Q&A Series: A Discussion with Matti Rautkivi on the Renewable Energy Transition

As Director of Strategy and Business Development for Wärtsilä, Energy Business, Matti Rautkivi has helped lead the Finnish technology company’s expansion of renewable energy capacity in the United States and throughout utility systems worldwide. His expertise replacing coal powered plants with renewables and flexible generation has made him a thought leader in the clean energy transition. He sits down here with Path to 100’s Michael Levitin to discuss the impacts of Wärtsilä’s work helping utilities worldwide cut energy costs while lowering emissions, what’s at stake for countries financially, and why the global transformation toward cleaner, cheaper forms of electricity cannot be stopped.

Michael Levitin: Let’s start with your recent book, Goodbye to Deerland: Leading Your Utility through the American Energy Transition. It’s had an impact in the U.S. and European energy markets and is now being translated into Chinese. Tell us what the main message of the book is, and why it’s important right now?

 Matti Rautkivi: Goodbye to Deerland is probably the first book to explain, in concrete steps and examples, what this energy transition really means—not just for people but for the utilities who are the prime movers really pushing this energy transition forward. The transition is taking place for financial reasons: because it makes economic sense. It’s a good story but it’s also a guide for these utilities that need to reinvent themselves and their whole way of doing business on the path to 100 percent renewable energy systems.

The positive thing is that utilities are closing old coal plants and this book gives them guidance to go forward. The guys we mention in the beginning of Deerland, from Nebraska, were totally against the idea—they were like the last Alamo of the utility business, defending their coal. And they’re the ones who are now replacing coal plants with hydrogen, building wind and building a new future.

Levitin: Now it’s a global phenomenon?

Rautkivi: The same thing is happening in Finland where utilities are starting to invest in the renewable energy transition because it makes economic sense. Nobody knew a year ago that wind is so cheap—and what you can do with wind in Finland. Now everybody knows and the Finnish government recently decided it will close all coal plants by 2029 while there’s a financial incentive in the market, making it the first country to get rid of coal by law. Finland will stop building nuclear, too.

It’s a pretty beautiful story, the same story we’ve told in the US and in Europe and which is expanding around the world. In developing countries, every dollar you save is beneficial for the development of the country so they don’t want to spend extra money on energy. They don’t think sustainability is the key driver for energy development: their key is just to get electricity as cheap as possible and now the cheapest option is renewables. When it starts to make economic sense to build renewables and flexibility and not jeopardize economic growth, they’re more than willing to make this change—and they’re able to move pretty quickly compared with the US and Europe. In that sense these developing countries have the energy transition easier: they don’t have the heavy existing infrastructure so the resistance to the change is lower.

Levitin: It’s easier to talk about closing down old coal facilities that are too expensive and inefficient to run. But what about the newer plants that are getting built, in Asia especially, with an operating lifetime of 30 or 40 years?

Rautkivi: The United States and Europe are different from China, and Asia more generally, where GDP and population is growing, economic wealth is growing, people are buying more fridges and electric appliances and the demand for electricity is increasing much faster. There they need to provide electricity for everyone 24/7, and over the last 10 or 20 years they’ve built the cheapest generating capacity they could find. But now public opinion is heavily against new coal plants and they’re starting to realize that renewables together with flexible gas and energy storage is a better option for them in the future. So they’re investing heavily in renewables, which are getting cheaper and cheaper and it’s become more economical to replace even those newer coal plants.

Look at the Philippines, where even in 2017 the plan was still to build 6,000 Megawatts of new coal plants just to keep the lights on and provide reliability. It was their master plan—to bring coal from Indonesia, China, or even the US—and on top of that they were planning to build 9,000 Megawatts of baseload gas to run around the clock. Now they’ve published their new plan in 2019 and with no proposals for coal: Now their plan is instead to build zero Megawatts of coal and 0 Megawatts of baseload gas, and build 17,000 Megawatts of wind and solar and 4,000 Megawatts of flexible gas. Similar logic in South Africa, which was planning to build at least 6,000 Megawatts of coal and now they’re building just renewables and flexible gas: because it makes financial sense.

Levitin: Talk about the white paper and Wärtsilä’s vision of what the Path to 100 percent renewables looks like?

Rautkivi: After spending a couple of years living in the US and really seeing the energy transition taking place, I’m 100% sure that it will happen everywhere. At that point we were still talking about the transition of coal plants leaving the market and people starting to build wind and solar and natural gas. Now we’re living that transition and when we look at where this world is going—where we need to go to save the planet, and the economic option for all of humankind—we need to maximize the amount of renewables in these power systems beyond 70% and 80%, to 90% and 100%. The question is what is the optimal way to get there, utility by utility, country by country, over the next 15 to 20 years?

