Exploring new frontiers








Ken Salazar.
Partner at the law firm Wilmer Cutler Pickering Hale and Dorr LLP and a member of Abengoa’s International Advisory Board.






Nestled in the historic city of Seville, Spain, Abengoa is rooted in the exploration world that led Seville to be the gateway from Europe to the Americas. Over 400 years ago, Seville became the main connection between Europe and the New World. Today, Abengoa is the connection between the old world and the emerging technologies that are defining the future of our planet.

For centuries, nations have chased the power of the sun wondering how electricity could be produced to power communities across the globe, while humanity has struggled to secure clean reliable water supplies, especially in times of drought.

Since the beginning of the environmental movement, international communities throughout the world have struggled with how to deal with the massive amount of waste generated by human activity and deposited in landfills around the world.

Now, Abengoa is giving solutions to these important defining challenges.

An example of this are the solar projects that the company is developing in different areas of the planet, which are making the skeptics to become core defenders of this kind of solar initiatives at commercial scale. Today Abenoga’s commercial scale solar plants are already delivering electricity to the grid in the United States, Abu Dhabi, Algeria and Spain. In addition, Abengoa is building new solar plants in Chile, United States and South Africa.

Until the last few years, the United States had only very limited commercial scale solar energy production. Today, Abengoa hosts some of the largest commercial solar plants in the world in the deserts of California and Arizona. In particular, Arizona’s sola plant, with 280 megawatt, features state of the art thermal storage technology and provides enough electricity to meet the demand of 70,000 Arizona homes, even when the solar resource is not there. This innovative technology is a major step forward, as the solar plant continues to provide electricity even after the sun goes down.

In the same way Abengoa is leading the solar energy revolution, the company is also trying to address the water needs of communities faced with seemingly insurmountable challenges in supplying water to their citizens. Abengoa’s I+D center within the water laboratories in Seville has developed pioneering technologies, providing water solutions through the use of water desalination plants as well as creating alternative water supply solutions for communities.

I have often said that water is the lifeblood of nations and communities. Because of historic droughts now underway in the Southwestern United States, communities are struggling to address water shortages and to plan for their future water supply. In the Rio Grande River shared by Colorado, New Mexico, Texas and Mexico, the ongoing drought has created problems that threaten to devastate municipal, industrial, and agricultural water supplies.

The same is true for the Colorado River, which is shared by Wyoming, Colorado, Utah, New Mexico, Arizona, Nevada, California and Mexico. The Colorado River is experiencing an historic dry period which is creating shortages for municipal and agricultural users throughout the Basin. In California, Governor Jerry Brown has already declared a state of emergency because of the lack of water.

In the view of scientists and water managing organizations, these droughts are caused by climate change. In addition, the growing population of the Southwest and the increased demand for water has put many communities in a crisis mode.

The United States is not alone in facing droughts. Droughts are also occurring in Latin America, Africa, Asia and many other places around the world. Abengoa’s water technology and projects are helping to provide water solutions to many of these communities. The company has built water projects around the globe, including water projects in China, Ghana, Algeria and Mexico.

As part of its pioneering efforts, Abengoa is also poised to address the challenges created by our landfills across the world. Starting in its facility in Salamanca, Spain, the company has developed the technology to convert solid urban waste into energy. As the earth’s population is expected to grow beyond 7 billion people, the amount of trash created will exponentially grow. Abengoa’s deployment of its solid urban waste energy technology will help addressing the waste problem the world faces and, at the same time, will help developing new alternatives for reliable energy supplies.

As Abengoa explores the energy frontiers, it is also leading the way in advanced cellulosic biofuels. Abengoa’s projects are already creating bioethanol and biodiesel. In the United States, its advanced cellulosic plant located in Houghton, Kansas, will soon convert straw and other biofuel material into biofuels.

In conclusion, the world is confronting major challenges from climate change and population growth. Abengoa’s proven technologies will help the world deal with these changes. Today the world confronts major challenges from climate change and population growth. Abengoa’s proven technologies will help humanity address the challenges that come with this reality.

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CSP Has a Bright Future with Thermal Energy Storage

Patricia Malo de Molina.

Abengoa Chief Communication Officer.

The past year has been a landmark year for the concentrated solar power (CSP) industry, seeing the completion of several major projects, including Abengoa’s Solana Generating Station in Gila Bend, Arizona. Yet questions persist as to whether CSP is a viable, cost-effective form of renewable energy for the future. Concerns focus on the environmental impact that large-scale CSP plants can have on desert ecosystems, levels of water consumption, and how they can remain relevant in the face of significantly lower cost photo voltaic (PV) and natural gas plants. However, CSP solves the greatest challenge that renewables have faced: intermittency. Specifically, CSP has a solid future in the U.S. energy market as a result of its energy storage capabilities.

Since renewable energy first entered the market, one of its greatest criticisms has been its intermittent nature; thus, the sources of renewables are unreliable. Sometimes clouds cover the sun, the wind doesn’t blow, or waves don’t crash. Given the unpredictability, costs would go up and traditional energy sources would still need to step in when renewable sources were unavailable. CSP with thermal energy storage circumvents these challenges. Compared to other renewable energies, it has the capacity to store energy efficiently that can later be dispatched, allowing a plant to continue to operate when it is cloudy or after the sun has set.  Dispatchability allows for electricity generation at peak demand times, such as early evening when consumers return home from work, for example.

