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Interview with Pedro Norton: "Everything points to solar photovoltaic as the technology that will grow the most"

24 July 2020

Pedro Norton is CEO of Finerge, the second largest wind energy producer in Portugal, and non-executive director of Fundação Calouste Gulbenkian. He started his professional career as an analyst at Banco de Investimentos ESSI, in September 1990, and joined the Impresa group in 1992, as an advisor to the chairman of Controljornal's board of directors and, from 2012 and 2016, replaced Francisco Pinto Balsemão as executive president. Holds a degree from the Portuguese Catholic University and a Master in Television Management from the Boston University School of Communication.

You have spent more than 20 years at Grupo Impresa, and in 2018 joined Finerge - why the change? What attracted you to the renewable energy sector?

They are both challenging sectors, but more relevant is that they are sectors where I found a purpose. I deeply believe in the importance of free and independent journalism, just as I am absolutely convinced that the fight against climate change is the greatest challenge of our generation. Professionally, it always seemed essencial for to me to deeply believe in what I do. I think I do my best when that happens.

Impresa Group was a great challenge and I led the group through one of the most difficult periods of its existence. Finerge and the renewable energy sector are now my present and my future. First, because as a professional I feel particularly stimulated by knowledge and new challenges. But also as a citizen. As I said, I am fortunate enough to work in a sector that goes through much of the solution to the great problem that we have an obligation to solve on behalf of future generations.

Since your first contact with the sector, what evolution did you observe in the paradigm? How have the sector's priorities and challenges in Portugal and Europe changed?

Portugal has made an excellent path and has followed and even walked ahead of the European Union's guidelines, towards carbon neutrality. The country has been decoupling the Gross Domestic Product from CO2 Emissions and Primary Energy Consumption. This means that Portugal has been able to generate wealth with less emissions and less energy consumption. It has been possible to reduce energy dependence on the outside, increasing domestic energy production and reducing primary energy consumption, thereby also ensuring a greater level of security of supply.

But to overcome the challenge of climate change, more is needed. Joint action is required in several areas: increased penetration of renewable sources, energy efficiency, increased electrification, reinforcement and modernization of infrastructure, development of interconnections, market stability and investment, reconfiguration and digitalization of the market, incentive for research and innovation.

On the political side, the Government has had, in essence, a pragmatic view of the sector. They named the topic of combating climate change as a priority and, from my point of view, well. There is an evident political commitment to the launch of a Roadmap for Carbon Neutrality, a National Plan for Energy and Climate with ambitious goals. Now it is necessary to move from conceptual plans to practice and there are challenges that we face every day. It is not possible to wait one and two years for licensing when we are pursuing goals that we are unable to achieve. And then there is the theme of the regulatory and fiscal framework, which has to be stable. It is possible to achieve the goals, but it is necessary to have the right public policies, so that afterwards the public administration is able to carry out the processes

How do you see the European Ecological Pact? Is Europe ahead or behind the curve?

The Green Deal is a package of measures and policies that point in the right direction. It strengthens European leadership in this area and signals a political priority with great clarity. But it is also an excellent communication tool. Not all money is new. Its success will depend, not only on the commitment of all Member States, but above all on the involvement of the business and financial sector.

That said, the European Commission has already admitted that it will delay some targets proposed in the Green Deal due to the new coronavirus pandemic. Only the timetable with a new 2030 emission reduction target and the most urgent environmental policies will remain unchanged. We will therefore have to wait and see.

Solar energy is on a huge growth path, and in this line, Finerge recently extended its business to photovoltaic. What has driven this trajectory?

All forecasts point photovoltaic solar as the technology that will grow the most in Portugal and Europe in the coming years. It is natural to do so in view of the combined effect of the country's resources and the amazing evolution of the cost of technology in recent years.

Finerge, for its part, has a vocation for growth. We are First State's growth platform in the field of renewable energy across Europe. That is my mandate. In addition, from a perspective of risk diversification, it made sense for us to become a multi-technology (and multi-geography) company.

Now, adding the market trend to our strategic vocation, I would say that it was inevitable that we would enter the photovoltaic business. It is also a coincidence that we entered the photovoltaic system with the same operation that marked the beginning of our internationalization.