What really struck me was I started to see that people think this is easy—that we can just do it, without understanding the facts. From our perspective as a company, we can sell our power plants and storage to support the transition, but what kinds of products and services really bring value to this system? What is the endgame? Will the world go really high in renewables, to 70% or 80%, then the transition stops there? No, it won’t, it will go to 90% and 100% if it makes financial sense. The ultimate goal is 100% renewables and we are heading there, and the white paper is one of the tools helping people understand it step by step. But the paper is not an end vision of a 100% renewable world that we’re heading toward—it’s about how we get there as fast as possible and at the lowest cost possible. The lower the cost, the easier the transition because there will be no reason to resist it.

 Levitin: What do you see as the greatest challenges right now in getting there?

 Rautkivi: The first phase of acceptance is denial: They say it’s not possible. So first you need to understand the facts, that all the elements are already there, and then you need to know the actual steps that you need to take. We happen to have pretty good tools and technologies in our portfolio but at the same time there are elements we don’t have today, so as a company we’re not able to solve all the pieces of the puzzle.

We figured out, for example, that if you build natural gas engines today, they won’t be part of the 100% renewables system unless you change the kind of fuel they use. Will the engine from 2017 still be there in the future? Yes, if you’re able to burn synthetic gas or biogas while continuing to add wind, solar, battery storage and flexible gas [to your energy mix]. This gives a huge motivation to our people that we want to be part of this story—that we are on the right path going forward.

 Levitin: Do you feel that utilities, and countries as a whole, are finally starting to get it?

 Rautkivi: It’s complex, that’s why we need to write books and white papers and do the modeling and explain this step by step. I’m extremely happy that this company is leading the transition toward a renewable energy future and developing an understanding for these countries and utilities, whether in Finland or the Philippines or Australia. It takes time explaining but in the end, every single utility and government understands that this makes sense—from Southern Company in Alabama to the Nebraska Public Power District, and from Helsinki to Shanghai. They have all changed their minds, every single one.

 Can you give an example of how this is translating into action right now in Europe—perhaps specifically in your home country?

Rautkivi: In Helsinki, we recently published a case study for the local utility showing how they can replace two coal plants by 2025 and get to 87% renewables, then what the next steps are to get to 100% renewables. It’s not just a matter of “close those coal plants.” We showed them, “First you need to build this, then you need to build this: These are the steps toward a 100% renewable energy system at lower cost than conventional energy.” We’re minimizing the cost so every economy and every country can move toward this 100% renewable energy system. Costs will go down and as a bonus we’ll cut emissions by 90%. There aren’t any good arguments any more to resist it.

 Levitin: You have helped Wärtsilä become a model for other companies to follow on the Path to 100. What is your message to those companies?

 Rautkivi: There are companies that will follow this and there are companies that will die defending their existing business models. For any company it is important to look beyond the obvious, next five years and look instead at what kind of world we will have in 15 or 20 years. It needs to ask what brings value, what brings internal motivation, in order to develop something for this world.

If you look at energy and those who are actually implementing the changes—the energy ministers, the regulators, the utilities investing in new technologies—the key element globally is we need to demystify energy. We need to make this transition really simple and understandable to people and show them that it is really possible. In general people are afraid of change. In China they’re afraid the coal miners will lose their jobs, the cost of electricity will increase, it’s too expensive, etc. We need to provide information and tools and really have the debate that this makes sense, and bring people together to argue about it. We as Wärtsilä are not, and cannot, be afraid of the debate. The best is to showcase Texas or Australia or the Philippines, where people are paying less for electricity and emissions are going down. That’s leadership. To call yourself a leader, all you need is followers.

 Levitin: Are there any key strategies you’ve learned in terms of presenting the renewables argument and convincing people it’s the wisest option?

Rautkivi: The argument must be fact-based. Facts, with support, with examples from around the world—and how we can use these best practices to solve these issues in detail. There are always more questions and things you need to clarify.

If you’re talking to utilities you really need to understand their business and where the market is going and how the system really works. It’s not that you’re attacking them, you’re simply telling them, “You need to change and this is a better option for you. Let me help model your power system, or train your staff how this system works and look like.”

We’ve done this in 50 different countries, we have the expertise, and that’s really powerful. The planning department of the Philippines energy minister was in Finland for two weeks with our power system analysts and they built the whole model for how this transition can take place in the Philippines, providing training and all the rest so they can go back to their colleagues and face these challenges.

Levitin: It sounds like a philosophy of change.

Rautkivi: People in general are against change, even when it makes financial sense. They say, “No, it’s not possible for this and this reason,” and at that point you need to say, “Let’s look and really try to solve this. We have experience and we can help you.” We have more than 10 years experience with flexibility and high renewable energy systems, and that’s what you need in order to support your customers. We believe in this, and that’s probably the most important thing: We believe that Yes, a 100% renewable world is possible. We just need to find the solutions to get there.

Levitin: Are you optimistic about the future?

Rautkivi: We are the leaders here and we’re trying to do the right thing. I think the main conclusion is that this transition is taking place and it’s global and it will happen throughout the world, and the good thing is that nothing is going to stop this. Climate change is accelerating it and the fact is we need to take action. In the end it will happen and that is a great thing for everybody.