CSP will be a critical component of meeting the world’s energy needs while balancing the effects of climate change. According to the U.S. Energy Information Administration, by 2040 there will be a global demand for 820 quadrillion Btu, a 30-year increase of 56 %. Simultaneously, during that same period, total U.S. energy-related CO2 emissions in 2040 will equal 5,599 million metric tons. Thus, there will be a continued need for energy sources that are reliable and have the ability to grow while lowering CO2 emissions. CSP meets these needs perfectly, providing sustainable energy at commercial scale levels to meet energy demands at any time.

To meet these challenges, U.S. states and territories are starting to mandate that renewable energy have storage.  In 2013, California set a requirement for the purchase of 1,325 megawatts of energy storage by 2020. Puerto Rico has also mandated that all new renewable energy include storage, and New York is looking at similar storage requirements. CSP with storage is a technology that local governments can look to in meeting the requirements for energy storage.

Abengoa’s Solana, which commenced full operations at the end of 2013, shows that this technology is viable, cost effective and ready to meet consumer demands.  At 280 megawatts and with six hours of thermal energy storage, Solana is the largest CSP plant in the world utilizing parabolic trough technology. It can satisfy peak demand in the region in the late summer evenings and night time hours.

Solana operates using mirrored parabolic trough collectors. The structures track the movement of the sun, concentrating the solar radiation onto a receptor tube that contains a heat transfer fluid that absorbs the heat, reaching high temperatures. The thermal energy in this fluid then converts water into steam, which drives a turbine to generate electricity. With thermal energy storage, Solana is able to supply clean energy to around 70,000 homes, preventing the emission of nearly half a million tons of CO2 every year.

Thermal storage is the breakthrough the solar industry has long awaited. With it, plants can deliver energy hours after the sun has set, when the moon is up or on a cloudy and rainy day. This type of technology is a unique differentiator, giving CSP an advantage among other renewable energy technologies that don’t have storage capabilities by providing consumers renewable, pollution free, and affordable energy when they need it.

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Sustainable Desalination

Arturo Buenaventura

Strategy and Corporate Development Manager of Abengoa Water

The Earth naturally desalinates seawater. Solar power causes the water in the oceans to evaporate, creating clouds that release their water in the form of rain, some of which falls on the Earth’s crust, feeding the rivers, lakes and groundwater reserves that one way or another eventually return to the sea.

The Earth is known as the blue planet. The total volume of water including rivers, lakes, groundwater, oceans and the polar caps is 1,386 million km3, equivalent to a sphere of water with a diameter of 1,385 km. To put this into perspective, if the Earth was the size of a basketball, all of the planet’s water would fit in a ping-pong ball. Moreover, all this water follows this natural cycle on Earth – it is the only water that we have and it has been used over and over again since the beginning of time.

Only 3% of the Earth’s water is fresh water –and only 0.3% of this is available in rivers and 0.6% in groundwater– the rest is held in the polar caps. Consequently, the majority is not easily accessible, or is sea water.

Furthermore, we are faced with the problem that neither the drinking water that we have nor the earth’s population are uniformly distributed. Although the population tends to be concentrated in areas with good access to drinking water, this access is increasingly difficult to guarantee, since towns and cities are increasing in size with more people.

Water is an essential element for life and is considered to be a basic right for every person on the planet. However, around one third of the population lives in areas that suffer from water stress (imbalance between water supply and demand), ranging between moderate and high, and around 20% of the world’s population does not have a secure source of drinking water. We therefore need to help the Earth’s natural water cycle, generating additional drinking water resources in regions where they are scarce.

Desalination is a solution to these problems in regions that have access to seawater or sources of salt water. That is why Abengoa has spent many years investing to develop reverse osmosis desalination technology, due to its lower energy consumption compared to other available desalination technologies. Abengoa’s desalination plants therefore use the latest technological advances and we have developed innovative tools that enable us to optimize their design and sustainability. These improvements include the use of latest-generation pressure exchangers, minimizing the use of chemical compounds, decreasing the volume of discharged brine and improving the conversion rate, as well as the use of latest-generation reverse osmosis membranes, high efficiency pumps, ultrafiltration membranes for pre-treatment and proprietary technology to re-mineralize the desalinated water, among others.

Furthermore, at Abengoa we continue to invest in developing technological advances that enable water to be desalinated more efficiently, at lower cost and more sustainability. For example, Abengoa currently has desalination solutions based on renewable energy, which enable alternative water resources to be generated, minimizing their carbon footprint.

This week we are celebrating World Water Day themed around water and energy, which is an opportunity for us to reaffirm our commitment to continued investment while continuing to offer sustainable solutions to water problems around the world.

Photograph: Jack Cook, Woods Hole Oceanographic Institution

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Report from the Chairman

Felipe Benjumea Llorente
Executive Chairman of Abengoa

Last year, 2013, was better than expected, offering glimpses of growth possibilities that will help to put the financial crisis behind us. However, climate change continues to lie at the heart of the problems facing mankind. The UN’s Intergovernmental Panel on Climate Change is warning that the planet’s average temperature is increasing while glaciers melt, sea levels rise and CO2 emissions grow, all of which are attributed to humankind with 95 % certainty. The Stern Report states that thereis still no trend in emissions reductions, meaning that global warmingg will continue and that, by 2100, hundreds of millions of people would have abandoned their homes.

