Tweet

Thank you.

Thank you.

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About the author

Fran Racioppi
View Bio | More From the Author

Francis Racioppi, CPP, CBCP, most recently led Genius Fund as the Chief Executive and Chief Operating Officer, a vertically integrated cannabis company in Los Angeles, CA. Prior to Genius, Fran served as the Director of Global Security for Snapchat where he was recruited to professionalize and scale the security organization across the globe and among all business units. Fran holds an MBA from New York University and graduated with honors from Boston University with a BA in Journalism and a minor in Political Science. Fran served 13 years in the United States Army as a Green Beret, deploying three times to Iraq in support of Operation Iraqi Freedom and Operation New Dawn. A lifelong sailor, Fran volunteers teaching Veterans to sail as the Race Director for Sailahead a Veterans service organization dedicated to reducing the Veteran suicide rate. Fran has also served as the Treasurer of the United War Veterans Council, an NYC-based non-profit focused on the wellness and healing of transitioning veterans, as well as the host of the annual NYC Veterans Day Parade.

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