Energy policies have essentially focused on the supply side, that is, on the production side. More recently, energy management on the demand side has begun to enter the current discourse, through, for example, energy communities. How do you see this evolution? Does Finerge have plans to act on this side of the energy sector?

It is a trend that seems to me positive for the country, in the sense that it also contributes to a clean and fair energy transition, in this case, through a more active participation of the consumer / producer in the renewable energy system. Due to its nature, it includes a very interesting environmental awareness component, and reinforces green jobs in local communities. Important levers to create a low carbon economy. Although it recognizes its value to society, Finerge currently has no plans to act on this side of the sector.

Would you say that Portugal is at the forefront with regard to the energy transition and the adoption of renewable energy sources? Is there still room for development? And how far do you feel the country can penetrate along the value chain?

The country has been able to reduce its energy dependence from abroad, increasing domestic energy production and reducing primary energy consumption, thus also ensuring a greater level of security of supply. In addition, renewable energy sources today have a very relevant contribution to electricity generation.

In April of this year, for example, 72% of all electricity came from renewable sources. It is also worth mentioning the contribution of this sector to the Portuguese economy, in the creation of a whole new industrial and business sector that generates jobs, promotes regional development, stimulates exports of goods and services, promotes innovation and scientific research, capable of capturing international investment and to stimulate the internationalization of national companies. But it is naturally necessary to do more.

Achieving carbon neutrality in 2050, implies not only the total decarbonization of the electroproducer system, but also urban mobility and also profound changes in the way we use energy and resources, betting on circular models, alongside the enhancement of the sequestration capacity carbon by forests and other land uses.

What possible impacts will the present crisis have on short- and medium-term decarbonisation strategies?

The pandemic is having a double impact on decarbonisation. On the one hand, and in the short term, the recent lockdown of the economy has greatly reduced greenhouse gas emissions. This clearly shows what can be achieved in the future with the creation of a more sustainable and carbon-free global economy. On the other hand, in the medium term, the economic contraction, which is still difficult to estimate in scope and time, can lead to a retraction of investors, financiers and even a revision of the policies already defined, jeopardizing the goals to be achieved.

But there is also another medium and long-term scenario that is the one I bet on. Energy transition and decarbonization policies can be seen as levers in the economy and as fundamental instruments to create more jobs and new business opportunities.

The energy area is very sensitive to technological innovation. Do you consider that R&D occupies, or should occupy, a prominent place in the strategic planning of the sector?

The competitiveness of the energy sector is naturally very dependent on the ability of R&D to accompany the transformation of the energy system. It is essential that the design of the R&D priorities for the sector are aligned with the market's innovation needs, in order to guarantee the maturity of energy technologies that contribute to financial and operational indicators capable of sustaining a clean energy transition.

I believe that there are more efforts in this direction. In 2018, the first estimates of national investment in R&D in the Energy area were produced. That same year, [the last for which data is available], R&D expenses exceeded 121 million euros distributed among the sector of the State (9%), Higher Education (46%) and Companies (45%). This represented about 0.06% of GDP. The National Energy and Climate Plan sets the target of 0.2% for 2030, which reveals a considerable desired increase. So we have a good way to go. I would say, in this context, that the country's digital transformation strategies could be more ambitious and follow more closely with the strategies of the EU and Portugal that aim at the transition to a low-carbon economy capable of responding to climate change.

In this same perspective, what contribution does INEGI can give to companies dedicated to the production of renewable energy in the various segments of the value chain?

Technological innovation is a natural ally in the good performance indicators of companies dedicated to the production of renewable energy. Between the need to maximize the availability of wind farms and solar power stations, minimize production losses, reduce costs and times with inspection and maintenance of infrastructure or increase production efficiency levels, there is a search for technological solutions that can serve these purposes, supporting the companies' risk management and mitigation strategy. Assessing the needs of renewable energy production companies as well as their investment trends could be an exercise of strategic value for INEGI.

In addition to this and in line with the national investment objectives for R&D in Energy stipulated in the PNEC, it seems pertinent to mention that it includes a clear recommendation for the promotion of national R&D programs in five major thematic areas: 1) intelligent systems of energy management and new infrastructure; 2) energy storage; 3) low carbon technologies; 4) energy efficiency; and 5) hydrogen as an energy vector.