According to the World Energy Outlook for 2013, the decision facing the world requires greater emphasis on energy efficiency. Our sector will play a fundamental role in whether climate change targets are achieved or not. The current trend is taking us towards a 3.5 ºC long-term rise in the planet’s temperature. To avoid this we have to accelerate the rate of renewable energy growth, currently around 2.5 % per annum.

Our company has viable solutions to these challenges. Knowledge creation and a commitment to technology form the basis of our competitive advantage in the energy and environment sectors, enabling Abengoa to become a scientific and technological leader in our business areas and a privileged place for training professionals in R&D and innovation.
Abengoa Research (AR), the research institute launched in 2011, is making highly significant progress in producing and storing solar power at competitive prices, transforming municipal solid waste into bioethanol (W2B), promoting energy vectors such as hydrogen or second-generation bioethanol, the desalination and reuse of industrial water and water from other sources, and developments related to enzymes and biomass.

Abengoa has also increased the number of technology patents it holds to 261 and is acknowledged as the leading Spanish company in the international patent applications ranking. These achievements are the result of the work carried out by the company’s team of 781 researchers, as well as investment in R&D and innovation projects totaling € 426 M during the year.
We are implementing the scheduled investments in our strategic plan, arranging financing for the corresponding projects and working with partners that can make our investments sustainable.
Abengoa’s projects map has expanded this year to include countries such as Israel, Sri Lanka, Ukraine and Angola, while we have consolidated our leadership position in countries like Brazil, USA, South
Africa, Chile, Mexico, Peru and Uruguay.

Abengoa’s global presence enables us to make the most of our opportunities for growth. This year revenues have grown by 17 % to € 7,356 M compared to 2012, and this growth is also reflected in our results, with an 44 % increase in EBITDA to € 1,365 M.

At the financial level, this year we have successfully completed our listing on the NASDAQ stock exchange in the USA through a capital increase of € 517.5 M, we have raised € 1,280 M from five bond issuances and made divestments totaling € 804 M, all of which have enabled us to cover the company’s financing requirements for 2014, reduce our dependency on the banking market following the partial repayment of the syndicated loan, and to extend the maturity profile of our debt.

Corporate net debt at the end of 2013 was 2.2 times corporate EBITDA, totaling € 2,124 M. We ended the year with a cash position of € 3,878 M, which will allow us to meet our investment and debt commitments scheduled for 2014.

We believe that Abengoa will continue to grow in 2014, strengthening its financial structure and consolidating a sustainable asset rotation program.

Engineering and construction
Revenues have grown by 27 % to € 4,808 M, bringing the backlog at the end of the year to € 6,796 M. In the USA we have commissioned the world’s largest solar-thermal plant, Solana, in Arizona, which uses a pioneering system that provides six hours of energy storage for when there is no sun. Work also continues on construction of the solar-thermal plant in California, which has the same capacity. Furthermore, the US power company Portland General Electric (PGE) has selected Abengoa to develop a 440 MW combined cycle plant.

We have also been selected to construct the largest combined cycle plant in Poland, transmission lines in Europe, Latin America, Africa and Australia, and new desalination plants in the Middle East and North Africa.

Concession-type infrastructures
We have generated more than 5,700 GWh of power in solar, hybrid and cogeneration plants during 2013, as well as commissioned three new plants in Abu Dhabi (Shams 1), USA (Solana) and Spain (the Extremadura Platform) with a total installed capacity of 480 MW. We have also produced 102.1 ML of desalinated water.

The total capacity (installed and under construction) of our power plants in the USA, Abu Dhabi, South Africa, Algeria, Israel, Mexico, Brazil, Uruguay, Spain, India and the Netherlands is 2,912 MW. At present, we are also constructing new desalination plants in Algeria and Ghana, and electricity transmission lines in Brazil, Peru and Chile.

Industrial production
The construction in Hugoton, Kansas (USA), of the first industrial plant to produce second-generation ethanol using Abengoa’s proprietary technology and the development of the first Waste to Biofuels pilot plant in Salamanca (Spain) are two examples of our research and innovation work from recent years becoming a reality.

Growth and diversification
The growth model is based on simultaneously managing businesses with different profiles and characteristics. The cash flows from our traditional activities are reinvested in growing our emerging businesses. Rotating our investments is part of our business model and we have numerous options for the future that will evolve through to maturity. Abengoa Hydrogen and Abengoa Energy Crops are two such possibilities, in addition to other technological opportunities that Abengoa Research and the business groups are obtaining from their research.

The company’s international activities account for 84 % of total revenues, including our businesses in USA with 28 %, Latin America that represent 29 %, Asia 4 %, Europa 12 % and Africa 11 %.

Human capital, employment and safety
At Abengoa we know that the future depends on the creativity of the present, which in turn relies on the training and performance of the people that are part of the company. We are well aware of this fact and place special emphasis on our employees’ professional development and training. In 2013 we carried out more than 1.8 M hours of training, many in collaboration with some of the world’ most prestigious universities.

It is also important to highlight the constant preoccupation in our corporate culture for the safety of our teams and operations around the world, which is managed through a strict system of quality and occupational health and safety at every level of the organization.

