”Ambitious targets need to be set and tough decisions must be made to mitigate climate change. However, before making any commitments, it is vital to understand how the global energy system works, what dependencies exist in the global economy, and how investments are made”, says Mika Anttonen, Chairman of the Board of St1 Nordic.
In 1995 Mika Anttonen founded the energy company Greenergy Baltic. Over the years the name changed to Green and then to St1 in 2005 when he acquired the St1 chain of service stations. In 2018 he passed on the CEO role to Henrikki Talvitie and continues as Chairman of the St1 board. His engagement as a climate activist is widely known, and with this came the desire to become the leading producer and seller of CO2 aware energy. In this article he discusses some of the arising challenges.
You say timing is key to succeed in the energy transformation. What do you mean by this?
Climate change mitigation targets and decisions should be based on science-based roadmaps and actions that can be turned into business opportunities. The objective for obligations must be clear – to aim towards climate neutrality. The end game must be kept in sight when preparing actions. Healthy balance sheets and income statements should enable long-term investments, otherwise investors may soon be out of the game. Entrepreneurship involves risks, but these must be managed.
One major challenge for investors is timing vs. technological advancement. Which point of the technology cycle is the right moment to invest into a new technology, for example into synthetic fuel production? Those who are too early may pay a high price if the market or technology is not ready. Those who are too late risk losing their business, and above all, they would not achieve the aim of reducing CO2 emissions.
Processes leading to investment decisions are lengthy. For example, together with leading technology providers in the field, St1 seeks the most promising technologies that can convert solid biomass to advanced biofuels. The time span for the project is five to 10 years as the technology readiness level is not yet mature and the cost of development and investment amounts to hundreds of millions of euros per plant. In order to meet short term targets in the European Union (EU), dozens of similar projects would be needed. An investment like this would tie up capital for decades. Increasing renewable energy production capacity to the desired level would require, for example, development, research, regulation, international agreements and the training of new skills and competences. These can result in new investments.
Accelerating the commercialization of new technology demands substantial investments in R&D. Pioneering efforts must focus on developing globally scalable solutions. Furthermore, these solutions must be piloted on an industrial scale, which must be supported by national regulations that go beyond EU objectives. Funds should be spent where the impact is greatest – globally.
What do you think it requires to achieve results that provides global impact?
Climate change hits the people in developing countries the hardest. Population growth and rising standards of living in developing countries result in massive increases in the demand for primary energy. The construction capacity of the world's renewable energy production cannot keep up with this new demand. To meet it, new investments in fossil energy production are constantly being made, in the developing countries in particular. The most urgent action for rich, industrialized countries is to find mechanisms to support the energy transition in developing countries so that the share of new fossil energy production is minimized.
For the time being, the EU focuses on measures to reduce emissions within the Union. The current framework only allows for actions within borders. For this reason, climate action is done in part on paper, while the global effects remain a zero-sum game. For example, feedstocks are imported to the Nordics for processing from outside the EU, so that we can utilize them to achieve our domestic emission reduction targets. This only further complicates the ability of the feedstock’s country of origin to reduce its own emissions. This is an expensive exercise that does not increase innovation or emission reductions.
How does St1 contribute in the energy transition?
We want to be in the driver’s seat in the energy transition. Last year we invested 50 million euros in renewable energy, and our R&D expenditure was 15 million euros. Approximately 1 Billion euros of our nets sales came from renewables, equalling 19% of the total. In the context of the global climate crisis and the loss of biodiversity, these numbers are small. However, our actions in the renewables arena have placed us at the same tables and markets as the biggest energy companies and technology providers in the world. This has given us a well-positioned understanding of the time horizon and the investments needed to the energy system transition.We participate in many consortia and partner initiatives that research and promote activities to mitigate climate change. We are hungry for new, proven knowledge and are prepared to change our views. We strongly believe that the constructive joint efforts by scientists, climate and policy experts, together with organizations, will take us closer to achieving a sustainable carbon cycle.
In 2020, we published St1 Outlook, where we examine the bigger picture on climate change and global energy challenges, and consider how we can reverse the situation. You will find it here (link). We welcome your thoughts and hope you can join forces with us in solving global energy challenges.