Audit
In line with our commitment to transparency and diligence, we have subjected our internal control system to an independent valuation process, in accordance with PCAOB auditing principles. The Annual Report therefore includes five independently verified reports on the following areas: financial statements, SOX (Sarbanes Oxley) internal control system, Corporate Social Responsibility Report, Corporate Governance Report and the design and application of the company’s risk management system in accordance with the specifications of the ISO 31000 standard.

Corporate social responsibility and sustainable development

Penny Mathews

In a future defined by innovation and the challenges associated with sustainable development, Abengoa is committed to responsible management to reduce the negative impacts of its activities, contribute to developing the communities where we are present and building trusted partnerships with stakeholders. As a result of this commitment, in 2008 Abengoa designed a strategic corporate social responsibility plan and in 2013 we invested more than €9.1 M in social action through the Focus-Abengoa Foundation.

 

During 2013 we have intensified our partnerships with suppliers to reduce their impact and improve operations across the whole value chain.

Once again we have used the Corporate Social Responsibility Report, prepared in accordance with the principles of the Global Reporting Initiative (GRI) and the AA1000 sustainability assurance standard, to report on our social, environmental and financial performance during 2013, as well as the objectives, challenges and areas for improvements for the coming years.

We offer and use the Corporate Social Responsibility e-mail address (rsc@abengoa.com), our website (www.abengoa.com), our Twitter and Linkedin profiles and our corporate blog (blog.abengoa.com) for this purpose.

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Designing tomorrow’s materials

Francisco Montero Chacón (Researcher at Abengoa Research) and Manuel Doblaré Castellano (General Manager of Abengoa Research).

It was the Nobel laureate Richard P. Feynman’s address “There’s plenty of room at the bottom!” that inspired, already in 1959, a generation of researchers to develop what is today known as nanotechnology. Why cannot –he remarked in his probably most famous quote– we write the entire 24 volumes of the Encyclopedia Britannica on the head of a pin? Feynman’s speech was as stunning as challenging. In fact, he did not only present the idea of directly arranging atoms but, what is more valuable, also introduced the potential framework to do so. It has taken us almost half a century to know that this initially “science fiction” idea is indeed possible and, although we are not there yet, we are undoubtedly much closer.

The difficulty is how to manipulate such tiny things as atoms and also how to control the effect of such manipulation into the macroscopic properties of the material. It has been sufficiently proved that scientists are now able to work both at the smaller (i.e. the atomic level) and larger scales (i.e. the continuum level) of observation. The new challenge is working on the bridge between these two sides of the same world, in other words, linking the atoms to the structures. One of the main issues is how to drive the information across that bridge. For instance, the step from the atomic level, in which the activation energy of materials is defined, to the macroscopic level of many thermochemical processes, covers around ten orders of magnitude in the length and time scales. Thus, the information flow has to be carefully chosen in order to obtain representative results.

Nature is multiscale itself. If we look at the human scale –Feynman illustrated his speech with that example– all of the information of a human being is stored in a small fraction of a cell in the form of DNA molecules of approximately 50 atoms per bit of information. On the other way around, humans are small individuals in our planet which is a fraction of the solar system which is, once more, a spot in the Universe. This astonishing fact is very well described in the book “Powers of Ten”.

The idea is then the following: such as the human being has been able to drive important changes to its environment or as the cells do so in a human being; we could manipulate material structures at different scales in order to obtain specific desired properties. For instance, we could manipulate the pore size of microporous materials in order to capture CO2, functionalize and activate the surface of a membrane for improving water filtration devices, or create a new kind of structured materials for storage of thermal energy in concentrated solar power plants. This can be also applied to manufacturing processes, controlling important process variables (e.g. power consumption, emissions) while remaining environmentally friendly.

Multiscale modeling of materials: from atoms to structures.

Some of the aforementioned examples are not just illustrative, but some of the applications that are currently being carried out in Abengoa through the Virtual Materials Design Platform project. The main goal of this project is to provide a state-of-the-art virtual laboratory in which new innovative materials with targeted properties could be tested by our scientists. Such an approach has important advantages with respect to traditional approaches in terms of reducing the number of (expensive) experimental tests, reducing the developing costs and, most important, improving the creation of value.

This is now possible from the advances developed in the last decades in the field of computational materials science. In fact, nowadays it is possible to study matter from the most fundamental electronic scale up to real scale systems, with the aim of tailoring and optimizing the materials properties to the particular application in hands. The way scientists link these scales is the so-called multiscale approach that not only comprises bridging different length and time scales, but also the multidisciplinary interfacing of several scientific communities.

This is essential since this challenge cannot be faced by single experts but by actual multidisciplinary teams of Physicists, Chemists, Biologists and Engineers that will allow the design of multipurpose optimized materials. These will be the teams that will develop tomorrow’s materials with properties that, although unthinkable only some years ago (self-healing, environmental adaptivity, auto-assembly and reorganization) are not too far from our capabilities.

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Cellulosic Ethanol Takes Off, Faces Challenges

Patricia Malo de Molina, Abengoa’s Chief Communication Officer

The year 2014 marks a significant moment for the U.S. advanced biofuels sector, and specifically for cellulosic ethanol. For the first time, well-financed and commercial-sized cellulosic ethanol plants are commencing operations – and the budding success of the cellulosic ethanol industry is just on the horizon. However, the U.S. EPA’s proposed reductions to the 2014 renewable fuel standard (RFS) volume requirements pose a potential challenge, and are likely to impact current biofuels producers, as well as freeze investment in second generation cellulosic facilities overall.

Using fuel from Earth’s most abundant organic feedstock source – plant fiber, or cellulosic biomass – renewable cellulosic ethanol production is a boon to the environment. In fact, a USDA study found the estimated emissions of greenhouse gases from cellulosic ethanol made from switchgrass was 94 percent lower than emissions from gasoline.1 To leverage this advancement in technology, cellulosic ethanol can be blended with conventional gasoline and used to reduce greenhouse gas emissions without a significant loss of fuel energy. Additionally, because the biomass used for cellulosic ethanol comes from an abundant and diverse array of waste sources, its production can reduce landfill waste and use it to make fuel instead.

The United States Department of Energy estimates 1.3 billion tons of harvestable cellulosic biomass exists domestically, an amount which in theory could meet one-third of our domestic transportation fuel demand. Even so, in the United States, the cellulosic ethanol industry has had to overcome many obstacles. Facing production delays and regulatory entanglements – most recently from the U.S. Environmental Protection Agency’s proposed rule that reduces renewable fuel blending mandates in 2014 – the cellulosic ethanol industry is poised for a challenging year.

Cellulosic ethanol producers, including Abengoa, view the RFS as the single most important market driver for the future of the biofuels industry. The program promotes investment and stability by guaranteeing a market for cellulosic ethanol products. In addition, first-generation ethanol is clearly tied to second-generation ethanol. First-generation ethanol producers are most likely to be the ones making investments in second generation technology and facilities, due to existing infrastructure. As a result, the proposed rule could diminish the available capital investment in second-generation technology.

In 2014, more than a dozen commercial-scale cellulosic ethanol plants are scheduled to commence operations. Among these are Abengoa’s new 400-acre plant near Hugoton, Kansas, which in the second quarter of 2014, will begin producing 25 million gallons of cellulosic ethanol and 21 megawatts of renewable electricity annually using only biomass.

Like many of the technological advancements taking place in the biofuels industry, the cellulosic ethanol created by Abengoa’s Hugoton plant is a significant innovation in renewable energy, using enzymes to convert cellulose from a variety of waste materials – such as corn stover, wheat straw, milo stubble, and switchgrass – into ethanol.

Beyond these environmental blessings, cellulosic ethanol is realizing important economic benefits. For example, Abengoa’s plant is enhancing the local economy of Hugoton and the state economy of Kansas. Creating an average of 300 full-time jobs over the last two years, the plant will bring 65 permanent jobs to the community with a $5 million annual payroll. Moreover, Abengoa has signed 10-year contracts with local farmers to purchase their biomass and use it to fuel the plant, resulting in even more positive impact on the local economy.

With significant environmental and economic benefits, cellulosic ethanol is driving advancements in the U.S. biofuels sector, delivering new economic development opportunities to rural communities and developing sustainable solutions for the future.

1 R., K. P. Vogel, R. B. Mitchell, and R. K. Perrin. “Net Energy of Cellulosic Ethanol from Switchgrass.” Proceedings of the National Academy of Sciences 105.2 (2008): 464-69. Print.

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Europe at the Crossroads: economy, energy and development

Natalia Fabra
Professor of Economics University Carlos III, Madrid

 

 

 

 

 

 

 

The two concepts that make up the term ‘sustainable development’ are closely linked: development either is sustainable or will not be so. Development is inevitable because it is intrinsic to our very existence as a species. However, if it occurs at any cost, rising rates of environmental deterioration will soon find its limits. The aim, therefore, is to find avenues that do not unbalance the entire ecosystem without which development itself would not be possible.

We therefore have to work to find the idyllic and stable combination between development and the environment, based on the incontrovertible fact that with development being inevitable, whatever it may be, it will encounter limits in the quality of the environment that supports it.

Sustainable development and social awareness

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Society begins to change its conduct when it senses development is generating environmental deterioration, whose costs exceed the costs of preventing or mitigating the damage. The problem is that even though the cost of prevention and mitigation are incurred by present generations, their benefits are perceived as uncertain and in the longer term, as affecting future generations that are not present in today’s decision making. Society will only accept the environmental problem when it perceives, in the short term, that the deterioration its activities are causing to the environment is curbing its very own actual wellbeing, and not only that of future generations. For this reason, environmental education is seen as an indispensable instrument for citizens to give greater value to environmental costs against the alleged short-term benefits of policies that ignore the negative effects on the environment.

Some signs of social awareness are beginning to emerge. Firstly, the scientific community has developed a consistent body of knowledge and compiled irrefutable evidence on climate change and its anthropogenic causes. Secondly, politics has begun to incorporate environmental concerns in its approaches, resulting in the adoption of climate change policies in some developed countries. And thirdly, an ever-increasing number of social groups, businesses and individuals are redirecting their behavior because they have realized that environmental degradation involves the destruction of wealth.

But social awareness is occurring much more slowly than the rapid advancement of environmental damage. If we were to wait for present generations to spontaneously abandon present-day development in favor of future development, we wouldn’t arrive in time. The economy, and handin-hand with the same, politics, must focus on designing mechanisms that allow environmental costs – which otherwise society would not perceive on time – to be incorporated into decision making. This is surely the biggest challenge the economy and politics have to face.

Environmental costs in the electricity sector

The electricity sector illustrates the importance of environmental costs being incorporated into decision making.

The production of electrical energy generates various negative externalities of different magnitude, depending on the primary energy source used. For instance, the use of fossil fuels (coal, gas and fueloil) for electricity generation produces the emission of gases that are associated with the greenhouse effect, acid rain and soil disturbance. At their extraction sites, there are also many other negative impacts to these fuels such as the occupation of spaces and disruption of natural habitats. Nuclear energy also generates negative effects on the environment associated with the likelihood of accidents with different degrees of severity, as well as risks associated with the management of waste, whose accumulation and final storage has not yet been resolved.

Any option is the result of its comparison against its alternative. In its 2013 Report, the Intergovernmental Panel on Climate Change (IPCC) argues that in the last 100 years the average global temperature has increased significantly, with the last three decades being those with the highest temperature of the past 1,400 years. In parallel, the accumulation of CO 2 in the atmosphere has been increasing due to the increase in the use of fossil fuels and, if CO 2 continues to be emitted at the same rate as up to now, at the 2050 horizon there will be an additional increase in temperatures of 1.4 to 2.6º C. Climate change will result in even more severe and frequent heat waves, an increase in sea level caused by melting, and some extreme-weather events that we are even already witnessing today. Therefore, the curbing of greenhouse gas emissions is a priority and, to this end, the commitment to non-emitting renewable energy continues to be more pressing than ever. And the reduction of emissions needs to occur not only in the electric sector, but also in other sectors that do not, as is the case of the electric sector, have the ability to incorporate renewable energy in the production process.

Europe: beyond 2020?

For decades, Europe has been the global leader in the fight against climate change. With the adoption in 2009 of the 20-2020 goals (20 % reduction in greenhouse gas emissions, achieve 20 % renewables in the energy mix, and enhance energy efficiency by 20 % by 2020), the European Union rolled out policies that channeled energy transition. However, Europe is faced with having to make very delicate decisions in the coming months. It has to establish its environmental goals for beyond 2020 and the policies than can make them happen. If Europe were to reaffirm its commitment to combat climate change with ambitious goals for 2030, negotiations at international level would be revitalized, contributing to greater success of the Paris summit in 2015. It is clear that Europe can not solve a global scale problem alone, but if its institutions were to put the short term before the long term, ignoring the effects on future generations, and going back on its environmental commitments, they could jeopardize global commitment. We would be compromising not only economic and environmentally sustainable development but also our very own identity as Europeans.

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Towards a sustainable world












Izaskun Artucha,
Head of Strategic Development Department of Abengoa.

The World Energy Congress is the world’s largest energy-related event that provides a platform for discussion of the key aspects on the energy agenda of the sector’s main players. Organized by the World Energy Council every three years, the 22nd World Energy Congress was staged in South Korea last September under the appealing theme “Securing tomorrow’s Energy Today”

German giant Siemens is a usual participant of the congress, part of this year’s contribution consisted of a report titled “Connecting Possibilities – Scenarios for Optimizing Energy Systems”. The report analyses the current energy situation and makes recommendations for the future for a number of countries. Although long, the report is not difficult to read and is structured in such a way that allows the reader to access the topics that are more interested to him.

Worldwide consumption of primary energy is steadily growing due to expanding economies and emerging countries, accelerating urbanization and the increasing demand for mobility and other energy-related services.

In this context, the greatest global energy challenge ahead is to provide affordable, sustainable and reliable energy supplies for urban as well as rural areas.

Each country faces its own specific challenges due to their infrastructure, economic maturity, available energy sources and population growth. Accordingly, the proposed solutions must be tailor-made to each situation but we do find some common elements to all of them:

-       Reduction of CO2 emissions to the atmosphere

-       Development of renewable energy technologies

-       More efficient use of natural resources available in the country, in particular primary energy sources

-       Modernization of energy infrastructure, mainly transport and generation.

A key element of any proposed solution is the potential to create a positive economic impact. The recent economic crisis has highlighted that environmental awareness becomes less relevant in times of economic distress. For those measures that don´t provide an immediate economic benefit, mainly those in which the only effect is CO2 emissions reduction, some value or cost must be attributed to those emissions in order to create the incentive for reduction.

1)  Europe

Europe has been the champion of renewable energy so far, but it is currently facing the challenge of meeting its 20-20-20 targets and at the same time remains competitive in the global market. The solutions proposed are:

a)    Optimize renewable energy location

Renewables to be located in the most efficient geographic locations: wind energy in the north and solar in the south where load factors are highest. Additional electricity transmission infrastructure will be required for electricity flows north-south.

Net savings (new capacity – grid investment) could reach 60,000 M€ by 2030.

b)    Coal-to-gas shift

Coal-fired plants to be replaced by more efficient combined cycle gas-fired plants.  Under this scenario, CO2 emissions could be reduced by 365 Mt by 2030.

 

2)  United States

The US has experienced an important transformation of its energy system, the development of the shale gas industry has made the country virtually energy independent. The challenge is now to exploit the shale gas industry to its full potential and diversify energy mix through the inclusion of more renewable energy.

a)    Coal-to-gas shift

The projected increase in cheap gas production using fracking should be able to cover the increase in gas demand in a broad coal-to-gas shift.

This would reduce CO2 emissions by 1,000 Mt by 2030 without increasing power prices.

b)     Modernization of the power grid

The upgrade of the power transmission grid would allow for the integration of more renewable energy and most importantly, would reduce electricity losses.

Assuming a 2% loss reduction (from 6% to 4% as in Germany) net annual savings would add up to 4 B$. In addition, the overall economy would benefit from a reduction in blackouts that have an estimated cost of 80 B$ per year.

3)  Saudi Arabia

Saudi Arabia has an energy market highly dependent on fossil fuels, mainly oil and derivatives. Economic growth is driving high energy consumption and consequently domestic oil consumption. The challenge would be to rationalize domestic oil consumption and hence maximize oil export revenue.

a)    Oil-to-gas shift

Shift of all oil-fired steam power plants to gas-fired combined cycle power plants by 2030 would lead to oil savings of 42Mtoe and an annual increase of export revenue of 18,000 M$ from 2030. In addition, the oil-to-gas shift would lead to 85 Mt CO2 savings from 2030 onwards.

b)    Increase share of non-fossil generation

This scenario contemplates the development not only of renewable technologies (wind, solar PV and CSP) but also nuclear power. In this scenario, export revenue would increase by 16,000 M$ / year and CO2 emissions savings would reach 93 Mt.

4)  China

China’s ongoing and rapid economic growth poses a major challenge to the domestic power sector: to provide enough electricity economically. This is to be achieved without increasing the dependency on imports and while meeting the announced CO2 intensity targets, so China needs to use its existing resources more efficiently and increase the share of other conventional and non-conventional resources.

a)    Replacement of old coal plants with large coal or gas plants

30% of China’s generation capacity is coal, the replacement of old inefficient plants by efficient supercritical large coal-fired plants would not only reduce CO2 emissions, but more importantly would reduce annual fuel costs by 14,000 M$.

An alternative scenario could be to replace some of the coal capacity by gas-fired plants while development the potential of shale gas industry.

b)    Expansion of renewable generation share

Increasing the share of renewables (without hydro) in the power generation mix to 30% by 2030 mainly through wind and solar PV.

The large investment required would be partially offset by savings in fuel costs and other economic incentives to CO2 emissions reduction. This scenario expects more than 2,000 Mt of CO2 savings, equivalent to twice the carbon emissions in Europe in 2010.

We could question whether all these proposals are realistic, some of them seem difficult to execute as they would require fundamental changes in energy and economic policy that need to stay unchanged for a long period of time and through different economic cycles. However, implementation of only a fraction of them would mean a lot of progress towards an energy system with innovative technologies, more effective climate and environment protection and better security of supply.

The conclusions of this report and the broader theme of the World Energy Congress are yet another confirmation about which is the right path to follow. There is plenty of opportunity worldwide to through technological innovation.

 

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The European Union’s energy policy

Germán Bejarano García
Assistant CEO and International Institutional Relations Manager of Abengoa.

Although the energy policy, in its broadest sense, has been around since the start of the former European Communities and subsequent organizations (European Coal and Steel Community and the European Atomic Energy Community, EURATOM), it did not appear as a common policy in the later treaties until the Treaty of Lisbon. However, an environmental policy did exist with as well as partial measures related to energy.

Specifically, the Treaty of Lisbon (2007) acknowledges the importance of energy policy and even reserves a specific section for energy (Article 194 of the TFEU), as well as linking its coordination with the functioning of the internal market, the necessary solidarity between member states, and with protecting and improving the environment. Four objectives govern this policy: the functioning of the market, supply security, promoting efficiency and energy savings; the interconnection of networks, and the development of new and renewable energy. By defining the legal basis for the energy policy, the Treaty offers a mechanism for the Union to act in these four areas, always subject to the principle of subsidiarity.

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This aspect of the treaties has led to specific actions resulting from a long process of prioritizing objectives and formulating actions contained in the White Paper of 1995 and the Green Papers of 2000 and 2006. Consequently, the Commission presented a communication in 2007 that proposed a highly ambitious European target: to reduce greenhouse gas emissions by 20% by 2020 compared to 1990.

The European strategy to achieve this identifies three challenges that must be reconciled: sustainability, supply security and competitiveness, while also defining specific targets in terms of introducing renewable energy, a reduction in emissions and energy efficiency, with a deadline of 2020, all within the framework of a structured action plan that was developed between 2007 and 2009.

In addition to recognizing that this ambitious global target to reduce greenhouse gases means moving towards an economy with low emissions and high energy efficiency, in implementing it, the European Union proposed a comprehensive set of associated aspects related to the structure of the market, existing and future networks, the international relations involved, the internal energy market, solidarity between member states, and bodies for regulation and transparency in the markets, among other important issues. In other words, the need for the legislative package commonly called 20-20-20 – as a central piece of the energy policy – must be supplemented with specific measures that tackle the aforementioned aspects.

The central legislative package was approved in 2009 and comprises a series of directives that on the one hand are designed to reduce GHGs by 20% by 2020, compared to 1990 levels (with a specific international agreement the commitment could rise to 30%); and on the other hand, that renewable energy accounts for 20% of the total, for the whole of the EU by 2020 (each Member State must achieve a specific national quota which in the case of Spain is also 20%) and that renewable energy use reaches 10% for all types of transport by 2020 in every State. And lastly, an increase in energy efficiency so that energy savings reach 20% compared to the forecasted energy consumption for 2020.

This ambitious energy and climate change package was accompanied, as we have already indicated, by a series of supplementary measures and regulations that were approved in the subsequent years, touching on the areas of technology, energy efficiency, improving emissions trading, the electricity and gas markets (third legislative package on the energy market), or rules about regulators, among others.

The first policy action of the current Commission’s mandate (2010-2014) was the 2020 Strategy, designed to overcome the economic crisis and to achieve dynamic and sustainable growth. The energy and climate targets described above were part of this strategy. To highlight this commitment, in 2010 the Commission prepared a communication entitled “Energy 2020: A strategy for competitive, sustainable and secure energy”, which reiterates five priorities: limiting energy use in Europe, emphasizing energy savings in transport and construction; building a pan-European integrated energy market, strengthening the technology component and innovation in this area (SET Plan); protecting consumers (supply security and price competitiveness) and strengthening the external dimension of EU energy policy. Over the last few years the Commission has been working to implement this extensive program.

In the presentation of its most recent work program, for 2014, the current European Commission defines growth and employment as major objectives, stating that 2014 must be a year of implementation and results. In this framework, energy policy must promote consumer access to an integrated market and offer greater supply guarantees thanks to energy connections. The Commission emphasizes the targets for efficiency and consumer price competitiveness.

This work program for the current transition year in Europe ratifies what for many represents a major change in European energy policy, which was formalized in 2013, specifically in the European Council last May, when the priorities seem to have swung towards economic efficiency compared to the environmental commitment of combatting climate change.

In its conclusions, the European Council stated that work must focus on promoting competitiveness and addressing the challenge of prices and costs. To achieve this, Member States think that the emphasis must be on measures to fully achieve an operational and interconnected internal energy market, attract new investments to the sector, diversify supply and energy efficiency measures.

The presentation of the climate and energy strategy for 2030 is expected to occur in February, which will provide the framework of actions in which investment and job creation targets need to be reconciled, providing greater certainty in relation to more ambitious emissions reductions. This document, which is expected to cause controversy between the different players involved, will offer a measure of the extent to which this last five-year period, overshadowed by the economic crisis, has partially neglected Europe’s commitment and leadership in favor of combatting climate change.

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Growing through knowledge

Manuel Doblaré
General Manager of Abengoa Research

When performing research in a company, we need to ask ourselves Why? What’s the purpose? How? Who? – among other questions.

The future is not what it was – according to an anonymous graffiti artist – although this is not because the explosive development and progressive spread of technology and scientific advances, among other factors, are influencing major changes in the economic-labor and socio-political spheres, which some writers associate with the beginning of the end of the history of civilization. According to many, these changes will affect the very essence of humanity and are comparable, in terms of importance, with the consolidation of urban settlements in the Neolithic Era.

Credit: Michaela Kobyakov

Credit: Michaela Kobyakov

Alongside this perspective, humanity today is tackling some enormous challenges, but for the first time in history, they are perceived as solvable. These include the compatibility required between demographic growth, development and sustainability; improvements in sanitation conditions; the reduction in socio-economic disparities; and conquering outer space.

The creation of new technologies and their economic and social impact is increasingly rapid. This implies a need for permanent adaptation and training, combined with changes in the business environment that involve an extremely intensive process of destroying and creating new companies and jobs with far-reaching socio-labor consequences, as stated by Joseph Schumpeter at the start of the 20th century with his idea of “creative destruction”.

However, some companies manage to hold on to their leadership position in their respective industrial sectors for many years without this process of creative destruction affecting them. Why is this?

Although there are numerous reasons, such as good management or international positioning, the most important is undoubtedly their capacity for permanent innovation, defined as the process that enables any type of knowledge to be converted into social or economic value.

Indeed, the direct relationship between the endeavors of a country (a region, a company…) to innovative and its competitiveness and economic growth is well documented.

In Spain, and Europe in general, there is a good level of new scientific knowledge being created, measured by publications and new technology proposals. However, these indicators are not consistent with others used to measure industrial value (triadic patents, creation of new products/processes and companies, etc.), leading to the so-called European paradox.

To understand this situation, it is not only important to examine the transfer mechanisms, but to review the current model for generating and valuing knowledge, making it more efficient and result-orientated without sacrificing thoroughness and scientific curiosity, maximizing its interdisciplinary nature and recognizing “knowledge” and “research” as products in themselves in a new industrial sector with huge potential and added value. This means that questions such as “Are we investing enough? Do we have the right R&D model? Are we efficient? Are we acquiring and creating sufficient knowledge?” must be constantly asked and answered in a company, as key factors for long-term success and to attract quality investment.

Acquiring and assimilating external technology is essential, but means following in the wake of the leaders. Only the generation of new knowledge and proprietary technology allows long-term leadership to be maintained. The permanent support of the company’s management, stable investments and hiring the correct people for each job, including professionals for essential and dedicated research, are therefore all essential factors.

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